Notice of EGM

Clarity Commerce Solutions PLC
03 May 2007

03 May 2007



Clarity Commerce Solutions plc


Notice of Extraordinary General Meeting



Why shareholders should vote against the EGM Resolutions



Clarity Commerce Solutions plc ('Clarity' or the 'Company') announces that a
notice of an Extraordinary General Meeting ('EGM') has today been sent to
shareholders. The EGM is scheduled to take place at 2.00 p.m. on Thursday 31 May
2007, at Cyntergy Services Limited, 33 Hanworth Road, Sunbury upon Thames,
Middlesex TW16 5DA.



On 12 April 2007 the Board of Clarity received a notice from Arthur Leonard
Robert Morton, Stephen Gerard Bellamy, George Boy Matthews and Groundlinks
Limited requisitioning an EGM. The EGM is to consider resolutions for Graham
York to be removed as a Director of the Company, for Mr Morton, Mr Bellamy and
Mr Matthews to be appointed as Directors of the Company and for any person
appointed by the Directors as an additional Director between the date of the
requisition and the conclusion of the EGM to be removed from office as a
Director of the Company.


The Board unanimously recommends that shareholders vote AGAINST the proposed
resolutions, which it believes are not in the best interests of the Company or
its shareholders.  The reasons for such recommendation are set out in the
abridged Circular to shareholders below. A full copy has been sent to
shareholders and will shortly be available on the companies website
www.claritycommerce.com





For further information, please contact:


Clarity Commerce Solutions
    Tim Bittleston, Chairman                   01932 778001

College Hill
   Sara Musgrave/Adrian Duffield/Ben Way       020 7457 2020





Letter from the Chairman of Clarity



Dear Shareholder



Extraordinary General Meeting
Letter from Tim Bittleston, Chairman



I was appointed as Chairman of Clarity in November 2006 to lead the company
through the next phase in its growth.



I decided to join as Chairman because I was impressed by the portfolio of
software Clarity has developed, the opportunities for the business, the quality
of the management and senior employees, and what the company had achieved to
date.



Contrary to the statements made by the Action Group, the Company has made
tremendous progress towards the integration of its businesses and products, and
is now poised to take advantage of that.



Direct Retail Software Experience



I have developed an excellent track record for taking businesses to the next
stage of growth and returning value to shareholders.



In addition, I have devoted most of my career to managing businesses in the UK
and overseas that have provided IT solutions to retailers; commencing with my
role as manager for several GEC businesses including Avery Scales and Gilbarco
(the supplier of petrol pumps, EPOS and pump control to the petrol forecourt
industry), through to the management buyout of Pennine Retail Systems Group that
was successfully sold to Alphameric for £60m (having been acquired for £17m) in
June 2000. I have been Chairman of Galleria Retail Technology Solutions since
start-up in 2001 which is now a multi national serving a wide range of customers
including Tesco, Food Lion, Safeway and ToysRus and I am currently CEO of
Panacea,  which provides accounting and back office IT to the retail and general
business sectors. I have also worked at Crown Hospitality Systems and was Group
CEO of Pc-Pos, Vista and Digipos from 2003 to 2006.



I understand the Retail market and am well resourced to find support and
contacts to bring business and ideas to any company in the sector. I have
already been able to bring business to Clarity with a strong prospect of being
able to create further business opportunities.



Representations made by Action Group



As you will see from our review in the Appendix to this document, the Action
Group have shown by the arguments advanced that they have little understanding
of the Company's business. Had they approached the Board through the proper
channels, we could have enlightened them.



The approach that the Action Group have adopted has not allowed shareholders to
consider a fair view of the facts.



The allegations made in respect of air charter are simply unfounded. I have used
this service privately myself, and it is a cost effective means of allowing
teams of executives to increase the number of visits and meetings they can make
in one day. Not least, the air charter service was properly disclosed and signed
off by the audit committee and board during the tenure of Mr Morton.



The requisitions have been accompanied by misleading and inaccurate statements,
and I therefore draw your attention to our response in the attached Appendix
which addresses these matters.



Progress



Following my appointment as Chairman I commenced a detailed assessment of the
Company in the first quarter of this year, which I completed in March 2007. This
has required visits with key personnel and engagement on some projects. We are
now commencing the implementation of my recommendations.



Now my attentions are directed at strengthening the board and improving the
communications with investors.



The Company has a significant sales pipeline. My assessment is that there are
several exciting developments happening within Clarity, not least of which are
recent proof of concept installations to test the new packages into ticketing
and leisure as well as combining Clarity's back office technology into MATRA,
which resolves a significant gap in the MATRA suite.



New Board Appointments



In addition to my appointment, the Company has recently appointed Sir Colin
Chandler as Non-Executive Director. I am proposing to appoint a further
Non-Executive Director as soon as practicable.



Sir Colin joined easyJet plc in April 2002 and was appointed Chairman in 2002.
Until November 2004, he was Non-Executive Deputy Chairman of Smiths Group plc,
having been a Non-Executive Director of TI Group since 1992. Sir Colin has been
variously Managing Director, Chief Executive and then Chairman of Vickers plc.



Earlier in his career Sir Colin was seconded from British Aerospace to the role
of Head of Defence Export Services, Ministry of Defence. He was Chairman of
Racal Electronics plc. He is Chairman of TI Automotive Limited, Chairman of
Automotive Technik Limited and Pro-Chancellor of Cranfield University.



Sir Colin has a wealth of industry and public company experience which further
strengthens Clarity's Board. Sir Colin greatly enhances the credibility of the
Company and will be key to reviewing its corporate governance.



We are currently working to strengthen the Board further and Sir Colin Chandler
has agreed to oversee the recruitment process for a new Finance Director who
will be reporting directly to me as Chairman.



Requisition of the EGM



I am concerned at the manner in which the EGM has been requisitioned; in
particular the Action Group's failure to engage with myself as Chairman in the
first instance.



Whatever criticism that has been levelled at management I can assure you that
they have gathered a group of highly motivated, able and very committed
employees who genuinely appear to enjoy working together.  This process will be
unsettling for them when we really need to focus their energies on driving the
business forward.



Success can only be achieved from a deep understanding of the requirements of
the industry and sound customer relationships. I have nothing personally against
the proposed management team, but based on the track record gleaned from the
market place I simply do not believe they have the specialist skills that are
necessary. For this reason I will not be prepared to act as non executive
director as proposed by the Action Group.



I firmly believe that the manner of change proposed will not be in the best
interests of shareholders.



Outlook



The Company is at a crossroads of its development and growth. During this
period, it will need different processes and skills as well as further
strengthening of the management team to take it to the next phase of its growth.
We will find the right people to do this from a proper selection process.



Ultimately the success of this business will be the direct result of the quality
of the management team that runs the Company.  I strongly believe that as
Chairman of this Company I can substantially transform the business and to
create a management team that can lead the Company forward.



I therefore urge you not to vote in favour of the resolutions but to allow me
and the current management team to deliver the exciting prospects for your
company.



I have serious misgivings regarding the intentions of the Action Group and
believes that it would be wholly inappropriate to hand Board control to the
Action Group. Accordingly, I strongly recommend to Shareholders that they vote
against all of the Resolutions proposed by the Action Group.



Recommendation



Your Board considers that the Resolutions are NOT in the best interests of
Shareholders as a whole.



The Board currently have expressions of support representing 39% of the
Company's issued share capital. The Board are continuing conversations with
other shareholders.



Your Board recommends Shareholders to vote AGAINST all of the Resolutions to be
proposed at the EGM, as the Directors of Clarity intend to do in respect of
their own beneficial holdings which amount to 3,859,522 Ordinary Shares
representing in aggregate approximately 18.3 per cent of the issued ordinary
share capital of the Company.



If you would like to contact me to discuss any aspects of this letter, please
call me on 01932 778001.



Yours sincerely



TIM BITTLESTON
Chairman




Definitions



The following definitions apply throughout this document, unless the context
requires otherwise:


'Action Group'           The proposers of the EGM resolutions - Stephen Gerard 
                         Bellamy, George Boy Matthews and Arthur Leonard Robert 
                         Morton and Groundlinks Limited

'Board'                  The board of Directors of Clarity

'Company' or 'Clarity'   Clarity Commerce Solutions plc

'Directors'              The directors of Clarity at the date of this document

'EGM'                    the Extraordinary General Meeting convened for 
                         2.00 p.m. on Thursday 31 May 2007, the notice of which 
                         is set out at the end of this document

'Group'                  Clarity and its subsidiaries

'Resolutions'            the resolutions set out in the Notice of EGM at the 
                         end of this document

'Shareholders'           The shareholders of Clarity








APPENDIX



Review of points raised by Action Group



Share price performance



When compared to the 'Software Computer and Service Sector', Clarity is
performing well above average with the FASOFT Index dropping some 80% since July
2000 with Clarity shares dropping approximately 60% across the same period.



In addition, the most significant fall in price was during Mr Morton's tenure as
Chairman. Since his departure the share price has been fluctuating between 50
pence and 80 pence. We expect shareholders to benefit as communication to
investors improves and the impact of the new management begins to take effect.



Financial performance and controls


Revenue


The Company issued a trading update on 2 April 2007, which stated that results
would be less than the Company's original expectations as a result of material
contracts being delayed and delivered after the year end. It also stated that
the shortfall was a result of slippage, and not as a result of any of these
contracts being lost.



Clarity is increasingly transacting business with larger international
customers. The timing and delivery of these types of material capital projects
can often be outside the control of the Company, with project roll out taking
place over a number of months.


Profits and Earnings


Clarity has moved from losses before tax in 2001 of £1.1m to profit before tax
in 2006 of £0.95m (£1.2m before impairment of goodwill).



Basic earnings per share have risen from a loss per share of 15.35p in 2001 to
5.81p in 2006.


Dividends


Additionally, the Board confirmed in the 2006 annual report and financial
statements a dividend policy as follows:



'We have reviewed our policy on dividends, and will initiate the recommendation
of a progressive dividend policy starting in respect of Clarity's fiscal year
2006/07, the amount of which will be determined in light of that year's result.'




Gross margin


Gross margin rose from 47% in 2001 to approximately 62% in 2004. This level has
been maintained in later years.



This gross margin percentage was at the same level in 2006, despite there being
a significant element of hardware relating to the Group's largest single
contract.




Operating margin


The Board believes that the Company is on track towards a rapid increase in its
operating margin based on:



•   The reduction in development costs as our new software product
    nears completion;

•   The additional software licence sales resulting from the
    availability of new product; and

•   The integration savings that have been achieved.




Revenue per employee




Revenue per employee has increased by 86% across the last six reported years.



Clarity has two distinct divisions - a software division and a services
division, with revenue per employee for the year ended 31 March 2006 of £107,000
and £54,000 respectively.




Debtor days


By December 2006, debtor days had been reduced to 68, evidence that
centralisation of the finance function is taking effect.



Organic versus acquisitive growth



Clarity has a strategy to build strong intellectual property rights (IPR) around
its Central software solutions, and export it into companies that it has
acquired.



Each acquisition of a software company is made on the basis of its ability to
sell an integrated Central solution.  The Company has built strong IPR around
its Central software solutions, and when they are acquired companies immediately
begin to include in their sales discussions Clarity Central and other Clarity
portfolio products into their respective markets.  Sales of existing software
therefore contribute to the acquired companies' results, with all businesses
benefiting from being part of a larger Group, both in terms of economy of scale
and from cross selling opportunities.



Strategy and Focus



The Action Group demonstrates a clear lack of knowledge of Clarity's software.
Clarity's new core software product works across many sectors; cinemas, leisure,
retail, theme parks and catering, with only configuration differences
distinguishing them.



Clarity has a clear focus to grow its software presence in transactional and
online systems, using one shared software platform and a central shared team to
deliver that software. As Clarity's sales to each market sector expand, it
expects to deliver greater efficiency and margin improvement across the Group.



Office locations



Clarity currently operates out of nine locations, three of them overseas,
servicing Europe and the US.



Of the six in the UK, one is the Edinburgh-based Business Intelligence centre,
handling all of the sales, training and consultancy for Scotland. Another is the
Basingstoke head office and R&D centre. Our helpdesk and training centre in
Sunbury is separate due to its specialised function.



When the time is right we will close two of the three remaining UK locations.



As a direct result of office closures and reorganisations that have already
taken place, savings will be made on premises across the next two years
totalling £200,000.



Closure of any other offices would put at risk revenue attached to local
offices.



Integration of acquired companies



Significant progress has been made with the integration of acquired companies.
The strategy the Board has pursued is to centralise key functions, while leaving
in place the sales channels to each market, but at a much lower cost.



In respect of all companies acquired by Clarity to date, the Group has
progressed with the centralising of the following functions in a single location
in Basingstoke:

•    Product design

•    Software development

•    QA

•    Marketing

•    Finance



And the following into our service centre in Sunbury

•    Helpdesk

•    Training



Prior to the centralisation of these functions, each individual company operated
on a stand-alone basis. The inefficiencies and fragmentation that were evident
have now been removed.



As a result of this programme of integrations, savings have been achieved and
the full year benefit of those will impact upon the financial year ending 31
March 2008. Those savings will be in the areas of people, premises and
associated costs.



Steps have already been taken which will achieve annualised savings of over
£1.6m. The full benefit of these savings will become apparent over the next two
financial years.



The integration of functions by the Group has allowed it to pursue a programme
of rationalisation of office locations.



As the consolidation and integration of the Group continues, the Board will
strive to identify further efficiencies while at the same time maintaining the
high quality of the Group's product and service offering.



R&D phase



The initial R&D phase, largely carried out by the centralised and dedicated
software and QA function, is now nearing conclusion, resulting in the successful
development of Clarity's portfolio of software on a .NET platform, allowing
development costs to reduce.



The investment cost of the new product impacts directly on the P&L. In the next
24 months alone, the Board expects annualised development spend to fall by
£200,000.



New Sales focus



A market-ready product now enables the Company to move into a focused sales-led
period of its growth.



There have been key senior appointments in the Group's sales department. A sales
support team has also been established to facilitate the marketing and sale of
the new products into Clarity's active markets.



Annuity revenues



As sales activity and the revenues generated as a result increase, Clarity will
also experience growth in its annuity revenues, namely support and maintenance.
These currently run at approximately 47% of turnover and the Board believe that
these will increase across time.



Corporate governance



The Board has been significantly strengthened with two recent appointments.




Chairman


The Action Group state that the Company has had three Chairmen in two years. It
is more representative to state that it has had three Chairmen in seven years.



For the first five years, the Company was under the stewardship of Mr Morton,
who retired on the basis of an impending change of residence and the need that
the Board had identified for the services of a Chairman with more relevant
experience in Clarity's marketplaces.



John O'Connell filled the role for a short period of time before Tim Bittleston
was appointed in November 2006.



Tim comes with excellent credentials and has been successful in the retail
sector; he is equipped with all the requisite skills to navigate Clarity through
its next phase of growth.


Finance Director


The Company has had a Group Financial Controller since prior to its flotation on
AIM, who was involved with the flotation, subsequent acquisitions and over the
seven years that Clarity has been a public company.



Recognising that the Finance Director role is a key part of the composition of
the Board, Sir Colin Chandler will lead the appointment of a suitable
individual.



A centralised finance function was created in September 2006.


Non Executive
Directors


In addition to the appointment of the Chairman, Clarity has just appointed Sir
Colin Chandler. He has a wealth of industry and public company experience which
will further strengthen the Board. He joined easyJet plc in April 2002 and was
appointed Chairman in 2002. Until November 2004, he was Non-Executive Deputy
Chairman of Smiths Group plc, having been a Non-Executive Director of TI Group
since 1992. Sir Colin was variously Managing Director, Chief Executive and then
Chairman of Vickers plc.




Growth in senior
management


With the Group nearing the conclusion of its major R&D phase, the Board
recognised the need to strengthen the management team in readiness for a
concentrated sales focused phase.



Key roles that have been established to complement the Board include:

•    Sales Director

•    Operations Director

•    Marketing Director



Expenditure on air charter services



Graham York does have interests in an air charter business. Across a number of
years, Clarity's executives have benefited from access to these services. The
Company opts for air charter as opposed to scheduled commercial flights on the
occasions where the locations involved do not have a commercial airport, or
where a number of locations are visited in one day. This often provides better
value and is more efficient a use of executives' time.



78% of the expenditure of £274,000 across five years was during Mr Morton's
Chairmanship; £80,000 of the expenditure was directly attributable to
acquisitions that were successfully completed, thus facilitating the growth of
the Company.



The relationship between Clarity and Direct Air is of a trading nature, and
statements that suggest that Clarity have provided capital to the business are
inaccurate and unfounded.



These related party transactions have always been considered during the
preparation for audit, at the audit clearance meeting, and appropriately
disclosed in the Company's published annual results.



Experience and suitability of the proposed Directors



The Action Group, in their release, set out what they consider to be the
relevant business experience of each of the three proposed new Board members: Mr
Bellamy, Mr Matthews and Mr Morton.



The Board is of the view that Mr Bellamy and Mr Matthews have a notable lack of
experience in the retail software sector compared to the current management
team. In the case of Mr Morton, Chairman of Clarity from 2000 to 2005, he is
equally answerable for the allegations of weak share price performance and poor
corporate governance during that time. The Board questions whether shareholders
wish to return to a company run by Mr Morton.



The Board also questions Mr Matthews' claim that he led a turnaround at Sherwood
International Plc ('Sherwood'). On 5 July 2001 a trading statement of Sherwood
stated that the interim results would not meet market expectations and the
management expected to lead to a small profit in e2-one. The interim results, 13
August 2001, reported losses of £1.45m (2001) compared to profit of £2.55m
(2000). £1.4m had been spent on investment in e2-one which was subsequently run
down and £0.9m spent on a potential acquisition was not completed. Mr Matthews
announced he would step down from Sherwood at the interim results shortly after
Mr Bellamy, COO, resigned on 1 August 2001. On the day of the interim results
Sherwood's share price closed at a three year low.



Mr Matthews was Chairman of K3 Business Technology Group from May 2002 until May
2006. During his time there was some uncertain trading. On 6 September 2002 it
was announced that interim results for the first half were below management
expectations and on 5 March 2004 it was announced trading for 2003 showed no
major improvements. No reason was given for Mr Matthews' departure.




                      This information is provided by RNS
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