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Annual Report 2019

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A c t u a l E x p e r i e n c e p l c A n n u a l R e p o r t 2 0 1 9 MAKING DIGITAL WORK for everyone everywhere Actual Experience plc Annual Report 2019 OUR PURPOSE TODAY WE ARE HELPING BUSINESSES TO IMPROVE their digital relationships with customers and employees Our analytics enable business leaders to understand when people are struggling with their digital experience and identify how to improve it. CONTENTS Introduction Our thinking page 2 Our performance page 10 The challenge page 12 Strategic report Our thinking Our performance The challenge Our Value Propositions Chairman’s statement Market overview Business model Commercialisation strategy Strategy in action Chief Executive’s statement Our people Our leadership team Financial review Principal risks and uncertainties 2 2 10 12 14 16 18 20 22 24 26 28 32 34 36 38 Governance 38 Board of Directors 40 Directors’ report Directors’ responsibilities statement 41 42 Corporate governance report 46 Audit Committee report 47 Directors’ remuneration report Financial statements Independent Auditors' report Consolidated statement of comprehensive income Consolidated statement of changes in equity Consolidated statement of financial position Consolidated statement of cash flows Notes to the consolidated financial statements Company statement of changes in equity Company statement of financial position Company statement of cash flows Notes to the Company financial statements Other information Notice of Annual General Meeting Notes relating to Annual General Meeting Glossary of terms Actual Experience plc Annual Report 2019 49 49 53 54 55 56 57 76 77 78 79 83 83 84 85 1 Financial statementsOther informationGovernanceStrategic reportActual Experience plc Annual Report 20193Actual Experience plc Annual Report 20192Financial statementsOther informationGovernanceStrategic reportOUR THINKINGMAKING DIGITAL WORK PROPERLYis all about human experienceUp until now the digital world has been about technology not humans.Our thinkingStrategic reportActual Experience plc Annual Report 201913Actual Experience plc Annual Report 201912Financial statementsOther informationGovernanceStrategic reportHX SCORETHE CHALLENGEThe human experience of a digital business has a direct impact on its brand reputation, productivity and ultimately operational costsdisrupted experienceRepresenting human experience (HX) is the fundamentally unique capability of our analytics.Our HX represents a proxy of how a human user would describe their experience of a digital service or application, if you were to ask them. A low score indicates a poor and variable experience, a high score indicates good and consistent experience with no variability.607080Lots of digital disruption, 2hrs lost in an 8 hour working day, for one employeeAt a digital quality score of 60, a user would lose around two hours a day to inconsistency and poor quality digital experience.For a Fortune 500 Company, with just 20% digital business processes, a digital quality score of 60 would cost around $400m in lost staff time a year.$400mlost in staff timeTypical digital disruption, 1hr lost in an 8 hour working day, for one employeeWhen first introducing our analytics, customers typically have a digital quality score of between 60 and 70.For a Fortune 500 Company, with just 20% digital business processes, a digital quality score of 70 would cost around $200m in lost staff time a year.$200mlost in staff timeMinimal digital disruption, no time lost in an 8 hour working dayAt a digital quality score of 80, a user would be at their most productive.There is no wasted time.$0mlost in staff timesmooth experience“We have been able to establish a relationship between our HX score and the amount of time wasted by a person waiting for the digital world to respond.”Professor Jonathan PittsChief Science OfficerThe challengeStrategic report Our thinking OUR THINKING MAKING DIGITAL WORK PROPERLY is all about human experience Up until now the digital world has been about technology not humans. 2 Actual Experience plc Annual Report 2019 Actual Experience plc Annual Report 2019 3 Financial statementsOther informationGovernanceStrategic reportOUR THINKING WE ANALYSE THE DIGITAL WORLD through the lens of human experience Ultimately human experience is the only thing that matters. It's not just about technology anymore. 4 Actual Experience plc Annual Report 2019 Actual Experience plc Annual Report 2019 5 Financial statementsOther informationGovernanceStrategic reportOUR THINKING HUMAN EXPERIENCE IS THE fundamentally unique capability of our analytics In an increasingly digital world business leaders are taking ownership of digital strategy. They are doing this because they know that staff productivity and their online brand rely on the digital world working properly. 6 Actual Experience plc Annual Report 2019 Actual Experience plc Annual Report 2019 7 Financial statementsOther informationGovernanceStrategic reportOUR THINKING GETTING THE HUMAN EXPERIENCE RIGHT is critical for our future Designing products and services built around human experience is fundamental for continued growth of the global economy and society as a whole. 8 Actual Experience plc Annual Report 2019 Actual Experience plc Annual Report 2019 9 Financial statementsOther informationGovernanceStrategic reportOur performance OUR PERFORMANCE “During FY19 our pipeline with our Channel Partners strengthened and we were pleased to secure significant ‘Land & Expand’ deployments.” Dave Page Chief Executive Officer ACCELERATING OUR commercialisation strategy 10 Actual Experience plc Annual Report 2019 OPERATIONAL HIGHLIGHTS PEOPLE HIGHLIGHTS Commercial strategy Our Channel Partner strategy Developing our people Our new learning management system see pages 22-23 for more information see pages 28-30 for more information Successful evaluation Our Digital User software evaluated to be built-in to Channel Partner hardware Giving something back Working with Julian House see pages 24-25 for more information see page 31 for more information FINANCIAL HIGHLIGHTS Revenue £1.93m Loss per share 13.04p Loss for the year £5.91m Cash and cash equivalents £7.88m Actual Experience plc Annual Report 2019 11 Financial statementsOther informationGovernanceStrategic reportThe challenge THE CHALLENGE The human experience of a digital business has a direct impact on its brand reputation, productivity and ultimately operational costs disrupted experience Representing human experience (HX) is the fundamentally unique capability of our analytics. Our HX represents a proxy of how a human user would describe their experience of a digital service or application, if you were to ask them. A low score indicates a poor and variable experience, a high score indicates good and consistent experience with no variability. 12 Actual Experience plc Annual Report 2019 HX SCORE 60 Lots of digital disruption, 2hrs lost in an 8 hour working day, for one employee At a digital quality score of 60, a user would lose around two hours a day to inconsistency and poor quality digital experience. For a Fortune 500 Company, with just 20% digital business processes, a digital quality score of 60 would cost around $400m in lost staff time a year. $400m lost in staff time “We have been able to establish a relationship between our HX score and the amount of time wasted by a person waiting for the digital world to respond.” Professor Jonathan Pitts Chief Science Officer smooth experience 70 Typical digital disruption, 1hr lost in an 8 hour working day, for one employee When first introducing our analytics, customers typically have a digital quality score of between 60 and 70. For a Fortune 500 Company, with just 20% digital business processes, a digital quality score of 70 would cost around $200m in lost staff time a year. $200m lost in staff time 80 Minimal digital disruption, no time lost in an 8 hour working day At a digital quality score of 80, a user would be at their most productive. There is no wasted time. $0m lost in staff time Actual Experience plc Annual Report 2019 13 Financial statementsOther informationGovernanceStrategic reportHow we meet that challenge OUR VALUE PROPOSITIONS HOW WE MEET THAT CHALLENGE Four innovative analytics based Human Experience offerings developed for our Partners to provide to their customers OUR ANALYTICS Professional Services offerings 1. Audit Calculating the financial impact of poor human experience 2. Protect Protecting brand and productivity during major digital transformations 3. Improve Recover lost productivity and achieve best in class Managed Services offering 4. Assure Diagnose human experience problems as and when they appear 14 Actual Experience plc Annual Report 2019 The value to our Partners is… Differentiation OUR CHANNEL PARTNERS VALUE DELIVERED Improves their customers' productivity and online brand Enhance brand perception Improved operational efficiency Improve productivity Large scale global blue chip enterprise 7 million calculations per minute per customer Actual Experience plc Annual Report 2019 15 Financial statementsOther informationGovernanceStrategic reportChairman's statement CHAIRMAN’S STATEMENT As we closed out the 2018 Financial Year, we did so with a sense that our Financial Year 2019 (FY19), the year we are reporting on, would mark an inflection point for Actual Experience. We had secured our first two significant customer deployments and were experiencing growing momentum with our Channel Partners. We had proven the potential of our unique technology and had invested in our operations, infrastructure and capabilities to be able to implement and support significant deployments at scale. While there were successes through FY19, including the signing of two new ‘land and expand’ type customer engagements and Vodafone’s successful evaluation of the deployment capability of our digital user software onto their uCPE devices, it would take another year of detailed discussions with our Channel Partners for us to jointly find the optimal ‘recipe’ to target their extensive customer bases. As we enter FY20, we believe that we now have the right go-to-market strategy to drive greater new customer wins via our Channel Partners. This new approach shifts initial customer engagement from IT-focused managed service offerings, in which our analytics were predominantly used by the IT division within a business, to a more business oriented Professional Services approach, targeting the leadership teams within enterprises. We believe our analytics will be used to deliver paid-for impactful 1-3 month analysis of an organisation’s digital ecosystem, quantifying the time lost to the enterprise through poor human experience associated with their digital offerings and infrastructure. The resulting short, high impact reports provide a compelling business case for progression onto identifying ongoing digital improvement opportunities, following our existing recurring AaaS revenue model. This new approach aims to shorten sales cycles, grow our applicability and deliver value to customers significantly faster. Financials and cash The Company continued to make financial progress in the year. Revenue for the 12 months increased 79% to £1.93m (FY18: £1.08m), largely as a result of the annualisation of the two large customer engagements secured in the prior year. The Company exited the year with Annualised Recurring Revenues (“ARR”) of £2.0m (FY18: £1.6m). Cash as at 30 September 2019 was £7.9m (FY18: £10.8m). 16 Actual Experience plc Annual Report 2019 Shareholders and Placing We are grateful for the ongoing support of our investors. The Placing in July 2019 has extended the period in which we have the ability to support the future potential development of the Partner channel. The results being achieved by our Partners and their end customers in terms of improved human experience, are being noted within the broader market. This is generating a number of enquiries and we are in active discussions with potential additional partners. This growing awareness of Actual Experience and our Human Experience Management capability bodes well for the future and the funds from the Placing, combined with the work we have carried out to refine our Partner go-to-market strategy, mean we have the ability to support new Partners as soon as they are signed. People Actual Experience continued to welcome many talented individuals to the Company through the course of the year. On behalf of the Board, I would like to take this opportunity to thank our staff in both the UK and US for their dedication to the business. Their hard work is the foundation of our success. Outlook We are actively seeking new business opportunities and progressing discussions with our existing Partners. While the extension of current contracts and the timing of new contracts remains uncertain, these discussions are well progressed and are expected to result in additional new revenue for the Group. Furthermore, the Group is proactively restructuring the business to align itself with the evolved sales model, which will result in a reduction of the cost base over the next 12 months as well as delivering operational efficiencies. The anticipated revenue growth and reduction in the cost base will ensure that the Group maintains sufficient liquidity to meet its ongoing needs. The Financial Review gives further comment on the liquidity position. We believe the opportunity for Actual Experience remains significant. We have no direct competitors, successful customer deployments, a significant market opportunity and the Partners with which to address it, together with a broadening route to market. Consequently, the Board believes we have the ability to become a significant global player in the market for Human Experience Management and hopes to report further successes to you later this year. Stephen Davidson Chairman 22 January 2020 Investment case Unique patented IP We have developed unique IP that allows us to deliver differentiated value propositions for our Channel Partners and their customers. We have patents granted in the US, China, Europe, and over ten years of research and development expertise. Large addressable market In the UNCTAD 2019 Report total e-commerce sales were measured at $29.4t 2017 $25.3t Scalable technology Our Digital Users are lightweight software that can be built into both the software and hardware that supplies digital journeys globally. Being built into the products, as well as the services, provided by our Channel Partners will enable us to reach more deeply into the Global Digital Economy as we become integral, rather than additional, to the services provided by our Channel Partners. Large Channel Partners engaged Our Channel Partners are some of the largest service providers in the world; building our analytics into their products and processes will enable us to scale quickly and reach further into the Global Digital Economy. Funds available to accelerate deployment We exited 2019 with £7.9m cash Actual Experience plc Annual Report 2019 17 Financial statementsOther informationGovernanceStrategic reportMarket overview MARKET OVERVIEW Our mission is to make the Global Digital Economy work properly From the work that we do with our Partners for multi-national corporates we know that significant productivity losses are occurring in the Global Digital Economy due to poor human experience. MARKET POTENTIAL $29.4t Ecommerce market (UNCTAD 2019) Recent Human Experience Audits have revealed productivity losses of $100-$500m per annum per enterprise business. The Global Digital Economy now accounts for a third of the world’s economy and this is accelerating as profound market trends enable businesses to enhance their value propositions to their customers. 18 Actual Experience plc Annual Report 2019 MARKET TRENDS Internet of things (IoT) Expansion of 5G The IoT has allowed completely new value propositions to be conceived and new businesses to be built. In 2018 there were more things (8.6bn) connected to the internet than people (5.7bn). Fifth generation (5G) wireless technology will act as an accelerant to businesses as it allows staff and customers to be connected at high speed anywhere and all the time. 5G networks can process around 1000 times more data than today’s systems. Source: UNCTAD, 2019. Source: Afolabi et al, 2018. Cloud computing infrastructure Increasing use of AI Cloud computing is helping businesses move faster. It can rapidly deliver new processes which accelerate the rate at which new propositions are developed. Gartner predicts the worldwide public cloud service market will grow from $182.4bn in 2018 to $331.2bn in 2022, attaining a compound annual growth rate (CAGR) of 12.6%. Source: Gartner.com Artificial intelligence, augmented intelligence and machine learning are all releasing humans to do more valuable and creative tasks whilst software robots tackle more intense administrative work. It has been estimated that this general purpose technology has the potential to generate additional global economic output of around $13t by 2030. Source: ITU, 2018. Actual Experience plc Annual Report 2019 19 Financial statementsOther informationGovernanceStrategic reportBusiness model BUSINESS MODEL Our unique IP allows us to deliver high value to our stakeholders Human Experience (HX) is the fundamentally unique capability of our AaaS. In an increasingly digital world business leaders are taking ownership of digital strategy. They are doing this because they know that staff productivity and their online brand rely on the digital world working properly. Annuity revenue model We provide Analytics-as-a-Service (AaaS) to our Channel Partners. They are able to build this into their solutions, hardware and software that they provide to customers. This gives them the actionable insight needed to improve their customers’ digital journeys. We sell our Channel Partners analytic capacity in our Analytics Cloud. The greater the required capacity, the greater the fee. We believe, on the basis of our experience, that the revenue to us, from a Channel Partner's enterprise customer, can be $500k per annum or more. Our Channel Partners have hundreds of customers at the scale of those deployed this year, and thousands of small and medium-sized business customers. Digital Users (DUs) are licensed for free. This enables customers to install them wherever they may need them. Fees are charged on a per analytic basis, for analysis of the DU measurements. As we have seen in this past year, some customers will deploy at full scale immediately and some will grow to full scale over a longer period. Full adoption of Actual Experience within a Channel Partner’s customer is expected to take from 12 months to two years. KEY STRENGTHS Intellectual property Patents We have patents granted in the US, China and Europe. Trade secrets It has taken the last 10½ years, since the creation of the Company, to make the patented technology work effectively in the real world. Expertise Within the R&D team we have particular expertise in the field of mathematics, and in Sales we have extensive experience in understanding the operation of Channel Partners. Process and platform Our AaaS platform has been live since 2011, with continual improvements being made. The value proposition is now firmly established amongst our Channel Partners. Channel partnerships We are focused on developing relationships with large Channel Partners, who have access to an enormous number of business and consumer customers. First mover advantage Although there are many vendors targeting budgets for the improvement of digital journeys, the Board remains convinced that we are uniquely positioned amongst these vendors because of our ability to analyse complex digital supply chains. “The real progress in the year has been the pivot in our Partners' thinking, which has resulted in a partner led change to our sales model from managed services to professional services as a way of initiating quicker and broader customer engagements.” Dave Page Chief Executive Officer 20 Actual Experience plc Annual Report 2019 HOW WE GENERATE VALUE WHO BENEFITS AaaS Our AaaS provides actionable information for our Channel Partners. They can use this information to improve the HX of their customers' digital journeys. Using our analytics, businesses can manage and improve the HX of their digital ecosystem, so that staff productivity is improved and online brand is protected. Scalable operating model We have invested considerable time and effort working with our Channel Partners to be built into their customer offerings. We will continue our focus to be built, not only into their solutions but also, into their software and hardware. Channel Partners will increasingly become able to scale the rollout of our AaaS independently, and in maturity they will require minimal support from Actual Experience. Vast market opportunity Our AaaS improves the quality of the HX's that make up the $29t Global Digital Economy. As the number of transactions and value that take place digitally increase, the need to manage and improve consistency and value to support the Global Digital Economy will only become more important. Channel Partners Our AaaS improves the operational efficiency of our Channel Partners, reducing the cost of service delivery and differentiating their offerings in the market. End users Clients, their staff and customers Business leaders are increasingly aware that the productivity of their staff and the satisfaction of their online customers relies heavily on the consistency of their digital business. With Actual Experience, they have actionable information to continuously improve their digital business from a HX perspective. Shareholders Long-term capital growth With our long-term aim of being built into the solutions, software and hardware supplied by our Channel Partners, Actual Experience will be positioned to become the HX management system to the entire Global Digital Economy. Successful execution with our existing Channel Partners will lay the foundation for enormous growth potential in the next 10 years through our existing and new Channel Partner relationships. Employees Actual Experience is dedicated to ensuring the happiness and success of our employees. We provide rewarding careers at the cutting edge of technology: staff are encouraged to grow with the business and are provided with regular opportunities for personal development. Actual Experience plc Annual Report 2019 21 Financial statementsOther informationGovernanceStrategic reportCommercialisation strategy COMMERCIALISATION STRATEGY Our Channel Partner strategy provides us with a scalable way of addressing a significant portion of the Global Digital Economy COMMERCIALISATION ROAD MAP Signing Partner framework agreements Work to get Partners in production* Small customer production deployments *POC, trial customer deployments, process integration, sales training As the profile of our business has increased through successful customer deployments, we have been approached by a number of potential new Channel Partners with similar customer bases to our existing Partners. 22 Actual Experience plc Annual Report 2019 Commercial rollout We remain focused on being built into the solutions, products and services of our Channel Partners. This built-in model means that we can be automatically sold as an intrinsic part of the offerings consumed by our Channel Partners’ customers, rather than sold individually to each customer on every occasion. Whilst this model has attractive scaling properties, it does take significantly longer to become built-in than the more common reseller approach. Our recent Vodafone announcement relating to their uCPE programme is an early indication of our Partners' desire to build us in to their products. WHERE WE ARE TODAY Large customer production deployments Built into Channel Partners’ hardware and software Systemic channel revenue at scale Global expansion beyond four current Channel Partners FOCUS ON 4 PARTNERS Product development and innovation simplifying our product We have been working on ensuring that our product is simple to deploy and use. Therefore, our Channel Partners and their customers can readily access the power and full capability of our analytic solutions. This will result in a significant reduction in the skill and knowledge required by Channel Partners and deliver value to their mid-tier and SME customers. Integrated sales process We are developing a more integrated sales process with our Channel Partners, ensuring that we make the most of the opportunity that this year’s large scale deployments have given us. We have allocated increased resources and subsequent land and expand deployments have followed. To support our Channel Partners, our sales and marketing teams are focusing on ensuring that they have the tools they need to effectively bring our proposition to their customers. We have not only provided web based training but also increased digital marketing activities to further enhance their offerings. Actual Experience plc Annual Report 2019 23 Financial statementsOther informationGovernanceStrategic reportStrategy in action STRATEGY IN ACTION FIRST SUCCESSFUL EVALUATION of ‘built-in’ with Vodafone 24 Actual Experience plc Annual Report 2019 “The trial showed we could easily deploy the Digital User onto our uCPE devices. Our desire is to give enterprises more control over their network analytics in line with our strategy of building superior Gigabit networks.” Gavin Young Head of Fixed Access Centre of Excellence, Vodafone Value for end user and Channel Partner Without the actionable evidence provided by Actual Experience's HXP report, this major government department would have had no benchmark of success regarding their digital transformation. Furthermore, the evidence regarding the direction of Zscaler traffic helped remove the guesswork involved in launching new services right first time. Preparation for commercial rollout with Vodafone We have been successfully evaluated by Vodafone to be ‘built-in’ to their Universal Customer Premises Equipment (uCPE). This equipment is typically deployed to customer sites by a service provider. This is a landmark development for Actual Experience, representing the successful achievement of another key strategic milestone on the pathway to the generation of recurring revenue at scale with minimal set-up costs. Actual Experience’s digital quality analytics will be built-in to the uCPE. Each uCPE will be ready to be activated if Vodafone’s enterprise customer chooses to utilise the analytics service. It is anticipated this will both significantly reduce the sales cycle for customer engagement and increase the speed of deployment. Being ‘built-in’ means that our software would be shipped as a standard service component to all uCPE customer sites, which entirely removes the need for the current deployment phase of our service. WORKING WITH OUR CHANNEL PARTNERS Case Study Challenge A major government department was planning to upgrade its internally deployed security however the proposed migration to Zscaler had raised questions around the impact it would have on the human experience of the department’ business critical applications and whether this would, in turn, affect staff productivity. They therefore needed to ensure the project was fit for purpose before migrating its staff. How Actual Experience helped The department needed tangible evidence that staff productivity would not be at risk due to its proposed security migration. With the help of Actual Experiences Human Experience Protect (HXP) service, they were able to quantify the HX of Zscaler’s security solution prior to deployment and quickly understand that for all sites, digital quality and therefore staff productivity could be maintained at each stage of the migration. The HXP report went on to provide actionable insight as to which global Zscaler domains would be the best to direct traffic towards achieving optimal potential human experience. This was information that neither Zscaler nor their Internet Service Provider could offer their client. Actual Experience plc Annual Report 2019 25 Financial statementsOther informationGovernanceStrategic report Chief Executive's statement PROGRESSING TOWARDS OUR GOALS 1 – 5 years Making the science work The first five years at Actual Experience were mostly focused on making Prof Pitts’ equations – resulting from years of academic laboratory research, work properly in the real world of the Global Digital Economy. CHIEF EXECUTIVE’S STATEMENT The 2019 financial year saw the business secure notable commercial milestones, giving us confidence in our technology and that we are heading towards successful commercialisation and revenue acceleration. However, the real progress in the year has been the pivot in our partners thinking. This has resulted in a partner led change to our sales model from managed services to professional services as a way of initiating quicker and broader customer engagements. In close conjunction with our Channel Partners we have sought to evolve our technology offering and service proposition. Our messaging and solution is more sharply focused on the negative impact of sub-optimal Human Experience on brand and productivity. Instead of interacting only with the IT departments, the professional service offerings target business leaders with insight into the cost to their business of poor Human Experience. While there has been some frustration both for us and our Partners at the time it has taken to convert their sales pipelines, we believe the launch of our Partners’ professional services offerings will shorten sales and deployment cycles, deliver value to customers significantly faster and provide a scalable means of addressing both the enterprise and mid-tier markets. Link between Human Experience and Productivity We have been able to establish a link between our proprietary Human Experience scores and the amount of time an employee wastes each day waiting for business applications to respond. Wasted employee time can be readily converted to wasted payroll, providing a clear financial measure as to the cost of poor human experience. Typically one to three percent of a company’s payroll is used to pay staff to do nothing; by way of an example, recent analysis of two blue chip businesses produced wasted payroll numbers of $139m and $400m respectively. Now, by offering to audit a company’s digital business, our partners can rapidly produce a wasted payroll estimate, which can establish the business case for ongoing work to improve human experience and recover lost employee time and wasted payroll. This Human Experience audit capability has been the catalyst for the transformation of our relationships with Verizon and other active and potential partners. 26 Actual Experience plc Annual Report 2019 Important Commercial Milestones in 2019 We received a new open purchase order (“PO”) from one of our Channel Partners in February 2019. This PO was in addition to the orders received in 2017 and 2018. The expansion of the Open PO was encouraging and confirmation that our Channel Partner is confident in our ability to deliver at scale and provide tangible benefit to their customers. Product Development By focusing on simplification and automation, we are continuously reducing the level of skill required to deploy and use our Analytics-as-a- Service (AaaS), thus enabling Channel Partners’ to deploy our technology more easily, at larger scale, quicker, and to address mid-sized customers. We are also focused on enabling our technology to be integrated into hardware, software and other Partner offerings. Over time, this means that our technology can be included as part of the delivery of a Partner’s own products and services to its customers. Because our technology can improve the human experience of arguably any digital service offering from our Partners, that ability to be built into these offerings means that a Partner could address most if not all its customers with our value propositions. This has clear and exciting implications for our ability to address a significant amount of the global digital economy. Current trading and outlook We have been working hard for over ten years to reach this point and to move into our next chapter of growth. The growing awareness of Actual Experience in the market, resulting in enquiries from potential new partners, and the acceleration of activity at Verizon in particular, along with the continual alignment of our business towards the professional services offerings of our partners, means that we head into 2020 with optimism for the potential of the year ahead. Dave Page Chief Executive Officer 22 January 2020 We were pleased to secure two significant ‘Land & Expand’ deployments through the course of the year. Our Channel Partners’ customers are typically large global blue-chip enterprises. These opportunities tend to start small and grow to full scale within two years, with the potential to deliver revenues in the order of $500,000 per annum per customer to the Company. One of these deployments has already started to expand, thereby providing good strategic validation. These deployments represent satisfying progress with managed service offerings based on our analytics. We do, however, expect the new professional services offerings to contribute to an acceleration of deals and revenue in 2020 and beyond. We were delighted to announce the major milestone of the successful evaluation by Vodafone of our product. Vodafone assessed the deployment capability of our product on Universal Customer Premises Equipment (uCPE). This means that our product can be quickly deployed if a customer has a uCPE device installed. Sales and Marketing As our partners develop their relationships with us over time, our engagement approach had naturally shifted from business development to sales. 2019 has seen the most significant changes in our sales personnel and processes in the history of our Company. Positively, this reflects the broadening and accelerating nature of certain key partnerships. Typically, when we employ salespeople to work with one of our partners, we expect them to have worked in sales at that partner or to have spent time selling software to that partner. Equally, in terms of process, as the number of pipeline opportunities increases, we have matched this with a rigorous sales culture. We have been supported in this endeavour by Duncan Mitchell who was until recently Senior Vice President at Cisco Systems. 6 – 10 years 11 – 15 years Commercialisation Once Prof Pitts' research had been converted into a working technology, we launched Human Experience AaaS and focused on productisation and the commercialisation of the partnerships we were developing with what are now our four major Partners. Revenue growth As we enter this period, our Partners have already deployed our AaaS at several high-profile blue-chip customers. We now expect revenues to accelerate as we increasingly tap into the full scale of our Partners customer base. Actual Experience plc Annual Report 2019 27 Financial statementsOther informationGovernanceStrategic reportOur people OUR PEOPLE We encourage our diverse and talented team, creating an environment where they can enjoy coming to work, have fun and thrive in their careers while meeting their personal development goals. Learning Management System Our success as a business depends on our ability to recruit the best people and support their continued development. In FY18 we rolled out a new learning management system (LMS). Initially focused on compliance modules, during the past twelve months we have developed a range of learning content covering our product architecture and features and career development. Everything we deploy on the LMS meets accessibility guidelines. In this way our team can learn on a smartphone, tablet or laptop whenever it fits into their day. In partnership with our sales team, we have enrolled almost 50 employees from our Channel Partners onto the LMS. Each Channel Partner has their own dedicated area with access to tailored product training material updated with each new feature they deploy. The LMS is an excellent learning tool with the potential to reduce our impact on the environment. One example of this is our transition from paper-based Display Screen Equipment questionnaires to digital training and assessments. This development has brought an important but potentially tedious task to life with engaging content and has significantly reduced our paper consumption. Our people are key to our success Personal Development Plans Supporting personal and professional development was an important focus area for HR and managers in FY19. Using our LMS, we deployed a module focused on Personal Development Plans (PDPs). This has helped our team to prepare and write a PDP. Content was tailored for each team with a personal message about development written by the team leader. The LMS was set up to provide a repository for PDPs and enable manager reviews and feedback. Our Development and Operations departments have extended this activity and created career management LMS modules. These help to map out potential career pathways for our employees. They also provide the opportunity to explore career options and understand what skills are needed to progress when an opportunity arises. Our next step is to develop content for line management positions, supporting the business to grow its own management talent. 28 Actual Experience plc Annual Report 2019 Our focus We attract the best talent The market for talent within the IT and software industries is very competitive. We have built our Bath HQ and employee benefits package to enable us to compete with the big technology companies in the south west. Our employees enjoy a relaxed and vibrant office environment where we support them to be the best that they can be, achieving success in their roles and developing their careers and personal goals. We equip our people with the right skills We recognise that enabling our employees to continue to develop, learn and grow is integral, not only to their success as individuals, but also to our success as a company. We care what our people think We encourage our employees to take part in our six-monthly Employee Engagement Surveys. These surveys act as a temperature check for our business. Gathering the feedback of our staff enables us to understand what is important to them and to introduce improvements throughout the business. We support the local community As an employer in Bath, we recognise that we have an impact on the local community. Our employees are encouraged to support local charities and get involved in the community. see page 31 for more information We encourage diversity within our team We believe that diversity of experience and background within teams encourages creativity. We have policies and procedures in place to support all employees. While our gender split continues to be better than the industry average, at 25% female, we are proactively looking to improve this as we believe in the importance of our team's reflecting the customers we serve. 67 Male employees 22 Female employees Total staff split by gender Actual Experience plc Annual Report 2019 29 Workplace Wellness We recognise the important role we play in improving our employees’ health and wellbeing. Our team have busy and at times stressful lives and we care about creating a positive work environment in which people can thrive. We encourage employees and managers to talk about mental and physical health and wherever possible we try to help our employees through challenging times in their lives. Our workplace wellbeing strategy focuses on the stakeholders involved in creating a healthy workplace. In FY19 we partnered with Bath Mind to deliver line manager mental health awareness training. This prepares our management team to recognise the signs of mental ill health and know how to signpost employees for support. We have also trained two employees to be Mental Health First Aiders complementing our existing team of First Aiders. We run a weekly yoga class in the office and recognised several national wellbeing weeks during FY19 with a range of activities including mindfulness sessions. Future developments include a wellbeing section in our LMS. This will be a self-service tool helping our team to access resources on physical, mental and financial wellbeing. Financial statementsOther informationGovernanceStrategic reportOUR PEOPLE continued EMPLOYEE IN FOCUS Renée Jacobs EMPLOYEE IN FOCUS Ali Gregory I have worked at Actual Experience for 3 years now. I joined Actual as Dave's Executive Assistant. I was very excited about joining a growing company, with an interesting and different technology. At the time, I saw Actual's offering as potentially game-changing, and I still do. I have been very fortunate that I have been able to take full advantage of the opportunities offered to me during my time at Actual. Working with Dave gave me an excellent insight into the business. I was also able to manage our Investor Relations programme, which was both interesting and challenging. Now I am supporting the business in Project Management. I am grateful to everyone at Actual for supporting me to move into Project Management at a time in my life when I needed to adjust my work-life balance but wanted to continue to focus on my career. Not only have I been able to gain my Prince 2 Agile Project Management certification, Actual have also supported me in working flexibly, helping me to spend time with my young family. As an early recruit in 2010, while finishing up my engineering degree, I was responsible for manually running our analytics engine and generating reports on a daily basis. As we developed the product I worked with our delivery team to set up our first customers and over the next few years was responsible for deployment of the "Actual Home" project which led us to delivering groundbreaking data to Ofcom. Working in a small but growing team early in my career gave me opportunities to work closely with and learn quickly from the best in the business. Working at Actual I was given the flexibility to continue to pursue some sporting endeavours around work while expanding my knowledge on all things human experience and the tech world. As my sporting career ended in 2016 I took on a deployment role dedicated to one of our Channel Partners. Working closely with our sales team I had the opportunity to represent Actual Experience at sales events across Europe and the US gaining significant sales experience and building important relationships in the channel. During this time I was responsible for designing and implementing our largest customer deployment to date. Having covered a broad pre and post-sales role since 2016 I have recently moved to a more sales and pre-sales focused role as a Solution Architect and look forward to helping grow Actual Experience further in 2020. 30 Actual Experience plc Annual Report 2019 WE CARE ABOUT PEOPLE GIVING SOMETHING BACK Work in the local community Building on our volunteering and fundraising last year, we established an employee-run charity team in FY19. We asked employees which charity we should support and they voted for Julian House, a homeless charity based in Bath. We have raised over £1,600 for Julian House in FY19, with our employees taking part in events such as the Bath Boules, the Big Sleep Out and the Circuit of Bath Walk. “Julian House are incredibly grateful for the continued support of Actual Experience. Their help frequently goes beyond financial donations and we benefit heavily from engagement of the team including their participation in Julian House events, as well as their vital volunteer support and workshops for Julian House staff. We are delighted to have such strong links with the team and organisation as a whole, who help us to continue to positively benefit the community of Bath and the South West.” Jess Gay Senior Community and Events Fundraiser Working with Julian House In addition to our charity work, we’ve looked at other ways in which we can fulfill our corporate social responsibility. We changed our cleaning provider in FY19 to a company with a clear environmental policy. We’ve reduced and where possible eliminated single use plastic packaging in daily consumables such as tea, coffee beans and sugar. Our employees proposed removing waste bins at every desk and introducing a food waste bin in the office. We’ve also considered the deliveries that arrive at our office each week. By coordinating this activity we have reduced transport pollution by consolidating single items into one larger combined order. We’ll continue the focus into FY20 with recycling a wider range of materials, introducing more eco-friendly cleaning products and extending our removal of single use plastics across the office. Actual Experience plc Annual Report 2019 Actual Experience plc Annual Report 2019 31 31 Financial statementsOther informationGovernanceStrategic reportOUR LEADERSHIP TEAM LEADING THROUGH Our People We asked our Leadership Team to look ahead to the forthcoming year and how they are going to make it a resounding success within their teams... Dave Page Chief Executive Officer This year, we expect to see the acceleration of our transition from five years of productisation and Partner commercialisation to more systematic Partner revenue growth. This is therefore a critical period, and because of that my focus will be on making sure that our staff have the environment where they can flourish and excel, that we have laser focus on helping our Partners differentiate themselves whilst delivering new insights and value to their customers, that we relentlessly focus on a sales led and customer focused culture, and ensure that science-led product innovation at Actual Experience continue. 32 Actual Experience plc Annual Report 2019 Ben Burns Chief Product Officer Product’s purpose is to distill the corporate vision into an innovative and market-leading service, delivering clear customer value in-line with the business’ objectives. The current roadmap focuses on strategic differentiation through innovation, simplification to eliminate complexity and drive high-scale deployment/ use, whilst maintaining flexibility to respond to tactical requirements from our customer base. This approach is aimed at enabling Channel Partners to take full ownership of the product lifecycle, as an embedded part of their business processes and go-to-market. Steve Bennetts Chief Financial Officer I'm privileged to lead an outstanding finance and legal team at the heart of the company, providing optimal support to all parts of the business while ensuring the highest standards of stewardship and control. Effective and timely planning and reporting are critically important tasks that help ensure that accurate and relevant data continues to drive our important business decisions. Robin Young Chief Operating Officer Operations exist to support all of our customers post the sales experience. Our teams manage Partners through product deployment, use of analytic data, testing, change management, hosting, information security, in-house technology, problem resolution and ongoing 24 hour helplines. With the impending increase in customer numbers; the teams are focussed on a seamless scaling of each function using prepared people, capacity and training plans. Martin Woods Chief Technology Officer By continuing to innovate with our human experience algorithms we will make it ever simpler for our customers to manage the human experience of their digital business and introduce intuitive new insights over time. We'll also actively continue to find and implement ways to improve the flow of work through Research & Development so that we can deliver increasing value to the business. Nick Gordon Chief Customer Officer I’m tremendously excited about this financial year as we continue to build trusted relationships with our existing and potential new Partners and diverse routes to market for us to reach both enterprise and mid market customers, worldwide. We now have the ability to sell alongside our Partners into large, bespoke, enterprise opportunities; sell through them into their mid market customer base and to embed our solution into their technology offerings, such as pre-loaded software inside universal CPE. I believe this will be a breakaway year for us as we deliver upon the potential of the foundations that have been built over the past decade. Actual Experience plc Annual Report 2019 33 Financial statementsOther informationGovernanceStrategic reportFinancial review FINANCIAL REVIEW Financial Review Revenue recognised in the year ended 30 September 2019 was £1,934,082 (2018: £1,076,463) and relates to the supply of analytical services and associated consultancy activities to customers. 99% of revenue was derived from sales to Channel customers (2018: 95%) with the balance arising from direct sales. This high percentage reflects the Group’s strategic focus on generating revenue growth from its Channel Partners. Gross profit The gross profit for the year was £790,966, a significant improvement from the prior year (2018: loss of £88,645). This reflects the inherent scalability of our business model as well as improved operational efficiency as the Group continues to provide full support to its Channel Partners. Expenses Administrative expenses comprising R&D, operational support, sales and marketing, finance and administration costs, and foreign exchange gains and losses, totalled £7,050,417, a decrease of £243,055 compared to the prior year. This decrease reflects the focus on effective management of the Group’s expense base, as well as greater operational efficiencies. Personnel costs continue to be the largest expense and represent approximately 81% of the Group’s cost base. The functional cost breakdown is as follows: Administrative Expenses Research and development Operational support Sales and marketing Finance and administration Foreign exchange gains Total 2019 £ 2018 £ 2,546,368 2,555,825 1,112,153 1,120,428 2,403,106 2,559,403 1,066,049 1,101,868 (77,259) (44,052) 7,050,417 7,293,472 Tax The tax credits recognised in the current and previous financial year arose from the accrual of R&D tax credits. Loss for the year Losses after tax totalled £5,911,950 (2018: loss of £7,211,796). This reduction in losses is the result of significantly higher revenues and a decrease in administrative expenses, which reflects a continuing focus on rigorous expense management as well as operational efficiencies. Loss per share The loss per share for the year was 13.04p (2018: loss per share of 16.08p). The reduction in loss per share reflects the decrease in total comprehensive loss for the year as well as an increase in the weighted average number of ordinary shares in issue. “The significant improvement in gross profit reflects the inherent scalability of our business model as well as improved operational efficiency.” Steve Bennetts Chief Financial Officer 34 Actual Experience plc Annual Report 2019 After making appropriate enquiries and considering the assumptions and uncertainties described above, the Directors consider that it is appropriate to adopt the going concern basis in preparing the consolidated financial statements. Accordingly, the financial statements do not include any adjustments which would be required if the going concern basis of preparation was deemed to be inappropriate. However, if the Group is unable to deliver the proposed revenue growth and cost reductions, it would give rise to a material uncertainty which may cast significant doubt about the Group’s ability to continue as a going concern. Key performance indicators As the Group is in the process of development and commercialisation of its services, the Directors consider the key quantitative performance indicators to be sales revenues of £1,934,082 (2018: £1,076,463) and the level of cash held in the business of £7,876,634 (2018: £10,776,516). The Board performs regular reviews of actual results against budget, and management monitors cash balances on a monthly basis to ensure that the business has sufficient resources to enact its current strategy. Certain non-financial measures, such as the number of active customers and deployed Digital Users, are monitored on a monthly basis. The Board will continue to review the KPIs used to assess the business as it grows. Steve Bennetts Chief Financial Officer 22 January 2020 Dividend No dividend has been proposed for the year ended 30 September 2019 (2018: £nil). Cash flow We are investing in the growth of our operations to address what we believe to be a significant commercial opportunity and our cash flow from operations was therefore negative during the year ended 30 September 2019, and in line with expectations. The Group's costs are mostly operating related, with very little investment required for capital infrastructure. Cash used by operating activities was £4,418,091 for the year, compared to cash used of £6,433,222 for the year ended 30 September 2018, with the improvement reflecting the reduction in losses. This operating cash requirement was substantially funded by cash reserves, which were augmented by net proceeds of £2,782,833 from the July 2019 Placing. The Group ended the year with cash totalling £7,876,634 (2018: £10,776,516). Free cash flow for the year was £(5,629,771) (2018: £(7,629,560)). Free cash flow is defined as net cash flows used in operating activities, plus development of intangible assets, plus purchase of property, plant, and equipment. Software development capitalisation The Directors believe that the software development capitalisation criteria in IAS38 have been met and accordingly development costs, net of amortisation charges, of £1,792,465 have been capitalised as at 30 September 2019 (2018: £1,579,227). Accounting policies The Group’s financial statements have been prepared in accordance with International Financial Reporting Standards. The Group’s significant accounting policies have been applied consistently throughout the year. Principal risks and uncertainties and going concern As in previous years the Group has continued to utilise its cash resources to fund losses whilst the sales pipeline is being established. The cash balance as at 30 September 2019 was £7.9m which will provide the Group with sufficient resources to meets its liquidity requirements for the next 18 months, based on its current forecast of sales growth and cost efficiencies. We are actively seeking new business opportunities and progressing discussions with our existing Partners. As at year end, the extension of current revenue contracts and the timing of new revenue contracts remains uncertain. However, the discussions are well progressed and are expected to result in additional new revenue for the Group. Furthermore, the Group is also proactively restructuring the business to align itself with the evolved sales model which will result in a reduction of the cost base over the next 12 months as well as operational efficiencies. The revenue growth and reduction in the cost base will ensure that there is sufficient liquidity for the Group’s needs. Actual Experience plc Annual Report 2019 35 Financial statementsOther informationGovernanceStrategic reportPrincipal risks and uncertainties PRINCIPAL RISKS AND UNCERTAINTIES Risk management framework In common with all businesses, we are exposed to risks and uncertainties as an inherent part of creating value for our shareholders. The Board recognises that effective risk management is fundamental to the Group’s ability to meet its strategic objectives and it is the Board’s responsibility to ensure that risk is appropriately managed across the Group. The identification of risk therefore continues to be an important activity and effective risk management is ingrained in all aspects of our business. The Risk Committee is chaired by Non-executive Director Paul Spence and has functional representation from senior management, including the CEO and CFO. The Committee meets at least twice each year and reports their findings to the Board. The Risk Policy defines how and at what frequency risks shall be reviewed. The Executive Risk Committee meets regularly and membership is made up of key operational managers. Each representative is responsible for the evaluation and implementation of risk mitigation within their functional areas. It is the responsibility of the Executive Risk Committee to maintain the master risk register. This register lists recognised risks and categorises them into risk themes. Resource and mitigation priorities are assessed based on likelihood and impact of risk occurrence. Principal operational risks The key challenges, risks and uncertainties facing the Group arise from the early stage of the Group’s maturity, the anticipated rapid growth in its operations, and the constantly changing nature of associated technologies such as mobile telephony and cloud computing. The Group’s financial risks are detailed in note 4 to the consolidated financial statements. The Board considers that the principal operational risks to achieving our strategic objectives are as summarised on the opposite page. Risk governance overview Actual Experience Board (Risk Related Activities) • Agrees Risk Governance framework • Sets level of Risk Appetite • Approves Risk Policy Board Risk Committee Terms of Reference • Reviews risk management framework and effectiveness • Reviews key residual risk • Recommends to Board appropriate levels of appetite • Recommends changes to policy Executive Risk Committee • Operational review and management of risk • Allocation of risk to owners and agree risk assessment • • Funding and resource allocation Implementation of risk mitigations Master Risk Register 36 Actual Experience plc Annual Report 2019 Description of risk Mitigation of risk Technology ownership, change and competition Fundamental to the Group’s business is a combination of patents and know-how. Our success will, in part, depend on our ability to maintain adequate protection of this intellectual property and know-how. Our revenue and profitability are affected by the extent to which there is increasing requirement for, and development by our competitors of, additional product features and capabilities. Significant investments are made in new product development to address these requirements, and there can be no guarantee that we will be able to generate sufficient revenue to offset the associated development costs. There are also risks relating to difficulties and delays in the development process of new products and features, and their acceptance by customers. If a future competitor successfully launches new products or features, which we are unable to match, then we could lose market share with a corresponding impact on our operational results. Managing rapid growth The anticipated rapid growth of our business may place a significant strain on our management, operational, and financial resources. If we are unable to address this growth in a timely and profitable manner, as a result of not being able to recruit skilled employees or effectively scale our operations, there could be a material adverse impact on our financial position. Acceptance of the Group’s analytic services and pricing model The Group is at an early stage of development and its ultimate success will depend on the acceptance of its analytical services and pricing model by Channel customers. Successful engagement with large Channel customers typically requires the completion of an extensive on-boarding process and the timescales for this are both lengthy and time consuming. Adequacy of financial resources The current level of cash may be insufficient to support the business through to profitability and positive cash flow. Additional capital may therefore be required in future to fund the business. The Group may be unable to access additional equity or debt capital, or to raise funds on acceptable terms. In the event that the resources available to the Group are inadequate then this could have a materially adverse impact on the implementation of the Group's strategy, its business, financial condition and operations. Dependence on key executives and personnel and recruitment and retention of new talent The Group is dependent on its senior management and skilled technical personnel. Whilst much of the Group’s know-how is documented, senior managers and members of the technical team each contribute valuable skills and know-how to the business and, despite contractual confidentiality agreements in favour of the Group, there can be no guarantee that those individuals will not join competitors or establish themselves in competition with the Group in the future. Failure to retain the services of any of these people may adversely affect the Group’s ability to achieve its commercial objectives. In addition as the Group continues to expand, it is essential that it is able to attract employees of a high calibre to drive its future success. Information security The Group regards information within the business as a key asset and recognises the risk and impact on the business of breaches to the integrity of information relating to the business. Product protection and innovation The Group retains the services of a leading patent attorney and ensures that all reasonable steps are taken to protect its patented technology. In addition, enhanced procedures have been introduced to ensure that critical know-how is identified and recorded, with appropriate controls over access to these records. We have an ongoing programme, both internal and with our commercial Partners, to constantly identify evolving customer needs and potential competitor advances. The resulting feedback informs our new product development priorities and helps to ensure that the Group maintains its technology leadership in the evolving digital quality management sector. We focus our development efforts on features that meet an identified market requirement and are likely to generate sufficient revenue to fund their development. We have developed internal processes for prioritising and reviewing our development projects. Investing in operational excellence The Board and management are continually reviewing and enhancing our internal controls and processes. A critical objective of this analysis is to ensure that capability to scale operations is a core consideration within each business function, and that all functions interoperate efficiently as required to deliver and support our services at scale. Developing improved customer engagement practices Management has acquired considerable experience in partnering with large Channel customers and seeks to apply best practice learning to drive efficiencies and improve its operational capabilities. While prioritising sales efforts on Channel development, the Group will continue to maintain a number of direct customer engagements to ensure a thorough understanding is maintained of both evolving digital quality management practices in the enterprise sector and the pricing characteristics of this service. Expense Control The Group will continue to rigorously manage its cash resources. Expenditure has been reduced from prior levels and management will continue to assess the appropriate levels of expenditure as the business develops. Developing the human resources function The HR function is leading new initiatives and enhancing existing processes with regard to recruitment activities, employment practices and staff benefits. The Group has introduced share-based compensation as a critical element of its ability to attract, retain, and motivate key talent and will continue to issue options in accordance with its policy in this area. The Group has introduced a defined contribution pension scheme, health insurance, life insurance and other employee benefits, ensuring that the Group remains competitive with market practice. Investment will continue to be made in human resource systems and procedures to ensure compliance with legislation and effective interactions with employees. Effective protection of information security and data integrity The Group has in place systems and processes for the classification and control of access to information within a number of areas of the business, and the security around access to Company information continues to be strengthened by the enforcement of enhanced security processes and practices. The level of monitoring performed of the production cloud infrastructure is reviewed regularly to identify any areas that require improvement. The Group is vigilant to security vulnerability announcements in the industry to ensure that any protective action is taken as soon as practicable. Information integrity is protected by regular off-site back-ups, and disaster recovery and business continuity plans are in place to ensure robust sustainability of operations. Pages 2 to 37 of this Annual Report and Accounts comprise the Strategic Report for the Group which has been prepared in accordance with Chapter 4A of part 15 of the Companies Act 2006. Approved by the Board and signed on its behalf by: Dave Page Director 22 January 2020 Actual Experience plc Annual Report 2019 37 Financial statementsOther informationGovernanceStrategic reportGovernance Board of Directors Dave Page Chief Executive Officer Appointed to Board: February 2014 Independent: No Dave was the founding member of the management team at Nexagent, a venture funded software business acquired by EDS in 2008. In 1998, Dave established and led the Consulting team for the $1 billion European Service Provider line of business at Cisco. Before this, Dave worked at IBM Global Services, BT Global Services and NatWest on numerous aspects of corporate IT infrastructure. Steve Bennetts Chief Financial Officer Appointed to Board: February 2014 Independent: No Steve worked as EMEA Finance Director at several Nasdaq quoted technology companies where he gained valuable international experience as well as leading the accounting, HR, legal, and administrative functions. This period included leadership of the team put in place to establish Amazon’s European operations, including managing the early hyper-growth in the UK and Germany. BOARD OF DIRECTORS Providing strong and experienced leadership Stephen Davidson Non-executive Chairman Appointed to Board: February 2014 Independent: Yes Stephen is currently Non-executive Chairman of JSE-listed Datatec Limited and Non-executive Director of Informa plc. In his earlier career, Stephen was CFO, then CEO, of Telewest Communications plc and Vice Chairman of investment banking at WestLB Panmure. 38 Actual Experience plc Annual Report 2019 Robin Young Chief Operating Officer Appointed to Board: September 2014 Independent: No Robin has extensive CIO, COO, technology and operations experience, serving at blue chip public companies including Mitchells & Butlers, GlaxoSmithKline, Procter & Gamble and Ford Motor Company. He also brings considerable City knowledge and expertise having spent almost a decade with HBOS and Citigroup. Kirsten English Non-executive Director Appointed to Board: January 2020 Independent: Yes Kirsten is currently Non-executive Director of Innovate Finance and Non-executive Director of Universities Superannuation Scheme (she is also Chair of the Governance and Nominations Committee). In her earlier career Kirsten held executive roles in FTSE 25, SME and Private Equity businesses internationally including CEO and Chair assignments. Sir Bryan Carsberg Non-executive Director Appointed to Board: July 2014 Independent: Yes The former Director General of OFT and Oftel, Sir Bryan Carsberg brings to the Board vast experience of the communications industry. He has held board positions with Cable & Wireless Communications plc, Inmarsat plc and RM plc, and in 2002 was Expert Adviser to the Joint Parliamentary Committee to undertake prelegislative scrutiny of the Communications Act, 2003. Paul Spence Non-executive Director Appointed to Board: February 2016 Independent: Yes Paul has spent much of his career with Capgemini and its predecessor companies, during which time his roles included deputy group CEO and CEO of Capgemini Global Outsourcing Services. He has broad international experience, having lived in and been responsible for, at various times, the North American, Latin American, Australian, Asian, and European markets. Paul is a graduate of the Wharton School at the University of Pennsylvania and is currently a Non-executive Director of G4S. Committee membership: Executive Board Audit Remuneration Nomination Risk Denotes Chair Actual Experience plc Annual Report 2019 39 Financial statementsOther informationGovernanceStrategic reportDirectors' report DIRECTORS' REPORT The Directors present their report and audited consolidated financial statements of the Group and of the Company for the year ended 30 September 2019. These will be laid before the shareholders of the Company at the next Annual General Meeting (AGM). 47,372,061 fully paid ordinary shares. All shares are freely transferable and rank pari passu in all respects, including voting and dividend rights. General information and principal activities Actual Experience plc is listed on the AIM market of the London Stock Exchange (LSE:ACT). The Company is incorporated and domiciled in the United Kingdom, registration number 06838738 and the address of its registered office is Quay House, The Ambury, Bath BA1 1UA. The principal activity of the Group is the provision of Human Experience Management Services and associated consultancy services. Results and dividends The results of the Group for the year ended 30 September 2019 are set out in the Consolidated Statement of Comprehensive Income on page 53. The Directors do not propose payment of a dividend for the year ended 30 September 2019 (2018: nil). Review of the year A summary of the Group’s progress and development is set out in the Chairman’s statement, the Chief Executive’s statement, and the Financial review, which form part of the Strategic Report on pages 2 to 37. This analysis includes comments on the position of the Group at the end of the financial year, an indication of likely future developments in the business of the Group and details of the Group’s activities in the field of research and development. Directors The Directors of the Company who served during the year and up to the date of approval of the financial statement are as follows: • Stephen Davidson, Non-executive Chairman. • Dave Page, Chief Executive Officer. • Steve Bennetts, Chief Financial Officer and Company Secretary. • Robin Young, Chief Operational Officer. • Sir Bryan Carsberg, Non-executive Director. • Mark Reilly, Non-executive Director (resigned 3 December 2019). • Kirsten English, Non-executive Director (appointed 1 January 2020). • Paul Spence, Non-executive Director. Short biographies of each current Director are provided on pages 38 and 39. Directors’ interests and indemnity arrangements Directors’ interests in the shares of the Company, including family interests, are disclosed in the Directors’ remuneration report on pages 47 and 48. No Director had, during or at the end of the year, a material interest in any contract which was significant in relation to the Group’s business except in respect of service agreements and share options and as disclosed in the Remuneration report. As permitted by the Articles of Association, in accordance with the provisions of the Companies Act 2006 the Group has maintained insurance throughout the year for its Directors and officers against the consequences of actions brought against them in relation to their duties for the Company. The Group has granted no indemnities to any of its Directors against liability in respect of proceedings brought by third parties. Share capital Details of the Group’s issued share capital are shown in note 18(a) to the consolidated financial statements. The share capital comprises one class of ordinary shares and these are listed on AIM. As at 31 December 2019 there were in issue 40 Actual Experience plc Annual Report 2019 Substantial shareholdings As at 31 December 2019, shareholders holding more than 3% of the share capital of Actual Experience plc were as follows: Name of shareholder Number of shares % of voting rights IP Group plc M&G Lombard Odier Mr Michael Edge Queen Mary University of London Mr Dave Page Professor Jonathan Pitts Allianz 10,120,977 7,063,972 6,690,316 3,195,000 2,610,000 1,932,368 1,879,750 1,815,705 21.36% 14.91% 14.12% 6.74% 5.51% 4.08% 3.97% 3.83% Save as referred to above, the Directors are not aware of any persons as at 31 December 2019 who were interested in three per cent or more of the voting rights of the Company or could directly or indirectly, jointly or severally, exercise control over the Company. Financial risk management objectives and policies The Group’s financial risk management objectives and policies are shown in note 4 to the consolidated financial statements. The main risks arising from the Group’s financial instruments are interest rate risk, exchange rate risk, credit risk, and liquidity risk, which are continuously monitored by the Board. The Group extends credit only to recognised creditworthy third parties, and trade receivable balances are monitored to minimise the Group’s exposure to bad debts. Details of the Group’s trade receivables are shown in note 14 to the consolidated financial statements. Employment policies The Group is committed to providing equality of opportunity to all existing and prospective employees without unlawful or unfair discrimination. Full support is given to the employment and advancement of disabled persons. Annual General Meeting The AGM will be held at 11.30am on 12 March 2020 at the London office of Osborne Clarke. On page 83 is the Notice of the AGM, which gives details of the resolutions to be proposed to shareholders. Independent auditors The independent auditors, PricewaterhouseCoopers LLP, have indicated their willingness to continue in office and a resolution that they be reappointed will be proposed at the AGM. Disclosure of information to the auditors Each of the persons who are Directors of the Company at the date when this report was approved has confirmed that: • so far as the Directors are aware, there is no relevant audit • information of which the Company and the Group’s auditors are unaware; and the Directors have taken all the steps that ought to have been taken as Directors in order to be aware of any relevant audit information and to establish that the Company and Group’s auditors are aware of that information. The Directors’ Report was approved and signed by order of the Board. Steve Bennetts Chief Financial Officer and Company Secretary 22 January 2020 Directors' responsibility statement DIRECTORS’ RESPONSIBILITIES STATEMENT The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulation. The Directors are also responsible for safeguarding the assets of the Group and Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have prepared the Group financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and Company financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. 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 Company and of the profit or loss of the Group and Company for that period. In preparing the financial statements, the directors are required to: • select suitable accounting policies and then apply them consistently; • state whether applicable IFRSs as adopted by the European Union have been followed for the Group financial statements and IFRSs as adopted by the European Union have been followed for the Company financial statements, subject to any material departures disclosed and explained in the financial statements; • make judgements and accounting estimates that are reasonable • and prudent; and • prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and Company will continue in business. • The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group and Company's transactions and disclose with reasonable accuracy at any time the financial position of the Group and Company and enable them to ensure that the financial statements comply with the Companies Act 2006 and, as regards the Group financial statements, Article 4 of the IAS Regulation. The Directors are responsible for the maintenance and integrity of the Company’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. The Directors consider that the Annual Report and Accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group and Company’s performance, business model and strategy. Each of the Directors, whose names and functions are listed in the Corporate governance report confirm that, to the best of their knowledge: • the Company financial statements, which have been prepared in accordance with IFRSs as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and loss of the Company; the Group financial statements, which have been prepared in accordance with IFRSs as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and loss of the Group; and the Directors' report includes a fair review of the development and performance of the business and the position of the Group and Company, together with a description of the principal risks and uncertainties that it faces. Actual Experience plc Annual Report 2019 41 Financial statementsOther informationGovernanceStrategic reportCorporate governance report Board composition We are led by a strong and effective Board of Directors. The Board comprises the following individuals: Executive: Dave Page Steve Bennetts Robin Young Non-executive: Stephen Davidson Sir Bryan Carsberg Kirsten English Paul Spence Chief Executive Officer Chief Financial Officer Chief Operating Officer Non-executive Chairman Non-executive Director Non-executive Director Non-executive Director The Board considers that it contains a range of skills, experience and knowledge that is appropriate for the business. Furthermore, the Board members are of sufficient calibre to bring independent judgement of issues of strategy, performance, resources, and standards of conduct, which are vital to the success of the Group. The Board believes that it operates in an open and constructive manner and works effectively. Brief biographies of the Directors, together with their membership of Board Committees, can be found on pages 38 and 39. Independence of Non-executive Directors The Board considers many criteria in assessing the independence of the Non-executive Directors including the criteria recommended by the Quoted Companies Alliance. The Non-executive Chairman and the Non-executive Directors are all considered by the Board to be independent of management and free of any relationship which could materially interfere with the exercise of their independent judgement. Board operation The Board is responsible for the Group’s strategy and for its overall management. The operation of the Board is documented in a formal schedule of matters reserved for its approval. These include matters relating to: • The Group’s strategic aims and objectives. • The structure and capital of the Group. • Financial reporting, financial controls and dividend policy. • Internal control, risk, and the Group’s risk appetite. • The approval of significant contracts and expenditure. • Effective communication with shareholders. • Changes to Board membership or structure. Apart from the matters above, the Board has delegated all authority to the Executive Directors on the understanding that they will at all times act in accordance with the best interests of the Group, its shareholders and employees, and that their actions will be consistent with the Group’s financial and strategic plans and objectives and in conformity with relevant legislation and best practice and that they will report regularly to the Board on the execution of these responsibilities. CORPORATE GOVERNANCE REPORT Chairman’s Corporate Governance Statement Dear fellow shareholders An important element of my role as Chairman is to ensure that the Company operates to a high standard of corporate governance. The Board has assessed the governance structures within the Company and considers these appropriate for the size, complexity and risk profile of the Company. As I noted in my letter to you last year, the Board has been committed to good corporate governance in the management and operation of the Group’s business since our AIM listing in 2014. Last year the Board adopted the 2018 Quoted Companies Alliance Corporate Governance Code (the “QCA Code”) in line with the London Stock Exchange’s changes to the AIM Rules. The QCA Code sets out ten corporate governance principles and requires the Company to publish certain related disclosures; these appear in this Annual Report and on our website, in accordance with the recommendations in the QCA Code. This information is reviewed annually and the date of the latest review is noted on our website. In summary, we remain committed to delivering the long-term success of the Group through an effective framework of leadership, management and controls. Stephen Davidson Non-executive Chairman 22 January 2020 42 Actual Experience plc Annual Report 2019 Board meetings The Board met seven times in the 2019 fiscal year. In addition, the Non-executive Directors communicate directly with executive Directors and senior management between formal Board meetings. The Board continues to review and assess the Group’s strategy at meetings throughout the year. Directors are expected to attend all meetings of the Board and Committees on which they sit, and to devote sufficient time to the Group’s affairs to enable them to fulfil their duties as Directors. In the event that Directors are unable to attend a meeting, their comments on papers to be considered at the meeting will be discussed in advance with the Chairman so that their contribution can be included in the wider Board discussion. The following table shows Directors’ attendance at scheduled Board and Committee meetings during the year:   Board Audit Remuneration Risk Stephen Davidson Sir Bryan Carsberg Paul Spence Mark Reilly (retired 3 December 2019) Dave Page Robin Young Steve Bennetts Kirsten English (appointed 1 Jan 2020) * attended by invitation 7/7 7/7 6/7 6/7 7/7 7/7 7/7 0/7 2/2* 2/2 2/2 2/2 2/2* – 2/2* 0/2 3/3 3/3 – 2/3 3/3 – 3/3 0/3 2/2* – 2/2 – 2/2 2/2 2/2 0/2 The Chairman, aided by the Company Secretary, is responsible for ensuring that the Directors receive accurate and timely information. The Company Secretary compiles the Board and Committee papers, which are electronically circulated to Directors at least two days prior to meetings. The Company Secretary provides minutes of each meeting and every Director is aware of the right to have any concerns minuted. Conflicts of interest To address the provisions of Section 175 of the Companies Act 2006 relating to conflicts of interest, the Company’s Articles of Association allow the Board to authorise situations in which a Director has, or may have, a conflict of interest. Directors are required to give notice of any potential situation or transactional conflict that are to be considered at the next Board meeting and, if considered appropriate, conflicts are authorised. Directors are not permitted to participate in such considerations or to vote regarding their own conflicts. The Board has received no notice from Directors of potential or actual conflicts of interest. Reappointment of Directors The Company’s Articles of Association require that at each Annual General Meeting (the “AGM”) one-third of Directors shall retire and seek re-election by shareholders. Additionally, any new Director appointed by the Board is required by the Articles to retire at the next AGM and to seek appointment by shareholders. Not withstanding these requirements, the Board has decided that, commencing with the March 2020 AGM all Directors will seek re-election on an annual basis. Insurance The Board has in place Directors’ and Officers’ Liability insurance. Board Committees The Board has delegated certain powers and duties to the Audit, Remuneration, Risk and Nominations Committees, details of which are set out in the table below. Each Committee has written terms of reference setting out its duties, authority and reporting responsibilities. Copies of these terms of reference are available on the Company website (www.actual-experience.com). The terms of reference of each committee is reviewed annually by the Board to ensure they remain appropriate and reflect changes to legislation, regulation, and best practice. The workload of the Committees is greater than the scheduled meetings would indicate as ad hoc meetings and communications between meetings are frequently required. Audit Committee The Audit Committee determines and examines matters relating to the financial affairs of Actual Experience including the terms of engagement of the Company’s auditors and, in consultation with the auditors, the scope of the audit. It receives and reviews reports from management and the Company’s auditors relating to the half yearly and annual financial statements and the accounting and the internal control systems in use throughout the Company. The Audit committee report on page 46 contains more detail on the Committee's role. Remuneration Committee The Remuneration Committee reviews and makes recommendations in respect of the Directors’ remuneration and benefits packages, including share options and the terms of their appointment. The Remuneration Committee also makes recommendations to the Board concerning the allocation of share options to employees under the Share Option Scheme. The Remuneration committee report on page 47 contains more detail on the Committee's role. Nominations Committee The Nominations Committee monitors the size and composition of the Board and the other Board Committees, is responsible for identifying suitable candidates for Board membership and monitors the performance and suitability of the current Board on an ongoing basis. Risk Committee The Risk Committee determines the overall process to identify, manage and control risk within Actual Experience. It is responsible for developing the Risk Policy and approving any subsequent changes to its content. The Risk Committee receives reports from management on the residual risks within Actual Experience and determines the appropriate level of risk appetite for the Company. The Principal risks and uncertainties on pages 36 and 37 contains more detail on the Committee's role. Chair: Sir Bryan Carsberg Members: Kirsten English Paul Spence Chair: Stephen Davidson Members: Sir Bryan Carsberg Kirsten English Chair: Stephen Davidson Members: Dave Page Kirsten English Paul Spence Chair: Paul Spence Members: Steve Bennetts Dave Page Robin Young Actual Experience plc Annual Report 2019 43 Financial statementsOther informationGovernanceStrategic reportCORPORATE GOVERNANCE REPORT continued Board performance In September 2018 each Director completed a questionnaire designed to measure the effectiveness of Board performance. The consolidated results of this exercise were subsequently reviewed by the Board. While no major performance impairments were noted, several minor matters were identified for further attention. It is intended that this exercise will be repeated in 2020 and any significant matters arising will be noted in the Annual Report. Internal Controls The Board is responsible for maintaining a sound system of internal financial and operational control and the ongoing review of their effectiveness. The Board’s measures are designed to manage, not eliminate, risk and such a system provides reasonable but not absolute assurance against material misstatement or loss. Whilst the Company, as a small AIM listed company, is not required to comply with the full provisions of the “Internal Control Guidance for Directors on the Combined Code” (The Turnbull Report), the Board considers that the internal controls do meet many of those requirements and are adequate given the size of the Company. Communication with shareholders and the AGM The Board recognises that it is accountable to shareholders for the performance and activities of the Group and is committed to maintaining regular dialogue and meetings with shareholders. Apart from the AGM, the Group communicates with its shareholders by way of the Annual Report and financial statements and via the Company’s website (www.actual-experience.com) which is kept updated with preliminary and interim results, and announcements to the Stock Exchange. The AGM offers a valuable opportunity to shareholders to meet and communicate with the Board. At the meeting the Board gives a business presentation which is followed by a question and answer session, offering shareholders an opportunity to question the Board on any matters affecting the Group’s performance. The Chairmen of the Audit, Remuneration, Risk, and Nominations Committees are available at the AGM to answer questions. Details of the resolutions to be proposed at the AGM can be found in the Notice of Meeting on page 83. This Notice of Meeting has been circulated to shareholders and is on the Company’s website. The principle elements of the Group’s internal control system are: i. Close management of the day to day activities of the Group by the Executive Directors; ii. An organisational structure with defined levels of responsibility, which promotes entrepreneurial decision making and rapid implementation whilst minimising risks; iii. A comprehensive annual budgeting process producing a detailed integrated profit and loss, balance sheet and cash flow, which is approved by the Board; iv. Detailed monthly reporting of performance against budget; and v. Central control over key areas such as capital expenditure authorisation and banking facilities. Business ethics The Board believes that it is critically important that Executive Directors are actively involved in ensuring our ethical values and culture continue to be shared by all employees. In support of this, anti-bribery and whistleblowing policies are circulated to all employees, who are required to certify annually that they have read and understood the policies. In addition, an online employee training course has been introduced, which includes compulsory modules on anti-bribery and fraud. The aim of the whistleblowing policy is to encourage all employees regardless of seniority to bring matters which cause them concern to the attention of the Non- executive Directors. The Group continues to review its system of internal control to ensure compliance with best practice, whilst also having regard to its size and the resources available. The Board considers that the introduction of an internal audit function is not appropriate at this time. Going concern The Board is required to assess whether the Group has adequate resources to continue operations for the foreseeable future. As detailed on page 35 after making enquiries, the Directors have a reasonable expectation that the Company and the Group will have adequate resources to fund their activities for the foreseeable future (being a period of at least 12 months from the date of this report). For this reason, they continue to adopt the going concern basis for preparing the financial statements. Approved by the Board of Directors and signed on its behalf. Stephen Davidson Non-executive Chairman 22 January 2020 44 Actual Experience plc Annual Report 2019 The Board has adopted the Quoted Companies Alliance (QCA) Corporate Governance Code. Set out below is how we currently comply with the key principles set out in the QCA code. Statement of Compliance with the QCA Corporate Governance Code Governance principles Compliant Explanation Deliver growth 1. Establish a strategy and business model which promote long-term value for shareholders. Our strategy is focussed on our four Channel Partners, until we produce channel revenue at scale. 2. Seek to understand and meet shareholder needs and expectations. 3. Take into account wider stakeholder and social responsibilities and their implications for long-term success. 4. Embed effective risk management, considering both opportunities and threats, throughout the organisation. Maintain a dynamic management framework 5. Maintain the Board as a well-functioning, balanced team led by the Chair. 6. Ensure that between them the Directors have the necessary up-to-date experience, skills and capabilities. Maintain a dynamic management framework 7. Evaluate Board performance based on clear and relevant objectives, seeking continuous improvement. 8. Promote a corporate culture that is based on ethical values and behaviours. 9. Maintain governance structures and processes that are fit for purpose and support good decision-making by the Board. Regular dialogues are held with shareholders. The CEO meets regularly with analysts and investors. The company also uses the Annual General Meeting as an opportunity to communicate with its shareholders. Actual Experience’s business model can be found within the Strategic Report of this document. In it we identify our stakeholders including our Channel Partners, end users, shareholders and employees. The principal ways in which their feedback is gathered is via meetings and conversations, and through our support system for customers. The Board is responsible for ensuring the Group has effective and sound systems of internal controls, which are designed to manage the risk of failure to achieve business objectives and provide reasonable assurance against material misstatements and loss. The Board, with the advice of the Audit Committee, has reviewed the effectiveness of the systems of internal control for the year to 30 September 2018. The composition and experience of the Board is shown in the Annual Report. The Board has a formal schedule of matters reserved for its approval and is supported by the Audit, Remuneration, Risk and Nomination Committees. All Directors are required to devote sufficient time to carry out their role. The Board is satisfied that, between the Directors, it has an effective and appropriate balance of skills and experience, including in the areas of technology and software, business transformation and management, capital markets, change management and governance. To ensure that the Directors maintain appropriate skills they are provided with training when identified as appropriate by the Chairman. The Board regularly considers and evaluates its own performance and effectiveness and that of the individual Directors and Board Committee members. The first Board Effectiveness Assessment was completed by all Directors in September 2019. The Board believes that the promotion of a corporate culture based on sound ethical values and behaviours is essential to creating a workplace environment that allows people to flourish and this will contribute to enhancing shareholder value. The Board is collectively responsible for the long-term success of Actual Experience. It has a schedule of matters reserved for its approval which covers the key areas of the management and governance of the Company. Further reading See pages 22-23 www.actual-experience. com/about/investors/ board-and-governance/ governance/ See pages 20-21 See pages 36-37 See pages 40-41 www.actual-experience. com/about/investors/ board-and-governance/ governance/ See page 44 www.actual-experience. com/about/investors/ board-and- governance/governance/ See pages 40-41 Build trust 10. Communicate how the Company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders. The Reports, Results and Presentation page can be found on the Company’s website. Results from our AGMs are announced via RNS, and historical announcements can be accessed via the RNS and News page of our website. www.actual-experience. com/about/investors/ reports-results-and- presentations/reports- results-and-presentations/ Actual Experience plc Annual Report 2019 45 Financial statementsOther informationGovernanceStrategic reportAudit Committee report Duties The main duties of the Audit Committee are set out in its Terms of Reference, which are available on the Company’s website (www.actual-experience.com) and on request from the Company Secretary. The main items of business considered by the Audit Committee during the year included: • • consideration of the external audit report and management review of the financial statements and Annual Report; representation letter; • going concern review; • • • • meetings with the auditor with and without management present. review of the 2019 audit plan and audit engagement letter; review of the risk management and internal control systems; review of the interim results; and Role of the Auditor The Audit Committee monitors the relationship with the auditor, PwC LLP, to ensure that auditor independence and objectivity are maintained. As part of its review the Committee monitors the provision of non-audit services by the external Auditor. The Audit Committee recommends that PwC LLP be re-appointed as the Group’s Auditor at the next AGM. Audit Process The Auditor prepares an audit plan for the full year financial statements. The audit plan sets out the scope of the audit, areas of special focus and audit timetable. This plan is reviewed and agreed in advance by the Audit Committee. The Auditor also carries out a review of interim financial reporting. Following the audit of the annual financial statements and the review of the interim report, the Auditor presents its findings to the Audit Committee for discussion. No major areas of concern were highlighted by the Auditor during the year. However, areas of significant risk and matters of audit judgement are regularly discussed. Internal Audit At present, in keeping with the size and level of complexity of the affairs of the Group, it does not have an internal audit function. The Committee keeps under review the desirability of establishing an internal audit function. Risk Management and Internal Controls As described on page 36 of the Strategic Report, the Group has established a framework of risk management and internal control systems, policies and procedures. The Audit Committee is responsible for reviewing the risk management and internal control framework and ensuring that it operates effectively. During the year, the Committee has reviewed risk management and internal controls and is satisfied that they are operating effectively. Whistleblowing The Group has in place a whistleblowing policy which sets out the formal process by which an employee of the Group may, in confidence, raise concerns about possible improprieties in financial reporting or other matters. Whistleblowing is a standing item on the Committee’s agenda, and updates are provided at each meeting. During the year, there were no incidents for consideration. AUDIT COMMITTEE REPORT Introduction to the Audit Committee report Dear shareholders I am pleased to present the report of the Audit Committee, which provides a summary of the Committee’s role and activities during the year ending 30 September 2019. In summary, these activities help to ensure the interests of shareholders are protected and the Group’s reporting is fair, balanced and understandable. The Audit Committee is responsible for monitoring the financial reporting process, including the integrity of the financial statements, reviewing financial disclosures, the application of accounting policies, and accounting judgements. It reviews the Group’s internal control and risk management systems, monitors the extent and nature of the non-audit services undertaken by external auditors, advises on the appointment of external auditors and maintains a regular dialogue with external auditors, both with and without executives. Sir Bryan Carsberg Audit Committee Chairman 22 January 2020 Members of the Audit Committee During the year, the Committee consisted of three Non- executive Directors: Mark Reilly, Paul Spence, and Bryan Carsberg, its Chairman. By invitation, meetings of the Committee may be attended by the Chairman of the Board, the Chief Executive Officer, and the Chief Financial Officer. The Committee met twice in the year. Following Mark Reilly's resignation, Kirsten English has been appointed to the Committee with effect 1 January 2020. The Board is satisfied that the Chairman of the Committee has recent and relevant financial experience. He is a Chartered Accountant and served for six years as Secretary General of the International Accounting Standards Committee and in senior roles both in the Public Sector and as a Non-executive Director of leading technology companies. The Committee’s deliberations are reported at the subsequent Board meeting and the minutes of each meeting are made available to all members of the Board. 46 Actual Experience plc Annual Report 2019 DIRECTORS’ REMUNERATION REPORT Remuneration Committee The responsibilities of the Committee are to advise upon and make recommendations to the Board on the Group’s remuneration policies and, within the framework established by the Board, to recommend the remuneration of the Executive Directors. The Chief Executive Officer and Chief Financial Officer are invited to attend meetings to discuss remuneration arrangements and bonus schemes for senior executives within the Group, as well as the awarding of share options to such persons under any share scheme adopted by the Group. Stephen Davidson chairs the Committee with effect from 3 December 2019 following the resignation of Mark Reilly. Stephen Davidson and Sir Bryan Carsberg served on the Committee during the year. Attendance at the scheduled Committee meetings during the year was as follows: Number of scheduled meetings Mark Reilly (Chair) (resigned 3 December 2019) Stephen Davidson (Chair) (appointed 3 December 2019) Sir Bryan Carsberg Kirsten English2 Dave Page1 Steve Bennetts1 3 2 3 3 0 3 3 1 By invitation 2 Appointed to Committee 1 January 2020 The Remuneration Committee assesses the performance of the Executive Directors and other senior managers in the context of recommending their annual remuneration, bonus awards, and share option grants to the Board for final determination. The remuneration of the Non-executive Directors is recommended by the Executive Directors and takes account of the time spent on Board and Committee matters. The Board will make the final determination although no Director will participate in any discussion about his own remuneration. Directors' remuneration report The objective of the Group’s remuneration policy is to attract, motivate, and retain high quality individuals who will contribute fully to the success of the Group. The Committee seeks to ensure that a competitive and appropriate base salary is paid to Executive Directors and senior managers, together with incentive arrangements that are: • aligned with shareholders’ interests and with long term business strategies; • measured against challenging and well-defined financial targets • (which are set in advance); and transparent and without “soft” non-financial targets which could otherwise allow undue discretion to award bonuses that do not reflect actual financial performance. Remuneration Policy It is the Group’s policy that Executive Directors should have contracts with an indefinite term providing for a maximum of six months’ notice. In the event of early termination, the Directors’ contracts provide for compensation up to a maximum of basic salary for the notice period. The main elements of the remuneration package for Executive Directors and senior management are: Base annual salary The base salary is reviewed annually by the Remuneration Committee and any change in salary is applied from the beginning of each calendar year. In determining the base annual salary the Remuneration Committee takes into account several factors, including the current position and development of the Group, individual contribution, and market salaries for comparable organisations. Discretionary annual bonus arrangements All Executive Directors and senior managers are eligible for a discretionary annual bonus which is paid in accordance with a bonus scheme developed by the Remuneration Committee. This takes into account performance against defined personal objectives and the financial performance of the Group. Pension and other benefits As with all employees, the Executive Directors may participate in the Group defined contribution pension scheme. In the 2019 fiscal year, the maximum employer pension contribution was 3% of base salary. The only other significant benefits that Executive Directors are entitled to are private health insurance and life assurance. Share incentive schemes The Group operates share option plans, under which certain Directors and senior management have been granted options to subscribe for ordinary shares. All options are equity settled. The options are subject to service conditions, have an exercise price of between 9.09 pence and 302.50 pence and the vesting period is up to four years. If the options remain unexercised after a period of ten years from the date of grant, the options expire. The Group has no legal or constructive obligation to repurchase or settle the options in cash. Remuneration Policy for Non-executive Directors Non-executive Directors are employed on letters of appointment which have an initial fixed term of three years and which may be terminated at any time by either party with three months’ notice. Remuneration for Non-executive Directors is set by the Chairman and the Executive Members of the Board. Non-executive Directors do not participate in bonus schemes. Stephen Davidson, Sir Bryan Carsberg and Paul Spence have each been awarded share options, as shown on the next page. Actual Experience plc Annual Report 2019 47 Financial statementsOther informationGovernanceStrategic reportDirectors’ remuneration (audited) The remuneration of the Board Directors of Actual Experience plc during the year ended 30 September 2019 was: Salary and fees £ Employer Pension Contributions £ Health Care £ Bonus £ Total Year ended 30 September 2019 £ Total Year ended 30 September 2018 £ Stephen Davidson1 Dave Page Steve Bennetts1 Robin Young1 Sir Bryan Carsberg1 Mark Reilly (resigned 3 December 2019) Paul Spence1 Total 50,000 150,000 130,358 150,000 25,000 25,000 33,426 563,784 – 3,750 3,250 – – – – 7,000 – 461 945 419 – – – 1,825 – – – – – – – – 50,000 154,211 134,553 150,419 25,000 25,000 33,426 572,609 50,000 157,652 138,341 155,436 25,000 25,000 25,000 576,429 1 In addition, certain Directors hold share option scheme interests in the Group. Fair value share-based payment charges recognised in the Consolidated Statement of Comprehensive Income attributable to these Directors are: Stephen Davidson £0 (2018: £0), Steve Bennetts £0 (2018: £3), Robin Young £1,375 (2018: £5,380), Sir Bryan Carsberg £0 (2018: £0), and Paul Spence £2,009 (2018: £8,975). Directors’ shareholdings (audited) The interests of the Directors holding office at 30 September 2019 in the shares of the Company, including family interests, were: Stephen Davidson Dave Page Steve Bennetts Robin Young Sir Bryan Carsberg Mark Reilly Paul Spence Ordinary Shares of 0.2p each 2019 Number 20,000 1,932,368 175,500 2,600 – 65,500 – 2019 % 0.04 4.08 0.37 0.01 – 0.14 – Directors’ interests in share options (audited) Directors’ interests in share options, granted under either the Actual Experience plc Enterprise Management Incentive Share Option Scheme or the Actual Experience plc Unapproved Share Option Scheme, to acquire ordinary shares of 0.2 pence each in the Company at 30 September 2019 were: Steve Bennetts Steve Bennetts Stephen Davidson Robin Young Robin Young Sir Bryan Carsberg Paul Spence At 1 October 2018 Granted during year At 30 September 2019 Exercise price 227,250 22,500 70,000 70,000 30,000 70,000 70,000 – – – – – – – 227,250 22,500 70,000 70,000 30,000 70,000 70,000 14.25 pence 54.50 pence 186.50 pence 207.50 pence 262.50 pence 186.50 pence 277.50 pence Vesting dates 2014 – 2017 2014 – 2017 2015 – 2017 2016 – 2018 2016 – 2019 2015 – 2017 2016 – 2018 Share options are subject to employment conditions and vest in equal annual instalments over the vesting period. It is anticipated that Kirsten English will be granted 70,000 share options after the date of this report. Other transactions that occurred with Directors during the year are detailed in note 22 to the financial statements under Related Party Transactions. Stephen Davidson Chair of the Remuneration Committee 22 January 2020 48 Actual Experience plc Annual Report 2019   INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF ACTUAL EXPERIENCE PLC Report on the audit of the financial statements Opinion In our opinion, Actual Experience plc’s group financial statements and company financial statements (the “financial statements”): • give a true and fair view of the state of the group’s and of the company’s affairs as at 30 September 2019 and of the group’s loss and the group’s and the company’s cash flows for the year then ended; • have been properly prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and, as regards the company’s financial statements, as applied in accordance with the provisions of the Companies Act 2006; and • have been prepared in accordance with the requirements of the Companies Act 2006. We have audited the financial statements, included within the Annual Report, which comprise: the Consolidated and Company statements of financial position as at 30 September 2019; the Consolidated statement of comprehensive income, the Consolidated and Company statements of cash flows, and the Consolidated and Company statements of changes in equity for the year then ended; and the notes to the financial statements, which include a description of the significant accounting policies. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities under ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence We remained independent of the group in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, which includes the FRC’s Ethical Standard, as applicable to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. Material uncertainty related to going concern In forming our opinion on the financial statements, which is not modified, we have considered the adequacy of the disclosure made in note 1 to the financial statements concerning the group’s and company’s ability to continue as a going concern. The Group has continued to utilise its cash resources to fund losses whilst the sales pipeline is being established. The Group is actively seeking new business opportunities and progressing discussions with its existing Partners. As at year end, the extension of current revenue contracts and the timing of new revenue contracts remains uncertain. The Group is also proactively restructuring the business to align itself with the evolved sales model. These conditions, along with the other matters explained in note 1 to the financial statements, indicate the existence of a material uncertainty which may cast significant doubt about the group’s and company’s ability to continue as a going concern. The financial statements do not include the adjustments that would result if the group and company was unable to continue as a going concern. What audit procedures we performed We obtained management forecast results and cashflows for the next three years and agreed actual post year end results and cash balances to the latest management accounts. For the key customer we read the existing contract and contractual obligations and obtained the latest purchase order and reconciliation to determine the level of unfulfilled sales orders. We read an example staff contract to understand the employment terms and any associated costs on terminating the contract. We performed sensitivity analysis over the revenue and costs to understand the impact on the cash balance. Our audit approach Overview • Overall group materiality: £312,000 (2018: £350,000), based on 5% of loss before tax. • Overall company materiality: £269,000 (2018: £325,000), based on 5% of loss before tax. • The audit has scoped in all operations being Actual Experience plc and Actual Experience Inc. • Overall coverage is therefore 100% of group operations. • All work is performed by the group auditor. • Risk that internally generated intangible assets capitalised do not qualify for recognition and that costs previously capitalised may not be recoverable (Group and Company). The scope of our audit As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements. In particular, we looked at where the directors made subjective judgements, for example in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits we also addressed the risk of management override of internal controls, including evaluating whether there was evidence of bias by the directors that represented a risk of material misstatement due to fraud. Actual Experience plc Annual Report 2019 49 Financial statementsOther informationGovernanceStrategic reportINDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF ACTUAL EXPERIENCE PLC continued Key audit matters Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by the auditors, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters, and any comments we make on the results of our procedures thereon, were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In addition to going concern, described in the Material uncertainty related to going concern section above, we determined the matters described below to be the key audit matters to be communicated in our report. This is not a complete list of all risks identified by our audit. Key audit matter How our audit addressed the key audit matter Risk that internally generated intangible assets capitalised do not qualify for recognition and that costs previously capitalised may not be recoverable. Group and Company We have considered whether the amounts capitalised in the year meet the criteria for capitalisation set out in IAS 38. This included meeting with appropriate members of management involved with the projects to understand the nature of them and testing on a sample basis the specific costs capitalised. We focus on this area because of the magnitude of the cumulative capitalised development expenditure of £1.6m and the risk that amounts may not be recoverable if future revenue growth is not realised. Furthermore, we note that judgment is applied by management whether the costs that are capitalised in the year meet the criteria in IAS 38. This risk is set out in the critical accounting estimates and areas of judgement. For cumulative amounts capitalised we considered and challenged management on the economic benefits expected to flow from the technology introduced from the projects. Management demonstrated the operation of new technology developments that had been completed and demonstrated a market for them, given the customer agreements that had been put in place and which were expected to deliver growth in revenues in the future. As a result of our work we determined that the judgement of management that the amounts capitalised were not impaired to be reasonable. How we tailored the audit scope We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a whole, taking into account the structure of the group and the company, the accounting processes and controls, and the industry in which they operate. Actual Experience plc is structured with one reporting component, Actual Experience Inc., reporting into the parent operations in the UK as Actual Experience plc. Actual Experience Inc. does not require a local statutory audit and therefore is scoped in as a significant component as it represents a significant portion of loss before tax adjusted for intercompany revenue transactions. It does not generate external revenue. Due to the availability of centralised financial information and the centralised accounting function, the component audit of Actual Experience Inc. is performed by the group engagement team.   Materiality The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the individual financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and in aggregate on the financial statements as a whole. Based on our professional judgement, we determined materiality for the financial statements as a whole as follows: Overall materiality How we determined it Rationale for benchmark applied Group financial statements Company financial statements £312,000 (2018: £350,000). £269,000 (2018: £325,000). 5% of loss before tax. 5% of loss before tax. Based on the benchmarks used in the annual report, loss before tax is the primary measure used by the shareholders in assessing the performance of the group, and is a generally accepted auditing benchmark. We believe that loss before tax is the primary measure used by the shareholders in assessing the performance of the entity, and is a generally accepted auditing benchmark. 50 Actual Experience plc Annual Report 2019   For each component in the scope of our group audit, we allocated a materiality that is less than our overall group materiality. The range of materiality allocated across components was between £126,000 and £269,000. Certain components were audited to a local statutory audit materiality that was also less than our overall group materiality. We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £15,600 (Group audit) (2018: £18,200) and £13,500 (Company audit) (2018: £18,200) as well as misstatements below those amounts that, in our view, warranted reporting for qualitative reasons. Reporting on other information The other information comprises all of the information in the Annual Report other than the financial statements and our auditors’ report thereon. The directors are responsible for the other information. Our opinion on the financial statements does not cover the other information and, accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated in this report, any form of assurance thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If we identify an apparent material inconsistency or material misstatement, we are required to perform procedures to conclude whether there is a material misstatement of the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report based on these responsibilities. With respect to the Strategic Report and Directors’ Report, we also considered whether the disclosures required by the UK Companies Act 2006 have been included. Based on the responsibilities described above and our work undertaken in the course of the audit, ISAs (UK) require us also to report certain opinions and matters as described below. Strategic Report and Directors’ Report In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic Report and Directors’ Report for the year ended 30 September 2019 is consistent with the financial statements and has been prepared in accordance with applicable legal requirements. In light of the knowledge and understanding of the group and company and their environment obtained in the course of the audit, we did not identify any material misstatements in the Strategic Report and Directors’ Report. Responsibilities for the financial statements and the audit Responsibilities of the directors for the financial statements As explained more fully in the Directors’ Responsibilities Statement, the directors are responsible for the preparation of the financial statements in accordance with the applicable framework and for being satisfied that they give a true and fair view. The directors are also responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the group’s and the company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group or the company or to cease operations, or have no realistic alternative but to do so. Auditors’ responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at: www.frc.org.uk/ auditorsresponsibilities. This description forms part of our auditors’ report. Use of this report This report, including the opinions, has been prepared for and only for the company’s members as a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing. Actual Experience plc Annual Report 2019 51 Financial statementsOther informationGovernanceStrategic reportINDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF ACTUAL EXPERIENCE PLC continued Other required reporting Companies Act 2006 exception reporting Under the Companies Act 2006 we are required to report to you if, in our opinion: • we have not received all the information and explanations we require for our audit; or • adequate accounting records have not been kept by the company, or returns adequate for our audit have not been received from branches not visited by us; or • certain disclosures of directors’ remuneration specified by law are not made; or • the company financial statements are not in agreement with the accounting records and returns. We have no exceptions to report arising from this responsibility. Heather Ancient (Senior Statutory Auditor) for and on behalf of PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors Bristol 23 January 2020 52 Actual Experience plc Annual Report 2019 Financial Statements Consolidated statement of comprehensive income CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME for the year ended 30 September 2019 REVENUE Cost of sales GROSS PROFIT/(LOSS) Administrative expenses OPERATING LOSS Finance income Finance expense Finance income – net LOSS BEFORE TAX Tax LOSS FOR THE YEAR Other comprehensive expense: Items that may be reclassified to profit or loss: Foreign currency difference on translation of overseas operations TOTAL COMPREHENSIVE EXPENSE FOR THE YEAR LOSS PER ORDINARY SHARE Basic and diluted Note 5 6 8 8 9 2019 £ 1,934,082 (1,143,116) 790,966 (7,050,417) (6,259,451) 54,235 (34,687) 2018 £ 1,076,463 (1,165,108) (88,645) (7,293,472) (7,382,11 7) 89,061 – 19,548 89,061 (6,239,903) 327,953 (7,293,056) 81,260 (5,911,950) (7,211,796) (7,241) (29,951) (5,919,191) (7,241,747) 10 (13.04)p (16.08)p Actual Experience plc Annual Report 2019 53 Financial statementsOther informationGovernanceStrategic reportConsolidated statement of changes in equity CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the year ended 30 September 2019 At 1 October 2017 Loss for the year Other comprehensive expense for the year Total comprehensive expense for the year Issue of shares Share-based payment expense At 30 September 2018 Note 18(a) 21 Share capital £ 89,522 – – – 283 – Share premium £ Accumulated losses £ Total equity £ 31,808,130 (11,839,635) 20,058,017 – – – 119,883 – (7,211,796) (29,951) (7,241,747) – 177,413 (7,211,796) (29,951) (7,241,747) 120,166 177,413 89,805 31,928,013 (18,903,969) 13,113,849 At 30 September 2018 – as previously presented Change of accounting policy 2 89,805 – 31,928,013 – (18,903,969) (55,221) 13,113,849 (55,221) Restated total equity at 1 October 2018 Loss for the year Other comprehensive expense for the year Total comprehensive expense for the year Issue of shares Expenses of share issue Share-based payment expense At 30 September 2019 89,805 31,928,013 (18,959,190) 13,058,628 – – – 4,444 – – – – – 2,995,557 (217,168) – (5,911,950) (7,241) (5,919,191) – – 83,199 (5,911,950) (7,241) (5,919,191) 3,000,001 (217,168) 83,199 94,249 34,706,402 (24,795,182) 10,005,469 18(a) 21 54 Actual Experience plc Annual Report 2019 CONSOLIDATED STATEMENT OF FINANCIAL POSITION as at 30 September 2019 ASSETS Non-current assets Property, plant and equipment Right-of-use assets Intangible assets TOTAL NON-CURRENT ASSETS Current assets Trade and other receivables Income tax receivable Cash and cash equivalents TOTAL CURRENT ASSETS TOTAL ASSETS LIABILITIES Non-current liabilities Deferred tax Lease liabilities TOTAL NON-CURRENT LIABILITIES Current liabilities Trade and other payables Lease liabilities TOTAL CURRENT LIABILITIES TOTAL LIABILITIES NET ASSETS EQUITY Share capital Share premium Accumulated losses TOTAL EQUITY Approved by the Board of Directors and authorised for issue on 22 January 2020. Stephen Davidson Chairman Steve Bennetts Chief Financial Officer Company number: 06838738 Consolidated statement of financial position Note 2019 £ 2018 £ 11 12 13 14 9 15 9 12 16 12 140,806 894,398 1,792,465 2,827,669 250,250 – 1,579,227 1,829,477 681,670 296,866 7,876,634 684,578 735,634 10,776,516 8,855,170 12,196,728 11,682,839 14,026,205 (14,317) (866,134) (880,451) (26,863) – (26,863) (689,426) (107,493) (796,919) (885,493) – (885,493) (1,677,370) (912,356) 10,005,469 13,113,849 18(a) 18(a) 18(b) 94,249 34,706,402 (24,795,182) 89,805 31,928,013 (18,903,969) 10,005,469 13,113,849 Actual Experience plc Annual Report 2019 55 Financial statementsOther informationGovernanceStrategic report Consolidated statement of cash flows Note 2019 £ 2018 £ (6,239,903) (7,293,056) 11 12 125,136 111,788 982,808 – 83,199 (19,548) 138,422 – 844,898 522 177,413 (89,061) (4,956,520) (6,220,862) (2,446) (213,300) (173,317) 58,110 (5,172,266) (6,336,069) 754,175 (97,153) (4,418,091) (6,433,222) 13 11 8 18(a) (1,196,046) (15,634) – 54,235 (1,157,864) (38,474) 5,000,000 89,061 (1,157,445) 3,892,723 2,782,833 (138,630) 27,101 2,671,304 120,166 – (18,000) 102,166 (2,904,232) 4,350 10,776,516 (2,438,333) 4,999 13,209,850 15 7,876,634 10,776,516 CONSOLIDATED STATEMENT OF CASH FLOWS for the year ended 30 September 2019 Cash flows from operating activities Loss before income tax Adjustments for: Depreciation of property, plant and equipment Depreciation of right-of-use assets Amortisation Loss on disposal of property, plant and equipment Non-cash employee benefits expense – share-based payments Finance income - net Operating cash outflow before changes in working capital Increase in trade and other receivables (Decrease)/increase in trade and other payables Cash used in operations Income taxes received/(paid) Net cash flows used in operating activities Cash flows from investing activities Development of intangible assets Purchases of property, plant and equipment Transfers to term deposits with more than 3 months maturity Finance income Net cash (outflow)/inflow from investing activities Cash flows from financing activities Proceeds from issue of share capital, net of costs Principal element of lease payments Inflow/outflow to Employee Benefit Trust Net cash inflow from financing activities Decrease in cash and cash equivalents Effect of exchange rate fluctuations on cash held Cash and cash equivalents at start of year Cash and cash equivalents at end of year 56 Actual Experience plc Annual Report 2019 Notes to the consolidated financial statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the year ended 30 September 2019 1 Summary of significant accounting policies This note provides a list of the significant accounting policies adopted in the preparation of these consolidated financial statements to the extent they are not disclosed in the other notes below. These policies have been consistently applied to all the years presented, unless otherwise stated. The financial statements are for the Group consisting of Actual Experience plc and its subsidiary. The financial statements are audited financial statements for the year to 30 September 2019. These include comparatives for the year ended 30 September 2018. 1(a) Basis of preparation The Company is incorporated and domiciled in the United Kingdom, registration number 06838738 and the registered office is Quay House, The Ambury, Bath, BA1 1UA. (i) Compliance with IFRS The consolidated financial statements of the Actual Experience plc Group have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union, interpretations issued by the IFRS Interpretations Committee (IFRS IC) and the Companies Act 2016 applicable to companies reporting under IFRS. The financial statements comply with IFRS as issued by the International Accounting Standards Board (IASB). (ii) Historical cost convention The financial statements have been prepared on a historical cost basis. (iii) New and amended standards adopted by the Group The Group has applied the following standards and amendments for the first time for the annual reporting commencing 1 October 2018: • • • • Annual improvements to IFRS standards 2015-2017 cycle • Definition of Material – Amendments to IAS 1 and IAS 8 IFRS 9 “Financial Instruments” (IFRS 9) IFRS 15 “Revenue from Contracts with Customers” (IFRS 15) IFRS 16 “Leases” (IFRS 16) IFRS 9 replaces the provisions of IAS 39 that relate to the recognition, classification and measurement of financial assets and financial liabilities, derecognition of financial instruments, impairment of financial assets and hedge accounting. In the current year, the Group has applied IFRS 9. The transition provisions of IFRS 9 allow an entity not to restate comparatives. The Group has not restated comparatives. IFRS 9 introduced new requirements for: 1. The classification and measurement of financial assets and financial liabilities, 2. Impairment of financial assets, and 3. General hedge accounting Applying the new requirements has not had a material impact on the Group’s financial statements. Applying the revised Expected Credit Losses (ECL) methodology did not result in any material change to the loss allowance recorded under IAS 39. Except for the changes to impairment methodology as noted above, the remainder of the differences as a result of adoption of IFRS 9 are limited to immaterial presentational and disclosure changes. Refer to note 1(h) for the revised accounting policy applied within the Group. IFRS 15 provides a unified five step model for determining the timing, measurement and recognition of revenue. The focus of the new standard is to recognise revenue as performance obligations are met rather than based on the transfer of risks and rewards. IFRS 15 includes a comprehensive set of disclosure requirements including qualitative and quantitative information about contracts with customers to understand the nature, amount, timing and uncertainty of revenue. The Group’s revenue is predominantly derived from the single performance obligation to sell a standalone digital experience quality service. As part of the adoption process, the Group assessed its performance obligations underlying the revenue recognition and assessed that the new requirements has not had a material impact on the Group’s financial statements. Refer to note 1(e) for the revised accounting policy applied within the Group. The Group has elected to early adopt IFRS 16 earlier than required as permitted by the IASB. The Group had to change its accounting policies as a result of adopting IFRS 16. The Group elected to adopt the new rules retrospectively but recognised the cumulative effect of initially applying the new standard on 1 October 2018. This is disclosed in note 2. The other amendments listed above did not have any impact on the amounts recognised in prior periods and are not expected to significantly affect the current or future periods. (iv) New standards and interpretations not yet adopted Certain new accounting standards and interpretations have been published that are not mandatory for 30 September 2019 reporting periods and have not been early adopted by the Group. These standards are not expected to have a material impact on the entity in the current or future reporting periods and on foreseeable transactions. Actual Experience plc Annual Report 2019 57 Financial statementsOther informationGovernanceStrategic report NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued for the year ended 30 September 2019 1 Summary of significant accounting policies continued (v) Going concern As in previous years the Group has continued to utilise its cash resources to fund losses whilst the sales pipeline is being established. The cash balance as at 30 September 2019 was £7.9m which will provide the Group with sufficient resources to meets its liquidity requirements for the next 18 months, based on its current forecast of sales growth and cost efficiencies. The Group is actively seeking new business opportunities and progressing discussions with its existing Partners. As at year end, the extension of current revenue contracts and the timing of new revenue contracts remains uncertain. However, the discussions are well progressed and are expected to result in additional new revenue for the Group. Furthermore, the Group is also proactively restructuring the business to align itself with the evolved sales model which will result in a reduction of the cost base over the next 12 months as well as operational efficiencies. The revenue growth and reduction in the cost base will ensure that there is sufficient liquidity for the Group’s needs. After making appropriate enquiries and considering the assumptions and uncertainties described above, the Directors consider that it is appropriate to adopt the going concern basis in preparing the consolidated financial statements. Accordingly, the financial statements do not include any adjustments which would be required if the going concern basis of preparation was deemed to be inappropriate. However, if the Group is unable to deliver the proposed revenue growth and cost reductions, it would give rise to a material uncertainty which may cast significant doubt about the Group’s ability to continue as a going concern. 1(b) Basis of consolidation The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) made up to 30 September each year. Control exists when the Company has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that presently are exercisable or convertible are taken into account. The financial statements of subsidiaries are included in the financial statements from the date that control commences until the date that control ceases. Accounting policies adopted are consistent across the Group. All intra-Group balances and transactions, including unrealised profits arising from intra-Group transactions, are eliminated fully on consolidation. 1(c) Segmental reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. 1(d) Foreign currency translation (i) Functional and presentational currency Items included in the financial statements are measured using the currency of the primary economic environment in which the Group operates (the functional currency) which is UK sterling (£). The financial statements are presented in pounds sterling (£), which is the Group’s presentational currency. All amounts are rounded to the nearest £. (ii) Group companies The results and financial position of foreign operations that have a functional currency different from the presentation currency and are translated into the presentation currency as follows: • assets and liabilities are translated at the closing rate at the date of the balance sheet; • income and expenses are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions); and • all resulting exchange differences are recognised in other comprehensive income and as a separate component of equity. (iii) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the Consolidated Statement of Comprehensive Income. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. 1(e) Revenue recognition Revenue is recognised at the fair value of the consideration received or receivable for the sale of services in the ordinary course of business and is shown net of Value Added Tax. The Group primarily earns revenues from the Human Experience Management Services and associated consultancy services. Revenue from Human Experience Management Services is recognised in the accounting period in which the services are rendered. For fixed-price contracts, revenue is recognised based on the actual service provided to the end of the reporting period as a proportion of the total services to be provided because the customer receives and uses the benefits simultaneously. This is determined based on the number of analytics under control. The difference between the amount of revenue recognised and the amount invoiced to a particular customer is included in the Consolidated Statement of Financial Position as deferred or accrued income as appropriate. Amounts included in deferred income are expected to be recognised within one year and are included within current liabilities. 58 Actual Experience plc Annual Report 2019 1(f) Internally-generated intangible assets – research and development expenditure Expenditure on research activities is recognised as an expense in the period in which it is incurred. Development costs incurred on specific projects are capitalised when all the following criteria are satisfied: (a) completion of the intangible asset is technically feasible so that it will be available for use or sale; (b) the Group intends to complete the intangible asset and use or sell it; (c) the Group has the ability to use or sell the intangible asset and the intangible asset will generate probable future economic benefits over and above cost; (d) there are adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and (e) the expenditure attributable to the intangible asset during its development can be measured reliably. The Directors believe that the criteria for capitalising development costs have been met in respect of certain projects. Consequently, the identifiable costs relating to these projects have been capitalised as intangible assets. The capitalised costs are being amortised over the estimated useful lives of those assets and the amortisation charge for the period is included within ‘Administrative expenses’ in the Consolidated Statement of Comprehensive Income. Expenses for research and development include associated wages and salaries, material costs and directly attributable overheads. The estimated useful life of the development costs capitalised is two years. Amortisation commences when the project is available for use within the business. Intangible assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs of disposal and value in use. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are largely independent cash flows (cash-generating units). Prior impairments of non-financial assets (other than goodwill) are reviewed for possible reversal at each reporting date. 1(g) Property, plant and equipment Property, plant and equipment is stated at cost less accumulated depreciation and any impairment losses. Cost includes the original purchase price of the asset and the costs attributable to bringing the asset to its working condition for its intended use. Depreciation is charged so as to write off the costs of assets over their estimated useful lives, on the following basis: Right-of-use assets Leasehold improvements Fixtures, fittings and equipment Computer equipment Over the term of the lease 5 years straight-line 5 years straight-line 3 years straight-line The gain or loss arising on the disposal of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in the Consolidated Statement of Comprehensive Income. Impairment of property, plant and equipment At each period end, the Group reviews the carrying amounts of its property, plant and equipment assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately. 1(h) Financial instruments Financial assets and financial liabilities are recognised in the Consolidated Statement of Financial Position when the Group becomes party to the contractual provisions of the instrument. Financial assets are de-recognised when the contractual rights to the cash flows from the financial asset expire or when the contractual rights to those assets are transferred. Financial liabilities are de-recognised when the obligation specified in the contract is discharged, cancelled or expired. Subsequent to initial recognition, assets are measured at either amortised cost, fair value through other comprehensive income or fair value through statement of comprehensive income. Actual Experience plc Annual Report 2019 59 Financial statementsOther informationGovernanceStrategic report NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued for the year ended 30 September 2019 1 Summary of significant accounting policies continued (i) Trade receivables Trade receivables are recognised initially at fair value and subsequently measured at amortised cost. Appropriate provisions for estimated irrecoverable amounts are recognised in the Consolidated Statement of Comprehensive Income when there is objective evidence that the assets are impaired. The Group applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all trade receivables and contract assets. To measure the expected credit losses, trade receivables and contract assets have been grouped based on shared credit risk characteristics and the days past due. The contract assets relate to unbilled work in progress and have substantially the same risk characteristics as the trade receivables for the same types of contracts. The group has therefore concluded that the expected loss rates for trade receivables are a reasonable approximation of the loss rates for the contract assets. The expected loss rates are based on the payment profiles of sales over a period of twelve months before 30 September 2019 respectively and the corresponding historical credit losses experienced within this period. The historical loss rates are adjusted to reflect current and forward looking information on macroeconomic factors affecting the ability of the customers to settle the receivables. (ii) Cash and cash equivalents Cash and cash equivalents comprise cash on hand, demand deposits, and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. Cash and cash equivalents are held in either UK Sterling or US Dollars and are placed on deposit in UK and US banks. (iii) Equity instruments An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs. (iv) Trade and other payables Trade payables are initially measured at their fair value and are subsequently measured at their amortised cost using the effective interest rate method; this method allocates interest expense over the relevant period by applying the ‘effective interest rate’ to the carrying amount of the liability. (v) Investments Investments comprise amounts held in a bank deposit account which has a maturity date between three months and twelve months after the balance sheet date. 1(i) Current and deferred tax The tax expense/(credit) represents the sum of the tax currently payable or recoverable and the movement in deferred tax assets and liabilities. Current tax is based upon taxable profit/(loss) for the year. Taxable profit/(loss) differs from net profit/(loss) as reported in the Consolidated Statement of Comprehensive Income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group’s liability or receivable for current tax is calculated by using tax rates that have been enacted or substantively enacted by the reporting date. Credit is taken in the accounting period for research and development tax credits, which have been claimed from HM Revenue and Customs, in respect of qualifying research and development costs incurred. Research and development tax credits have been accounted for on an accruals basis. Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled based upon tax rates that have been enacted or substantively enacted by the reporting date. Deferred tax is charged or credited in the Consolidated Statement of Comprehensive Income, except when it relates to items credited or charged directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit and is accounted for using the liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the profit nor the accounting period. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. 60 Actual Experience plc Annual Report 2019 1(j) Leases As explained in note 2, the Group has changed its accounting policy for leases where the Group is a lessee. The new policy is described in note 12 and the impact of the change in note 2. Until 30 September 2018 and prior to the adoption of IFRS16 leases in which a significant portion of the risks and rewards of ownership were not transferred to the Group as lessee were classified as operating leases (see note 20). Payments made under operating leases were charged to profit or loss on a straight-line basis over the period of the lease. 1(k) Investment in subsidiaries Shares in Group undertakings are stated at cost less any provision for impairment. The Company assesses investments for impairment whenever events or changes in circumstances indicate that the carrying of an investment may not be recoverable. If any such indication of impairment exists, the Company makes an estimate of the recoverable amount. If the recoverable amount of the cash-generating unit is less than the value of the investment, the investment is considered to be impaired and is written down to its recoverable amount. An impairment loss is recognised immediately in the Consolidated Statement of Comprehensive Income. 1(l) Employee benefits (i) Short-term obligations Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulative sick leave that are expected to be settled wholly within 12 months after the end of the period in which the employees render the related service are recognised in respect of employees’ services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled. The liabilities are presented within other creditors in the Consolidated Statement of Financial Position. (ii) Post-employment obligations The Group operates a defined contribution pension plan. The Group pays contributions to publicly or privately administered pension insurance plans on a mandatory, contractual or voluntary basis. The Group has no further payment obligations once the contributions have been paid. The contributions are recognised as employee benefit expense when they are due. (iii) Share-based payments The Company issues equity settled share-based payments to certain employees. Equity settled share-based payments are measured at fair value at the date of grant and expensed in the Consolidated Statement of Comprehensive Income on a straight-line basis over the vesting period, along with a corresponding increase in equity. At each reporting date, the Company revises its estimate of the number of equity instruments expected to vest as a result of the effect of non-market-based vesting conditions. The impact of the revision of the original estimates, if any, is recognised in the Consolidated Statement of Comprehensive Income such that the cumulative expense represents the revised estimate, with a corresponding adjustment to equity reserves. The fair value of share options is determined using a Black-Scholes model, taking into consideration the Directors’ best estimate of the expected life of the option. 2 Change in accounting policies This note explains the impact of the adoption of IFRS 16 Leases on the Group’s financial statements. As indicated in note 1(j) above, the Group has adopted IFRS 16 Leases retrospectively from 1 October 2018 but has not restated comparatives for the 2018 reporting period, as permitted under the specific transition provisions in the standard. The reclassifications and the adjustments arising from the new leasing rules are therefore recognised in the opening balance sheet on 1 October 2018. The new accounting policies are disclosed in note 12. On adoption of IFRS 16, the Group recognised lease liabilities in relation to leases which had previously been classified as ‘operating leases’ under the principal of IAS 17 Leases. These liabilities were measured at the present value of the remaining lease payments, discounted using the lessee’s incremental borrowing rate as of 1 October 2018. The lessee’s incremental borrowing rate applied to the lease liabilities on 1 October 2018 was 3.5%. (i) Practical expedients applied In applying IFRS 16 for the first time, the Group has used the following practical expedients permitted by the standard: • accounting for operating leases with a remaining lease term of less than 12 months as at 1 October 2018 as short-term leases; • excluding initial direct costs for the measurement of the right-of-use asset at the date of initial application, and; • using hindsight in determining the lease term where the contract contains options to extend or terminate the lease. Actual Experience plc Annual Report 2019 61 Financial statementsOther informationGovernanceStrategic reportNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued for the year ended 30 September 2019 2 Change in accounting policies continued (ii) Measurement of lease liabilities Operating lease commitments at 30 September 2018 Adjustment to reflect the extension to the lease term Discounted using the incremental borrowing rate at the date of initial application Less: short-term leases not recognised as a liability Lease liability recognised as at 1 October 2018 Of which are: Current lease liabilities Non-current lease liabilities Lease liability recognised as at 1 October 2018 2019 £ 432,516 783,229 (133,080) (5,095) 1,077,570 103,943 973,627 1,077,570 * In the year ended 30 September 2018, the Group calculated operating lease commitments on the basis that it would terminate the lease on the break clause in 2021. On implementing IFRS 16, it has now been assumed that the Group will not terminate the lease at the break clause but will remain in the lease for the full lease term. (iii) Measurement of right-of-use assets The associated right-of-use assets for property leases were measured on a retrospective basis as if the new rules had always been applied. (iv) Adjustments recognised in the balance sheet on 1 October 2018 The change in accounting policy affected the following items in the balance sheet on 1 October 2018: • • • accruals – decrease by £16,163 right-of-use assets – increase by £1,006,186 lease liabilities – increase by £1,077,570 The net impact on retained earnings on 1 October 2018 was a decrease of £55,221. We have not restated the comparative disclosures for the impact of IFRS16 which came into effect from 1 October 2018. 3 Critical accounting estimates and areas of judgement Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Actual results may differ from these estimates. The estimates and assumptions that have the most significant effects on the carrying amounts of the assets and liabilities in the financial information are discussed below: Research and development costs The assessment of when development expenditure meets the recognition criteria required for capitalisation requires judgement as to the technical feasibility and commercial viability of products and ideas that are under development. These judgements are subjective and, to the extent that actual circumstances differ, there can be an increase or decrease in the amount of expenditure expensed to the Consolidated Statement of Comprehensive Income. When development expenditure is capitalised, the Directors also make a judgement in respect of the expected useful lives of the intangible development costs and an appropriate amortisation charge is made. The useful economic life of the development costs is two years. A one-year reduction in the period over which such development costs are amortised would have increased loss before income tax by £1,000,062 (2018: £878,378). A one-year increase in the period over which such development costs are amortised would have reduced loss before income tax by £333,354 (2018: £285,353). Equity settled share-based payments The estimation of share-based payment costs requires the selection of an appropriate valuation method, consideration as to the inputs necessary for the valuation model chosen and the estimation of the number of awards that will ultimately vest. Inputs subject to judgement relate to the future volatility of the share price of comparable companies, the Group’s expected dividend yields, risk-free interest rates and expected lives of the options. The Directors draw on a variety of sources to aid in the determination of the appropriate data to use in such calculations. Recoverability of deferred tax assets Deferred tax assets are recognised only to the extent that it is considered probable that those assets will be recoverable. This involves an assessment of when those deferred tax assets are likely to reverse and a judgement as to whether or not there will be sufficient taxable profits available to offset the tax assets when they do reverse. This requires assumptions regarding future probability and is therefore inherently uncertain. To the extent that assumptions regarding future probability change, there can be an increase or decrease in the level of deferred tax assets recognised which can result in a charge or credit to the Consolidated Statement of Comprehensive Income in the period in which the change occurs. 62 Actual Experience plc Annual Report 2019 4 Financial risk management The Board has overall responsibility for the determination of the Group’s risk management objectives and policies. The overall objective of the Board is to set policies that seek to reduce risk as far as possible without unduly affecting the Group’s competitiveness and flexibility. The Group does not use derivative financial instruments such as forward currency contracts or similar instruments. The Group does not issue or use financial instruments of a speculative nature. The Group is exposed to the following financial risks: • Credit risk • Liquidity risk • Market risk It should be noted that the same policy is applied to the Company as is applied to the Group. To the extent that financial instruments are not carried at fair value in the Consolidated Statement of Financial Position, book value approximates to fair value at 30 September 2018 and 30 September 2019. Trade and other receivables are measured at fair value and amortised cost. Book values and expected cash flows are reviewed by the Board and any impairment charged to the Consolidated Statement of Comprehensive Income in the relevant period. (i) Credit risk Credit risk is the risk of loss to the Group if a customer or counterparty to financial instruments fails to meet its contractual obligation. Credit risk arises from the Group’s cash and cash equivalents and receivables balances. The concentration of the Group’s credit risk is considered by counterparty, geography and currency. The Group gives careful consideration to which organisation it uses for its banking services in order to minimise credit risk. The Group has a significant concentration of cash held in accounts with three large banks in the UK, two institutions with an A+ credit rating and one with a BBB- credit rating (long term, as assessed by Fitch). The amounts of cash held on deposit with those banks at each reporting date can be seen in note 15. All of the cash and cash equivalents held with those banks at each reporting date were denominated in UK sterling or US dollars. The Directors are satisfied that the level of risk inherent in holding the cash deposits with three banks is low given the credit ratings assessed. The Directors monitor the levels of cash held by the Group on a regular basis and, if necessary, will mitigate any perceived increase in the level of risk by spreading the cash deposits across other institutions. The nature of the Group’s business and current stage of its development are such that individual customers can comprise a significant proportion of its trade and other receivables at any point in time. The Group mitigates the associated risk by close monitoring of the debtor ledger. At 30 September 2019, the Group’s trade receivables balance was £425,636 (30 September 2018: £418,904). The carrying amount of financial assets recorded in the financial statements represents the Group’s maximum exposure to credit risk. An allowance for impairment is made where there is an identified loss event which, based on previous experience, is evidence of a reduction in the recoverability of the cash flows. In the Directors’ opinion, there has been no impairment of financial assets at any point during the year. No collateral is held by the Group as security in relation to its financial assets. The Directors consider the above measures to be sufficient to control the credit risk exposure. (ii) Liquidity risk Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. This risk is managed by ensuring that sufficient liquidity is available to meet foreseeable needs and to invest cash assets safely and profitably. The Group’s cash is held in bank accounts with notice periods no greater than three months and management continually monitors rolling cash flow forecasts to ensure sufficient cash is available for anticipated cash requirements. At 30 September 2019, the Group had £7,876,634 (30 September 2018: £10,776,516) of cash and cash equivalents. Actual Experience plc Annual Report 2019 63 Financial statementsOther informationGovernanceStrategic reportNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued for the year ended 30 September 2019 4 Financial risk management continued (iii) Market risk Market risk is the risk of loss that may arise from changes in market factors such as interest rates and foreign exchange rates. The Group’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates. The Group’s exposure to foreign currency risk has been limited, as the majority of its invoicing and payments are in UK sterling. There are no significant balances held in foreign currencies at each reporting date and it has made no payments in foreign currencies other than US dollar and Euro. Accordingly, the Board has not presented any sensitivity analysis in this area as it is immaterial. The carrying values of trade and other receivables, trade and other payables and cash and cash equivalents approximate their fair values due to their relatively short periods to maturity. Fair value measurements are determined in accordance with the following levels: Level 1: Quoted prices (unadjusted) in active markets for identical assets and liabilities. Level 2: Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3: Prices or valuations that require management inputs that are both significant to the fair value measurement and unobservable. Fair values of all financial assets and liabilities are classified as Level 3 financial instruments, except cash and cash equivalents which is classified as Level 2. (iv) Capital risk management The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The Group’s objective when managing capital is to maintain adequate financial flexibility to preserve its ability to meet financial obligations, both current and long term. The capital structure of the Group is managed and adjusted to reflect changes in economic circumstances. The Group’s capital is made up of share capital, share premium and retained earnings totalling at 30 September 2019: £10,005,469 (30 September 2018: £13,113,849). The Group funds its expenditures on commitments from existing cash and cash equivalent balances, primarily received from issuances of shareholders’ equity. There are no externally imposed capital requirements. Financing decisions are made by the Board based on forecasts of the expected timing and level of capital and operating expenditure required to meet the Group’s commitments and development plans. 5 Revenue The information that is presented to the Chief Executive Officer, who is considered to be the Chief Operating Decision Maker (CODM), for the purposes of resource allocation and assessment of performance, is based wholly on the overall activities of the Group. Due to the current size and activities of the Group, there is a high degree of centralisation of activities. The Directors therefore consider that there is one operating, and hence one reportable segment for the purposes of presenting information under IFRS8; that of Human Experience Management Services and associated consultancy services. There are no differences between the segment results and the Consolidated Statement of Comprehensive Income. The assets and liabilities information presented to the CODM is consistent with the Consolidated Statement of Financial Position. During the year ended 30 September 2019 the Group had two customers who generated more than 10% of total revenue. These customers generated 79% and 17% of revenue respectively. During the year ended 30 September 2018 the Group had one customer who generated more than 10% of total revenue. This customer generated 81% of revenue. An analysis of revenues by geographic location of customers is set out below: United Kingdom United States of America 2019 £ 396,300 1,537,782 2018 £ 179,071 897,392 1,934,082 1,076,463 64 Actual Experience plc Annual Report 2019 6 Operating Loss Loss from operations is stated after charging/(crediting) to administrative expenses: Depreciation on property, plant and equipment Depreciation of right-of-use assets Amortisation of intangible assets Loss on disposal of property, plant and equipment Operating lease rentals – land and buildings Employee costs Foreign exchange losses/gains Auditors’ remuneration: – Audit of these financial statements Total auditors’ remuneration 7 Employee costs The average monthly number of persons (including Directors) employed by the Group during the year was: Directors Sales and support Software development Administration The aggregate remuneration, including Directors, comprised: Wages and salaries Social security costs Other pension costs Share-based expense (note 21) Directors’ remuneration comprised: Emoluments for qualifying services Note 2019 £ 2018 £ 11 12 13 7 125,136 111,788 982,808 – – 5,133,281 (77,259) 138,422 – 844,898 522 239,380 5,477,969 (44,052) 43,000 43,000 33,000 33,000 2019 Number 2018 Number 7 43 33 10 93 2019 £ 7 44 33 9 93 2018 £ 5,401,892 585,336 258,900 83,199 5,660,258 599,447 198,715 177,413 6,329,327 6,635,833 572,609 576,429 Directors’ emoluments disclosed above include £154,211 paid to the highest paid Director (2018: £150,000); this Director did not exercise any share options in the year and no options are due under incentive plans. The Remuneration Report on pages 47 and 48 detail Directors’ interests in share options. Included within total employee costs of £6,329,327 (2018: £6,635,833) is £1,196,046 (2018: £1,157,864) which has been capitalised within development costs in accordance with IAS 38 (see note 13). The remaining £5,133,281 (2018: £5,477,969) has been expensed in the Consolidated Statement of Comprehensive Income. 8 Finance income and expense Finance income Bank interest receivable Finance expense Interest payable for lease liabilities Net finance income 2019 £ 54,235 2018 £ 89,061 34,687 – 19,548 89,061 Actual Experience plc Annual Report 2019 65 Financial statementsOther informationGovernanceStrategic reportNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued for the year ended 30 September 2019 9 Tax Tax on loss Current tax: UK Corporation tax on losses of the year Prior year adjustment Overseas taxes Deferred tax: Origination and reversal of timing differences Total tax credit Factors affecting the current tax credits The tax assessed for the year varies from the standard UK company rate of corporation tax as explained below: Loss before tax Tax at the UK corporate tax of 19.00% (2018: 19.50%) Effects of: Expenses not deductible for tax purposes Unrecognised deferred tax asset on losses Tax relief in respect of exercise of share options Research and development enhancement in respect of the current year Prior year adjustment Change in rate of tax used to calculate deferred tax liability Tax credit for the year 2019 £ 2018 £ (296,866) (30,911) 12,370 (12,546) (327,953) (271,759) 104,227 97,153 (10,881) (81,260) 2019 £ 2018 £ (6,239,903) (7,293,056) (1,185,582) (1,422,146) 231,498 1,010,552 – (354,985) (30,911) 1,475 216,657 1,409,086 (52,048) (338,643) 104,227 1,607 (327,953) (81,260) The Group has tax losses carried forward of approximately £30,355,000 (2018: £25,006,000). The Group has incurred qualifying expenditure on research and development projects which has given rise to tax credits due from HM Revenue and Customs. At 30 September 2019, the amount due from HMRC was £296,866 (2018: £735,634). Deferred tax Deferred tax relates to the following: Accelerated depreciation for tax purposes Deferred tax liability Reconciliation of deferred tax liabilities Balance at the beginning of the year Credit to the Consolidated Statement of Comprehensive Income Balance at the end of the year 2019 £ 14,317 14,317 2019 £ 26,863 (12,546) 14,317 2018 £ 26,863 26,863 2018 £ 37,744 (10,881) 26,863 66 Actual Experience plc Annual Report 2019 Unrecognised deferred tax assets/(libilities) The Group had unrecognised deferred tax assets/(libilities) as follows: At 1 October 2018 Deferred tax asset Deferred tax liability Net unrecognised asset/(liability) At 30 September 2019 Deferred tax asset Deferred tax liability Net unrecognised asset/(liability) Tax losses £ Lease liabilities £ Right-of-use assets £ Total £ 4,251,000 – 4,251,000 183,187 – 183,187 – (171,052) (171,052) 4,434,187 (171,052) 4,263,135 Tax losses £ Lease liabilities £ Right-of-use assets £ Total £ 5,160,000 – 5,160,000 165,517 – 165,517 – (152,048) 5,325,517 (152,048) (152,048) 5,173,469 The Group has not recognised the net deferred tax asset in respect of tax losses in the Consolidated Statement of Financial Position due to the uncertainty in the timing of when it is probable that future taxable profit will be available against which the unused tax losses and unused tax credits can be utilised. The Group has not recognised the net deferred tax asset of £13,469 (2018: £12,135) arising on the recognition of right-of-use assets and the associated lease liability following the adoption of IFRS 16 on the basis that it is not material. 10 Loss per ordinary share Basic loss per share is calculated by dividing the loss attributable to the owners of the parent by the weighted average number of ordinary shares in issue during the year. Diluted loss per share is calculated by adjusting the weighted average number of ordinary shares in issue during the year to assume conversion of all dilutive potential ordinary shares. The Company has one class of potentially dilutive ordinary shares, being those share options granted to employees where the exercise price is less than the average market price of the Company’s ordinary shares during the year. However, due to losses incurred in both the current and previous financial year there is no dilutive effect from the potential exercise of these dilutive shares. Total loss attributable to the equity holders of the parent Weighted average number of ordinary shares in issue during the year Loss per share Basic and diluted on loss for the year The weighted average number of shares in issue throughout the year is as follows: Issued ordinary shares at the beginning of the year Effect of shares issued in October 2017 Effect of shares issued in February 2018 Effect of shares issued in June 2018 Effect of shares issued in July 2019 Weighted average number of shares at the end of the year 2019 £ 2018 £ (5,911,950) (7,211,796) No. No. 45,334,606 44,845,951 (13.04)p (16.08)p 2019 2018 44,902,338 – – – 432,268 44,761,213 50,329 22,279 12,130 – 45,334,606 44,845,951 Actual Experience plc Annual Report 2019 67 Financial statementsOther informationGovernanceStrategic reportNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued for the year ended 30 September 2019 11 Property, plant and equipment Cost At 1 October 2017 Additions Disposals Foreign currency translation differences At 30 September 2018 Additions Foreign currency translation differences At 30 September 2019 Accumulated depreciation At 1 October 2017 Charge for the year Disposals Foreign currency translation differences At 30 September 2018 Charge for the year Foreign currency translation differences At 30 September 2019 Net book value At 30 September 2019 At 30 September 2018 At 30 September 2017 Leasehold improvements £ Fixtures fittings and equipment £ Computer equipment £ 173,909 – – – 173,909 – – 77,976 3,294 – – 81,270 4,737 – 290,537 35,180 (1,156) 161 324,722 10,897 302 Total £ 542,422 38,474 (1,156) 161 579,901 15,634 302 173,909 86,007 335,921 595,837 47,873 34,782 – – 82,655 34,782 – 117,437 56,472 91,254 126,036 20,522 15,872 – – 36,394 16,812 – 123,323 87,768 (634) 145 210,602 73,542 244 53,206 284,388 32,801 44,876 57,454 51,533 114,120 167,214 191,718 138,422 (634) 145 329,651 125,136 244 455,031 140,806 250,250 350,704 12 Leases This note provides information where the Group is a lessee. 12(a) Amounts recognised in the consolidated statement of financial position The consolidated statement of financial position shows the following amounts relating to leases: Right-of-use assets Buildings Total Lease liabilities Current Non-current Total 2019 £ 894,398 894,398 2019 £ 107,493 866,134 973,627 At 1 October 2018* £ 1,006,186 1,006,186 At 1 October 2018* £ 103,943 973,627 1,077,570 * In the previous year, the Group did not have any finance lease liabilities or right-of-use assets. For adjustments recognised on the adoption of IFRS 16 on 1 October 2018, please refer to note 2. 68 Actual Experience plc Annual Report 2019 12(b) Amounts recognised in the consolidated statement of comprehensive income The Consolidated Statement of Comprehensive Income shows the following amounts relating to leases Depreciation charge for right-of-use assets Buildings Total Interest expense (included in finance cost) The total cash outflow for leases in 2019 was £138,630. 2019 £ 111,788 111,788 34,687 2018 £ – – – 12(c) The Group’s leasing activities and how these are accounted for The Group leases an office. The lease commenced in February 2016 and has a fixed term ending September 2027. The lease agreement does not impose any covenants other than the security in the leased assets that are held by the lessor. Leased assets may not be used as security for borrowing purposes. Until the 2018 financial year, leases of property, plant and equipment were classified as operating leases. From 1 October 2018, leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the Group. Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments: • Fixed payments, less any lease incentive receivable • Payments of penalties for terminating the lease, if the lease term reflects the Group exercising that option The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which is generally the case for leases in the Group, the Group’s incremental borrowing rate is used, being the rate that the Group would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions. To determine the incremental borrowing rate the Group has used rates obtained from its principal bankers. The Group is exposed to potential future increases in variable lease payments based on rent reviews which are not included in the lease liability until they take effect. When adjustments to lease payments take effect, the lease liability is reassessed and adjusted against the right-of-use asset. Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. Right-of-use assets are measured at cost comprising the amount of the initial measurement of the lease liability. Right-of-use assets are generally depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis. Payments associated with short-term leases of equipment and vehicles and all leases of low-value assets are recognised on a straight-line basis as an expense in the Consolidated Statement of Comprehensive Income. Short-term leases are leases with a lease term of 12 months or less. Low-value assets comprise IT equipment and small items of office furniture. Actual Experience plc Annual Report 2019 69 Financial statementsOther informationGovernanceStrategic reportNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued for the year ended 30 September 2019 13 Intangible assets Cost At 1 October 2017 Additions At 30 September 2018 Additions At 30 September 2019 Accumulated amortisation and impairment losses At 1 October 2017 Charge for the year At 30 September 2018 Charge for the year At 30 September 2019 Net book value At 30 September 2019 At 30 September 2018 At 30 September 2017 Development costs £ 1,954,533 1,157,864 3,112,397 1,196,046 4,308,443 688,272 844,898 1,533,170 982,808 2,515,978 1,792,465 1,579,227 1,266,261 Amortisation and impairment charge The amortisation of development costs is recognised within administrative expenses in the Consolidated Statement of Comprehensive Income. 14 Trade and other receivables Trade receivables Other receivables Loan to Employee Benefit Trust Prepayments and accrued income 2019 £ 425,636 67,380 46,849 141,805 681,670 2018 £ 418,904 66,669 73,950 125,055 684,578 Contractual payment terms with the Group’s customers are typically 30 to 90 days. There are no provisions for impairment losses in respect of trade and other receivables. There are no trade receivables past due and not impaired and there is no provision for impaired receivables in either 2019 or 2018. The credit quality of those trade receivables not past due and not impaired is considered good. The Directors believe that the carrying value of trade and other receivables represents their fair value. In determining the recoverability of trade receivables, the Board considers any change in the credit quality of the receivable from the date credit was granted up to the reporting date. For details on credit risk management policies, refer to note 4(i). 15 Cash and cash equivalents Bank credit rating: A+ BBB+ BBB- Cash and cash equivalents 2019 £ 3,754,036 – 4,122,598 2018 £ 2,564,438 4,123,384 4,088,694 7,876,634 10,776,516 The above gives an analysis of the credit rating of the financial institutions where cash balances are held. 70 Actual Experience plc Annual Report 2019 All of the Group’s cash and cash equivalents at 30 September 2019 and 30 September 2018 are held in instant access current accounts or short-term deposit accounts. Balances are denominated in UK sterling (£) and US dollars ($) as follows: Denominated in UK sterling Denominated in US dollars Cash and cash equivalents 2019 £ 2018 £ 7,015,209 861,425 10,359,870 416,646 7,876,634 10,776,516 The Directors consider that the carrying value of cash and cash equivalents approximates to their fair value. For details of credit risk management policies, refer to note 4. 16 Trade and other payables Trade payables Other tax and social security Other creditors Accruals Deferred income 2019 £ 176,648 136,374 48,042 296,260 32,102 689,426 2018 £ 104,571 147,521 73,365 489,207 70,829 885,493 Trade and other payables principally comprise amounts outstanding for trade purchases and ongoing costs. They are non-interest bearing and are normally settled on 30-45 day terms. The Directors consider that the carrying value of trade and other payables approximate their fair value. The Group has financial risk management policies in place to ensure that all payables are paid within the credit time frame and no interest has been charged by any suppliers as a result of late payment of invoices during the year. 17 Financial instruments The principal financial instruments used by the Group, from which financial instrument risk arises are as follows: • Trade and other receivables • Trade and other payables • Cash and cash equivalents • Loan to Employee Benefit Trust Investments – Term deposits • The carrying values of trade and other receivables, trade and other payables and cash and cash equivalents approximate their fair values due to their relatively short periods to maturity. Financial assets The Group held the following financial assets: Due within three months Cash and cash equivalents Trade receivables Other receivables 2019 £ 2018 £ 7,876,634 425,636 26,832 10,776,516 418,904 49,490 8,329,102 11,244,910 Actual Experience plc Annual Report 2019 71 Financial statementsOther informationGovernanceStrategic reportNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued for the year ended 30 September 2019 17 Financial instruments continued Financial liabilities The Group held the following financial liabilities held at amortised cost (non-derivatives): Non-derivative financial liabilities Due within one year Trade payables Lease liabilities Other payables Total due within one year Due after more than one year Lease liabilities Total due within after more than year Total financial liabilities 18 Equity 18(a) Share capital and share premium Ordinary shares Fully paid 2019 £ 2018 £ 176,648 107,493 376,404 660,545 866,134 866,134 104,571 – 633,401 737,972 – – 1,526,679 737,972 2019 Shares 2018 Shares 2019 £ 2018 £ 47,124,561 44,902,338 34,800,651 32,017,818 Total share capital and share premium 47,124,561 44,902,338 34,800,651 32,017,818 Movements in Ordinary Shares Details Opening balance at 1 October 2017 Employee share scheme issues Balance at 30 September 2018 Placing of shares Less: transaction costs arising on share issues Balance at 30 September 2019 Number of Shares Share Capital £ Share premium £ 44,761,213 141,125 44,902,338 2,222,223 47,124,561 – 89,522 283 89,805 4,444 94,249 – 31,808,130 119,883 31,928,013 2,995,557 34,923,570 (217,168) Total £ 31,897,652 120,166 32,017,818 3,000,001 35,017,819 (217,168) 47,124,561 94,249 34,706,402 34,800,651 Ordinary shares have a par value of 0.2p. They entitle the holder to participate in dividends, and to share in the proceeds of winding up the company in proportion to the number of and amounts paid on the shares held. On a show of hands every holder of ordinary shares present at a meeting, in person or by proxy, is entitled to one vote, and on a poll each share is entitled to one vote. As permitted by the provisions of the Companies Act 2006, the Company does not have a limited amount of authorised share capital. 18(b) Accumulated losses The movement in accumulated losses is as follows: Balance at 1 October Loss for the year Items of other comprehensive expense recognised directly in accumulated losses Shared-based payment charge Balance at 30 September * The amounts disclosed at 1 October 2018 are after the restatement for the change in accounting policy set out in note 2. 2019* £ (18,959,190) (5,911,950) (7,241) 83,199 2018 £ (11,839,635) (7,211,796) (29,951) 177,413 (24,795,182) (18,903,969) 72 Actual Experience plc Annual Report 2019 19 Cash flow information Net funds reconciliation This section sets out an analysis of net funds and the movement in net funds for each of the periods presented. Net funds Cash and cash equivalents Lease liabilities Net funds Cash and cash equivalents Gross debt – variable interest rates Net funds Net funds at 1 October 2017 Cash flows Foreign exchange adjustments Net funds at 30 September 2018 Recognised on adoption of IFRS 16 Net funds at 1 October 2018 Cash flows Foreign exchange adjustments Other changes Net funds at 30 September 2019 2019 £ 2018 £ 7,876,634 (973,627) 10,776,516 – 6,903,007 10,776,516 7,876,634 (973,627) 10,776,516 – 6,903,007 10,776,516 Leases £ – – – – (1,077,570) Cash £ 13,209,850 (2,438,333) 4,999 10,776,516 – Total £ 13,209,850 (2,438,333) 4,999 10,776,516 (1,077,570) (1,077,570) 10,776,516 9,698,946 138,630 – (34,687) (2,904,232) 4,350 – (2,765,602) 4,350 (34,687) (973,627) 7,876,634 6,903,007 Other changes include non-cash movements include interest expenses arising on lease liabilities. 20 Commitments 20(a) Capital commitments The Group had no capital commitments at 30 September 2019 (2018: none). 20(b) Non-cancellable operating leases The Group leases offices under non-cancellable operating leases expiring within eight years. From 1 October 2018, the Group has recognised right-of-use assets for these leases, except for short-term and low-value leases. See notes 2 and 12 for further information. Commitments for minimum lease payments in relation to non-cancellable operating leases are payable as follows: Within one year Later than one year but not later than five years Rental expense relating to operating leases Minimum lease payments 2019 £ – – – 2019 £ – 2018 £ 208,861 223,655 432,516 2018 £ 138,630 Actual Experience plc Annual Report 2019 73 Financial statementsOther informationGovernanceStrategic reportNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued for the year ended 30 September 2019 21 Share-based payments Share options The Company has a share option plan under which it grants options over ordinary shares to certain employees. Options are exercisable at a price equal to the estimated market price of the Company’s shares on the date of the grant. The vesting period for shares is usually four years. The options are settled in equity once exercised. If the options remain unexercised for a period after ten years from the date of grant, the options expire. Options are forfeited if the employee leaves the Group before the options vest. Details of the number of share options and the weighted average exercise price outstanding during the year are as follows: At 1 October 2017 Granted in the year Exercised in the year Forfeited in the year At 30 September 2018 Granted in the year Forfeited in the year At 30 September 2019 Number of share interests EMI options Unapproved options 1,850,925 147,500 (86,125) (74,000) 1,838,300 72,500 (82,500) 1,828,300 525,000 – (55,000) (110,000) 360,000 – (50,000) 310,000 CSOP options – 157,500 – (20,000) Total 2,375,925 305,000 (141,125) (204,000) 137,500 2,335,800 172,500 (42,500) 245,000 (175,000) 267,500 2,405,800 Weighted average exercise price per share (pence) 152.82 283.43 (85.15) (249.01) 164.29 192.50 233.70 163.09 There were 1,806,925 share options outstanding at 30 September 2019 (30 September 2018: 1,630,216), which were eligible to be exercised. The remaining options were not eligible to be exercised as these are subject to employment period vesting conditions, some of which had not been met at 30 September 2019. Options have a range of exercise prices from 9.09 pence per share to 302.5 pence per share and have a weighted contractual life of 5.46 years. Details of the outstanding share options are given below: Employees entitled Number of options Performance conditions Exercise price(p) Earliest exercise date Grant date 19/03/2010 22/06/2011 17/10/2011 04/03/2013 01/10/2013 18/11/2013 23/12/2013 09/07/2014 15/09/2014 24/10/2014 29/05/2015 05/06/2015 29/06/2015 24/07/2015 14/10/2015 07/03/2016 26/05/2016 06/06/2016 13/06/2016 19/01/2017 24/05/2017 01/08/2017 01/09/2017 31/10/2017 18/01/2018 04/06/2018 18/06/2018 04/10/2018 15/01/2019 17/05/2019 07/08/2019 Outstanding 1 2 2 2 1 1 1 2 2 1 3 1 5 1 6 3 5 1 1 13 13 1 1 11 18 3 1 9 3 13 5 247,500 61,700 60,600 160,750 227,250 47,000 22,500 140,000 80,000 50,000 130,000 30,000 75,000 30,000 100,000 90,000 85,000 10,000 10,000 130,000 152,500 25,000 10,000 62,500 108,500 15,000 10,000 52,500 20,000 95,000 67,500 2,405,800 Time served Time served Time served Time served Time served Time served Time served Time served Time served Time served Time served Time served Time served Time served Time served Time served Time served Time served Time served Time served Time served Time served Time served Time served Time served Time served Time served Time served Time served Time served Time served 9.091 9.091 9.091 14.255 14.255 14.255 54.500 186.500 184.000 175.000 207.500 207.500 212.500 212.500 262.500 277.500 282.500 282.500 282.500 277.500 302.500 290.000 295.000 270.000 299.000 275.000 280.000 270.000 210.000 185.000 135.000 25/01/2011 15/10/2011 17/10/2011 11/06/2013 01/10/2014 11/11/2014 01/10/2014 09/07/2015 06/01/2015 24/10/2015 25/11/2015 05/06/2016 29/05/2016 08/06/2016 17/08/2016 16/11/2016 07/03/2017 06/06/2017 13/06/2017 20/06/2017 01/01/2018 26/06/2018 26/06/2018 31/10/2017 03/04/2018 04/09/2018 18/06/2019 11/06/2019 06/11/2019 17/05/2019 04/10/2019 Expiry date 19/03/2020 22/06/2021 17/10/2021 04/03/2023 01/10/2023 18/11/2023 23/12/2023 09/07/2024 15/09/2024 24/10/2024 29/05/2025 05/06/2025 29/06/2025 24/07/2025 14/10/2025 07/03/2026 26/05/2026 06/06/2026 13/06/2026 19/01/2027 24/05/2027 01/08/2027 01/09/2027 31/10/2027 18/01/2028 04/06/2028 18/06/2028 04/10/2028 15/01/2029 17/05/2029 07/08/2029 74 Actual Experience plc Annual Report 2019 Share options continued The fair values were calculated using the Black-Scholes pricing model. The inputs into the model for options granted during the year were as follows: Dividend yield Expected volatility Risk-free interest rate (%) Life of options (years) Weighted average exercise price (pence) Weighted average share price (pence) Granted on 4 October 2018 Granted on 15 January 2019 Granted on 17 May 2019 Granted on 7 August 2019 0% 18.5% 1.50% 10 270.0p 270.0p 0% 19.7% 1.50% 10 210.0p 210.0p 0% 19.5% 1.50% 10 185.0p 185.0p 0% 20.8% 1.50% 10 135.0p 135.0p The Group uses historical data to estimate option exercise and employee retention within the valuation model. Expected volatilities are based upon an estimate by the Directors taking account of the implied volatility as determined from the Company’s historical share price movements. The risk-free rate for the year within the contractual life of the option is based on the UK gilt yield curve at the time of the grant. Any share options which are not exercised within ten years from the date of grant will expire. The Group recognised a charge of £83,199 (2018: £177,413) in the Consolidated Statement of Comprehensive Income in respect of equity settled share-based payment transactions in the year. 22 Related party transactions Remuneration of key personnel The remuneration of the Directors, who are the key management personnel of the Group and the Company, is shown below: Executive Directors – aggregate Short-term employment benefits* Non-executive Directors – aggregate Short-term employment benefits* Total 2019 £ 2018 £ 439,182 451,429 133,426 572,608 125,000 576,429 * In addition, certain Directors hold share options in the Company for which a fair value share-based charge of £3,384 has been recognised in the Consolidated Statement of Comprehensive Income (2018: £14,358). Amounts outstanding to key personnel As at 30 September 2019, no amounts were due to Directors in relation to reimbursement of fees and expenses arising in the ordinary course of business (30 September 2018: £nil). Transactions with shareholders and other related parties During the year the Group entered into transactions, in the ordinary course of business, with shareholders and other related parties. Transactions entered into, along with trading balances outstanding, are as follows: Related party: IP Group plc (see note below) Purchases – Non-executive Director fees Amounts invoiced to related party 2019 £ Amounts invoiced by related party 2019 £ Amounts invoiced to related party 2018 £ Amounts invoiced by related party 2018 £ – – 26,383 26.383 – – 25,000 25,000 Note: IP Group plc is a shareholder of the Company. There were no amounts outstanding due from or to the related parties at 30 September 2019. During the year ended 30 September 2019, the Company entered into numerous transactions with its subsidiary company, which net off on consolidation – these have not been shown above. Ultimate controlling party The Company has no single ultimate controlling party. Actual Experience plc Annual Report 2019 75 Financial statementsOther informationGovernanceStrategic reportCompany statement of changes in equity COMPANY STATEMENT OF CHANGES IN EQUITY for the year ended 30 September 2019 At 1 October 2017 Loss and total comprehensive expense for the year Issue of shares Share-based payment expense Share-based payment credit in respect of services provided to subsidiary undertaking At 30 September 2018 At 30 September 2018 – as previously presented Change in accounting policy Restated total equity at 1 October 2018 Loss and total comprehensive expense for the year Issue of shares Expenses of share issues Share-based payment expense Share-based payment credit in respect of services provided to subsidiary undertaking At 30 September 2019 Share capital £ 89,522 – 283 – – 89,805 89,805 – 89,805 – 4,444 – – – Share premium £ Accumulated losses £ Total equity £ 31,808,130 (11,980,131) 19,917,521 – 119,883 – (7,306,010) – 202,268 (7,306,010) 120,166 202,268 – (24,855) (24,855) 31,928,013 (19,108,728) 12,909,090 31,928,013 – (19,108,728) (55,221) 12,909,090 (55,221) 31,928,013 (19,163,949) 12,853,869 – 2,995,557 (217,168) – (5,995,642) – – 97,165 (5,995,642) 3,000,001 (217,168) 97,165 – (13,966) (13,966) 94,249 34,706,402 (25,076,392) 9,724,259 76 Actual Experience plc Annual Report 2019 COMPANY STATEMENT OF FINANCIAL POSITION as at 30 September 2019 ASSETS Non-current assets Property, plant and equipment Right-of-use assets Intangible assets Investments TOTAL NON-CURRENT ASSETS Current assets Trade and other receivables Income tax receivable Cash and cash equivalents TOTAL CURRENT ASSETS TOTAL ASSETS LIABILITIES Non-current liabilities Lease liabilities Deferred tax TOTAL NON-CURRENT LIABILITIES Current liabilities Trade and other payables Lease liabilities TOTAL CURRENT LIABILITIES TOTAL LIABILITIES NET ASSETS EQUITY Share capital Share premium At 1 October Loss for the year Other changes in accumulated losses ACCUMULATED LOSSES TOTAL EQUITY Approved by the Board of Directors and authorised for issue on 22 January 2020. Company statement of financial position Note 2019 £ 2018 £ C3 12 13 C4 C5 C10 C6 12 C10 140,691 894,398 1,792,465 100,234 249,270 – 1,579,227 114,201 2,927,788 1,942,698 673,914 296,866 7,801,487 677,435 735,634 10,702,764 8,772,267 12,115,833 11,700,055 14,058,531 (866,134) (14,317) (880,451) – (26,863) (26,863) C7 12 (987,852) (107,493) (1,122,578) – (1,095,345) (1,122,578) (1,975,796) (1,149,441) 9,724,259 12,909,090 18 18 94,249 34,706,402 (19,108,728) (5,995,642) 27,978 89,805 31,928,013 (11,980,131) (7,306,010) 177,413 C8 (25,076,392) (19,108,728) 9,724,259 12,909,090 Actual Experience plc Annual Report 2019 77 Financial statementsOther informationGovernanceStrategic reportCompany statement of cash flows 2019 £ 2018 £ (6,335,965) (7,484,423) 124,191 111,788 982,808 – 97,165 (54,130) 34,687 (5,039,456) (23,580) (118,562) (5,181,598) 766,545 136,660 – 844,898 417 202,268 (89,019) – (6,389,199) (195,760) 257,131 (6,327,828) – (4,415,053) (6,327,828) (1,196,046) (15,612) – 54,130 (1,157,864) (38,287) 5,000,000 89,019 (1,157,528) 3,892,868 2,782,833 (138,630) 27,101 2,671,304 120,166 – (18,000) 102,166 (2,901,277) 10,702,764 (2,332,794) 13,035,558 7,801,487 10,702,764 COMPANY STATEMENT OF CASH FLOWS for the year ended 30 September 2019 Cash flows from operating activities Loss before tax Adjustment for non-cash items: Depreciation of property, plant and equipment Depreciation of right-to-use assets Amortisation of intangible assets Loss on sale of property, plant and equipment Share-based payment charge Finance income Finance expense Operating cash outflow before changes in working capital Movement in trade and other receivables Movement in trade and other payables Cash flows used in operations Tax received Net cash flows used in operating activities Cash flows from investing activities Development of intangible assets Purchases of property, plant and equipment Transfers to term deposits with more than three months maturity Finance income Net cash (outflow)/inflow from investing activities Cash flows from financing activities Proceeds from issue of share capital, net of costs Principal element of lease payments Inflow/outflow to Employee Benefit Trust Net cash inflow from financing activities Decrease in cash and cash equivalents Cash and cash equivalents at start of year Cash and cash equivalents at end of year 78 Actual Experience plc Annual Report 2019 Notes to the company financial statements NOTES TO THE COMPANY FINANCIAL STATEMENTS for the year ended 30 September 2019 C1. Principal accounting policies The financial statements of the Company are presented as required by the Companies Act 2006 and in accordance with IFRS. The principal accounting policies adopted are the same as for those set out in the Group’s financial statements. C2. Company results The Company has elected to take the exemption under section 408 of the Companies Act 2006 not to present the parent company’s statement comprehensive income. The parent company’s result for the year ended 30 September 2019 was a loss of £5,995,642 (2018: loss of £7,306,010). The audit fee for the Company is set out in note 6 of the Group’s financial statements. C3. Property, plant and equipment Cost At 1 October 2017 Additions Disposals At 30 September 2018 Additions At 30 September 2019 Accumulated depreciation At 1 October 2017 Charge for the year Disposals At 30 September 2018 Charge for the year At 30 September 2019 Net book value At 30 September 2019 At 30 September 2018 At 30 September 2017 Leasehold improvements £ Fixtures, fittings and equipment £ Computer equipment £ 173,909 – – 173,909 – 173,909 47,873 34,782 – 82,655 34,782 117,437 56,472 91,254 126,036 77,976 3,294 – 81,270 4,737 86,007 20,522 15,872 – 36,394 16,812 53,206 32,801 44,876 57,454 284,908 34,993 (663) 319,238 10,875 330,113 120,338 86,006 (246) 206,098 72,597 278,695 51,418 113,140 164,570 C4. Investments At 30 September 2019, the Company held the following investments in subsidiary companies: Undertaking Actual Experience Inc Sector 251 Little Falls Drive, Wilmington, Delaware, Newcastle, USA, 19808 Sales and marketing services Cost At 1 October 2017 Disposals At 30 September 2018 Disposals At 30 September 2019 Impairment At 1 October 2017, 30 September 2018 and 30 September 2019 Carrying value at 30 September 2019 Carrying value at 30 September 2018 Carrying value at 30 September 2017 Total £ 536,793 38,287 (663) 574,417 15,612 590,029 188,733 136,660 (246) 325,147 124,191 449,338 140,691 249,270 348,060 Share of issued capital and voting rights 2019 100% £ 139,056 (24,855) 114,201 (13,967) 100,234 – 100,234 114,201 139,056 Movements in the year arise from adjustments for share-based payment charges for the Group’s subsidiary undertaking which are accounted for as capital contributions. Actual Experience plc Annual Report 2019 79 Financial statementsOther informationGovernanceStrategic reportNOTES TO THE COMPANY FINANCIAL STATEMENTS continued for the year ended 30 September 2019 C5. Trade and other receivables Trade receivables Other receivables Loan to Employee Benefit Trust Prepayments and accrued income 2019 £ 425,636 67,380 46,849 134,049 673,914 2018 £ 418,904 66,669 73,950 117,912 677,435 Contractual payment terms with the Company’s customers are typically 30 to 90 days. There are no receivables for which allowance has been made. There are no provisions for impairment losses in respect of trade and other receivables. There are no receivables at any of the year ends which were considered to be past due. The Directors believe that the carrying value of trade and other receivables represents their fair value. In determining the recoverability of trade receivables the Board considers any change in the credit quality of the receivable from the date credit was granted up to the reporting date. For details on credit risk management policies, refer to note 4(i). C6. Cash and cash equivalents Bank credit rating: A+ BBB+ BBB- Cash and cash equivalents 2019 £ 3,678,889 – 4,122,598 2018 £ 2,564,438 4,049,632 4,088,694 7,801,487 10,702,764 The above gives an analysis of the credit rating of the financial institutions where cash balances are held. All of the Company’s cash and cash equivalents at 30 September 2019 and 30 September 2018 are held in instant access current accounts or short-term deposit accounts. Balances are denominated in UK sterling (£) and US dollars ($) as follows: Denominated in UK sterling Denominated in US dollars Cash and cash equivalents 2019 £ 2018 £ 7,015,209 786,278 10,359,870 342,894 7,801,487 10,702,764 The Directors consider that the carrying value of cash and cash equivalents approximates to their fair value. For details of credit risk management policies, refer to note 4(i). C7. Trade and other payables Trade payables Other tax and social security Other creditors Amounts due to subsidiary undertakings Accruals and deferred income 2019 £ 164,046 136,374 44,121 315,656 327,655 987,852 2018 £ 93,947 147,521 65,170 361,552 454,388 1,122,578 Trade and other payables principally comprise amounts outstanding for trade purchases and ongoing costs. They are non-interest bearing and are normally settled on 30-45 day terms. The Directors consider that the carrying value of trade and other payables approximate their fair value. The Company has financial risk management policies in place to ensure that all payables are paid within the credit time frame and no interest has been charged by any suppliers as a result of late payment of invoices during the year. 80 Actual Experience plc Annual Report 2019 C8. Accumulated losses At 1 October 2017 Loss for the year Share-based payment charge Share-based payment credit in respect of services provided to subsidiary undertaking At 30 September 2018 Change of accounting policy for IFRS 16 At 1 October 2018 Loss for the year Share-based payment charge Share-based payment credit in respect of services provided to subsidiary undertaking At 30 September 2019 C9. Employee costs The average monthly number of persons (including Directors) employed by the Company during the year was Directors Sales and support Software development Administration The aggregate remuneration, including Directors, comprised: Wages and salaries Social security costs Other pension costs Share-based expense (note 21) Directors’ remuneration comprised: Emoluments for qualifying services Accumulated losses £ (11,980,131) (7,306,010) 202,268 (24,855) (19,108,728) (55,221) 19,163,949) (5,995,642) 97,165 (13,966) (25,076,392) 2019 Number 2018 Number 6 41 33 10 90 2019 £ 6 41 33 9 89 2018 £ 4,885,948 576,620 252,793 97,165 4,952,425 579,907 184,913 202,268 5,812,526 5,919,513 539,183 551,429 Directors’ emoluments disclosed above include £154,211 paid to the highest paid director (2018: £157,652); this Director did not exercise any share options in the year and no options are due under incentive plans. The Directors’ remuneration report on pages 47 and 48 details the Directors’ interests in share options. Included within total employee cost of £5,812,526 (2018: £5,916,513) is £1,196,046 (2018: £1,157,864) which has been capitalised within development costs in accordance with IAS 38 (see note 11). The remaining £4,616,480 (2018: £4,758,649) has been expensed in the Consolidated Statement of Comprehensive Income. Actual Experience plc Annual Report 2019 81 Financial statementsOther informationGovernanceStrategic reportNOTES TO THE COMPANY FINANCIAL STATEMENTS continued for the year ended 30 September 2019 C10. Taxation Deferred tax Deferred tax relates to the following: Accelerated depreciation for tax purposes Deferred tax liability Reconciliation of deferred tax liabilities Balance at the beginning of the year Credit to the Consolidated Statement of Comprehensive Income Balance at the end of the year Unrecognised deferred tax assets/(liabilities) The company had unrecognised deferred tax assets/(liabilities) as follows: 2019 £ 14,317 14,317 2019 £ 26,863 (12,546) 14,317 2018 £ 26,863 26,863 2018 £ 37,744 (10,881) 26,863 At 1 October 2018 Deferred tax asset Deferred tax liability Net unrecognised asset/(liability) At 30 September 2019 Deferred tax asset Deferred tax liability Net unrecognised asset/(liability) Tax losses £ 4,251,000 – 4,251,000 Tax losses £ 5,160,000 – 5,160,000 Lease liability £ Right-of-use assets £ Total £ 183,187 – 183,187 – (171,052) 4,434,187 (171,052) (171,052) 4,263,135 Lease liability £ Right-of-use assets £ Total £ 165,517 – 165,517 – (152,048) 5,325,517 (152,048) (152,048) 5,173,469 The Company has not recognised the net deferred tax asset in respect of tax losses in the Statement of Financial Position due to the uncertainty in the timing of when it is probable that future taxable profit will be available against which the unused tax losses and unused tax credits can be utilised. The Company has not recognised the net deferred tax asset of £13,469 (2018: £12,135) arising on the recognition of right-of-use assets and the associated lease liability following the adoption of IFRS 16 on the basis that it is not material. The Company has incurred qualifying expenditure on research and development projects which has given rise to tax credits due from HM Revenue and Customs to the Company. At 30 September 2019 an amount of £296,866 was due from HMRC (2018: £735,634). C11. Related party transactions Details of external related party transactions are set out in note 22. The Company has entered into transactions with its wholly-owned subsidiary undertaking, Actual Experience Inc during the year. The Company incurred costs of £827,798 charged by Actual Experience Inc. during the year (2018: £1,198,408). At 30 September 2019, an amount of £315,656 was due to the subsidiary company (30 September 2018: £361,552 due to the subsidiary company). 82 Actual Experience plc Annual Report 2019 Other information Notice of annual general meeting NOTICE OF ANNUAL GENERAL MEETING Notice is given that the Annual General Meeting of Actual Experience plc (the Company) will be held at the offices of Osborne Clarke, 1 London Wall, London EC2Y 5EB at 11:30am on Thursday 12 March 2020 for the following purposes: To consider and, if thought fit, to pass the following resolutions as ordinary resolutions: 1. To receive the Company’s Annual Financial Statements, Strategic Report and Directors’ and auditors’ reports for the year ended 30 September 2019. 2. To re-elect Stephen Davidson as a Director. 3. To re-elect Dave Page as a Director. 4. To re-elect Steve Bennetts as a Director. 5. To re-elect Robin Young as a Director. 6. To re-elect Sir Bryan Carsberg as a Director. 7. To re-elect Paul Spence as a Director. 8. To appoint Kirsten English who has been appointed by the Board since the previous Annual General Meeting. 9. To reappoint PricewaterhouseCoopers LLP as auditors of the Company. 10. To authorise the Directors to determine the remuneration of the Auditors. 11. That, pursuant to section 551 of the Companies Act 2006 (Act), the Directors be and are generally and unconditionally authorised to exercise all powers of the Company to allot Relevant Securities up to an aggregate nominal amount of £31,581 provided that (unless previously revoked, varied or renewed) these authorities shall expire at the conclusion of the next Annual General Meeting of the Company after the passing of this resolution or on the date falling 18 months after the passing of this resolution (whichever is the earlier), save that, in each case, the Company may make an offer or agreement before the authority expires which would or might require Relevant Securities to be allotted after the authority expires and the Directors may allot Relevant Securities pursuant to any such offer or agreement as if the authority had not expired. In this resolution, ‘Relevant Securities’ means shares in the Company or rights to subscribe for or to convert any security into shares in the Company; a reference to the allotment of Relevant Securities includes the grant of such a right; and a reference to the nominal amount of a Relevant Security which is a right to subscribe for or to convert any security into shares in the Company is to the nominal amount of the shares which may be allotted pursuant to that right. These authorities are in substitution for all existing authorities under section 551 of the Act (which, to the extent unused at the date of this resolution, are revoked with immediate effect from the passing of this resolution). To consider and, if thought fit, to pass the following resolution as a special resolution: 12. That, subject to the passing of resolution 11 and pursuant to section 570 of the Act, the Directors be and are generally empowered to allot equity securities (within the meaning of section 560 of the Act) for cash pursuant to the authorities granted by resolution 11 as if section 561(1) of the Act did not apply to any such allotment, provided that this power shall be limited to: 12.1 the allotment of equity securities in connection with an offer of equity securities (whether by way of a rights issue, open offer or otherwise): 12.1.1 to holders of ordinary shares in the capital of the Company in proportion (as nearly as practicable) to the respective numbers of ordinary shares held by them; and 12.1.2 to holders of other equity securities in the capital of the Company, as required by the rights of those securities or, subject to such rights, as the Directors otherwise consider necessary, but subject to such exclusions or other arrangements as the Directors may deem necessary or expedient in relation to treasury shares, fractional entitlements, record dates or any legal or practical problems under the laws of any territory or the requirements of any regulatory body or stock exchange; and 12.2 the allotment of equity securities otherwise than pursuant to paragraph 12.1 of this resolution) up to an aggregate nominal amount of £9,474, and (unless previously revoked, varied or renewed) this power shall expire at the conclusion of the next Annual General Meeting of the Company after the passing of this resolution or on the date falling 18 months after the passing of this resolution (whichever is the earlier), save that the Company may make an offer or agreement before this power expires which would or might require equity securities to be allotted for cash after this power expires and the Directors may allot equity securities for cash pursuant to any such offer or agreement as if this power had not expired. This power is in substitution for all existing powers under section 570 of the Act (which, to the extent unused at the date of this resolution, are revoked with immediate effect from the passing of this resolution). By order of the Board Roy Stephen (Steve) Bennetts Company Secretary 22 January 2020 Registered office Quay House The Ambury Bath BA1 1UA United Kingdom Registered in England and Wales No. 06838738 Actual Experience plc Annual Report 2019 83 Financial statementsOther informationGovernanceStrategic report Notes relating to annual general meeting NOTES RELATING TO ANNUAL GENERAL MEETING Entitlement to attend and vote 1. The right to vote at the meeting is determined by reference to the register of members. Only those shareholders registered in the register of members of the Company as at close of business on 10 March 2020 (or, if the meeting is adjourned, close of business on the date which is two working days before the date of the adjourned meeting) shall be entitled to attend and vote at the meeting in respect of the number of shares registered in their name at that time. Changes to entries in the register of members after that time shall be disregarded in determining the rights of any person to attend or vote (and the number of votes they may cast) at the meeting. Proxies A member entitled to attend and vote at the meeting may appoint one or more proxies to exercise all or any of the member’s rights to attend, speak and vote at the meeting. A proxy need not be a member of the Company but must attend the meeting for the member’s vote to be counted. If a member appoints more than one proxy to attend the meeting, each proxy must be appointed to exercise the rights attached to a different share or shares held by the member. If a member wishes to appoint more than one proxy they may do so at www.signalshares.com. The appointment of a proxy will not preclude a shareholder from attending and voting in person at the meeting. 2. You will not receive a proxy card in the post. You may vote your shares electronically at www.signalshares.com. On the home page search ‘Actual Experience PLC’ and then log in or register using your Investor Code. To vote, click on the ‘Vote Online Now’ button. To be effective, the proxy vote must be submitted at www. signalshares.com so as to have been received by the Company’s registrars. not less than 48 hours (excluding weekends and public holidays) before the time appointed for the meeting or any adjournment of it. By registering on the Signal shares portal at www.signalshares.com, you can manage your shareholding, including: - cast your vote - change your dividend payment instruction - update your address - select your communication preference. 3. Any power of attorney or other authority under which the proxy is submitted must be returned to the Company’s Registrars, Link Asset Services, PXS1, 34 Beckenham Road, Beckenham, Kent, BR3 4ZF. If a paper form of proxy is requested from the registrar, it should be completed and returned to Link Asset Services, PXS1, 34 Beckenham Road, Beckenham, Kent, BR3 4ZF to be received not less than 48 hours before the time of the meeting. If you need help with voting online, or require a paper proxy form, please contact our Registrar, Link Asset Services by email at enquiries@linkgroup.co.uk , or you may call Link on 0871 664 0391 if calling from the UK, or +44 (0) 371 664 0391 if calling from outside of the UK. We are open between 9.00 a.m. – 5.30 p.m., Monday to Friday excluding public holidays in England and Wales. Submission of a Proxy vote shall not preclude a member from attending and voting in person at the meeting in respect of which the proxy is appointed or at any adjournment thereof. 4. CREST members who wish to appoint a proxy or proxies for the meeting (or any adjournment of it) through the CREST electronic proxy appointment service may do so by using the procedures described in the CREST Manual. CREST personal members or other CREST sponsored members, and those CREST members who have appointed a voting service provider(s), should refer to their CREST sponsor or voting service provider(s), who will be able to take the appropriate action on their behalf. 84 Actual Experience plc Annual Report 2019 In order for a proxy appointment or instruction made using the CREST service to be valid, the appropriate CREST message (a ‘CREST Proxy Instruction’) must be properly authenticated in accordance with Euroclear UK & Ireland Limited’s specifications and must contain the information required for such instructions, as described in the CREST Manual. The message, regardless of whether it constitutes the appointment of a proxy or is an amendment to the instruction given to a previously appointed proxy, must, in order to be valid, be transmitted so as to be received by LinkAsset Services (ID RA10) no later than 11.00am on 10 March 2020 (or, if the meeting is adjourned, no later than 48 hours before the time of any adjourned meeting). For this purpose, the time of receipt will be taken to be the time (as determined by the timestamp applied to the message by the CREST Applications Host) from which Link Asset Services is able to retrieve the message by enquiry to CREST in the manner prescribed by CREST. After this time, any change of instructions to proxies appointed through CREST should be communicated to the appointee through other means. CREST members and, where applicable, their CREST sponsors or voting service providers should note that Euroclear UK & Ireland Limited does not make available special procedures in CREST for any particular messages. Normal system timings and limitations will therefore apply in relation to the input of CREST Proxy Instructions. It is the responsibility of the CREST member concerned to take (or, if the CREST member is a CREST personal member or sponsored member or has appointed a voting service provider(s), to procure that his or her CREST sponsor or voting service provider(s) take(s)) such action as shall be necessary to ensure that a message is transmitted by means of the CREST system by any particular time. In this connection, CREST members and, where applicable, their CREST sponsors or voting service providers are referred, in particular, to those sections of the CREST Manual concerning practical limitations of the CREST system and timings. The Company may treat a CREST Proxy Instruction as invalid in the circumstances set out in Regulation 35(5)(a) of the Uncertificated Securities Regulations 2001. Corporate representatives 5. A shareholder which is a corporation may authorise one or more persons to act as its representative(s) at the meeting. Each such representative may exercise (on behalf of the corporation) the same powers as the corporation could exercise if it were an individual shareholder, provided that (where there is more than one representative and the vote is otherwise than on a show of hands) they do not do so in relation to the same shares. Documents available for inspection 6. The following documents will be available for inspection during normal business hours at the registered office of the Company from the date of this Notice until the time of the meeting. They will also be available for inspection at the place of the meeting from at least 15 minutes before the meeting until it ends. a. b. Copies of the service contracts of the Executive Directors. Copies of the letters of appointment of the Non-executive Directors. Biographical details of Directors 7. Biographical details of all those Directors who are offering themselves for reappointment at the meeting are set out on pages 38 and 39 of the enclosed Annual Report and Accounts. GLOSSARY OF TERMS Actual Experience plc is our legal entity. Our brand name is Actual Experience, without the plc. Once we have introduced our brand name, we often shorten it to Actual. Analytics as a Service (AaaS) – often shortened to AaaS, Analytics as a Service is the analysis of data (in our case, performance data) in an application hosted on the web. These web-based solutions offer businesses an alternative to developing internal hardware setups just to perform business analytics. Analytics Cloud – the Actual Experience Analytics Cloud receives data from Digital Users, applies our algorithms to the data and produces an objective score of digital experience quality and supply chain diagnostics. Our patented technology is based on decades of academic research. CRM – Customer relationship management Digital Supply Chain – the combination of businesses and the technologies they provide, including networks, IT infrastructure and applications, that deliver a digital product or service. Digital User (DU) is the measurement software component of Actual Work and Actual Home. Enterprise Customer – A large, typically multi-national corporation with hundreds or thousands of sites globally. Production – When a customer of Actual Experience has DUs deployed measuring a target. Quality Dashboard – The Actual Experience Quality Dashboard provides actionable data for Service Providers to pinpoint the cause of poor digital quality. This insight can be used to fix or improve the digital quality problems that users are experiencing in their homes, on their phones or in the office. Voice of the Customer – the objective score produced in Actual’s Analytics Cloud, which is an accurate proxy for what your customer would tell you about their experience of your digital product or service. MSA – Master Services Agreement POC – Proof of concept PO – Purchase order Actual Experience plc Annual Report 2019 85 Financial statementsOther informationGovernanceStrategic reportA c t u a l E x p e r i e n c e p l c A n n u a l R e p o r t 2 0 1 9 Actual Experience plc Quay House, The Ambury, Bath, BA1 1UA www.actual-experience.com 

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