C a t a p u l t G r o u p I n t e r n a t i o n a l L i m i t e d A n n u a l R e p o r t 2 0 1 8 ANNUAL REPORT 2018 CATAPULT Our purpose To build and improve the performance of athletes and sporting teams. What we do We create technology to help athletes and teams fulfil their true potential. Organisational excellence We have codified Catapult’s purposes and values to drive continued organisational excellence as Catapult’s business scales globally. Contents Letter from the Chairman and CEO 2 Business Overview 4 Review of Operations 6 Directors’ Report 12 Remuneration Report (Audited) 21 Auditor’s Independence Declaration 38 Corporate Governance Statement 39 Consolidated Statement of Profit or Loss 51 Consolidated Statement of Other Comprehensive Income 52 Consolidated Statement of Financial Position 53 Consolidated Statement of Cash Flows 54 Consolidated Statement of Changes in Equity 55 Notes to the Consolidated Financial Statements 56 Directors’ Declaration 104 Independent Auditor’s Review Report 105 Shareholdings 110 Corporate Directory IBC Annual Report 2018 1 FY18 KEY ACHIEVEMENTS STRONG RESULTS › Reported revenue 26%, pro-forma 19% › ARR $53.4m 16% › Revenue growth accelerated and expense growth slowed in the second half › First year of positive operating cash flow PROFITABLE CORE › Operating in 128 countries › Increasing leverage from ELITE Wearables & ELITE Video › Core business is EBITDA and cash flow positive INNOVATION CONTINUES › $9.1m invested in R&D › Launched PLAYR prosumer product in June 2018 › Launched Catapult Vision ahead of schedule › Prosumer revenue $3.4m up from $1m in FY17 Annual Report 2018 2 LETTER FROM THE CHAIRMAN AND CEO elite wearable subscription base up 27% to 17,098 devices Dear Shareholder, Catapult has been empowering sports scientists, coaches and athletes to train and play smarter since 2006. We remain committed to delivering on our purpose “To build and improve the performance of athletes and sporting teams” and we are making significant progress against this purpose on a global scale. On behalf of your Board of Directors, it is our pleasure to share with you the Catapult Group International Ltd Annual Report for the financial year ended 30 June 2018. The 2018 financial year was a year of significant strategic progress, strong operational achievement and financial growth for your company. STRATEGIC PROGRESS Our primary strategic focus is to own the Performance Technology Stack for Elite Sport. Our growing and profitable global core business successfully highlights this focus, encompassing elite wearable devices, elite video analytics and our athlete management system (AMS). Today there are now more than 1,800 elite organisations in 128 countries from 35 different sports globally partnering with Catapult. These partnerships drove a 29% increase in elite wearables revenue and a 6% increase in elite video revenue in 2018. Total annual recurring revenue (ARR) grew by 16%. During 2018 Catapult won elite wearables business for the first time in new countries including Finland, Oman, Kenya, Ukraine and Slovakia. We captured new league and association wide deals with the UK’s Rugby Football League, Scottish Rugby, Confederation of African Football and AFL Women’s League. In 2018 we also increased the penetration of our elite video products and services into our existing customer base with the launch of Catapult Vision and successfully integrated and leveraged the AMS capability we acquired in August 2017. The AMS capability enabled us to capture new business with the Women’s Tennis Association covering 4,000 athletes, and facilitated our entry into premier football in Japan, with Kashiwa Reysol in the J1 League. By partnering with NCAA Division 1 Baylor University we have also entered into our first full-stack technology solution, integrating wearable-derived performance data with video analysis tools and an AMS. Our reputation for being the leader in global sports science technology and performance was further enhanced as the wearables technology provider for a market leading 12 countries at the 2018 World Cup of Football in Russia. We are excited about the potential for sustained and strong growth from our core elite business given the size of the addressable market we are pursuing, and because so little of today’s growth is sourced from clients with more than one of the products in the performance technology stack. Catapult is also focused on the development of two more strategic priorities. Leveraging Elite into Prosumer and Commercialising Elite Wearable and Video Data. In June 2018 we launched the innovative PLAYR product for ‘prosumer’ football players. This is an exciting opportunity for Catapult as we capture a new and large market opportunity of 20 million in football alone. The successful and high profile PLAYR launch was held in London and we are pleased with the early sales of PLAYR and the progress the team are making. Pleasingly we have also made good progress with Commercialising Elite Wearable Data during 2018. The Australian market has provided good examples of early adoption with the AFL, NRL, Cricket Australia and NBL all Catapult Group International Limited 3 League and association wide deals signed with offering their fans enhanced engagement experiences by leveraging Catapult’s live in-game data analytics platforms. STRONG OPERATING AND FINANCIAL PERFORMANCE Highlights from the 2018 financial results include: › Group revenue of $76.8 million, up 26% on a reported basis and 19% on a pro-forma basis. › ARR of $53.4 million, up 16%. › Steady average revenue per unit (ARPU) and improving churn. › Net operating cash flow of $6.4 million represented the first full year of positive operating cash flow for Catapult, highlighting the growing profitability of the core elite wearables and elite video business. › A strengthened balance sheet to fund continued growth, including the recently launched new Prosumer product, PLAYR, with cash and cash equivalents at 30 June 2018 of $31.7 million. During the year we successfully raised $25 million through an equity placement with institutional shareholders. › Group underlying EBITDA was $1.0 million and reported EBITDA loss was $1.9 million, an improvement of $1.8 million or 48%. › More than 200 new elite clients signed. › 17.1k wearable devices covered by subscription contracts, an increase of 27%. › $9.1 million invested in research and development, and a › Stronger second half of the financial year with revenue growth accelerating and expense growth slowing. Employing more than 300 people in a global workforce, Catapult has hub offices in the large sporting capitals of Melbourne, Boston, Chicago, London and Leeds. The quality of our workforce continues to improve. During the year Catapult recruited Mark Hall as CFO. Before joining Catapult Mark was the Deputy CFO at Telstra. Other senior executives who joined the team during 2018 were Marcus Williams as Head of Market Strategy and Markus Ziemer as General Counsel and Company Secretary. We will continue to bolster the quality of the workforce to ensure we have the right team to take advantage of the unique global growth opportunities in front of us. It is also pleasing that two of Catapult’s founders Shaun Holthouse and Igor Van De Griendt continue to provide the Catapult business with valuable insight and support as Executive Directors. OUTLOOK We are uniquely positioned to continue our journey as a high growth global business operating at the exciting intersection of technology and sport. We are excited about the opportunity for continued strong growth from our elite core business given the large addressable market available and the innovative products we will continue to bring to market. Complementing this is the phenomenal potential for the recently launched Prosumer product, PLAYR, to revolutionise football participation and performance, opening up a massive and new addressable market opportunity of 20 million in football alone. Finally, the Board and CEO wishes to thank the athletes, teams and shareholders for their continued support in the past year. Catapult’s continued growth and drive towards its purpose would not be possible without the support of the Board, the Executive team and the strong contributions from all of our hard working employees right across the globe, thank you. Regards, Adir Shiffman Executive Chairman Joe Powell Chief Executive Officer Annual Report 2018 4 BUSINESS OVERVIEW CATAPULT TIMELINE Working with over 1,800 organisations 1999 2006 2013 2014 2017 2018 First Collaboration in Australia Catapult is commercialised IPO Stock exchange Reached 300 employees Launched Catapult Vision & PLAYR Multiple acquisitions GLOBAL MARKET LEADERSHIP IN ELITE SPORT Countries with Catapult clients Catapult Hub Offices › 1800+ elite clients › More than 200 new elite clients in 2018 › Operating in 128 countries › Involved in 35 sports Catapult Group International Limited OUR STRATEGY 5 Leverage ELITE into Prosumer Own the performance technology stack for ELITE sport Commercialise ELITE wearable & video data Large addressable market identified in soccer There is a large, unaddressed market for wearable devices focused on team-based sports across multiple sports and multiple geographies x p a n sion TAM E ~20m soccer prosumers (Immediate TAM) American Football 1.5m prosumers Rugby 1.5m prosumers AFL/Gaelic Football 0.5m prosumers Large and growing addressable market (Underpenetrated) c. 10,000 teams (Plus we believe an additional 10,000 teams will push up into this market over time) 10,000 teams >1,800 >1,800 current Catapult clients Annual Report 2018 6 REVIEW OF OPERATIONS The 2018 financial year was a year of significant strategic progress and strong operational and financial achievement for Catapult. Our core business, centred around elite wearable and elite video, is profitable and cash flow positive. League and association-wide deals signed with. For the first time, Catapult won elite wearables business in new countries including Finland, Oman, Kenya, Ukraine and Slovakia. We captured new league and association wide deals with the UK’s Rugby Football League, Scottish Rugby and AFL Women’s League. We also increased the penetration of our XOS elite video products and services into our existing customer base, and successfully integrated and leveraged the athlete management system (AMS) capability we acquired in August 2017. The AMS capability enabled us to capture new business with the Women’s Tennis Association covering 4,000 athletes, and facilitated our entry into premier football in Japan, with Kashiwa Reysol in the J1 League. By partnering with NCAA Division 1 Baylor University we have also entered into our first full-stack technology solution, integrating wearable-derived performance data with video analysis tools and an athlete management system. Today there are now more than 1,800 elite teams across 35 different sports globally partnering with Catapult. These partnerships have driven a 29% increase in elite wearables revenue, and a 6% increase in elite video revenue in 2018. Total annual recurring revenue (ARR) grew by 17% to $53.4 million. Total reported revenue grew by 26% to $76.8 million. GROUP REVENUE GROWTH A$80m A$60m A$40m A$20m A$0m $76.8m $61m $5m FY14 $11m FY15 $17m FY16 FY17 FY18 Catapult Group International Limited 7 STRONG FINANCIAL AND OPERATING RESULTS Catapult’s strong 2018 results included: › Reported revenue +26% and on a pro-forma basis +19% to $76.8 million. › Group ARR +16% with Elite wearables ARR +29%. › Positive operating cash flow for the first time – it was $6.4 million. › The core elite business (excludes the Prosumer segment) was profitable with underlying EBITDA of $8 million, growing 38%. The core business is also free cash flow positive. › Elite wearable revenue per device per month is stable at $109. › Elite wearable subscriptions have shown tremendous growth over the last 5 years – below 2k devices in 2013 and now above 17k devices in 2018. Reported revenue +26% PROFITABLE CORE +27% in FY18 (device numbers) Total FY18 sales of 9,422 devices, up 1% FY18 subs mix at 57%, down from adjusted FY17 59% Wearables +29% Video +5% Annual Report 20181525354555Jun-17Dec-17Jun-18Wearables +29%Video +5%Group ARR +16%1525354555Jun-17Dec-17Jun-18Wearables +29%Video +5%1,83717,098FY14FY15FY16FY17FY18Group ARR +16%$5.8m$8.0mFY18FY17•+27% in FY18 (device numbers)•Total FY18 sales of 9,422 devices, up 1%•FY18 subs mix at 57%, down from adjusted FY17 59%8$109 $106 $109 100110Jun-17Dec-17Jun-18FY18FY17$0.0m$10.0m20,0000$100$110ARPU STABLECORE EBITDA GROWTH +38% $5.8m$8.0mJun-17Dec-17Jun-18$109$106$109FY14FY15FY16FY17FY18$15m$55mARR IS GROWING STRONGLYELITE WEARABLES SUBSCRIPTION GROWTHJun-17Dec-17Jun-181,83717,098Group ARR +16%1525354555Jun-17Dec-17Jun-18Wearables +29%Video +5%Group ARR +16%1525354555Jun-17Dec-17Jun-18Wearables +29%Video +5%1,83717,098FY14FY15FY16FY17FY18Group ARR +16%$5.8m$8.0mFY18FY17•+27% in FY18 (device numbers)•Total FY18 sales of 9,422 devices, up 1%•FY18 subs mix at 57%, down from adjusted FY17 59%8$109 $106 $109 100110Jun-17Dec-17Jun-18FY18FY17$0.0m$10.0m20,0000$100$110ARPU STABLECORE EBITDA GROWTH +38% $5.8m$8.0mJun-17Dec-17Jun-18$109$106$109FY14FY15FY16FY17FY18$15m$55mARR IS GROWING STRONGLYELITE WEARABLES SUBSCRIPTION GROWTHJun-17Dec-17Jun-181,83717,098Group ARR +16% 8 REVIEW OF OPERATIONS (CONT.) INVESTMENT IN GROWTH Employing more than 300 people in a global workforce, Catapult has hub offices in the large sporting capitals of Melbourne, Boston, Chicago, London and Leeds. The quality and efficiency of our workforce continues to improve. EXPENSES Labour Non-labour EMEA Americas Asia Pac We will continue to invest in R&D and deliver innovative new products. In FY18 our R&D investment was $9.1 million. Catapult has significantly progressed development of its new tactical analytics product, which integrates video and wearable data and deepens coaching engagement with teams. Tactical analytics will be launched during 2019. Catapult Group International LimitedFY18FY170350STAFF BY REGIONOPEX +14% (PRO-FORMA) Jun-16Jun-17Jun-18SCALED FOR GROWTH (STAFF NUMBERS)125288311 Strategy 99 LEVERAGE ELITE INTO PROSUMER Innovative product PLAYR released in June 2018 and available throughout UK, Ireland, Europe and USA OWN THE PERFORMANCE TECHNOLOGY STACK FOR ELITE SPORT › AMS acquired, integrated and delivering new business › Our first integrated 3 product solution sold into US market › Video solutions internationalised by Catapult Vision › Continued market leadership with > 1,800 clients COMMERCIALISE ELITE WEARABLE & VIDEO DATA Early adoption in the Australian market Owning the performance technology stack for elite sport is the centrepiece of Catapult’s strategy. Following the successful acquisition and integration of AMS in August 2017, we have all the components of the performance technology stack comprising AMS, elite video and elite wearables. Annual Report 2018 10 REVIEW OF OPERATIONS (CONT.) STRATEGY – OWN THE PERFORMANCE TECHNOLOGY STACK FOR ELITE SPORT FOCUS CATAPULT’S STACK AMS ELITE VIDEO ELITE WEARABLES DRIVING GROWTH AND EFFICIENCY THROUGH THE CORE BUSINESS EXPANDING AND DIFFERENTIATING OUR VALUE PROPOSITION › Increase penetration of addressable market › Leverage scalable foundations › Increase product integration across existing customers › Tactical analytics › Internationalisation of video › New analytics metrics › Enhanced elite wearable product The success of our growing and profitable global elite core business is a testament to our focus on the performance technology stack. The potential for strong and continued growth from our core business given the size of the addressable market is significant. This is because today’s growth is predominantly sourced from clients with only one product in the technology stack. Catapult is also focused on the development of two more strategic priorities. The first; leveraging elite into prosumer, and the second; commercialising elite wearable and video data. STRATEGY – LEVERAGE ELITE INTO PROSUMER WEARABLE DEVICE PRODUCT ENHANCEMENT SMART COACH SALES AND MARKETING FOCUS › Other sports › Team layer › ~20M addressable market › Marketing and channel activation and optimisation CHANNELS The successful PLAYR launch was held in London in June 2018, and the extensive planning and preparation has resulted in the delivery of an exciting and innovative product. This is an exciting opportunity for Catapult as we capture a new and large market opportunity of 20 million athletes in soccer alone. Scalable product manufacturing and global 3rd party logistics are in place to support expected strong interest and the anticipated growth in sales volumes through 2019 and beyond. Catapult Group International Limited 11 STRATEGY – COMMERCIAL ELITE WEARABLE AND VIDEO DATA FOCUS PARTNERSHIPS PROVEN IN AUSTRALIAN MARKET OPERATING CAPABILITIES CONTINUE TO PROGRESS IN OTHER MARKETS Strong progress has also been made with commercialising elite wearable data during 2018. The Australian market has provided good examples of early adoption with the AFL, NRL, Cricket Australia and NBL all offering their fans enhanced engagement experiences by leveraging Catapult’s live in-game data analytics platforms. Annual Report 2018 12 DIRECTORS’ REPORT The Directors of Catapult Group International Ltd (‘Catapult’) present their Report together with the financial statements of the consolidated entity, being Catapult Group International Ltd (‘the Company’) and its controlled entities (‘the Group’) for the year ended 30 June 2018 (‘FY18’). DIRECTOR DETAILS The following persons were Directors of Catapult Group International Ltd during or since the end of the financial year. Dr Adir Shiffman MBBS, Medicine Executive Chairman Mr Shaun Holthouse B.E. (Hon), Mechanical Engineering, GAICD Chief Executive Officer to 30 April 2017 Appointed 4 September 2013 Global Head of Strategy from 1 June 2017 Member of Remuneration and Nomination Committee Dr Adir Shiffman, Executive Chairman of Catapult, has extensive CEO and board experience in the technology sector. Adir has founded and sold more than half a dozen technology startups, many of which were high growth SaaS (software as a service) businesses. His expertise includes: strategic planning, international expansion, mergers and acquisitions, and strategic partnerships. Adir currently sits on several boards. He is regularly featured in the media in Australia, the US and Europe. Adir graduated from Monash University with a Bachelor of Medicine and a Bachelor of Surgery. Prior to becoming involved in the technology sector, he practised as a doctor. Other current Directorships: None Previous Directorships (last 3 years): In past three years he has also been a Director of iBuyNew Group Limited (ASX:IBN) (Appointed February 2013. Resigned March 2017). Appointed 4 September 2013 Founder, Executive Director and Global Head of Strategy. Shaun has extensive experience in new technology transitioning into commercial products, including Biotechnology, MEMS, fuel cells, and scientific instrumentation. Prior to co-founding Catapult, Shaun was a Technology Development Manager for the CRC for microtechnology from 2002-06, which included providing technical direction to more than 20 projects with a budget of over $60m. Shaun has grown Catapult from its inception as CEO from 2006 to 1 June 2017, which included launching Catapult’s initial products, expanding sales to more than 15 countries, sourcing early stage investment, listing on the Australian stock exchange and acquiring XOS, Playertek and GP Sports. From 1 June 2017 Shaun’s role changed to Global Head of Strategy. Shaun holds a Bachelor of Engineering (Hons) from the University of Melbourne and is a graduate member of the Australian Institute of Company Directors. He is the author of numerous patents and patent applications in athlete tracking, analytics and other technologies. Other current Directorships: None Previous Directorships (last 3 years): None Catapult Group International Limited 13 Mr Igor Van De Griendt B.E. Electrical Engineering Chief Technology Officer Mr Calvin Ng BComm (Fins) LLB AMC DFP Non-Executive Director Appointed 4 September 2013 Appointed 29 November 2013 Member of Risk and Audit Committee Member of Risk and Audit Committee Mr Igor van de Griendt is a co-founder, former Chief Operating Officer and an Executive Director of Catapult. Mr Calvin Ng has significant investment banking, mergers & acquisitions and funds management experience. In his capacity as CTO, he has been responsible for providing strategic direction and leadership in the development of Catapult’s products, both in the analytical space, as well as with respect to Catapult’s various hardware offerings. Igor also provides guidance and operational support to Catapult’s R&D and software development teams. Prior to co-founding Catapult, Igor was a Project Manager for the CRC for microtechnology which, in collaboration with the Australian Institute of Sport, developed several sensor platforms and technologies ultimately leading to the founding of Catapult. Prior to joining the CRC for microtechnology, Igor was a director of a consulting business that provided engineering services for more than 13 years to technology companies such as Redflex Communications Systems (now part of Exelis, NYSE:XLS), Ceramic Fuel Cells (ASX:CFU), Ericsson Australia, NEC Australia and Telstra. Igor holds a Bachelor of Electrical Engineering from Darling Downs Institute of Advanced Education (now University of Southern Queensland). Calvin is a co-founder and Managing Director of the Aura Group, an independent corporate advisory and funds and wealth management business. He is also a co-founder and Non-Executive Director of the Finsure Group, one of Australia’s largest mortgage groups. Calvin has significant board experience in several businesses, with particular expertise in providing management oversight and strategic guidance to small and medium sized enterprises. Calvin currently sits on a number of boards, including entities associated with the Aura Group, Finsure Group and ASX-listed iBuyNew Group Limited (ASX:IBN). Calvin holds a Bachelor of Commerce and Bachelor of Laws from the University of New South Wales. Calvin has also completed a Graduate Diploma of Legal Practice and has been admitted to practice as a lawyer in the Supreme Court of New South Wales. Other current Directorships: iBuyNew Group Limited (ASX:IBN) (Appointed February 2013) Previous Directorships (last 3 years): Other current Directorships: None None Previous Directorships (last 3 years): None Annual Report 2018 14 DIRECTORS’ REPORT (CONT.) Mr Brent Scrimshaw Non-Executive Director Mr James Orlando BSc, MBA Appointed 24 November 2014 Non-Executive Director Appointed 24 October 2016 Chair of Risk and Audit Committee Member of Remuneration and Nomination Committee Mr James Orlando has held senior finance positions driving growth and shareholder value in the United States, Asia and Australia. Most recently he was the CFO of Veda Group Ltd (VED.ASX), leading the company through its successful IPO in December 2013. Before joining Veda, James was the CFO of AAPT where he focused on improving the company’s earnings as well as divesting its non-core consumer business. He also served as the CFO of PowerTEL Ltd, an ASX-listed telecommunications service provider which was sold to Telecom New Zealand in 2007. James also held various international treasury positions at AT&T and Lucent Technologies in the US and Hong Kong including running Lucent’s international project and export finance organisation. Other current Directorships: None Previous Directorships (last 3 years): None Chair of Remuneration and Nomination Committee Mr Brent Scrimshaw has over 25 years of experience in consumer innovation, executive business leadership and global brand management focused on the athletic and sports industry, primarily through diverse and international experience spanning an 18-year career at Nike Inc. Brent held senior leadership roles in Australia, Europe and the United States, including Vice President and Chief Executive of Nike Western Europe; Chief Marketing Officer and Vice President of Category Businesses for Nike Europe, Middle East and Africa; and General Manager of Nike’s East Coast United States operations. As one of Nike Inc’s 30 most senior leaders worldwide, Brent has also served on Nike’s Global Corporate Leadership Team, where he helped lead the creation of Nike’s overall brand and global operating strategy, as well as playing a senior role as a key member of the Global Commercial Operations Executive Team, which is responsible for sales and distribution strategies worldwide. Brent is currently a Non-Executive Director at Rhinomed Ltd, a medical technology company focused on enhancing human efficiency through innovative respiratory technologies and products and also a Non-Executive Director at Kathmandu Holdings Ltd, a specialty clothing and equipment retailer with over 160 stores in AUS, NZ and the UK. Other current Directorships: Rhinomed Ltd (ASX:RNO) (Appointed February 2014) Kathmandu Ltd (ASX:KAT) Catapult Group International Limited 15 COMPANY SECRETARY Markus Ziemer is a lawyer and was previously employed in legal and commercial roles including as General Manager Corporate Services at Pacific Hydro Pty Ltd., Ashton Mining Ltd., and Senior Counsel Newcrest Mining Ltd. He received his undergraduate LLB and BA degrees from the University of Melbourne and an MBA from Melbourne Business School. Markus was appointed Company Secretary of Catapult Group International on 28 September 2017. PRINCIPAL ACTIVITIES During the year, the principal activities of entities within the Group were: • the development and sale of wearable tracking solutions and analytics to elite sporting teams, leagues and associations; • the development and sale of digital video coaching and analytics solutions to elite sporting teams, leagues and associations; • the development and sale of wearable tracking solutions and analytics to prosumer athletes, sporting teams and associations; and • the development and sale of an athlete management platform and analytics to elite sporting teams, leagues and associations. The Group’s wearable and video solutions are provided to elite clients on both a subscription and upfront sales basis, with subscription sales forming the majority of all sales to elite clients. The Group is the global leader in wearable tracking technology and analytics solutions for the elite market with over 1,800 elite clients. The Group is also a market leader in providing innovative digital and video analytic software solutions to elite sports teams in the United States. With major offices in Australia, the United States and the United Kingdom and over 300 staff in more than 14 countries, Catapult is an Australian technology success story with a truly global footprint that is committed to advancing the way data is used in elite sports. REVIEW OF OPERATIONS & FINANCIAL RESULTS The Group has recorded an increased loss of $17,360,108 (2017: $13,580,952). Loss per share for the year was $0.10 (2017: $0.086) and no dividend will be paid or declared. The Group’s net assets increased to $127,070,810 compared to the previous years’ position of $114,761,579. SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS During the year, the following changes occurred within the Group: Capital Raising: During the year, the Group issued 22,727,273 fully paid ordinary shares as part of its capital raising program, which resulted in gross proceeds of $25,000,000; Acquired the SportsMed Elite and Baseline Athlete Management System (AMS) products and clients and recruited key personnel, from SMG Technologies Pty Ltd (SMG) in August 2017. In the Directors’ opinion, there have been no other significant changes in the state of the affairs of the Group during the year. A further review of matters affecting the Group is contained in the operating and financial review. Annual Report 2018 16 DIRECTORS’ REPORT (CONT.) EVENTS ARISING SINCE THE END OF THE REPORTING PERIOD The Directors are not aware of any matter or circumstance that has arisen since the end of the financial year that, in their opinion, has significantly affected, or may significantly affect in future years, Catapult’s operations, the results of those operations or the state of Catapult’s affairs. LIKELY DEVELOPMENTS, BUSINESS STRATEGIES AND PROSPECTS Based on the expected demand for athlete analytics globally and the continued growth in the Group’s sales and marketing platform across key regions, we are optimistic about the long-term growth opportunity. Furthermore, Catapult Group has continued to broaden its suite of athlete analytics solutions through the acquisitions of XOS, PLAYERTEK and AMS, resulting in a substantially larger addressable market opportunity across a wider range of customers in both elite and prosumer sporting leagues. Catapult Group expects to benefit in these new segments with increasing sales and brand loyalty. BUSINESS RISK In executing its growth plans, Catapult Group is subject to the following key market, operational and acquisition risks outlined below. Economic risk Catapult may be affected by general economic conditions. Changes in the broader economic and financial climate may adversely affect the conduct of the Catapult’s operations. In particular, sustained economic downturns in key geographies or sectors, in particular sports business and consumer sectors, where Catapult is focused, may adversely affect its financial performance. Changes in economic factors affecting general business cycles, inflation, legislation, monetary and regulatory policies, as well as changes to accounting standards, may also affect the performance of Catapult. Industry and competition risk Catapult’s performance could be adversely affected if existing or new competitors reduce Catapult’s market share, or its ability to expand into new market segments. Catapult’s existing or new competitors may have substantially greater resources and access to more markets than Catapult. Competitors may succeed in developing new technologies or alternative products which are more innovative, easier to use or more cost effective than those that have been or may be developed by Catapult. This may place pricing pressure on Catapult’s product offering and may impact on Catapult’s ability to retain existing clients, as well as Catapult’s ability to attract new clients. If Catapult cannot compete successfully, Catapult’s business, operating results and financial position could be adversely impacted. Technology and hosting platforms Catapult relies on a third-party hosting provider to maintain continuous operation of its technology platforms, servers and hosting services and the cloud-based environment in which Catapult provides its products. There is a risk that these systems may be adversely affected by various factors such as damage, faulting or aging equipment, power surges or failures, computer viruses, or misuse by staff or contractors. Other factors such as hacking, denial of service attacks, or natural disasters may also adversely affect these systems and cause them to become unavailable. Further, if Catapult’s third-party hosting provider ceased to offer its services to Catapult and Catapult was unable to obtain a replacement provider quickly, this could lead to disruption of service to the Catapult website and cloud infrastructure. This could lead to a loss of revenue while Catapult is unable to provide its services, as well as adversely affecting its reputation. This could have a material adverse effect on Catapult’s financial position and performance. Catapult Group International Limited 17 Cyber security Catapult provides its services through cloud based and other online platforms. Hacking or exploitation of any vulnerability on those platforms could lead to loss, theft or corruption of data. This could render Catapult’s services unavailable for a period while data is restored. It could also lead to unauthorised disclosure of users’ data with associated reputational damage, claims by users, regulatory scrutiny and fines. Although Catapult employs strategies and protections to try to minimise security breaches and to protect data, these strategies and protections might not be entirely successful. In that event, disruption to Catapult’s services could adversely impact on Catapult’s revenue, profitability and growth prospects. The loss of client data could have severe impacts to client service, reputation, and the ability for clients to use the products. Manufacturing and product quality risks Catapult currently uses third party manufacturers to produce components of its products. There is no guarantee that these manufacturers will be able to meet the cost, quality and volume requirements that are required to be met for Catapult to remain competitive. Catapult’s products must also satisfy certain regulatory and compliance requirements which may include inspection by regulatory authorities. Failure by Catapult or its suppliers to continuously comply with applicable requirements could result in enforcement action being taken against Catapult. As a manufacturer, importer and supplier of products, product liability risk, faulty products and associated recall and warranty obligations are key risks of the Catapult business. While Catapult has product liability insurance, not all claims will be covered by this and the fallout from product liability issues may be far greater than what an insurance policy is able to cover. Foreign exchange Foreign exchange rates are particularly important to Catapult’s business given the significant amount of revenue which Catapult derives outside Australia. Catapult’s financial statements are prepared and presented in Australian dollars. Adverse movements in foreign currency markets could affect Catapult’s profitability and financial position. Development and commercialisation of intellectual property Catapult relies on its ability to develop and commercialise its intellectual property. A failure to protect, develop and commercialise its intellectual property successfully would lead to a loss of opportunities and adversely impact the operating results and financial position of Catapult. Furthermore, any third party developing superior technology or technology with greater commercial appeal in the fields in which Catapult operates may harm the prospects of Catapult. Catapult’s success depends, in part, on its ability to obtain, maintain and protect its intellectual property, including its patents. Actions taken by Catapult to protect its intellectual property may not be adequate, complete or enforceable and may not prevent the misappropriation of its intellectual property and proprietary information or deter independent development of similar technologies by others. The granting of a patent does not guarantee that Catapult’s intellectual property is protected and that others will not develop similar technologies that circumvent such patents. There can be no assurance that any patents Catapult owns, controls or licences, whether now or in the future, will give Catapult commercially significant protection of its intellectual property. Monitoring unauthorised use of Catapult’s intellectual property rights is difficult and can be costly. Catapult may not be able to detect unauthorised use of its intellectual property rights. Changes in laws in Australia and other jurisdictions in which Catapult operates may adversely affect Catapult’s intellectual property rights. Annual Report 2018 18 DIRECTORS’ REPORT (CONT.) Other parties may develop and patent substantially similar or substitute products, processes, or technologies to those used by Catapult, and other parties may allege that Catapult’s products incorporate intellectual property rights derived from third parties without their permission. Whilst Catapult is not the subject of any claim that its products infringe the intellectual property rights of a third party, allegations of this kind may be received in the future and, if successful, injunctions may be granted against Catapult which could materially affect the operation of Catapult and Catapult’s ability to earn revenue, and cause disruption to Catapult’s services. The defence and prosecution of intellectual property rights lawsuits, proceedings, and related legal and administrative proceedings are costly and time-consuming, and their outcome is uncertain. In addition to its patent and licensing activities, Catapult also relies on protecting its trade secrets. Actions taken by Catapult to protect its trade secrets may not be adequate and this could erode its competitive advantage in respect of such trade secrets. Further, others may independently develop similar technologies. Further product development risk Catapult has developed its athlete video and tracking technology and software products and continues to invest in further systems and product development. Catapult gives no guarantee that further development of its video and athlete tracking technology and software products will be successful, that development milestones will be achieved, or that Catapult’s intellectual property will be developed into further products that are commercially exploitable. There are many risks inherent in the development of technologies and related products, particularly where the products are in the early stages of development. Projects can be delayed or fail to demonstrate any benefit or may cease to be viable for a range of reasons, including scientific and commercial reasons. Brand and reputation damage The brand and reputation of Catapult and its individual products are important in retaining and increasing the number of clients that utilise Catapult’s technology and products and could prevent Catapult from successfully implementing its business strategy. Any reputational damage or negative publicity surrounding Catapult, or its products could adversely impact on Catapult’s business and its future growth and profitability. Product liability Catapult’s business exposes it to potential product liability claims related to the manufacturing, marketing and sale of its products. Catapult maintains product liability insurance. However, to the extent that a claim is brought against Catapult that is not covered or fully covered by insurance, such claim could have a material adverse effect on the business, financial position and results of Catapult. Claims, regardless of their merit or potential outcome, may adversely impact on Catapult’s business and its future growth and profitability. Litigation Catapult may in the ordinary course of business be involved in disputes. These disputes could give rise to litigation. While the extent of any disputes and litigation cannot be ascertained at this time, any dispute or litigation may be costly and may adversely affect the operational and financial results of Catapult. Dividends In respect of the current year, no dividend has been paid by Catapult Group International Limited. Catapult Group International Limited 19 DIRECTORS’ MEETINGS The number of Directors Meetings (including meetings of Committees of Directors) held during the year, and the number of meetings attended by each Director is as follows: Board Meetings Audit and Risk Committee Remuneration and Nomination Committee A 7 7 7 7 7 7 B 7 7 7 6 7 7 A – – 6 6 – 6 B – – 6 6 – 6 A 4 – – – 4 4 B 4 – – – 4 4 Director’s Name Adir Shiffman Shaun Holthouse Igor van de Griendt Calvin Ng Brent Scrimshaw Jim Orlando Where: Column A is the number of meetings the Director was entitled to attend. Column B is the number of meetings the Director attended. UNISSUED SHARES UNDER OPTION AND RIGHTS Date Options Granted Expiry Date 31 October 2014 31 October 2014 14 April 2016 14 April 2016 14 April 2016 14 April 2016 31 October 2019 31 October 2019 14 April 2021 1 January 2021 1 January 2021 14 April 2021 22 September 2016 22 September 2019 22 September 2016 29 March 2021 22 September 2016 22 September 2019 30 November 2016 30 November 2016 30 November 2016 1 May 2017 24 March 2019 23 March 2020 1 May 2022 1 May 2022 1 November 2017 31 October 2022 19 December 2017 22 September 2022 19 December 2017 22 June 2022 19 December 2017 31 December 2020 19 December 2017 19 December 2017 22 July 2021 30 July 2022 19 December 2017 19 December 2022 8 January 2018 8 July 2022 Exercise Price of Shares $0.55 $0.605 $2.20 $2.31 $1.55 $1.68 $3.78 $2.50 $2.50 $4.843 $4.843 $3.00 $2.54 $1.72 $2.50 $2.08 $2.08 $2.59 $2.13 $1.83 $1.82 Number under Option 441,000 960,000 525,576 50,000 300,000 90,000 300,000 57,515 100,000 500,000 500,000 645,000 2,000,000 750,000 75,000 400,000 175,000 165,000 75,000 745,000 25,000 Annual Report 2018 20 DIRECTORS’ REPORT (CONT.) During the financial year ending 30 June 2018 the company issued 2,495,000 options as part of the Employee Share Plan. The options were issued at an average exercise price of $1.89 and an average fair value of $0.80 Unissued ordinary shares of Catapult Group International Ltd under rights at the date of this report: Date Rights Granted Expiry Date 30 November 2016 22 September 2019 All options and rights expire on their expiry date. Exercise Price of Shares $0.00 Number under Rights 100,000 All options and rights are issued in accordance with the CSESP, as approved by shareholders. SHARES ISSUED DURING OR SINCE THE END OF THE YEAR AS A RESULT OF EXERCISE On 28 February 2018, the Group issued 144,176 shares on satisfaction of purchase consideration for AMS acquisition at $1.73 per share. The value of shares issued was $250,000 as consideration. On 29 March 2018, the Group undertook a capital raising, with 22,727,273 shares at $1.10 per share. The amount raised was $25,000,000. During the 12 months to 30 June 2018 the Group allocated 1,348,000 treasury shares as part of options and rights exercised under the Employee Share Plan. The options and rights were exercised at an average exercise price of $0.5903 and $0.00 respectively. Catapult Group International Limited DIRECTORS’ REPORT REMUNERATION REPORT (AUDITED) 21 The Directors of Catapult Group International Ltd present the Remuneration Report for Non-Executive Directors, Executive Directors and other Key Management Personnel, prepared in accordance with the Corporations Act 2001 and the Corporations Regulations 2001. REMUNERATION REPORT Letter from the Chairman of the Nominations and Remuneration Committee Dear Shareholders, Catapult’s 2018 Remuneration Report provides information about the remuneration of our key management personnel for the year just completed. It also explains the significant amount of work we have done to revise our remuneration policy effective from 1 July 2018. Ours is a young, high growth, global business with a strong focus of building our product stack for our target markets. We are engaged in a highly competitive and dynamic global business where there is real competition for the best human talent. As the global leader in the rapidly expanding sports technology market it is unsurprising that our staff are highly sought after. Your Board is mindful that our remuneration practices ensure we continue to attract and retain the high performance talent we need to realise Catapult’s true potential. Key Metrics in FY18 Catapult’s remuneration incentives mirror the strategic focus of the business; namely, penetration of the company’s technology stack in our addressable market. This requires commitment to driving sales into elite sports and allocating available funds to grow our technology offering. Accordingly, the short-term incentive targets for our executive team for FY18 focused on revenue growth and positive underlying EBITDA. With our leadership team motivated to drive revenue growth, it was positive to see the 26% lift in revenue, which was within guidance range. This impressive growth further enhances Catapult’s position as the leader in the elite sports technology market. As a fair reflection of the performance achieved against the targets set, by the leadership team, the Directors have endorsed the partial grant of short term incentive payments as detailed in this report. Revised Remuneration Policy Your Board has taken seriously the strong message sent by the “first strike” vote recorded against the company’s remuneration report at the November 2017 AGM. As a first step, the company engaged an independent remuneration consultant to benchmark executive remuneration. After listening to a range of views from shareholders and taking independent expert advice, the Nominations and Remunerations Committee has reviewed and revised Catapult’s remuneration policies effective FY19. The revised policy enhances the focus on alignment between executive remuneration and shareholder interests and includes the following key improvements: • long term incentive equity grant terms to include a total shareholder return hurdle, with a nil award where compounding annual growth rate is below 12.5% pa, • transition to deferral of STI awards through equity awards to create increased shareholder alignment, motivate retention and preserve cash, and • greater clarity, transparency and certainty around our remuneration practices. As Catapult continues to grow its revenue, staff numbers and market share, the Board is committed to continuous improvement of the rigour and discipline we are applying to our incentive policies and believe that the revisions will further align motivation of our executives with positive outcomes for all our shareholders. More information is outlined in the following report. Annual Report 2018 22 DIRECTORS’ REPORT (CONT.) REMUNERATION REPORT (AUDITED) (CONT.) The Board Our Board composition is a reflection of Catapult’s unique short life as a public company. The Board remains committed to high governance standards. It is also well served by its present mix of non-executive and executive directors with extensive and detailed knowledge of the business and the high growth sports technology market which the company leads on a global scale. With two founder executive directors and a significant equity holder as executive chairman, we acknowledge we do not fit the textbook model of Board composition. The independent directors on the Nominations and Remuneration Committee consider the ongoing role and related remuneration of the executive directors add significant value to the business. They bring a unique competitive advantage to the business through their deep relevant experience and are important for Catapult in the context of its early life stage. We also acknowledge that over the medium term it will be appropriate to review the composition of the Catapult Board. We anticipate an evolution of the Board composition to address the diversity and skills mix appropriate for the next phase of growth of this ambitious, listed sports technology business. On behalf of the Directors, we trust that the following report and analysis properly informs your understanding of Catapult’s remuneration arrangements and the changes we have implemented. Brent Scrimshaw Independent Director Chairman Nominations and Remuneration Committee PRINCIPLES USED TO DETERMINE THE NATURE AND AMOUNT OF REMUNERATION APPLICABLE IN FY18 The principles of the Group’s executive strategy and supporting incentive programs and frameworks are: • to align rewards to business outcomes that deliver value to shareholders • to drive a high-performance culture by setting challenging objectives and rewarding high performing individuals; and • to ensure remuneration is competitive in the relevant employment market place to support the attraction, motivation and retention of executive talent. The Board has established a Nomination and Remuneration Committee which operates in accordance with its charter as approved by the Board and is responsible for determining and reviewing compensation arrangements for the Directors and the Executive Team. The remuneration structure adopted by the Group applicable for FY18 consists of the following components: • fixed remuneration being annual salary; • short term incentives, being employee bonuses; and • options The Nomination and Remuneration Committee assess the appropriateness of the nature and amount of remuneration on a periodic basis by reference to recent employment market conditions with the overall objective of ensuring maximum stakeholder benefit from the retention of a high-quality Board and Executive Team. The metrics for earning short and long-term incentives are reviewed by the Nomination and Remuneration Committee annually as part of the review of executive remuneration and a recommendation is put to the Board for approval. All bonuses, options and incentives must be linked to pre-determined performance criteria. Catapult Group International Limited 23 Short Term Incentive (STI) The Group’s performance measures involve the use of annual performance objectives, financial metrics, performance appraisals and continuing emphasis on living the Company values. The performance measures are set annually after consultation with the Directors and executives and are specifically tailored to the areas where each executive has a level of control. The measures target areas the Board believes hold the greatest potential for expansion and profit and cover financial and non-financial measures. The Key Performance Indicators (‘KPI’s’) for the Executive Team are summarised as follows: Performance area: • financial – consistent with the early growth stage focus of the business key metrics of achieving revenue growth targets and underlying EBITDA; and • non-financial – strategic goals set in relation to each executive’s business unit objectives and job description. Some key financial performance measures are highlighted in the following table. Item EPS (dollars) Dividends (cents per share) Revenue ($’000) Underlying EBITDA ($’000) Statutory EBITDA ($’000) Net loss ($’000) Share price ($) 2018 (0.10) – 76,793 955 (1,945) (17,360) 1.225 2017 (0.086) – 60,783 2,858 (3,713) (13,581) 2.33 2016 (0.05) – 17,368 (4,400) (6,789) (5,871) 3.08 2015 (0.04) – 11,777 (2,500) (4,600) (4,309) 1.04 The board determined that the best alignment with company strategy was to build revenue through growth in sales and market share. The executive team was accordingly set financial targets relating to revenue and underlying EBITDA. The STI Program for FY18 is a cash bonus for the Executive Team and other employees consistent with the remuneration policy in place at the start of FY18. Total At Risk Amount ($) Percentage vested during the year Percentage undeter- mined at 30 June Performance criteria Executive Directors Adir Shiffman Shaun Holthouse Igor van de Griendt 200,000 150,000 61% 61% 0% Performance against Revenue & EBITDA targets, operational and strategic metrics 0% Performance against Revenue & EBITDA targets, operational and strategic metrics 123,000 61% 0% Performance against Revenue & EBITDA targets Technology development targets Annual Report 2018 24 DIRECTORS’ REPORT (CONT.) REMUNERATION REPORT (AUDITED) (CONT.) Total At Risk Amount ($) Percentage vested during the year Percentage undeter- mined at 30 June Performance criteria Other Key Management Personnel Joe Powell Mark Hall Shane Greenan Barry McNeill Matt Bairos 400,000 61% 0% Performance against Revenue & EBITDA targets Performance against Operational & People Metrics 150,000 80% 0% Performance against Revenue 100,000 0% & EBITDA targets Finance Function targets 0% Total at risk ineligible as ceased employment during the year Finance Function targets 113,461 70% 0% Performance against Revenue & EBITDA targets 232,168 70% 0% Performance against Revenue Key Performance Targets for ROW Region & EBITDA targets Key Performance Targets for Americas Region (i) For KMP who joined the Group during the period the Total Amount at Risk amount relates to a 12-month period, so it is provided on a consistent basis to other KMP listed in the table. The percentage amounts shown for vested, forfeited and undetermined are based on the pro-rata mounts that the KMP is entitled to from date of joining the Group to 30 June 2018. The Board believes that the achievements of these targets has benefited Catapult and shareholders in that the company has achieved significant and material advancement of its strategy to penetrate the global addressable market in elite sports technology. This is reflected in the 26% year on year growth in revenue which was a key performance metric set for achievement at the outset of FY18. This is consistent with the objectives of building Catapult’s technology stack and positioning the business to reap the long-term rewards of subscription income over multiple years and rewards success in overcoming the material challenges of building profile and customer base in a highly competitive market. Long Term Incentive (LTI) Under existing remuneration policy, equity incentives in the form of premium priced options have been provided to senior executives at or about the date of their appointment. Other than Mark Hall, who joined the business during FY18, no new grants of equity were made during FY18 to executives who were employed in the business at the start of FY18. The details set out in this report showing equity benefits for executives who were employed as at 1 July 2017 reflect the accounting value of multiple year awards made to those executives in prior periods. These awards were considered a mechanism for motivation, reward and retention of employees. The remuneration policy including the LTI policy has been reviewed and revised with effect from 1 July 2018. The Board will continue to focus executive ‘at risk’ remuneration to achieving goals and targets that are necessary to achieve value accretion in CAT’s share price, short-term volatility notwithstanding. Set out in the tables in the following pages are the remuneration and option and rights holdings of KMP. Catapult Group International Limited d e s a b - e r a h S m r e t - g n o L l - y o p m e - t s o P s t n e m y a p s t i f e n e b s t i f e n e b t n e m s t i f e n e b e e y o p m e m r e t l t r o h S d e s a b e c n a m r o f r e P f o e g a t n e c r e p n o i t a r e n u m e r l $ a t o T d n a s n o i t p O e c n a m r o f r e P e c i v r e s g n o L - r e p u S s $ t h g R i e $ v a e l n $ o i t a u n n a - n o N s $ t i f e n e b y r a t e n o m e $ v a e l l a u n n A s $ u n o b h s a C s $ e e f d n a l y r a a s h s a C r a e Y e e y o p m E l : l l w o e b e b a t e h t n i n w o h s d t L l a n o i t a n r e t n I p u o r G t l u p a t a C f o ) ’ P M K ‘ ( l e n n o s r e P t n e m e g a n a M n o i t a r e n u m e r l e n n o s r e P t n e m e g a n a M y e K r e h t o d n a r o t c e r i D y e K h c a e f o n o i t a r e n u m e r e h t l f o t n e m e e h c a e f o t n u o m a d n a e r u t a n e h t f o s l i a t e D n o i t a r e n u m e r f o s l i a t e D % 5 . 5 2 % 1 . 4 3 % 2 7 2 . % 5 . 4 3 % 5 9 . % 4 . 8 1 2 8 9 8 7 4 , 2 8 9 6 5 , 6 5 5 7 5 4 , 6 5 5 , 6 4 – – – – 0 5 5 , 6 3 3 2 8 9 6 5 , ) 7 1 0 9 4 ( , 9 4 0 0 2 , , 6 7 4 8 3 6 6 5 5 , 6 4 9 2 8 3 , 4 5 2 0 2 , 2 3 0 7 0 4 , 2 8 9 6 5 , , 4 2 7 9 8 3 6 5 5 , 6 4 6 9 0 4 , 4 2 0 3 , 1 7 1 , 2 2 9 4 0 0 2 , a / n a / n a / n a / n a / n a / n a / n a / n 8 7 5 , 1 5 1 2 8 9 6 5 , ) 4 0 4 ( 0 6 9 , 1 4 1 6 5 5 , 6 4 4 0 4 3 9 2 9 6 4 , 5 4 6 , 4 8 3 ) 2 5 3 ( 6 8 4 2 7 6 , 4 3 1 , 7 8 5 2 5 3 – 6 1 0 5 9 , 9 4 3 , 6 6 0 5 7 3 2 , – – – – – – – – 2 4 2 , 8 2 4 2 8 , 4 7 3 7 , 4 7 3 7 , 3 4 2 , 8 6 5 7 5 , 0 6 0 2 , – – – – – – – – – – – – – – – – 0 0 0 2 2 1 , 0 0 0 0 0 3 , 8 1 0 2 0 0 0 6 5 1 , 0 0 0 5 5 2 , 7 1 0 2 ) 6 2 3 9 4 ( , 0 0 5 , 1 9 2 6 3 , 6 6 2 7 2 8 0 2 , 0 0 0 0 2 2 , 0 1 0 7 2 3 , ) 0 6 3 , 3 2 ( 0 3 0 5 7 , 5 3 2 , 4 7 2 9 9 7 0 2 , 0 0 9 6 3 , , 4 7 2 0 6 2 – – – – – – – – – – – – – – – – 8 5 7 , 6 8 8 5 7 6 8 , 6 2 6 7 7 , 6 2 6 7 7 , 3 7 7 , 6 8 3 9 5 0 6 , – 0 9 6 , 1 2 8 1 0 2 7 1 0 2 8 1 0 2 7 1 0 2 8 1 0 2 7 1 0 2 8 1 0 2 7 1 0 2 8 1 0 2 7 1 0 2 8 1 0 2 7 1 0 2 d a e H l l a b o G & r o t c e r i D e s u o h t l o H n u a h S y g e t a r t S f o t d n e i r G e d n a v r o g I r e c i f f O y g o o n h c e T l i f e h C & r o t c e r i D s r o t c e r i D e v i t u c e x E - n o N w a h s m i r c S t n e r B s r o t c e r i D e v i t u c e x E r i a h C e v i t u c e x E n a m f f i h S r i d A ) i i ( l l ’ e n n o D O a d n o h R ) i ( o d n a l r O s e m a J g N n v a C l i 25 m o r f s d r a w a f o t c a p m i l i a c n a n i f r a e y t n e r r u c t c e l l f e r e b a t e v o b a e h t n i s t n e m y a p d e s a b - e r a h S . 8 1 Y F n i s r o t c e r i D o t s t h g i r e c n a m r o f r e p r o s n o i t p o f o s t n a r g o n e r e w e r e h T : e t o N . s r a e y r o i r p 6 1 0 2 r e b m e t p e S 9 d e n g i s e r – l l ’ e n n o D O a d n o h R ) i i ( 6 1 0 2 r e b o t c O 4 2 d e t n o p p a – o d n a l r i O s e m a J ) i ( Annual Report 2018 26 DIRECTORS’ REPORT (CONT.) REMUNERATION REPORT (AUDITED) (CONT.) d e s a b - e r a h S m r e t - g n o L l - y o p m e - t s o P s t n e m y a p s t i f e n e b s t i f e n e b t n e m s t i f e n e b e e y o p m e m r e t l t r o h S d e s a b e c n a m r o f r e P f o e g a t n e c r e p n o i t a r e n u m e r l $ a t o T d n a s n o i t p O e c n a m r o f r e P e c i v r e s g n o L - r e p u S s $ t h g R i e $ v a e l n $ o i t a u n n a - n o N s $ t i f e n e b y r a t e n o m e $ v a e l l a u n n A s $ u n o b h s a C s $ e e f d n a l y r a a s h s a C r a e Y e e y o p m E l % 6 . 8 1 % 3 . 6 2 % 9 5 1 . a / n a / n % 9 6 . % 8 . 2 1 % 9 0 1 . a / n % 0 7 . % 1 . 0 2 % 1 . 3 2 % 2 . 6 1 % 7 . 5 1 – – 0 6 2 0 5 2 , 7 1 1 , 9 8 9 1 2 , 4 0 5 0 2 7 , 4 9 1 0 7 8 9 5 , ) 0 9 5 , 6 9 ( , 1 4 9 5 2 3 0 9 5 , 6 9 – – – – 4 7 2 , 1 2 3 , 1 1 0 7 , 4 3 5 3 9 4 9 4 0 0 2 , 9 1 5 7 , 2 1 5 , 4 1 – 9 9 3 , 2 1 0 3 5 , 4 1 – – – – – – 6 3 1 , 9 4 6 7 4 4 , 5 3 6 8 3 , 6 6 8 3 , 6 6 9 4 , 4 5 4 8 4 6 , 3 7 , 5 1 7 0 7 4 2 5 2 9 1 , , 5 6 9 7 0 8 9 8 3 , 1 1 2 – – – – – – – 1 7 6 7 1 , 9 1 1 , 4 1 9 2 6 7 , 0 4 5 , 4 1 1 8 9 7 1 , 2 0 0 2 , 8 0 0 2 3 , 0 3 2 , 3 2 3 8 1 5 , 2 6 1 5 4 8 9 9 3 , 8 1 0 2 4 1 9 3 1 , ) 2 9 0 8 ( , 4 8 8 8 0 1 , 8 3 6 2 2 3 , 7 1 0 2 – 3 2 7 8 , 7 8 9 4 1 , 3 5 2 , 5 ) 3 5 2 , 5 ( ) 6 4 0 2 ( , 0 6 3 , 1 5 1 6 5 3 , 2 2 5 2 4 9 7 , 2 1 2 7 8 1 , 4 3 9 0 2 , 7 9 0 5 4 2 , 0 0 0 0 0 5 , 8 1 0 2 – – 3 5 7 5 6 , 8 4 1 , 9 7 7 1 0 2 0 0 0 0 8 , 0 0 0 0 0 2 , 8 1 0 2 7 1 0 2 8 1 0 2 7 1 0 2 7 1 0 2 8 1 0 2 7 1 0 2 5 5 3 , 1 2 6 6 9 4 0 4 , 2 9 5 9 4 0 0 2 , 7 5 1 , 2 5 1 ) 0 7 6 , 3 ( 7 0 3 , 2 3 3 8 1 0 2 6 4 2 , 2 2 7 5 1 , 2 5 1 1 1 4 , 6 3 8 6 5 0 7 , 7 0 3 , 2 3 3 0 2 5 9 5 2 , , 5 3 7 6 , 3 0 5 , 1 ) 1 9 5 , 4 4 ( 7 3 6 8 4 1 , 7 9 6 , 6 6 1 ) 6 8 6 , 3 4 ( 4 2 5 , 3 5 8 6 6 2 , 5 7 6 , 2 8 1 0 2 , 9 4 8 0 4 5 , 4 , 2 1 4 7 8 0 , 1 9 0 6 7 , 1 7 2 , 4 2 1 0 0 7 , 3 7 1 2 0 9 , 1 0 1 9 6 4 , 2 1 7 6 8 4 , 3 3 3 , 2 7 1 0 2 t n e m e g a n a M y e K r e h t O r e c i f f O e v i t u c e x E f e h C i ) i i i ( l l e w o P e o J l e n n o s r e P ) v i ( l l a H k r a M r e c i f f O l i i a c n a n F f e h C i ) v ( n a n e e r G e n a h S r e c i f f O l i i a c n a n F f e h C i r e c i f f O g n i t a r e p O f e h C i l l i e N c M y r r a B a c i r e m A h t r o N t n e d s e r P i ) i v ( p p o K n a i r B ) i i v ( s o r i a B t t a M S O X O E C l a t o T 8 1 0 2 l a t o T 7 1 0 2 l t l u p a t a C y b d e y o p m e d e n a m e r e H i . e t a d s i h t m o r f l e n n o s r e P t n e m e g a n a M y e K e b r e g n o l i o n o t d e n m r e t e d s a w d n a 7 1 0 2 r e b m e v o N 5 1 n o O F C s a d e s a e c – n a n e e r G e n a h S ) v ( . 7 1 0 2 r e b m e c e D 8 l i t n u . 6 1 0 2 t s u g u A 2 1 , S O X f o n o i t i s i u q c a f o e t a d e h t m o r f l e n n o s r e P t n e m e g a n a M y e K e b o t d e r e d i s n o c – s o r i a B t t a M ) i i v ( . 7 1 0 2 y a M 0 2 n o l e n n o s r e P t n e m e g a n a M y e K d e r e d i s n o c e b o t d e s a e c – p p o K n a i r B ) i v ( s a h l l i e N c M r M 8 1 Y F f o d n e e h t e c n S i . 6 1 0 2 n i a i l a r t s u A o t K U e h t m o r f n o i t a c o e r l s i h g n w o i l l o f s m r e t e t a i r t a p x e s i h o t e t a e r l l l i e N c M y r r a B r M o t s t i f e n e b y r a t e n o m - n o N : e t o N s m r e t t n e m y o p m e l l a c o l o t d e t r e v e r d n a K U e h t o t d e t a i r t a p e r n e e b . 7 1 0 2 r e b m e v o N 1 m o r f l e n n o s r e P t n e m e g a n a M y e K d e r e d i s n o C . 7 1 0 2 r e b m e v o N 5 1 n o O F C d e t n o p p A i . 7 1 0 2 r e b m e v o N 1 n o p u o r G t l u p a t a C e h t d e n o i j – l l a H k r a M ) v i ( . 7 1 0 2 y a M 1 m o r f l e n n o s r e P t n e m e g a n a M y e K d e r e d i s n o C . l 7 1 0 2 y u J 1 n o O E C d e t n o p p A i . 7 1 0 2 y a M 1 n o p u o r G t l u p a t a C e h t d e n o i j – l l e w o P e o J ) i i i ( Catapult Group International Limited 27 The relative proportions of remuneration that are linked to performance and those that are fixed are as follows: Name Executive Directors Adir Shiffman Shaun Holthouse Igor van de Griendt Other Key Management Personnel Joe Powell Mark Hall Shane Greenan Barry McNeill Matt Bairos Brian Kopp Fixed remuneration At risk – STI At risk – options 54% 52% 50% 35% 47% 100% 68% 47% 0% 36% 35% 34% 28% 23% n/a 23% 28% 0% 10% 13% 16% 37% 30% n/a 9% 25% 100% Long term incentives are provided exclusively by way of options, the percentages disclosed reflect the valuation of remuneration consisting of options, based on the value of options expensed during the year. Service agreements Remuneration and other terms of employment for the Executive Directors and other Key Management Personnel are formalised in a Service Agreement. The major provisions of the agreements relating to remuneration are set out below: Term of agreement Notice period Annual Director’s fees not included in base salary Name Adir Shiffman Current base salary $300,000 Shaun Holthouse $82,192 Igor van de Griendt $182,648 Director appointment term in accordance with CAT constitution Director appointment term in accordance with CAT constitution Director appointment term in accordance with CAT constitution Joe Powell Mark Hall Barry McNeill Matt Bairos $500,000 Permanent $300,000 Permanent $332,307 Permanent $399,845 Permanent Share-based remuneration One (1) month – Three (3) months $85,000 Three (3) months $85,000 Six (6) months Three (3) months One (1) month At will – – – – All options refer to options over ordinary shares of the Company, which are exercisable on a one-for-one basis under the terms of the agreements. All options remain subject to review and approval by the Remuneration and Nomination Committee and Board. Annual Report 2018 28 DIRECTORS’ REPORT (CONT.) REMUNERATION REPORT (AUDITED) (CONT.) Details of options & rights holdings Name Grant Date Held at 1 July 2017 Granted as remu- neration Net change other Held at 30 June 2018 Vested during the year Vested as at 30 June 2018 Note Vesting Schedule Vesting date Expiry Date grant date grant date Value per Total value option/ rights at of option/ rights at Exercise price per option Joe Powell 1-May-17 2,000,000 Adir Shiffman 1-Dec-16 300,000 Calvin Ng 1-Dec-16 300,000 Shaun Holthouse 1-Dec-16 300,000 Igor van de Griendt 1-Dec-16 300,000 Brent Scimshaw 1-Dec-16 300,000 Shane Greenan 30-Nov-16 250,000 – – – – – – – – 2,000,000 337,500 337,500 (i) 162,500 1-May-18 1-May-22 (100,000) 200,000 100,000 (100,000) 200,000 100,000 (100,000) 200,000 100,000 (100,000) 200,000 100,000 (100,000) 200,000 100,000 Mark Hall 1-Nov-17 – 750,000 – 750,000 (250,000) – – – Barry McNeill 31-Oct-14 960,000 Barry McNeill Brian Kopp 14-Apr-16 31-Oct-14 100,000 960,000 Matthew Bairos 22-Sep-16 66,000 22-Jun-17 400,000 – – – – – – 960,000 432,000 960,000 320,000 15-Sep-15 31-Oct-19 – 100,000 (960,000) – 432,000 – – 66,000 – 400,000 70,000 – – – – – – – – – 500,000 1-May-21 1-May-22 $0.68 $340,950 500,000 1-May-19 1-May-22 500,000 1-May-20 1-May-22 100,000 22-Sep-18 24-Mar-19 100,000 22-Sep-19 23-Mar-20 100,000 22-Sep-18 24-Mar-19 100,000 22-Sep-19 23-Mar-20 100,000 22-Sep-18 24-Mar-19 100,000 22-Sep-19 23-Mar-20 100,000 22-Sep-18 24-Mar-19 100,000 22-Sep-19 23-Mar-20 100,000 22-Sep-18 24-Mar-19 100,000 22-Sep-19 23-Mar-20 50,000 30-Jun-17 30-Sep-21 50,000 30-Jun-18 30-Sep-21 50,000 30-Jun-19 30-Sep-21 50,000 30-Jun-20 30-Sep-21 50,000 30-Jun-21 30-Sep-21 200,000 31-Oct-20 30-Oct-22 200,000 31-Oct-21 30-Oct-22 320,000 15-Sep-16 31-Oct-19 320,000 15-Sep-17 31-Oct-19 100,000 12-Apr-19 14-Apr-21 48,000 15-Sep-15 31-Oct-19 240,000 15-Sep-16 31-Oct-19 192,000 15-May-17 31-Oct-19 66,000 22-Sep-17 22-Sep-19 100,000 22-Jun-19 22-Jun-22 100,000 22-Jun-20 22-Jun-22 100,000 22-Jun-21 22-Jun-22 $0.52 $0.57 $0.63 $0.45 $0.65 $0.45 $0.65 $0.45 $0.65 $0.45 $0.65 $0.45 $0.65 $0.92 $1.01 $1.10 $1.17 $1.25 $0.85 $0.90 $0.08 $0.13 $0.17 $0.99 $0.08 $0.13 $0.17 $1.20 $0.77 $0.83 $0.88 $0.93 $83,964 $286,350 $314,350 $44,820 $64,700 $44,820 $64,700 $44,820 $64,700 $44,820 $64,700 $44,820 $64,700 $45,890 $50,520 $54,760 $58,695 $62,355 $170,440 $179,200 $24,960 $42,240 $55,040 $98,800 $3,840 $32,160 $33,216 $78,995 $23,046 $82,530 $88,110 $93,320 $2.54 $2.54 $2.54 $2.54 $4.83 $4.83 $4.83 $4.83 $4.83 $4.83 $4.83 $4.83 $4.83 $4.83 $3.00 $3.00 $3.00 $3.00 $3.00 $1.72 $1.72 $1.72 $1.72 $0.61 $0.61 $0.61 $2.20 $0.61 $0.61 $0.61 $2.50 $2.08 $2.08 $2.08 $2.08 – 150,000 31-Oct-18 30-Oct-22 $0.75 $112,845 200,000 31-Oct-19 30-Oct-22 $0.80 $160,900 70,000 (i) 30,000 22-Jun-18 22-Jun-22 Catapult Group International Limited Details of options & rights holdings Name Grant Date 1 July 2017 Held at Granted as remu- neration Net change other Held at 30 June 2018 Vested during the year Vested as at 30 June 2018 Note Vesting Schedule Vesting date Expiry Date Joe Powell 1-May-17 2,000,000 – 2,000,000 337,500 337,500 (i) 162,500 1-May-18 1-May-22 500,000 1-May-19 1-May-22 500,000 1-May-20 1-May-22 Value per option/ rights at grant date $0.52 $0.57 $0.63 Total value of option/ rights at grant date $83,964 $286,350 $314,350 – – – – – – 500,000 1-May-21 1-May-22 $0.68 $340,950 100,000 22-Sep-18 24-Mar-19 100,000 22-Sep-19 23-Mar-20 100,000 22-Sep-18 24-Mar-19 100,000 22-Sep-19 23-Mar-20 100,000 22-Sep-18 24-Mar-19 100,000 22-Sep-19 23-Mar-20 100,000 22-Sep-18 24-Mar-19 100,000 22-Sep-19 23-Mar-20 100,000 22-Sep-18 24-Mar-19 100,000 22-Sep-19 23-Mar-20 50,000 30-Jun-17 30-Sep-21 50,000 30-Jun-18 30-Sep-21 50,000 30-Jun-19 30-Sep-21 50,000 30-Jun-20 30-Sep-21 50,000 30-Jun-21 30-Sep-21 $0.45 $0.65 $0.45 $0.65 $0.45 $0.65 $0.45 $0.65 $0.45 $0.65 $0.92 $1.01 $1.10 $1.17 $1.25 $44,820 $64,700 $44,820 $64,700 $44,820 $64,700 $44,820 $64,700 $44,820 $64,700 $45,890 $50,520 $54,760 $58,695 $62,355 Mark Hall 1-Nov-17 – 750,000 – 750,000 – 150,000 31-Oct-18 30-Oct-22 $0.75 $112,845 200,000 31-Oct-19 30-Oct-22 $0.80 $160,900 Barry McNeill 31-Oct-14 960,000 – 960,000 432,000 960,000 320,000 15-Sep-15 31-Oct-19 200,000 31-Oct-20 30-Oct-22 200,000 31-Oct-21 30-Oct-22 320,000 15-Sep-16 31-Oct-19 320,000 15-Sep-17 31-Oct-19 100,000 12-Apr-19 14-Apr-21 48,000 15-Sep-15 31-Oct-19 240,000 15-Sep-16 31-Oct-19 192,000 15-May-17 31-Oct-19 66,000 22-Sep-17 22-Sep-19 – – – 70,000 (i) 30,000 22-Jun-18 22-Jun-22 100,000 22-Jun-19 22-Jun-22 100,000 22-Jun-20 22-Jun-22 100,000 22-Jun-21 22-Jun-22 $0.85 $0.90 $0.08 $0.13 $0.17 $0.99 $0.08 $0.13 $0.17 $1.20 $0.77 $0.83 $0.88 $0.93 $170,440 $179,200 $24,960 $42,240 $55,040 $98,800 $3,840 $32,160 $33,216 $78,995 $23,046 $82,530 $88,110 $93,320 Adir Shiffman 1-Dec-16 300,000 (100,000) 200,000 100,000 Calvin Ng 1-Dec-16 300,000 (100,000) 200,000 100,000 Shaun Holthouse 1-Dec-16 300,000 (100,000) 200,000 100,000 Igor van de Griendt 1-Dec-16 300,000 (100,000) 200,000 100,000 Brent Scimshaw 1-Dec-16 300,000 (100,000) 200,000 100,000 Shane Greenan 30-Nov-16 250,000 (250,000) – – – Barry McNeill Brian Kopp 14-Apr-16 31-Oct-14 100,000 960,000 – 100,000 (960,000) – 432,000 Matthew Bairos 22-Sep-16 66,000 22-Jun-17 400,000 – – 66,000 – 400,000 70,000 – – – – – – – – – – – – 29 Exercise price per option $2.54 $2.54 $2.54 $2.54 $4.83 $4.83 $4.83 $4.83 $4.83 $4.83 $4.83 $4.83 $4.83 $4.83 $3.00 $3.00 $3.00 $3.00 $3.00 $1.72 $1.72 $1.72 $1.72 $0.61 $0.61 $0.61 $2.20 $0.61 $0.61 $0.61 $2.50 $2.08 $2.08 $2.08 $2.08 Annual Report 2018 30 DIRECTORS’ REPORT (CONT.) REMUNERATION REPORT (AUDITED) (CONT.) Details of rights holdings Grant Date Held at 1 July 2017 Granted as remu- neration Net change other Held at 30 June 2018 Vested during the year Vested as at 30 June 2018 Note Vesting Schedule Vesting date Expiry Date grant date grant date Value per Total value option/ rights at of option/ rights at Exercise price per option 30-Nov-16 300,000 – (200,000) 100,000 100,000 - 100,000 23-Mar-19 22-Sep-19 $3.27 $327,000 $0.00 Name Calvin Ng (i) Options with did not meet vesting during the period but under issue terms may be eligible to vest in the event of future out-performance All options and rights above were issued for nil consideration and will vest on the vesting date noted provided the continuous service conditions and any applicable performance conditions set under the LTI policy have been met. The options and rights may be exercised at any time from the vesting date to expiry date. Catapult Group International Limited Grant Date 1 July 2017 Held at Granted as remu- neration Net change other Held at 30 June 2018 Vested during the year Vested as at 30 June 2018 Note Vesting Schedule Vesting date Expiry Date Value per option/ rights at grant date Total value of option/ rights at grant date Exercise price per option 30-Nov-16 300,000 – (200,000) 100,000 100,000 - 100,000 23-Mar-19 22-Sep-19 $3.27 $327,000 $0.00 Details of rights holdings Name Calvin Ng out-performance to expiry date. (i) Options with did not meet vesting during the period but under issue terms may be eligible to vest in the event of future All options and rights above were issued for nil consideration and will vest on the vesting date noted provided the continuous service conditions and any applicable performance conditions set under the LTI policy have been met. The options and rights may be exercised at any time from the vesting date 31 Annual Report 2018 32 DIRECTORS’ REPORT (CONT.) REMUNERATION REPORT (AUDITED) (CONT.) Details of shareholdings The movement during the year in the number of ordinary shares held directly, indirectly or beneficially, by each key management personnel, including their related parties, is as follows: Name Adir Shiffman(a) Shaun Holthouse Igor van de Griendt James Orlando(c) Brent Scrimshaw(d) Calvin Ng(b) Joe Powell Mark Hall Barry McNeill Brian Kopp Matt Bairos Shane Greenan Held at 1 July 2017 7,292,100 24,775,000 23,008,000 30,000 15,150 421,100 50,000 – – 66,177 – – Received on exercise of options Purchased or sold during year Net change other* Held at 30 Jun 2018 – – – – – 200,000 – – – – – – – (3,500,000) (2,500,000) 25,000 – – – – – (66,177) – – – – 7,292,100 21,275,000 – 20,508,000 – – – – – – – – – 55,000 15,150 621,100 50,000 – – – – – (a) Adir Shiffman holds a relevant interest in another 9,811,600 shares held by Disruptive Special Opportunities Fund I by virtue of him being the sole shareholder in BBHF Pty Ltd which is a 23% shareholder of Disruptive Capital Pty Ltd which is the Trustee of the Fund. He holds a relevant interest in another 11,552,000 shares held by Disruptive Special Opportunities Fund II by virtue of him being the sole shareholder in BBHF Pty Ltd which is a 23% shareholder of Disruptive Capital Pty Ltd which is the Trustee of the Fund. (b) Calvin Ng holds a relevant interest in another 9,811,600 shares held by Disruptive Special Opportunities Fund I by virtue of him being the sole shareholder in Ng Capital Management Pty Ltd which is a 24.34% shareholder in Aura Group Holdings Pty Ltd which is the ultimate shareholder of entities owning 77.06% of Disruptive Capital Pty Ltd which is the Trustee of the Fund. He holds a relevant interest in another 11,552,000 shares held by Disruptive Special Opportunities Fund II by virtue of him being the sole shareholder in Ng Capital Management Pty Ltd which is a 24.34% shareholder in Aura Group Holdings Pty Ltd which is the ultimate shareholder of entities owning 77.06% of Disruptive Capital Pty Ltd which is the Trustee of the Fund. He also holds a relevant interest in another 2,000 shares held by Aura Funds Management 1 Pty Ltd by virtue of him being the sole shareholder in Ng Capital Management Pty Ltd which is a 24.34% shareholder in Aura Group Holdings Pty Ltd, which is the ultimate shareholder of entities owning a 100% shareholding in Aura Funds Management Pty Ltd. (c) James Orlando holds a relevant interest in 55,000 shares by way of his relationship with Kimberly Ann Foltz. (d) Brent Scrimshaw holds a relevant interest in 15,150 shares held by B&A Scrimshaw Superannuation Fund which is controlled by Mr Scrimshaw. Catapult Group International Limited 33 OUTCOMES OF REMUNERATION STRATEGY REVIEW EFFECTIVE 1 JULY 2018 The Board identified the need to set a clearer remuneration strategy and guidelines to satisfy generally accepted market conventions and to provide a clear path to its future growth that can be understood both internally (Board, employee and executives) and externally (shareholders and other stakeholders). Following an independent review of the Catapult remuneration strategy by Crichton & Associates Pty Limited (Independent Remuneration Consultants) the following revised strategy was adopted to take effect from 1 July 2018, as follows: • The CEO will receive a strategic mix of remuneration consisting of fixed and ‘at risk’ components. The ‘at risk’ components will consist of short-term incentives (STI) and long-term incentives (LTI) under a clearly defined framework; • Selected executives reporting to the CEO will receive a performance balanced remuneration mix; • Selected other executives will receive fixed annual remuneration (FAR) and STI with the STI awarded in both cash and equity (with deferral); and • All other employees will receive FAR, or FAR and STI. They may also be eligible to participate in Catapult Sports Employee Share Plan (CSESP) previously approved by shareholders, on specific terms to be determined. Catapult’s target strategic mix of remuneration to be effective from 1 July 2018 is as follows: Remuneration Strategy Mix CEO Other executive KMP Other executives Other employees FAR STI LTI 33% Up to 33% 1 Up to 34% 50% Up to 25% 1 Up to 25% 70% Up to 30% 1 80% Up to 20% 1 0% ² 0% ² TAR 100% 100% 100% 100% 1. STI may be awarded part in cash and part in equity with deferral 2. CSESP participation may be considered The terms and participation in both STI and LTI will be decided on an annual basis. Annual Report 2018 34 DIRECTORS’ REPORT (CONT.) REMUNERATION REPORT (AUDITED) (CONT.) Catapult’s revised remuneration strategy relating specifically to Key Management Personnel can be further illustrated as set out in the following diagram. CATAPULT EXECUTIVE KMP REMUNERATION OBJECTIVES Shareholder value creation through equity components An appropriate balance of ‘fixed’ and ‘at risk’ components Creation of award differentiation to drive performance culture and behaviours Attract motivate and retain executive talent required at stage of development TOTAL ANNUAL REMUNERATION (TAR) OR TOTAL TARGET REMUNERATION (TTR) IS SET BY REFERENCE TO RELEVANT MARKET BENCHMARKS At Risk Short Term Incentives (STI) Long Term Incentives (LTI) STI performance criteria are set by reference to Group, Business Unit and Individual performance targets appropriate to the specific position and set each Targets are linked to Catapult group objectives such as TSR CAGR or other specified metrics as determined by the Board each year Fixed Fixed Annual Remuneration (FAR) Fixed remuneration is set based on relevant market relativities reflecting responsibilities, performance, qualifications, experience and geographic location REMUNERATION TO BE DELIVERED AS: Base salary plus any allowances (includes superannuation for Australian Executives) Paid as cash on completion of the relevant performance period. Deferral of a portion of the STI into equity (performance rights) to be considered for individual roles Awarded as equity and vest (or not) at the end of the performance period TOTAL ANNUAL REMUNERATION (TAR) OR TOTAL TARGET REMUNERATION (TTR) TAR or TTR is intended to be positioned in the 3rd quartile compared to relevant market based comparisons. 4th quartile TAR or TTR may be derived if demonstrable out performance is achieved by Catapult Group. These remuneration objectives will be reviewed annually by the Board. Any variation from these objectives will be considered on a ‘case’ by ‘case’ basis to ensure Catapult retains flexibility in the various international markets in which it operates. The following table sets out the revised criteria for STI awards as recommended by the Independent Remuneration Consultants, reviewed by the Nominations and Remuneration Committee and adopted by the Board. STI awards will continue to be measured against business critical financial, Group and business unit objectives. Performance gates will be set annually to determine the threshold standard to be met for eligibility for the financial metrics related portion of the STI award. The performance gate will emphasise and drive executive performance alignment with shareholder interests. In setting the financial and personal KPIs and the performance gate, the Board will apply measurable and controllable objectives which align with strategic objectives and enhance shareholder value. Catapult Group International Limited 35 An important development in the revised STI policy to apply from 1 July 2018, is the transition to deferral of STI through a Board determined proportion of annual STI awards to be awarded as equity. Such awards will be forfeited if the participant leaves their employment with Catapult before the vesting date. This service condition can be waived only in exceptional circumstances. The number of equity units awarded will be determined as at 1 July in the year after the completion of the performance period, based on the 5 day VWAP applicable on that date. STI criteria Revised terms adopted effective 1 July 2018 Participants KMP and other employees as determined by the Board. STI $ Value Based on remuneration strategy intention. Performance Criteria and Weightings Performance Period STI Payment Date STI Deferral STI $ value ‘trade-off’ Service restriction Clawback Date of Offer – STI For disclosed executives (KMP) STI awards will be weighted towards financial outcomes and/or be subject to a financial performance gate or cap. KPI will consist of a mix of financial, customer, talent and employees and businesses unit objectives. 1 July to 30 June. On or before 30 September each year. STI deferral will apply to the CEO, designated executive KMP and selected others in FY19 grants vest in August 2020. In subsequent years the deferral period will be at least one (1) year after vesting and be contingent on future service only. Deferred STI will be awarded as RSU, performance rights or similar. The Board will determine the % of any STI to be awarded as equity. The number of equity units (RSU, performance rights or similar) will be determined as at 1 July in the year of the performance period based on the 5 day VWAP applicable on that date. (Note: in the Financial Statements released to ASX on 16 August 2018, this was incorrectly reported as “1 July in the year after the completion of the performance period”.) Any STI deferral provided will be forfeited if the participant leaves before the vesting date. The Board has the discretion to waive this restriction, in exceptional circumstances. STI to executive KMP will be subject to a Clawback and Malus policy that may apply from time to time. Before 30 June each year. Date of Offer – Equity On or before 30 September once the STI $ value has been determined and the number of equity units for STI deferral is calculated. The following table sets out the revised criteria for LTI awards as recommended by the Independent Remuneration Consultants, reviewed by the Nominations and Remuneration Committee and adopted by the Board. The Board has determined that executives will be motivated by the granting of premium priced share options (15% above 5 day VWAP at the time of option pricing) with a hurdle rate to be achieved of a minimum compounding annual growth rate (CAGR) of 12.5% in Total Shareholder Return (TSR). If that hurdle is met at the relevant vesting date, 50% of those options become exercisable. The proportion of options vesting increases to 100% if a 17.5% TSR CAGR is achieved, with a pro rata entitlement between 12.5% and 17.5% TSR CAGR. Directors are of the view that this simple and transparent formula for awarding premium priced options provides strong incentive for executives and only rewards them when all shareholders have benefited from a meaningful CAGR in total shareholder return. Annual Report 2018 36 DIRECTORS’ REPORT (CONT.) REMUNERATION REPORT (AUDITED) (CONT.) LTI Terms FY19 Applicable from 1 July 2018 Participants KMP and other employees as determined by the Board. LTI $ Value Equity type Based on remuneration strategy intention, as approved by the Board. Options. Exercise Price 15% above the VWAP at the date of pricing the Option. Date of Pricing The date of pricing will be the 5 day VWAP as at 1 July. Number The number of Options will be determined by dividing the LTI $ value (in accordance with the remuneration strategy) by the Option value determined using the ‘Contract Life’ value of the option at the date of pricing of the Option. Issue Price None. Performance Criteria Hurdle Rates Service and Performance Period Last Exercise Date Cost Dilution Clawback Minimum Shareholding Change of Control Termination TSR absolute. TSR CAGR <12.5% p.a. (0% vesting); 12.5% p.a. to 17.5% p.a. (50% to 100% pro-rata). FY19 grant will be service up to 31 August 2020. TSR will be measured from the date of release of CAT financial statements in 2018 to 31 August 2020. In subsequent years 3 year term applies. 5 years after grant (Note: in the Financial Statements released to ASX on 16 August 2018, this was incorrectly reported as “30 days after vesting”.) Estimated Income Statement Cost in Total and for FY19 to be determined once final allocations have been approved by the Board. Total dilutive impact and Prospectus relief calculation to be determined once final allocations approved. Unexercised LTI will be subject to any Clawback Policy that may apply from time to time. No minimum shareholding guidelines or policies are in place. 100% of unvested options will vest on a Change of Control. Bad Leaver – Lapse; Good Leaver – Redundancy – Pro-rata service and performance; Other – Board Discretion. Other Conditions No hedging, no securitising, no nominee, no retesting. INDEPENDENT REMUNERATION CONSULTANT During FY18 a remuneration consultancy contract was entered by the company and accordingly the following disclosure is made in accordance with s300A(1)(h) of the Corporations Act. Consultant: Ian Crichton, Remuneration Consultant, Crichton & Associates Pty Ltd. Services provided: Remuneration benchmarking, review of remuneration policy and practice and recommendations for the improvement of those policies and practices (fees: $30,417). Other services: pricing and valuations of grants made during the FY18 and related work (fees: $16,940). The Board is satisfied that the making of remuneration recommendations and related advice was free from undue influence by the executive KMP as a result of the appointment selection and engagement and interaction was the responsibility of the independent director members of the Nomination and Remuneration Committee Mr Brent Scrimshaw and Mr Jim Orlando. The Independent Remuneration Consultant confirmed that he was not subject to any undue influence. END OF AUDITED REMUNERATION REPORT Catapult Group International Limited 37 ENVIRONMENTAL LEGISLATION Catapult Group International Ltd operations are not subject to any particular or significant environmental regulation under a law of the Commonwealth or of a State or Territory in Australia. INDEMNITIES GIVEN AND INSURANCE PREMIUMS PAID TO AUDITORS AND OFFICERS During the year, Catapult Group International Ltd paid a premium to insure officers of the Group. The officers of the Group covered by the insurance policy include all Directors. The liabilities insured are legal costs that may be incurred in defending civil or criminal proceedings that may be brought against the officers in their capacity as officers of the Group, and any other payments arising from liabilities incurred by the officers in connection with such proceedings, other than where such liabilities arise out of conduct involving a wilful breach of duty by the officers or the improper use by the officers of their position or of information to gain advantage for themselves or someone else to cause detriment to the Group. Details of the amount of the premium paid in respect of insurance policies are not disclosed as such disclosure is prohibited under the terms of the contract. The Group has not otherwise, during or since the end of the financial year, except to the extent permitted by law, indemnified or agreed to indemnify any current or former officer or auditor of the Group against a liability incurred as such by an officer or auditor. NON-AUDIT SERVICES During the year, Grant Thornton, the Company’s auditors, performed certain other services in addition to their statutory audit duties. The Board has considered the non-audit services provided during the year by the auditor and is satisfied that the provision of those non-audit services during the year is compatible with, and did not compromise, the auditor independence requirements of the Corporations Act 2001 for the reason the non-audit services do not undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants, as they did not involve reviewing or auditing the auditor’s own work, acting in a management or decision-making capacity for the Company, acting as an advocate for the Company or jointly sharing risks and rewards. Details of the amounts paid to the auditors of the Company, Grant Thornton, and its related practices for audit and non-audit services provided during the year are set out in Note 26 to the Financial Statements. A copy of the Auditor’s Independence Declaration as required under s307C of the Corporations Act 2001 is included on page 38 of this financial report and forms part of this Directors’ Report. PROCEEDINGS ON BEHALF OF THE COMPANY No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Company, or to intervene in any proceedings to which the Company is a party, to taking responsibility on behalf of the Company for all or part of those proceedings. Signed in accordance with a resolution of the Directors. Adir Shiffman Director 16 August 2018 Annual Report 2018 38 AUDITOR’S INDEPENDENCE DECLARATION Collins Square, Tower 1 727 Collins Street Docklands VIC 3008 Correspondence to: GPO Box 4736 Melbourne VIC 3001 T +61 3 8320 2222 F +61 3 8320 2200 E info.vic@au.gt.com W www.grantthornton.com.au Auditor’s Independence Declaration To the Directors of Catapult International Limited In accordance with the requirements of section 307C of the Corporations Act 2001, as lead auditor for the audit of Catapult Group International Limited for the year ended 30 June 2018, I declare that, to the best of my knowledge and belief, there have been: a b no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and no contraventions of any applicable code of professional conduct in relation to the audit. Grant Thornton Audit Pty Ltd Chartered Accountants B A Mackenzie Partner – Audit & Assurance Melbourne, 16 August 2018 Grant Thornton Audit Pty Ltd ACN 130 913 594 a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389 www.grantthornton.com.au ‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the context requires. Grant Thornton Australia Ltd is a member firm of Grant Thornton International Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one another and are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to Grant Thornton Australia Limited ABN 41 127 556 389 and its Australian subsidiaries and related entities. GTIL is not an Australian related entity to Grant Thornton Australia Limited. Liability limited by a scheme approved under Professional Standards Legislation. Catapult Group International Limited CORPORATE GOVERNANCE STATEMENT 39 This corporate governance statement sets out Catapult Group International Ltd’s (Company) current compliance with the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations (ASX Principles and Recommendations). The ASX Principles and Recommendations are not mandatory. However, this corporate governance statement discloses the extent to which the Company has followed the ASX Principles and Recommendations and sets out reasons where the Company does not follow recommendations. This corporate governance statement is current as at 18 October 2018 and has been approved by the board of the Company (Board). # 1 ASX Principles and Recommendations Lay Solid Foundations for Management and Oversight 1.1 A listed entity should disclose: Comply (Yes/No) (a) the respective roles and responsibilities of its board and management; and (b) those matters expressly reserved to the board and those delegated to Yes Yes management. Recommendation/Action The Board is responsible for the corporate governance of the Company. The Board has adopted a Board Charter which outlines the manner in which its powers and responsibilities will be exercised and discharged having regard to principles of good corporate governance and applicable laws. Pursuant to the Board Charter, the Board assumes responsibilities including the following: (a) protecting and enhancing the value of the assets of the Company; (b) providing leadership and setting strategies, directions and monitoring and reviewing against these strategic objectives; (c) reviewing and ratifying internal controls, codes of conduct and legal compliance; (d) reviewing the Company’s financial statements and overseeing the integrity of the Company’s accounting and corporate reporting systems, including the external audit; (e) approval and review of the operating budget and the strategic plan for the Company; (f) evaluating performance and determining the remuneration of the Chief Executive Officer (CEO) and Senior Management and the Company’s remuneration framework generally; (g) ensuring the significant risks facing the Company have been identified and adequate control monitoring and reporting mechanisms are in place; (h) approval of transactions relating to acquisitions, divestments and capital expenditure above delegated authority limits; (i) approval of financial and dividend policy; (j) appointment of the CEO; (k) overseeing the Company’s process for making timely and balanced disclosure of all material information concerning the Company that a reasonable person would expect to have a material effect on the price or value of the Company’s securities; (l) ensuring that the Company has in place an appropriate risk management framework and setting the risk appetite within which the Board expects Senior Management to operate; and (m) monitoring the effectiveness of the Company’s governance practices. The responsibilities of the Chair of the Board, the CEO, Company Secretary and Senior Management are all outlined in the Company’s Board Charter. A copy of the Board Charter is available on the Company’s website at the following URL: http://www.catapultsports.com/investor/corporate-governance/ Annual Report 2018 40 CORPORATE GOVERNANCE STATEMENT (CONT.) # 1 1.1 ASX Principles and Recommendations Lay Solid Foundations for Management and Oversight (continued) Comply (Yes/No) The Company is committed to the circulation of relevant materials to Directors in a timely manner to facilitate Directors’ participation in Board discussions on a fully informed basis. As growth of the Company requires, the Company intends to review the balance of responsibilities between the Board and management to ensure that the division of functions remains appropriate to the needs of the Company. 1.2 A listed entity should: (a) Undertake appropriate checks before appointing a person, or putting forward Yes to security holders a candidate for election as a director; and (b) Provide security holders with all material information in its possession relevant to a decision on whether or not to elect or re-elect a director. Yes Recommendation/Action The Remuneration and Nomination Committee will identify and recommend Board member candidates to the Board. These recommendations will occur after considering the necessary and desirable competencies of new Board members, the range of and depth of skills and the diversity of the Board, and making appropriate checks regarding an individual being put forward. The Remuneration and Nomination Committee will also ensure that all material information in its possession relevant to a decision of whether to appoint or re-elect a director is made available to security holders. A copy of the charter of the Remuneration and Nomination Committee is available on the Company’s website at the following URL: www.catapultsports.com/investor/ corporate-governance/ 1.3 A listed entity should have a written agreement with each director and senior Yes executive setting out the terms of their appointment. Recommendation/Action Directors are given letters of appointment and/or service agreements, and senior executives are given employment contracts prior to their engagement with the Company. 1.4 The company secretary of a listed entity should be accountable directly to the Yes board, through the chair, on all matters to do with the proper functioning of the board. Recommendation/Action The Company Secretary was appointed by and is responsible to the Board through the Chairman. The Chairman and the Company Secretary co-ordinate the Board agenda. Catapult Group International Limited 41 # 1 ASX Principles and Recommendations Lay Solid Foundations for Management and Oversight (continued) 1.5 A listed entity should: (a) have a diversity policy which includes requirements for the board or a relevant committee of the board to set measurable objectives for achieving gender diversity and to assess annually both the objectives and the entity’s progress in achieving them; (b) disclose that policy or a summary of it; and (c) disclose as at the end of each reporting period the measurable objectives for achieving gender diversity set by the board or a relevant committee of the board in accordance with the entity’s diversity policy and its progress towards achieving them and either: 1. 2. the respective proportions of men and women on the board, in senior executive positions and across the whole organisation (including how the entity has defined “senior executive” for these purposes); or if the entity is a “relevant employer” under the Workplace Gender Equality Act, the entity’s most recent “Gender Equality Indicators”, as defined in and published under that Act. Comply (Yes/No) Yes Yes Yes Yes Recommendation/Action The Company has adopted a Diversity Policy which identifies gender diversity as a key area of focus for the Company. Gender diversity is integral to the Company’s overall diversity strategy. Increasing the representation of women is one of the Company’s ongoing priorities. Diversity related measurable objectives for the Company and its controlled entities will be reviewed on an annual basis. The Remuneration and Nomination Committee is responsible, on an annual basis, for developing a long-term plan to address diversity initiatives and measures. A copy of the Diversity Policy is available on the Company’s website at the following URL: http://www.catapultsports.com/investor/corporate-governance The Company has adopted the following measurable objectives regarding recruitment and remuneration practices: (a) to require the CEO and direct reports to provide a pool of diverse candidates from which to consider for all new roles, and for any replacement/vacant roles; (b) to have a remuneration practice that does not discriminate based on gender; and (c) to grow the number of female employees within Catapult, (together, the Measurable Objectives). The Company is able to report that its remuneration practice does not discriminate based on gender. For example we are able to report that the FY18 annual salary review process was merit based and resulted in equivalent average increases across female and male employees. The Company has however not made material improvements in the gender representation within each band within the Company, in particular at Board and executive levels. The Company continues to experience an under-representation of women amongst candidates for advertised roles, especially in technical and information technology roles. Included in these proposals, is the requirement to ensure that a female employee is included on the interview panel for senior level roles moving forward. Annual Report 2018 42 CORPORATE GOVERNANCE STATEMENT (CONT.) # 1 ASX Principles and Recommendations Lay Solid Foundations for Management and Oversight (continued) Comply (Yes/No) As at the end of FY18, the respective proportions of men and women in the following roles were as follows: Board Senior executives Other employees 1.6 A listed entity should: Men 6 8 265 Women 0 0 51 (a) have and disclose a process for periodically evaluating the performance of the board, its committees and individual directors; and (b) disclose, in relation to each reporting period, whether a performance evaluation was undertaken in the reporting period in accordance with that process. Yes Yes Recommendation/Action The performance of the Board as a group and of individual Directors is assessed each year. Directors have the opportunity to reflect on their performance as a Board and at Committee level, with areas for improving their performance identified as a result of the process. The Company did undertake a formal performance appraisal during FY18 and will do so again in FY19. 1.7 A listed entity should: (a) have and disclose a process for periodically evaluating the performance of its senior executives; and (b) disclose, in relation to each reporting period, whether a performance evaluation was undertaken in the reporting period in accordance with that process. Yes Yes Recommendation/Action The Board and CEO intend to regularly review the performance of its senior executives and address any issues that may emerge. In December 2014, the Company adopted the ‘Process for Evaluation of Performance’ policy which outlines the process of evaluating the performance of its senior executives and management. The Company did undertake a formal performance appraisal of its senior executives during the reporting period. Catapult Group International Limited 43 Comply (Yes/No) Yes Yes Yes Yes Yes # 2 ASX Principles and Recommendations Structure the Board to Add Value 2.1 The board of a listed entity should: (a) have a nomination committee which: 1. has at least three members, a majority of whom are independent directors; and 2. is chaired by an independent director, and disclose: 3. the charter of the committee; 4. the members of the committee; and 5. as at the end of each reporting period, the number of times the committee met throughout the period and the individual attendances of the members at those meetings; or (b) if it does not have a nomination committee, disclose that fact and the processes it employs to address board succession issues and to ensure that the board has the appropriate balance of skills, knowledge, experience, independence and diversity to enable it to discharge its duties and responsibilities effectively. Recommendation/Action The Company has a Remuneration and Nomination Committee which has three members being Dr Adir Shiffman (Executive Chairman), Mr James Orlando (Independent Non-Executive Director) and Mr Brent Scrimshaw (Independent Non-Executive Director). A majority of the members of the committee are independent directors as Mr Orlando and Mr Scrimshaw are considered independent. The chair of the committee is Mr Scrimshaw. A copy of the Remuneration and Nomination Committee Charter is available on the Company’s website at the following URL: http://www.catapultsports.com/investor/corporate-governance During the reporting period, the Remuneration and Nomination Committee met 4 times. 2.2 A listed entity should have and disclose a board skills matrix setting out the mix of skills and diversity that the board currently has or is looking to achieve in its membership. No The Board strives to ensure that it is comprised of directors with a blend of skills, experience and attributes appropriate for the Company and its business. The Remuneration and Nomination Committee is responsible for assessing the board skills set. An assessment of skills required by the Company and attributes and skills of the Company’s Directors was undertaken as part of the Board assessment process referred to in item 1.6 above. The Board acknowledges that over the medium term it will be appropriate to review the composition of the Catapult Board to address the diversity and skills mix required for the next phase of Company’s growth. Annual Report 2018 44 CORPORATE GOVERNANCE STATEMENT (CONT.) # 2 ASX Principles and Recommendations Structure the Board to Add Value (continued) 2.3 A listed entity should disclose: Comply (Yes/No) (a) the names of the directors considered by the board to be independent Yes directors; (b) if a director has an interest, position, association or relationship of the type No described in Box 2.3 but the board is of the opinion that it does not compromise the independence of the director, the nature of the interest, position, association or relationship in question and an explanation of why the board is of that opinion; and (c) the length of service of each director. Yes Recommendation/Action The Board has reviewed the position and associations of each of the six directors in office and has determined that only two are independent. These directors are Mr. James Orlando and Mr. Brent Scrimshaw. In making this determination the Board has had regard to the independence criteria in the ASX Principles and Recommendations, and other facts, information and circumstances that the Board considers relevant. The Board assesses the independence of new directors upon appointment and reviews their independence, and the independence of the other directors, as appropriate. Information with respect to potential issues of independence may be disclosed to the market but no formal policy exists to ensure such disclosure. The Company has disclosed the details of each director (including their length of service) in the 2018 Annual Report. 2.4 A majority of the board of a listed entity should be independent directors. No Recommendation/Action The Board considers only Mr Orlando and Mr Scrimshaw to be independent directors of the Company. 2.5 The chair of the board of a listed entity should be an independent director and, No in particular, should not be the same person as the CEO of the entity. Recommendation/Action The Company’s current Executive Chairman, Dr Adir Shiffman is not an independent director. The Board considers Mr Shiffman’s role as Executive Chairman as being essential to the success of the Company in its current stage. 2.6 A listed entity should have a program for inducting new directors and provide appropriate professional development opportunities for directors to develop and maintain the skills and knowledge needed to perform their role as directors effectively. Yes Recommendation/Action Each new director of the Company will, upon appointment, participate in an induction program. This will include meeting with members of the existing Board, the Company Secretary, management and other relevant executives to familiarise themselves with the Company, its business activity and products, its procedures and prudential requirements, and Board practices and procedures. Catapult Group International Limited # 3 ASX Principles and Recommendations Act Ethically and Responsibly 3.1 A listed entity should: (a) have a code of conduct for its directors, senior executives and employees; and (b) disclose that code or a summary of it. Recommendation/Action 45 Comply (Yes/No) Yes Yes The Board is committed to the establishment and maintenance of appropriate ethical standards in order to instil confidence in both clients and the community in the way the Company conducts its business. These standards are encapsulated in the Code of Conduct which outlines how the Company expects each person who represents it to behave and conduct business. A copy of the Code of Conduct is available on the Company’s website at the following URL: http://www.catapultsports.com/investor/corporate-governance 4 Safeguard Integrity in Corporate Reporting 4.1 The board of a listed entity should: (a) have an audit committee which: 1. has at least three members, all of whom are non-executive directors and a majority of whom are independent directors; and 2. is chaired by an independent director, who is not the chair of the board, and disclose: 3. the charter of the committee; 4. the relevant qualifications and experience of the members of the committee; and 5. in relation to each reporting period, the number of times the committee met throughout the period and the individual attendances of the members at those meetings; or (b) if it does not have an audit committee, disclose that fact and the processes it employs that independently verify and safeguard the integrity of its corporate reporting, including the processes for the appointment and removal of the external auditor and the rotation of the audit engagement partner. Yes No Yes Yes Yes Yes Recommendation/Action The Company has a separately constituted Audit and Risk Committee which consists of three members being Mr Igor van de Griendt (Executive Director), Mr Calvin Ng (Non-Executive Director) and Mr James Orlando (Non-Executive Director). Only two members of the committee are non-executive directors and only Mr Orlando is considered independent. The chair of the committee is Mr Orlando. A copy of the Audit and Risk Committee Charter is available on the Company’s website at the following URL: http://www.catapultsports.com/investor/corporate-governance The Company has disclosed the relevant qualifications and experience of the members of the committee in the 2018 Annual Report. During FY18, the Audit and Risk Committee met a total of 6 times. Annual Report 2018 46 CORPORATE GOVERNANCE STATEMENT (CONT.) # 4 ASX Principles and Recommendations Safeguard Integrity in Corporate Reporting (continued) Comply (Yes/No) 4.2 The board of a listed entity should, before it approves the entity’s financial Yes statements for a financial period, receive from its CEO and CFO a declaration that, in their opinion, the financial records of the entity have been properly maintained and that the financial statements comply with the appropriate accounting standards and give a true and fair view of the financial position and performance of the entity and that the opinion has been formed on the basis of a sound system of risk management and internal control which is operating effectively. Recommendation/Action The Company has received a declaration from the CEO and CFO that, in their opinion, the financial records have been property maintained and comply with the proper standards. 4.3 A listed entity that has an AGM should ensure that its external auditor attends its AGM and is available to answer questions from security holders relevant to the audit. Yes Recommendation/Action An external auditor will be present at the AGM and be available to answer questions from security holders relevant to the audit. 5 Make Timely and Balanced Disclosure 5.1 A listed entity should: (a) have a written policy for complying with its continuous disclosure obligations Yes under the Listing Rules; and (b) disclose that policy or a summary of it. Recommendation/Action Yes The Company is committed to providing timely, complete and accurate disclosure of information to allow a fair, and well-informed market in its securities and compliance with the continuous disclosure requirements imposed by law including the Corporations Act and the ASX Listing Rules. A copy of the Company’s Continuous Disclosure Policy is available at the following URL: http://www.catapultsports.com/investor/corporate-governance 6 Respect the Rights of Security Holders 6.1 A listed entity should provide information about itself and its governance to Yes investors via its website. Recommendation/Action The Company provides information about itself and its governance to its investors via the website http://www.catapultsports.com/investor which contains all relevant information about the Company. The Company will regularly update the website and contents therein as deemed necessary. 6.2 A listed entity should design and implement an investor relations program to Yes facilitate effective two-way communication with investors. Recommendation/Action The Company has an investor relations program in place to ensure effective two-way communication with investors. Catapult Group International Limited # 6 ASX Principles and Recommendations Respect the Rights of Security Holders (continued) 47 Comply (Yes/No) 6.3 A listed entity should disclose the policies and processes it has in place to facilitate Yes and encourage participation at meetings of security holders. Recommendation/Action The Company adopted a formal shareholders’ communications policy. A copy of the Company’s Shareholders’ Communications Policy is available at the following URL: http://www.catapultsports.com/investor/corporate-governance 6.4 A listed entity should give security holders the option to receive communications Yes from, and send communications to, the entity and its security registry electronically. Recommendation/Action The Company encourages shareholders to register for receipt of announcements and updates electronically. 7 Recognise and Manage Risk 7.1 The board of a listed entity should: (a) have a committee or committees to oversee risk, each of which: 1. has at least three members, a majority of whom are independent directors; and 2. is chaired by an independent director, and disclose: 3. the charter of the committee; 4. the members of the committee; and 5. as at the end of each reporting period, the number of times the committee met throughout the period and the individual attendances of the members at those meetings; or (b) if it does not have a risk committee or committees that satisfy (a) above, disclose that fact and the processes it employs for overseeing the entity’s risk management framework. Yes No Yes Yes Yes Yes Recommendation/Action The Company has a separately constituted Audit and Risk Committee which consists of three members being Mr Igor van de Griendt (Executive Director), Mr Calvin Ng (Non-Executive Director) and Mr James Orlando (Non-Executive Director). Only two members of the committee are non-executive directors and only Mr Orlando is considered independent. A copy of the Audit and Risk Committee Charter is available on the Company’s website at the following URL: http://www.catapultsports.com/investor/corporate-governance The charter outlines the key areas of responsibility for the committee, outlining its responsibility for oversight over potential risks which affect the Company. In the 2018 financial year, the Audit and Risk Committee met a total of 6 times. Annual Report 2018 48 CORPORATE GOVERNANCE STATEMENT (CONT.) # 7 ASX Principles and Recommendations Recognise and Manage Risk (continued) 7.2 The board or a committee of the board should: Comply (Yes/No) (a) review the entity’s risk management framework at least annually to satisfy Yes itself that it continues to be sound; and (b) disclose, in relation to each reporting period, whether such a review has Yes taken place. Recommendation/Action The Board annually reviews and approves the risk framework of the Company. A copy of the Company’s Risk Management Policy is available on the Company’s website at the following URL: http://www.catapultsports.com/investor/corporate-governance The Company undertook a formal risk review and update of its risk register during FY18. 7.3 A listed entity should disclose: (a) if it has an internal audit function, how the function is structured and what role it performs; or (b) if it does not have an internal audit function, that fact and the processes it employs for evaluating and continually improving the effectiveness of its risk management and internal control processes. No No Recommendation/Action The Company does not have an internal audit function, and does not disclose the processes it uses to improve risk management. Nonetheless, it remains committed to effective management and the control of these factors. 7.4 A listed entity should disclose whether it has any material exposure to economic, Yes environmental and social sustainability risks and, if it does, how it manages or intends to manage those risks. Recommendation/Action All material exposure to economic, environmental and social sustainability risks will be announced to the market, in accordance with the requirements of the ASX listing rules and otherwise. Catapult Group International Limited 49 Comply (Yes/No) Yes Yes Yes Yes Yes Yes # 8 ASX Principles and Recommendations Remunerate Fairly and Responsibly 8.1 The board of a listed entity should: (a) have a remuneration committee which: 1. has at least three members, a majority of whom are independent directors; and 2. is chaired by an independent director, 3. and disclose 4. the charter of the committee; 5. the members of the committee; and 6. as at the end of each reporting period, the number of times the committee met throughout the period and the individual attendances of the members at those meetings; or (b) if it does not have a remuneration committee, disclose that fact and the processes it employs for setting the level and composition of remuneration for directors and senior executives and ensuring that such remuneration is appropriate and not excessive. Recommendation/Action The Company has a Remuneration and Nomination Committee which has three members being Dr Adir Shiffman (Executive Chairman), Mr James Orlando l (Non-Executive Director) and Mr Brent Scrimshaw (Non-Executive Director). members of the committee are non-executive directors, and both Mr Orlando and Mr Scrimshaw are considered independent. The chair of the committee is Mr Brent Scrimshaw. A copy of the Remuneration and Nomination Committee Charter is available on the Company’s website at the following URL: http://www.catapultsports.com/investor/corporate-governance During the reporting period, the Remuneration and Nomination Committee met 4 times. 8.2 A listed entity should separately disclose its policies and practices regarding the remuneration of non-executive directors and the remuneration of executive directors and other senior executives. Yes Recommendation/Action The Company has disclosed its remuneration policy in the FY18 Annual Report together with an update to that policy applicable from the start of FY19, following a review of the remuneration policy and practices in conjunction with an independent remuneration consultant. Annual Report 2018 50 CORPORATE GOVERNANCE STATEMENT (CONT.) # 8 ASX Principles and Recommendations Remunerate Fairly and Responsibly (continued) 8.3 A listed entity which has an equity-based remuneration scheme should: (a) have a policy on whether participants are permitted to enter into transactions (whether through the use of derivatives or otherwise) which limit the economic risk of participating in the scheme; and (b) disclose that policy or a summary of it. Recommendation/Action Comply (Yes/No) Yes Yes The Company has a Securities Trading Policy that prohibits directors, offices and employees from entering into transactions or arrangements which limits the economic risk of participating in unvested entitlements under any equity based remuneration scheme. A copy of the Company’s Securities Trading Policy is available on the Company’s website at the following URL: http://www.catapultsports.com/investor/corporate-governance Catapult Group International Limited CONSOLIDATED STATEMENT OF PROFIT OR LOSS FOR THE YEAR ENDED 30 JUNE 2018 51 Revenue Other Income Costs of Goods Sold Employee benefits expense Employee share option compensation expense Capital raising and listing expenses Travel, marketing and promotion Occupancy Professional fees Other expenses Loss on disposal of assets Operating loss before depreciation and amortisation Depreciation and amortisation Operating loss Finance costs Finance income Other financial items Loss before income tax Income tax (expense)/benefit Notes 8 9 20 20 2018 $’000 76,793 392 (18,570) (38,005) (1,512) (274) (7,716) (3,143) (2,611) (6,806) (493) (1,945) (14,141) 2017 $’000 60,783 215 (14,224) (28,401) (3,256) (385) (6,111) (1,972) (3,824) (6,538) – (3,713) (9,994) (16,086) (13,707) (76) 169 (266) (21) 67 (385) (16,259) (14,046) (1,101) 465 23 23 24 25 Loss for the year from continuing operations (17,360) (13,581) Earnings per share Basic and diluted earnings per share (cents per share) 27 (10.0) cents (8.6) cents This statement should be read in conjunction with the notes to the financial statements. Annual Report 2018 52 CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2018 Loss for the year from continuing operations Other Comprehensive Income Items that may be reclassified subsequently to profit or loss: Foreign currency translation differences for foreign operations, net of tax 2018 12 months $ 2017 12 months $ (17,360) (13,581) 3,256 (1,991) Other comprehensive income for the year, net of tax 3,256 (1,991) Total comprehensive income for the year attributable to owners (14,104) (15,572) This statement should be read in conjunction with the notes to the financial statements. Catapult Group International Limited CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2018 53 Assets Current Cash and cash equivalents Trade and other receivables Inventories Current tax assets Total current assets Non-Current Assets Trade and other receivables Property, plant and equipment Goodwill Other intangible assets Deferred tax assets Total non-current assets Total assets Liabilities Current Trade and other payables Deferred revenue Other liabilities Employee benefits Borrowings Total current liabilities Non-Current Deferred revenue Other liabilities Employee benefits Deferred tax liabilities Borrowings Total non-current liabilities Total liabilities Net assets Equity Share capital Share option reserve Foreign currency translation reserve Accumulated losses Total equity Notes 30-Jun-18 $’000 30-Jun-17 $’000 10 11 12 11 13 14 15 16 17 18 18 20 19 18 18 20 16 19 31,715 30,849 3,819 89 16,686 26,864 3,342 2,013 66,472 48,905 275 8,683 56,730 42,097 10,172 117,957 184,429 11,199 25,657 1,794 8,798 3,452 50,900 584 582 53 5,137 103 6,459 57,359 127,071 208 7,710 53,127 41,181 10,167 112,393 161,298 8,542 22,380 1,125 6,084 3,141 41,272 698 395 62 4,109 – 5,264 46,536 114,762 21 164,324 138,724 4,847 525 (42,625) 127,071 4,033 (2,731) (25,264) 114,762 This statement should be read in conjunction with the notes to the financial statements. Annual Report 2018 54 CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2018 Note 2018 $’000 2017 $’000 Cash flows from operating activities Cash receipts from Customers Cash paid to suppliers and employees Cash generated from/(used in) operations Interest Received Government Grants Income taxes paid Acquisition and integration costs Net cash flows from/(used in) operating activities 29 Cash flows from investing activities Payments for property, plant and equipment Purchase of other intangible assets Acquisition of subsidiaries net of cash acquired 37 Net cash flows used in investing activities Cash flows from financing activities Loans received Finance Costs on Bank Loan Interest paid Proceeds from issue of share capital Proceeds from share options Transaction costs related to share capital issued Net cash flows from financing activities Net increase in cash and cash equivalents Cash and cash equivalents at the beginning of the financial period Effect of exchange rate fluctuations on cash held Cash and cash equivalents at the end of the financial period 77,253 (72,978) 4,275 169 95 1,881 – 6,420 (5,849) (8,579) (1,534) (15,962) 52,892 (59,168) (6,276) 67 131 (12) (2,754) (8,844) (4,892) (5,833) (82,201) (92,926) 253 – (51) 3,250 (111) (21) 25,000 116,175 447 (1,138) 24,511 14,969 16,686 60 31,715 521 (4,440) 115,374 13,604 3,643 (561) 16,686 This statement should be read in conjunction with the notes to the financial statements. Catapult Group International Limited CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2018 55 Share Option Reserve $’000 Foreign Currency Translation Reserve $’000 Accumu- lated Losses $’000 777 (740) (11,684) Share Capital $’000 23,586 Total Equity $’000 11,939 – – – 115,138 – 115,138 138,724 – – – – 3,256 3,256 4,033 – (13,581) (13,581) (1,991) (1,991) – (1,991) (13,581) (15,572) – – – – – – (2,731) (25,264) 115,138 3,256 118,394 114,762 Balance at 1 July 2016 Total comprehensive income for the year Loss for the year Other comprehensive income Total comprehensive income Transactions with owners, recorded directly in equity Contributions by and distributions to owners Issue of ordinary shares, net of transaction costs Share based payments Total transactions with owners Balance at 30 June 2017 Balance at 1 July 2017 138,724 4,033 (2,731) (25,264) 114,762 Total comprehensive income for the year Loss for the year Other comprehensive income Total comprehensive income Transactions with owners, recorded directly in equity Contributions by and distributions to owners Issue of ordinary shares, net of transaction costs Share based payments Total transactions with owners Balance at 30 June 2018 – – – – – – – (17,360) (17,360) 3,256 3,256 – 3,256 (17,360) (14,104) 24,111 1,489 25,600 164,324 – 813 813 – – – – – – 24,111 2,302 26,413 4,847 525 (42,625) 127,071 This statement should be read in conjunction with the notes to the financial statements. Annual Report 2018 56 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. NATURE OF OPERATIONS Catapult Group International Ltd and its controlled entities (the ‘Group’) principal activities are the development and supply of wearable tracking devices, software and video analytics solutions for athletes and sports teams. 2. GENERAL INFORMATION AND BASIS OF PREPARATION The consolidated general purpose financial statements of the Group have been prepared in accordance with the requirements of the Corporations Act 2001, Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting Standards Board. Compliance with Australian Accounting Standards results in full compliance with the International Financial Reporting Standards (‘IFRS’) as issued by the International Accounting Standards Board (IASB). Catapult Group International Ltd is a for-profit entity for the purpose of preparing the financial statements. Catapult Group International Ltd is the Group’s Ultimate Parent Company. Catapult Group International Ltd is a Public Company incorporated and domiciled in Australia and listed on the Australian Stock Exchange. The address of its registered office and its principal place of business is 75-83 High Street, Prahran, Victoria, Australia. The consolidated financial statements for the year ended 30 June 2018 were approved and authorised for issue by the Board of Directors on 16 August 2018. 3. CHANGES IN ACCOUNTING POLICIES 3.1 New and revised standards that are effective for these financial statements Effective this financial period the amendment below takes effect 1st July 2017: Several new and revised standards became effective for the first time to annual periods beginning on or after 1 July 2017. Only those that are significant to the Group have been included. 3.2 Accounting Standards issued but not yet effective and have not been adopted early by the Group Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2018 reporting periods and have not yet been adopted by the group. The group’s assessment of the impact of these new standards and interpretations is set out below: AASB 15 Revenue from Contracts with Customers AASB 15: • replaces AASB 118 Revenue, AASB 111 Construction Contracts and some revenue-related Interpretations • establishes a new control-based revenue recognition model • establishes a new concept of ‘distinct good or services’ to identify performance obligations • changes the basis for deciding whether revenue is to be recognised over time or at a point in time • provides new and more detailed guidance on specific topics (e.g., multiple element arrangements, variable pricing, rights of return, warranties and licensing) • expands and improves disclosures about revenue This standard will be adopted for the first time in the in the financial statements for the year ending 30 June 2019. Catapult Group International Limited 57 Management have undertaken a detailed review of contract obligations and the underlying transactions. This review indicates that compliance with the standard may result in a requirement to adjust the current revenue recognition methodology. Elite Wearable contracts contain an obligation to provide training. This is currently amortised over the life of the contract. Compliance with the standard will require this revenue to be recognised as the service is incurred, generally within the first 90 days of the contract, causing a change in the first year of revenue recognition, this is not considered to have a material impact. A review of costs incurred in Elite Wearable contract acquisition indicates that the distributor commissions on total contract value, currently recognised upfront, will also require a change in accounting treatment and be amortised over the life of the contract. This change is anticipated to result in a deferral of $300,000 of costs in FY19. AASB 16 Leases (February 2017) AASB 16: • replaces AASB 117 Leases and some lease-related Interpretations • requires all leases to be accounted for ‘on-balance sheet’ by lessees, other than short-term and low value asset leases • provides new guidance on the application of the definition of lease and on sale and lease back accounting • largely retains the existing lessor accounting requirements in AASB 117 • requires new and different disclosures about leases Management has reviewed the applicable provisions relating to the Group’s position as a lessor and lessee under the new standard when it is first adopted for the year ending 30 June 2020. In relation to the Group being a lessor of operating leases of wearables under subscription arrangements the standard is not expected to have a material impact on the transactions and balances recognised in the financial statements. In relation to the Group being a lessee it is expected that the first-time adoption of AASB 16 for the year ending 30 June 2020 will have the following impact on the transactions and balances recognised in the financial statements, in particular: • lease assets and financial liabilities on the balance sheet will increase by $7,037,067 and $5,401,277 respectively (based on the facts at the date of the assessment) • there will be a reduction in the reported equity as the carrying amount of lease assets will reduce more quickly than the carrying amount of lease liabilities • EBIT in the statement of profit or loss and other comprehensive income will be higher as the implicit interest in lease payments for former off-balance sheet leases will be presented as part of finance costs rather than being included in operating expenses • operating cash outflows will be lower and financing cash flows will be higher in the statement of cash flows as principal repayments on all lease liabilities will now be included in financing activities rather than operating activities. Interest can also be included within financing activities. AASB 2016-1 Amendments to Australian Accounting Standards – Recognition of Deferred Tax Assets for Unrealised Losses (1 January 2017) AASB 2016-1 amends AASB 112 Income Taxes to clarify how to account for deferred tax assets related to debt instruments measured at fair value, particularly where changes in the market interest rate decrease the fair value of a debt instrument below cost. When these amendments are first adopted for the year ending 30 June 2018, there will be no material impact on the financial statements. Annual Report 2018 58 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.) 3. CHANGES IN ACCOUNTING POLICIES (CONTINUED) 3.2 Accounting Standards issued but not yet effective and have not been adopted early by the Group (continued) AASB 2016-2 Amendments to Australian Accounting Standards – Disclosure Initiative: Amendments to AASB 107 (1 January 2017) AASB 2016-2 amends AASB 107 Statement of Cash Flows to require entities preparing financial statements in accordance with Tier 1 reporting requirements to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes. When these amendments are first adopted for the year ending 30 June 2018, there will be no material impact on the financial statements. 4. SIGNIFICANT ACCOUNTING POLICIES 4.1 Overall considerations The consolidated financial statements have been prepared using the significant accounting policies and measurement bases summarised below. 4.2 Basis of consolidation The Group financial statements consolidate those of the Parent Company and all of its subsidiaries as of 30 June 2018. The Parent controls a subsidiary if it is exposed, or has rights, to variable returns from its involvement with the subsidiary and could affect those returns through its power over the subsidiary. All subsidiaries have a reporting date of 30 June. All transactions and balances between Group companies are eliminated on consolidation, including unrealised gains and losses on transactions between Group companies. Where unrealised losses on intra-group asset sales are reversed on consolidation, the underlying asset is also tested for impairment from a group perspective. Amounts reported in the financial statements of subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Group. Profit or loss and other comprehensive income of subsidiaries acquired or disposed of during the year are recognised from the effective date of acquisition, or up to the effective date of disposal, as applicable. Non-controlling interests, presented as part of equity, represent the portion of a subsidiary’s profit or loss and net assets that is not held by the Group. The Group attributes total comprehensive income or loss of subsidiaries between the owners of the parent and the non-controlling interests based on their respective ownership interests. 4.3 Business combination The Group applies the acquisition method in accounting for business combinations. The consideration transferred by the Group to obtain control of a subsidiary is calculated as the sum of the acquisition-date fair values of assets transferred, liabilities incurred, and the equity interests issued by the Group, which includes the fair value of any asset or liability arising from a contingent consideration arrangement. Acquisition costs are expensed as incurred. The Group recognises identifiable assets acquired and liabilities assumed in a business combination regardless of whether they have been previously recognised in the acquiree’s financial statements prior to the acquisition. Assets acquired and liabilities assumed are generally measured at their acquisition-date fair values. Catapult Group International Limited 59 Goodwill is stated after separate recognition of identifiable intangible assets. It is calculated as the excess of the sum of (a) fair value of consideration transferred, (b) the recognised amount of any non-controlling interest in the acquiree, and (c) acquisition-date fair value of any existing equity interest in the acquiree, over the acquisition-date fair values of identifiable net assets. If the fair values of identifiable net assets exceed the sum calculated above, the excess amount (i.e. gain on a bargain purchase) is recognised in profit or loss immediately. 4.4 Foreign currency translation Functional and presentation currency The consolidated financial statements are presented in Australian dollars (‘AUD’), which is also the functional currency of the Parent Company. Foreign currency transactions and balances Foreign currency transactions are translated into the functional currency of the respective Group entity, using the exchange rates prevailing at the dates of the transactions (spot exchange rate). Foreign exchange gains and losses resulting from the settlement of such transactions and from the re-measurement of monetary items at year end exchange rates are recognised in profit or loss. Non-monetary items are not retranslated at year-end and are measured at historical cost (translated using the exchange rates at the date of the transaction), except for non-monetary items measured at fair value which are translated using the exchange rates at the date when fair value was determined. Foreign operations In the Group’s financial statements, all assets, liabilities and transactions of Group entities with a functional currency other than the AUD are translated into AUD upon consolidation. The functional currency of the entities in the Group has remained unchanged during the reporting period. On consolidation, assets and liabilities have been translated into AUD at the closing rate at the reporting date. Income and expenses have been translated into AUD at the average rate over the reporting period. Exchange differences are charged or credited to other comprehensive income and recognised in the currency translation reserve in equity. On disposal of a foreign operation the cumulative translation differences recognised in equity are reclassified to profit or loss and recognised as part of the gain or loss on disposal. 4.5 Revenue Revenue arises from the sale of goods and the rendering of services, it is measured by reference to the fair value of consideration received or receivable, excluding sales taxes, rebates, and trade discounts. The Group enters into sales transactions involving an outright sale to the client, on a subscription basis or for the rendering of services. The Group applies the revenue recognition criteria set out below to each separately identifiable component of the sales transaction in order to reflect the substance of the transaction. Outright sale of goods Outright sale of goods is recognised when the Group has transferred to the buyer the significant risks and rewards of ownership. The timing of the transfer of risks and rewards varies depending on the individual terms of the sales agreement. For sales of wearable units the transfer usually occurs when the customer has taken undisputed delivery of the goods. For sales of hardware in the video analytics business the transfer usually occurs on despatch of the goods from Catapult’s premises. Annual Report 2018 60 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.) 4. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 4.5 Revenue (continued) Subscription and Services (i) Wearables Subscription sale The Group generates revenues from subscription sales and once the customer has taken undisputed delivery of the goods, the revenue from the subscription agreement is recognised on a monthly basis in equal amounts for each month of the subscription agreement. In determining that wearable subscription constitute an operating lease under AASB 117 the Group considers the nature of the term of the agreement and the useful life of the goods being provided under the subscription agreement. (ii) Rendering of Services The Group is involved in providing software, support and maintenances services. The Group recognises revenue from such activities on a monthly basis in equal amounts for each month of the subscription agreement. (iii) Multiple Element contracts The Group’s Sub-Elite Wearables offering includes an ‘outright sale’ element for the GPS Tracking unit sold to the customer and a ‘rendering of services’ element for the hosted software platform that customers have access to over the duration of the sales agreement. The consideration received for the bundled offering is allocated to each element on the basis of relative fair value. The fair value used for allocating revenue is based on customer contracts and internal pricing models. The revenues associated with the ‘Outright Sale’ and ‘Rendering of services’ elements of the sales agreements are recognised on the basis set-out above. (iv) Content Licensing The Group is involved in the provision of licensed video content to customers. Where video content is purchased on a one-off basis, associated revenue is recognised upon delivery of the licensed content. Where video content is purchased via a term contract with content available for consumption during the contract term, associated revenue is recognised on a monthly basis in equal amounts for each month of the content licensing agreement. (v) Interest and dividend income Interest income and expenses are reported on an accrual basis using the effective interest method. Dividends, other than those from investments in associates, are recognised at the time the right to receive payment is established. 4.6 Operating expenses Operating expenses are recognised in profit or loss upon utilisation of the service or at the date of their origin. 4.7 Borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset are capitalised during the period of time that is necessary to complete and prepare the asset for its intended use or sale. Other borrowing costs are expensed in the period in which they are incurred and reported in finance costs (see Note 23). Catapult Group International Limited 61 4.8 Goodwill Goodwill represents the future economic benefits arising from a business combination that are not individually identified and separately recognised. See Note 4.3 for information on how goodwill is initially determined. Goodwill is carried at cost less accumulated impairment losses. Refer to Note 14.1 for a description of impairment testing procedures. 4.9 Other intangible assets Acquired intangible assets Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and install the specific software. Brand names and customer lists acquired in a business combination that qualify for separate recognition are recognised as intangible assets at their fair values (see Note 4.3). Internally developed software Expenditure on the research phase of projects to develop new customised software for athlete tracking and analytic analysis is recognised as an expense as incurred. Costs that are directly attributable to a project’s development phase are recognised as intangible assets, provided they meet the following recognition requirements: • the development costs can be measured reliably; • the project is technically and commercially feasible; • the Group intends to and has sufficient resources to complete the project; • the Group has the ability to use or sell the software; and • the software will generate probable future economic benefits. Development costs not meeting these criteria for capitalisation are expensed as incurred. Directly attributable costs include employee costs and costs incurred on software development. Internally developed hardware Expenditure on the research phase of projects to develop new hardware for athlete tracking and analytic analysis is recognised as an expense as incurred. Costs that are directly attributable to a project’s development phase are recognised as intangible assets, provided they meet the following recognition requirements: • the development costs can be measured reliably; • the project is technically and commercially feasible; • the Group intends to and has sufficient resources to complete the project; • the Group has the ability to use or sell the hardware; and • the hardware will generate probable future economic benefits. Development costs not meeting these criteria for capitalisation are expensed as incurred. Directly attributable costs include employee costs and costs incurred on hardware development. Subsequent measurement All intangible assets, including capitalised internally developed software and hardware, are accounted for using the cost model whereby capitalised costs are amortised on a straight-line basis over their estimated useful lives, as these assets are considered finite. Residual values and useful lives are reviewed at each reporting date. In addition, they are subject to impairment testing as described in Note 4.12. Annual Report 2018 62 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.) 4. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 4.9 Other intangible assets (continued) The following useful lives are applied: • software (licenses and internally developed): 4–5 years, except with regard to identified projects with 2 years • brand names: annually assessed by management for impairment • customer lists: 7–10 years • hardware: 3 years • distributor relationships: 10 years • distributor contracts: 10 years • goodwill: annually assessed by management for impairment Amortisation has been included within depreciation, amortisation and impairment of non-financial assets. Subsequent expenditures on the maintenance of computer software and brand names are expensed as incurred. When an intangible asset is disposed of, the gain or loss on disposal is determined as the difference between the proceeds and the carrying amount of the asset, and is recognised in profit or loss within other income or other expenses. 4.10 Property, plant and equipment Plant, IT equipment and other equipment (comprising fittings and furniture) are initially recognised at acquisition cost or manufacturing cost, including any costs directly attributable to bringing the assets to the location and condition necessary for it to be capable of operating in the manner intended by the Group’s management. Plant, IT equipment and other equipment are subsequently measured using the cost model, cost less subsequent precaution and impairment losses. Depreciation is recognised on a diminishing-value basis to write down the cost less estimated residual value of Plant buildings, IT equipment and other equipment. The following useful lives are applied: • plant 3-10 years • office equipment 3-20 years • fixture and fittings 20 years • other equipment 2-7 years • property improvements 7 years Depreciation is recognised on a straight line basis to write down the cost less estimated residual value of Subscription, service and demonstration wearable units over their useful life of 4 years. In the case of leasehold property, expected useful lives are determined by reference to comparable owned assets or over the term of the lease, if shorter. Material residual value estimates and estimates of useful life are updated as required, but at least annually. Gains or losses arising on the disposal of property, plant and equipment are determined as the difference between the disposal proceeds and the carrying amount of the assets and are recognised in profit or loss within other income or other expenses. Catapult Group International Limited 63 4.11 Leased assets Operating leases Where the Group is a lessee, payments on operating lease agreements are recognised as an expense on a straight-line basis over the lease term. Associated costs, such as maintenance and insurance, are expensed as incurred. 4.12 Impairment testing of goodwill, other intangible assets and property, plant and equipment For impairment assessment purposes, assets are grouped at the lowest levels for which there are largely independent cash inflows (cash-generating units). As a result, some assets are tested individually for impairment and some are tested at cash-generating unit level. Goodwill is allocated to those cash-generating units that are expected to benefit from synergies of the related business combination and represent the lowest level within the Group at which management monitors goodwill. Cash-generating units to which goodwill has been allocated (determined by the Group’s management as equivalent to its operating segments) are tested for impairment at least annually. All other individual assets or cash-generating units are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s or cash-generating unit’s carrying amount exceeds its recoverable amount, which is the higher of fair value less costs to sell and value-in-use. To determine the value-in-use, management estimates expected future cash flows from each cash-generating unit and determines a suitable interest rate in order to calculate the present value of those cash flows. The data used for impairment testing procedures are directly linked to the Group’s latest approved budget, adjusted as necessary to exclude the effects of future reorganisations and asset enhancements. Discount factors are determined individually for each cash-generating unit and reflect management’s assessment of respective risk profiles, such as market and asset-specific risks factors. Impairment losses for cash-generating units reduce first the carrying amount of any goodwill allocated to that cash-generating unit. Any remaining impairment loss is charged pro rata to the other assets in the cash-generating unit. With the exception of goodwill, all assets are subsequently reassessed for indications that an impairment loss previously recognised may no longer exist. An impairment charge is reversed if the cash-generating unit’s recoverable amount exceeds its carrying amount. 4.13 Financial instruments Recognition, Initial Measurement and De-recognition Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the financial instrument, and are measured initially at fair value adjusted by transactions costs, except for those carried at fair value through profit or loss, which are measured initially at fair value. Subsequent measurement of financial assets and financial liabilities are described below. Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or when the financial asset and all substantial risks and rewards are transferred. A financial liability is derecognised when it is extinguished, discharged, cancelled or expires. Annual Report 2018 64 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.) 4. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 4.13 Financial instruments (continued) Classification and Subsequent Measurement of Financial Assets For the purpose of subsequent measurement, financial assets other than those designated and effective as hedging instruments are classified into the following categories upon initial recognition: • Loans and receivables; • Financial assets at Fair Value Through Profit or Loss (‘FVTPL’); • Held-To-Maturity (‘HTM’) investments; or • Available-For-Sale (‘AFS’) financial assets. All financial assets except for those at FVTPL are subject to review for impairment at least at each reporting date to identify whether there is any objective evidence that a financial asset or a group of financial assets is impaired. Different criteria to determine impairment are applied for each category of financial assets, which are described below. All income and expenses relating to financial assets that are recognised in profit or loss are presented within finance costs, finance income or other financial items, except for impairment of trade receivables which is presented within other expenses. Loans and Receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial recognition, these are measured at amortised cost using the effective interest method, less provision for impairment. Discounting is omitted where the effect of discounting is immaterial. The Group’s cash and cash equivalents, trade and most other receivables fall into this category of financial instruments. Individually significant receivables are considered for impairment when they are past due or when other objective evidence is received that a specific counterparty will default. Receivables that are not considered to be individually impaired are reviewed for impairment in groups, which are determined by reference to the industry and region of a counterparty and other shared credit risk characteristics. The impairment loss estimate is then based on recent historical counterparty default rates for each identified group. Classification and subsequent measurement of Financial Liabilities The Group’s financial liabilities include borrowings, trade and other payables and derivative financial instruments. Financial liabilities are measured subsequently at amortised cost using the effective interest method, except for financial liabilities held for trading or designated at FVTPL, that are carried subsequently at fair value with gains or losses recognised in profit or loss. All derivative financial instruments that are not designated and effective as hedging instruments are accounted for at FVTPL. Derivative financial instruments and hedge accounting Derivative financial instruments are accounted for at FVTPL except for derivatives designated as hedging instruments in cash flow hedge relationships, which requires a specific accounting treatment. 4.14 Inventories Inventories are stated at the lower of cost and net realisable value. Cost includes all expenses directly attributable to the manufacturing process as well as suitable portions of related production overheads, based on normal operating capacity. Costs of ordinarily interchangeable items are assigned using the first in, first out cost formula. Net realisable value is the estimated selling price in the ordinary course of business less any applicable selling expenses. Catapult Group International Limited 65 4.15 Income taxes Tax expense recognised in profit or loss comprises the sum of deferred tax and current tax not recognised in other comprehensive income or directly in equity. Current income tax assets and/or liabilities comprise those obligations to, or claims from, the Australian Taxation Office (‘ATO’) and other fiscal authorities relating to the current or prior reporting periods that are unpaid at the reporting date. Current tax is payable on taxable profit, which differs from profit or loss in the financial statements. Calculation of current tax is based on tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period. Deferred income taxes are calculated using the liability method on temporary differences between the carrying amounts of assets and liabilities and their tax bases. However, deferred tax is not provided on the initial recognition of goodwill or on the initial recognition of an asset or liability unless the related transaction is a business combination or affects tax or accounting profit. Deferred tax on temporary differences associated with investments in subsidiaries and joint ventures is not provided if reversal of these temporary differences can be controlled by the Group and it is probable that reversal will not occur in the foreseeable future. Deferred tax assets and liabilities are calculated, without discounting, at tax rates that are expected to apply to their respective period of realisation, provided they are enacted or substantively enacted by the end of the reporting period. Deferred tax assets are recognised to the extent that it is probable that they will be able to be utilised against future taxable income, based on the Group’s forecast of future operating results which is adjusted for significant non-taxable income and expenses and specific limits to the use of any unused tax loss or credit. Deferred tax liabilities are always provided for in full. Deferred tax assets and liabilities are offset only when the Group has a right and intention to set off current tax assets and liabilities from the same taxation authority. Changes in deferred tax assets or liabilities are recognised as a component of tax income or expense in profit or loss, except where they relate to items that are recognised in other comprehensive income (such as the revaluation of land) or directly in equity, in which case the related deferred tax is also recognised in other comprehensive income or equity, respectively. Catapult Group International Ltd and its wholly-owned Australian controlled entities have implemented the tax consolidation legislation. As a consequence, these entities are taxed as a single entity and the deferred tax assets and liabilities of these entities are set off in the consolidated financial statements. 4.16 Cash and cash equivalents Cash and cash equivalents comprise cash on hand and demand deposits, together with other short-term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value. 4.17 Equity, reserves and dividend payments Share capital represents the fair value of shares that have been issued. Any transaction costs associated with the issuing of shares are deducted from share capital, net of any related income tax benefits. Other components of equity include the following: • foreign currency translation reserve – comprises foreign currency translation differences arising on the translation of financial statements of the Group’s foreign entities into AUD (see Note 4.4) • share option reserve – comprises the grant date fair value of options issued but not exercised. Retained earnings include all current and prior period retained profits. Annual Report 2018 66 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.) 4. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 4.17 Equity, reserves and dividend payments (continued) Other components of equity include the following: (continued) Dividend distributions payable to equity shareholders are included in other liabilities when the dividends have been approved in a general meeting prior to the reporting date. All transactions with owners of the parent are recorded separately within equity. 4.18 Post-employment benefits and short-term employee benefits Post-employment Benefit Plans The Group provides post-employment benefits through defined contribution plans. Short-term Employee Benefits Short-term employee benefits are benefits, other than termination benefits, that are expected to be settled wholly within twelve (12) months after the end of the period in which the employees render the related service. Examples of such benefits include wages and salaries, non-monetary benefits and accumulating sick leave. Short-term employee benefits are measured at the undiscounted amounts expected to be paid when the liabilities are settled. 4.19 Share-based employee remuneration The Group operates equity-settled share-based remuneration plans for its employees. None of the Group’s plans feature any options for a cash settlement. All goods and services received in exchange for the grant of any share-based payment are measured at their fair values. Where employees are rewarded using share-based payments, the fair values of employees’ services are determined indirectly by reference to the fair value of the equity instruments granted. This fair value is appraised at the grant date and excludes the impact of non-market vesting conditions (for example performance conditions). All share-based remuneration is ultimately recognised as an expense in profit or loss with a corresponding credit to share option reserve. If vesting periods or other vesting conditions apply, the expense is allocated over the vesting period, based on the best available estimate of the number of share options expected to vest. Non-market vesting conditions are included in assumptions about the number of options that are expected to become exercisable. Estimates are subsequently revised if there is any indication that the number of share options expected to vest differs from previous estimates. Any cumulative adjustment prior to vesting is recognised in the current period. No adjustment is made to any expense recognised in prior periods if share options ultimately exercised are different to that estimated on vesting. Upon exercise of share options, the proceeds received net of any directly attributable transaction costs are allocated to share capital. 4.20 Provisions, contingent liabilities and contingent assets Provisions for product warranties, legal disputes, onerous contracts or other claims are recognised when the Group has a present legal or constructive obligation as a result of a past event, it is probable that an outflow of economic resources will be required from the Group and amounts can be estimated reliably. Timing or amount of the outflow may still be uncertain. Restructuring provisions are recognised only if a detailed formal plan for the restructuring has been developed and implemented, or management has at least announced the plan’s main features to those affected by it. Provisions are not recognised for future operating losses. Catapult Group International Limited 67 Provisions are measured at the estimated expenditure required to settle the present obligation, based on the most reliable evidence available at the reporting date, including the risks and uncertainties associated with the present obligation. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. Provisions are discounted to their present values, where the time value of money is material. Any reimbursement that the Group can be virtually certain to collect from a third party with respect to the obligation is recognised as a separate asset. However, this asset may not exceed the amount of the related provision. No liability is recognised if an outflow of economic resources as a result of present obligation is not probable. Such situations are disclosed as contingent liabilities, unless the outflow of resources is remote in which case no liability is recognised. 4.21 Goods and Services Tax, Sales taxes and Value Added Tax (GST) Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the appropriate tax authority in the relevant tax jurisdiction. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables in the statement of financial position are shown inclusive of GST. Cash flows are presented in the statement of cash flows on a gross basis, except for the GST components of investing and financing activities, which are disclosed as operating cash flows. 4.22 Significant management judgement in applying accounting policies When preparing the financial statements, management undertakes a number of judgements, estimates and assumptions about the recognition and measurement of assets, liabilities, income and expenses. Significant management judgement The following are significant management judgements in applying the accounting policies of the Group that have the most significant effect on the financial statements. Recognition of subscription revenue and rental units Determining when to recognise revenues from subscription agreements requires an understanding of the customer’s use and the useful life of the products, historical experience and knowledge of the market. The company provides GPS tracking units for team sports under both an up-front sales model and a subscription model. Under the subscription model, the customer has the right to use the GPS tracking units for the period of the subscription, however must return the unit to the Group at the end of the subscription period. Management have considered various factors under AASB 117 Leases as to whether a component of the subscription agreements represents a finance or operating lease. These include: • The GPS tracking units for the majority of subscription contracts have a subscription period no more than 75% of the useful life of the units. • Risk in the fair wear and tear of GPS tracking units remains with the Group. As a result this component of the subscription agreements has been considered an operating lease with the Group as lessor. As such, those GPS tracking units provided under subscription agreements have been capitalised as ‘Rental Units’ under property, plant and equipment and are amortised over their estimated useful life. All revenue under subscription sales is therefore recognised on a straight-line basis over the term of the subscription period, reflecting management’s best estimate of the delivery of services and provision of the rental units over the term of the agreements. Annual Report 2018 68 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.) 4. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 4.22 Significant management judgement in applying accounting policies (continued) Recognition of deferred tax assets The extent to which deferred tax assets can be recognised is based on an assessment of the probability of the Group’s future taxable income against which the deferred tax assets can be utilised, as described in note 16. In addition, significant judgement is required in assessing the impact of any legal or economic limits or uncertainties in various tax jurisdictions. Estimation uncertainty Information about estimates and assumptions that have the most significant effect on recognition and measurement of assets, liabilities, income and expenses is provided below. Actual results may be substantially different. Impairment In assessing impairment, management estimates the recoverable amount of each asset or cash-generating unit based on expected future cash flows and uses an interest rate to discount them. Estimation uncertainty relates to assumptions about future operating results and the determination of a suitable discount rate (see Note 4.12). Useful lives of depreciable assets Management reviews its estimate of the useful lives of depreciable assets at each reporting date, based on the expected utility of the assets. Uncertainties in these estimates relate to technical obsolescence that may change the utility of certain software and IT equipment. Inventories Management estimates the net realisable values of inventories, taking into account the most reliable evidence available at each reporting date. The future realisation of these inventories may be affected by future technology or other market-driven changes that may reduce future selling prices. Business combinations Management uses valuation techniques in determining the fair values of the various elements of a business combination (see Note 4.3). Particularly, the fair value of contingent consideration is dependent on the outcome of many variables that affect future profitability (see Note 5). 4.23 Going concern The financial statements have been prepared on the basis that the consolidated entity is a going concern, which assumes continuity of normal business activities and the realisation of assets and the settlement of liabilities in the ordinary course of business. The consolidated group incurred a loss after tax of $17,360,108 and had net cash inflow from operating activities of $6,419,144. Notwithstanding this, the directors are of the view that the going concern principle is appropriate due to the following factors: • The consolidated entity has continued to successfully secure sale arrangements with many leading sporting organisations across the world for which revenues and cash inflows will be recognised in future reporting periods; and • The business has put in place appropriate staffing globally to execute the growth strategy outlined in the March 2018 capital raising. Catapult Group International Limited 69 5. ACQUISITIONS AND DISPOSALS Acquired the SportsMed Elite and Baseline Athlete Management System (AMS) products and clients and recruited key personnel, from SMG Technologies Pty Ltd (SMG) in August 2017. 6. INTERESTS IN SUBSIDIARIES Set out below details of the subsidiaries held directly by the Group: Parent Entity Catapult Group International Limited (i),(iii) Group Ownership Interests Name of the Subsidiary Catapult Sports Pty Ltd (i),(ii),(iii) Catapult Gameday Pty Ltd Catapult International Pty Ltd (ii) GPSports Systems Pty Ltd (iii) Catapult Innovations Pty Ltd Principal Place of Business Australia Australia Principal Activity 30-Jun-18 30-Jun-17 Design and sale of wearable products and software Trading entity for relationships with Media sector 100% 100% 100% 100% Australia Holding Company 100% 100% Australia Design and sale of wearable products and software 100% 100% Australia Non trading entity 100% 100% Catapult Group US Inc. (iii) United States of America Catapult Sports LLC (iii) United States XOS Technologies Inc of America United States of America Holding Company 100% 100% North American Sales Operations Video Analytics 100% 100% 100% 100% Collegiate Images LLC United States Content licensing 100% 100% of America Catapult Sports Limited (iii) Catapult Sports Godo Kaisha Catapult Sports Europe Limited United Kingdom European Sales Operations 100% 100% Japan Asia Sales Operations 100% 100% Ireland Holding company 100% 100% Kodaplay Ltd (iii) Ireland Manufacturing and Selling for Catapult consumer products 100% 100% (i) Catapult Group International Limited (the Company) and Catapult Sports Pty Ltd (the “Closed Group”) entered into a Deed of Cross Guarantee on 26 June 2017. The effect of the deed is that the Company has guaranteed to each creditor to pay any deficiency in the event of the winding up of any of the controlled entities in the “Closed Group”. All entities in the “Closed Group” have also given a similar guarantee in the event that the Company is wound up – refer to Note 35. (ii) Pursuant to ASIC Corporations (Wholly owned Companies) Instrument 2016/785 Order 98/1418 (as amended) relief has been granted to Catapult Sports Pty Ltd from the Corporations Act 2001 requirements for preparation, audit and lodgement of financial reports and directors reports. (iii) These entities have provided guarantees to Western Alliance Bank in respect of credit facilities of USD 6,000,000 granted to XOS Technologies Inc and Collegiate Images LLC. Annual Report 2018 70 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.) 7. SEGMENT REPORTING For the year ended 30 June 2018 Management identifies its operating segments based on the Group’s business units which represent the main products and services provided by the Group. The Group’s three main operating segments are: • Wearables: design, development and supply of wearable technology and analytic software to athletes and sports teams. • Video Analytics: develops and provides innovative digital and video analytic software solutions to elite sports teams. • New Products: development of the prosumer product and entry into the prosumer market These operating segments are monitored and strategic decisions are made on the basis of adjusted segment operating results. In the 12 months to June 2018, the Group identified New Products as a separate segment of its business and as such has restated the 2017 comparatives to reflect this categorisation. The revenues and profit generated by each of the Group’s operating segments and segment assets are summarised as follows: 12 months to 30 June 2018 Revenue – external customers Segment EBITDA Segment Operating Profit/(Loss) Segment Assets Segment Liabilities 12 months to 30 June 2017 Revenue – external customers Segment EBITDA Segment Operating Profit/(Loss) Segment Assets Segment Liabilities Wearables $’000 Video Analytics $’000 New products $’000 34,024 7,252 1,562 68,666 26,348 39,350 10,642 2,904 106,399 29,866 3,419 (5,958) (6,664) 9,364 1,145 Wearables $’000 Video Analytics $’000 New products $’000 26,402 5,305 629 54,409 23,814 33,341 9,025 3,124 104,524 21,444 1,040 (2,444) (2,543) 2,365 1,278 Total $’000 76,793 11,936 (2,198) 184,429 57,359 Total $’000 60,783 11,886 1,210 161,298 46,536 Catapult Group International Limited The Group’s segment operating loss reconciles to the Group’s loss before tax as presented in its financial statements as follows: 71 Total reporting segment operating EBITDA Depreciation and Amortisation for the segments Finance segment costs Finance segment income Other financial segment income/(cost) Total reporting segment operating profit Corporate costs Employee benefits expense Employee share option compensation expense Capital raising and listing expenses Travel, marketing and promotion Occupancy Professional fees Other expenses Total Corporate Costs Finance income Finance expense Other financial items Group loss before tax 2018 12 months $’000 2017 12 months $’000 11,936 (14,141) (55) 4 58 (2,198) (6,172) (1,512) (242) (332) (876) (2,122) (2,627) 11,886 (9,994) – 93 (775) 1,210 (5,608) (3,256) (385) (1,048) (930) (2,665) (1,707) (13,883) (15,599) 165 (21) (322) – (47) 390 (16,259) (14,046) The description of comparative figures have been relabelled due to the miss-labelling in the prior financial period. Annual Report 2018 72 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.) 7. SEGMENT REPORTING (CONTINUED) Revenue by Geography The Group’s revenues from external customers (excludes government grants) and are divided into the following geographical areas: Revenue – external customers Australia APAC EMEA USA Total Revenue – external customers Australia APAC EMEA USA Total Wearables 2018 $’000 Video Analytics 2018 $’000 New products 2018 $’000 4,533 3,138 11,339 15,014 34,024 – – – 39,350 39,350 – 417 2,203 799 3,419 Wearables 2017 $’000 Video Analytics 2017 $’000 New products 2017 $’000 4,125 2,412 9,280 10,585 26,402 – – – 33,340 33,340 – 97 577 367 1,041 Total 2018 $’000 4,533 3,555 13,542 55,163 76,793 Total 2017 $’000 4,125 2,509 9,857 44,292 60,783 All revenue is generated from external customers and there is no inter segment revenues. Revenues from external customers in the Group’s domicile, Australia, as well as its major markets, the Europe and the USA, have been identified on the basis of the customer’s geographical location. 8. REVENUE Revenue has been generated from the following types of sales transactions: Capital revenue Subscription and service Other revenues Total revenue 2018 $’000 24,029 51,477 1,287 76,793 2017 $’000 17,220 42,973 590 60,783 Catapult Group International Limited 9. OTHER INCOME Other income has been generated from the following sources: Government grants – EMDG Other income Total other income 10. CASH AND CASH EQUIVALENTS Cash and cash equivalents include the following components: Cash at bank and in hand AUD EUR GBP USD JPY 73 2018 $’000 174 218 392 2017 $’000 131 84 215 2018 $’000 20,291 1,699 227 9,433 65 2017 $’000 8,896 403 1,252 6,132 3 Total cash and cash equivalents 31,715 16,686 The amount of cash and cash equivalents inaccessible to the Group as at 30 June 2018 amounts to $353,721 (2017: $279,089) relating to Letter of Credits for rental leases held by the company. 11. TRADE AND OTHER RECEIVABLES Trade and other receivables consist of the following: Trade receivables, gross Accrued Revenue Allowance for credit losses Trade receivables Social security and other taxes Other receivables Prepayments Non-financial assets Total current trade and other receivables Other long-term financial assets Total trade and other receivables 2018 $’000 26,803 2,120 (613) 2017 $’000 23,129 2,133 (251) 28,310 25,011 332 567 1,640 2,539 30,849 275 31,124 224 141 1,488 1,853 26,864 208 27,072 The net carrying value of trade receivables is considered a reasonable approximation of fair value. All of the Group’s trade and other receivables have been reviewed for indicators of impairment. An amount of $643,594 (2017: $449,445) was found to be impaired and subsequently the bad debts were written off. Annual Report 2018 74 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.) 12. INVENTORIES Raw materials and consumables Work in progress Finished goods Total inventories 2018 $’000 653 5 3,161 3,819 2017 $’000 667 44 2,631 3,342 In 2018, total costs of $12,827,293 associated with inventories was included in the Consolidated Statement of Profit and Loss and Other Comprehensive Income as an expense (2017: $13,093,595). $440,338 (2017: $336,317) was incurred regarding a write down of inventories associated with a change in device models and obsolescence of raw materials. 13. PROPERTY, PLANT AND EQUIPMENT Details of the Group’s property, plant and equipment and their carrying amount are as follows: Rental & Demo Units $’000 Plant & Equipment $’000 Furniture & Fittings $’000 Office Equipment $’000 Leasehold Improve- ments $’000 Total $’000 Gross carrying amount Balance 1 July 2017 Acquisition of business Additions Disposals Net exchange Differences Balance 30 June 2018 Depreciation and impairment Balance 1 July 2017 Depreciation Disposals Net exchange Differences Balance 30 June 2018 Carrying amount 30 June 2018 8,018 – 3,138 (3,601) 1 1,523 – 634 (44) 30 113 – 172 (11) 4 1,351 – 579 (14) 77 1,046 12,051 – – 1,221 (218) 23 5,744 (3,888) 135 7,556 2,143 278 1,993 2,072 14,042 (3,090) (2,313) 2,697 – (471) (1,153) 29 (8) (2,706) (1,603) (5) (2) 3 – (4) (426) (70) 10 (31) (349) (270) 92 (2) (4,341) (3,808) 2,831 (41) (517) (529) (5,359) 4,850 540 274 1,476 1,543 8,683 Catapult Group International Limited 75 Total $’000 5,760 513 5,921 (80) (63) Rental & Demo Units $’000 Plant & Equipment $’000 Furniture & Fittings $’000 Office Equipment $’000 Leasehold Improve- ments $’000 Gross carrying amount Balance 1 July 2016 4,460 Acquisition of business Additions Disposals Net exchange Differences Balance 30 June 2017 Depreciation and impairment Balance 1 July 2016 Depreciation Disposals Net exchange Differences Balance 30 June 2017 Carrying amount 30 June 2017 – 3,559 – (1) 821 10 804 (73) (39) 11 19 94 (7) (4) 249 453 653 – (4) 219 31 811 – (15) 8,018 1,523 113 1,351 1,046 12,051 (1,097) (1,993) – – (363) (227) 55 64 (3,090) (471) (1) (11) – 7 (5) (48) (387) 2 7 (55) (319) – 25 (1,564) (2,937) 57 103 (426) (349) (4,341) 4,928 1,052 108 925 697 7,710 All depreciation and amortisation charges are included within depreciation and amortisation expense. During the year the Group wrote off rental units with a net book value of $137,290 (2017: $Nil) which had been upgraded to a new device in line with Catapult’s subscription agreements. During the year the Group also conducted a review of the loan unit register and disposed of old rental units on the register that were no longer reconciled to existing subscription contracts. These units had a net book value of $766,725 (2017: $Nil). During the year the Group moved its Head Office in Melbourne to 75-83 High Street, Prahran and this crystalised a disposal of leasehold improvements and other fixed assets related to the premises with a net book value of $153,976 (2017: $Nil). There were no material contractual commitments to acquire property,plant and equipment at 30 June 2018 (2017: $Nil). The net book value of assets held under Finance Leases at the 30th June 2018 was $224,217 and are included in Office Equipment. Annual Report 2018 76 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.) 14. GOODWILL The movements in the net carrying amount of goodwill are as follows: Balance 1 July 2017 Acquired through business combinations Foreign exchange effect on goodwill Balance 30 June 2018 14.1 Impairment Testing 2018 $’000 53,127 1,141 2,462 2017 $’000 1,213 51,824 90 56,730 53,127 For the purpose of annual impairment testing goodwill is allocated to the cash-generating units which are expected to benefit from the synergies of the business combinations in which goodwill arises. Elite Wearables Sub-Elite Wearables Video Analytics Goodwill allocation at 30 June 2018 $’000 2,354 4,101 50,275 56,730 2017 $’000 1,213 3,866 48,048 53,127 The recoverable amounts of the cash-generating units were determined based on value-in-use calculations, covering the detailed five-year forecast, followed by a terminal growth rate of expected cash flows for the units. Growth rates are determined by management. The present value of the expected cash flows of each segment is determined by applying a suitable discount rate. In measuring value in use cash flow projections are based on: (a) reasonable and supportable assumptions that represent management’s best estimate of the range of economic conditions that will exist over the remaining useful life of the asset; (b) most recent financial budgets/forecasts approved by management, but exclude any estimated future cash inflows or outflows expected to arise from future restructurings or from improving or enhancing the asset’s performance; and (c) estimates cash flow projections beyond the period covered by the most recent budgets/forecasts by extrapolating the projections based on the budgets/forecasts using a steady or declining growth rate for subsequent years. EBITDA growth rate (CAGR FY19 – FY23) (i) Terminal value growth rate Discount Rates 2018 25% 80% 16% 2017 22% 280% 15% 2018 4% 0% 4% 2017 4% 3% 4% 2018 11% 10% 11% 2017 11% 11% 11% Elite Wearables Sub-Elite Wearables Video Analytics (i) Compound Annual Growth Rate (CAGR). Catapult Group International Limited Management have identified that a reasonably possible change in two key assumptions could cause the carrying amount of some of the CGUs to exceed the recoverable amount. The following table shows the amount by which the assumptions would need to change individually for the estimated recoverable amount to be equal to the carrying amount. 77 In percent Elite Wearables Sub-Elite Wearables Video Analytics Brand names Change Required for carrying amount to equal recoverable amount EBITDA Growth Rate Discount Rate 16% 51% 8% 30% 46% 5% The carrying value of brand names associated with each cash generating unit of the Group are outlined below: Elite Wearables Sub-Elite Wearables Video Analytics Brand names as at 30 June 14.2 Growth Rates 2018 $’000 250 – 4,867 5,117 2017 $’000 250 – 4,677 4,927 Five years of cash flows were included in the discounted cash flow model. The cash flow projections included specific estimates for five years and a terminal growth rate thereafter. The terminal growth rate was determined based on management’s estimate of the long-term compound annual EBITDA growth rate, consistent with the assumptions that a market participant would make. EBITDA was estimated taking into account past experience, adjusted as follows. • Revenue growth was projected taking into account the average growth levels experienced over the past five years and the estimated sales volume and price growth for the next five years. It was assumed that the sales price would increase in line with forecast inflation over the next five years. • Continued investment in core product development to underpin revenue growth particularly in video and tactical products. The growth rates reflect a conservative management estimate, as publicly published growth rates for this industry segment are not readily available. 14.3 Discount Rates The discount rate reflects appropriate adjustments relating to market risk and specific risk factors of the business unit. The discount rate was a post-tax measure estimated based on the historical industry average weighted-average cost of capital. Annual Report 2018 78 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.) l a t o T 0 0 0 $ ’ 0 8 2 , 1 4 3 4 9 4 , 9 7 5 8 , 0 0 6 , 1 3 9 8 0 6 , 0 0 4 7 2 , 4 2 3 0 2 , 6 9 5 2 4 ) 3 5 2 8 ( , ) 4 3 3 0 1 ( , ) 4 4 4 , 4 ( ) 7 8 4 , 6 ( ) 9 0 2 ( ) 9 9 ( ) 6 9 7 8 1 ( , ) 0 3 0 , 1 1 ( 7 9 0 2 4 , 0 7 3 , 6 1 ) 3 3 5 , 2 ( ) 4 6 7 2 ( , ) 8 9 ( ) 5 9 3 , 5 ( 9 2 9 4 1 , ) 6 9 ( – – – ) 6 9 ( ) 9 2 1 ( ) 9 3 ( – ) 8 6 1 ( 7 5 2 6 7 1 , 1 1 3 8 8 1 , 3 0 5 0 9 8 6 , 4 0 1 – 5 7 7 5 4 4 9 1 , – – – 6 9 – – – 5 2 4 7 2 9 4 , – – 0 9 1 7 1 1 , 5 – – – – 7 1 1 , 5 – 2 9 2 , 5 2 3 1 2 2 6 , 1 6 4 0 7 , ) 3 7 9 ( ) 0 3 0 , 1 ( ) 2 1 ( ) 5 1 0 2 ( , 1 3 0 5 , – 8 1 4 7 6 – 5 8 4 ) 8 7 ( ) 4 1 ( – ) 2 9 ( 3 9 3 t n u o m a g n y r r a c i s s o r G 7 1 0 2 y u J 1 l t a e c n a a B l n o i t a n b m o c i s s e n s u b i h g u o r h t n o i t i i s u q c A s n o i t i d d A e c n e r e f f i d e g n a h c x e t e N 8 1 0 2 e n u J 0 3 t a e c n a a B l 7 1 0 2 y u J 1 l t a e c n a a B l d n a n o i t a s i t r o m A t n e m r i a p m i t n e m r i a p m i d n a n o i t a s i t r o m A e c n e r e f f i d e g n a h c x e t e N 8 1 0 2 e n u J 0 3 t a e c n a a B l t n u o m a g n y r r a C i 8 1 0 2 e n u J 0 3 0 0 0 $ ’ y l l a n r e t n I l d e p o e v e D e r a w t f o S s p h s i 0 0 0 $ ’ r e m o t s u C - n o i t a e R l 0 0 0 $ ’ s t c a r t n o C r o t u b i r t s i D s p h s i 0 0 0 $ ’ - n o i t a e R l r o t u b i r t s i D 0 0 0 $ ’ 0 0 0 $ ’ 0 0 0 $ ’ e m a N d n a r B P I e r a w d r a H s e s n e c i L d e r i u q c A e r a w t f o S S T E S S A E L B G N A T N I I R E H T O . 5 1 Catapult Group International Limited l a t o T 0 0 0 $ ’ 0 3 5 , 5 6 2 8 8 3 , ) 5 1 6 ( 3 9 6 , 5 0 2 9 2 , 0 9 3 , 1 1 ) 0 5 1 ( 1 7 6 , 4 4 3 4 9 4 , 1 3 8 8 1 , ) 6 9 2 , 1 ( ) 3 1 1 , 7 ( 6 5 1 ) 3 5 2 8 ( , 1 8 1 , 1 4 ) 8 0 6 ( ) 7 0 9 3 ( , 1 7 ) 4 4 4 , 4 ( 7 8 3 , 4 1 0 0 0 $ ’ y l l a n r e t n I l d e p o e v e D e r a w t f o S s p h s i 0 0 0 $ ’ r e m o t s u C - n o i t a e R l 0 0 0 $ ’ s t c a r t n o C r o t u b i r t s i D s p h s i 0 0 0 $ ’ - n o i t a e R l r o t u b i r t s i D 0 0 0 $ ’ 0 0 0 $ ’ 0 0 0 $ ’ e m a N d n a r B P I e r a w d r a H s e s n e c i L d e r i u q c A e r a w t f o S 7 8 3 6 8 3 9 1 , – ) 8 2 3 ( 5 4 4 9 1 , ) 8 7 ( ) 1 3 5 , 2 ( 6 7 ) 3 3 5 , 2 ( 2 1 9 6 1 , 6 9 – – – 6 9 ) 6 9 ( – – – ) 6 9 ( – – – 5 2 4 – ) 1 8 ( 0 5 2 8 5 7 4 , 3 0 1 , 1 2 9 2 , 3 ) 6 5 ( 3 5 9 5 2 4 7 2 9 4 , 2 9 2 , 5 ) 6 8 ( ) 3 4 ( – ) 9 2 1 ( 6 9 2 – – – – 7 2 9 4 , ) 0 6 3 ( ) 2 2 6 ( 9 ) 3 7 9 ( 9 1 3 , 4 – 9 4 3 – 9 6 8 1 4 ) 8 6 ( ) 0 1 ( – ) 8 7 ( 0 4 3 t n u o m a g n y r r a c i s s o r G 6 1 0 2 y u J 1 l t a e c n a a B l n o i t a n b m o c i s s e n s u b i h g u o r h t n o i t i i s u q c A s n o i t i d d A e c n e r e f f i d e g n a h c x e t e N 7 1 0 2 e n u J 0 3 t a e c n a a B l 6 1 0 2 y u J 1 l t a e c n a a B l d n a n o i t a s i t r o m A t n e m r i a p m i t n e m r i a p m i d n a n o i t a s i t r o m A e c n e r e f f i d e g n a h c x e t e N 7 1 0 2 e n u J 0 3 t a e c n a a B l t n u o m a g n y r r a C i 7 1 0 2 e n u J 0 3 . s e s n e p x e r e h t o s a d e s n g o c e r e r e w i , ) 3 2 3 9 1 6 $ : 7 1 0 2 ( 1 7 4 , 1 3 6 $ f o s t s o c h c r a e s e r , n o i t i d d a n I 79 l i i a c n a n F 8 1 0 2 e h t r o f h c u s s a d e i f i l s s a c e r n e e b e v a h s e c n a a b e h T l . y r o g e t a c P I e r a w d r a H e h t r e d n u d e t c e l f e r l y e t a r u c c a e r o m e r a s e c n e c L i e r a w t f o S d e r i u q A o t s n o i t i d d a t a h t d e t o n s a w t i d n a n e k a t r e d n u s a w n o i t a z i r o g e t a c t e s s a e b g n a t n i l i e h t i f o w e v e r a r a e y e h t g n i r u D . y r o g e t a c n i e g n a h c i s h t t c e l f e r o t d e i f i l l s s a c e r n e e b o s a e v a h s t n e m e t a t S l i i a c n a n F 7 1 0 2 e h t o t g n n a t r e p s e c n a a b e h T l i i . s t n e m e t a t S Annual Report 2018 80 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.) 16. DEFERRED TAX ASSETS AND LIABILITIES Deferred taxes arising from temporary differences and unused tax losses can be summarised as attributable to the following: Deferred Tax Liabilities/(Assets) 1 July 2017 $’000 Deferred Tax Assets Recognised directly in equity $’000 Recognised in Business Combin- ation $’000 Recognised in Profit & Loss $’000 Exchange Differences $’000 30 June 2018 $’000 Provision for annual leave Provision for long service leave Other employee obligations Professional fees and doubtful debts Other provisions Tax losses Section 40-880 Expenditure Deferred Tax Liabilities Other intangible assets Capitalised R&D Foreign exchange Deferred Tax Movement 217 65 268 45 216 7,927 1,429 10,167 (3,568) (865) 324 (4,109) – – – – – – 342 342 – – (324) (324) 18 – – – – – – – – – – – – – 42 (49) 251 65 20 (559) (376) (606) – – – – – 269 – 269 259 16 519 110 236 7,637 1,395 10,172 722 (136) (2,982) (1,262) (29) (569) – – (2,127) (29) (136) (5,138) (1,175) 133 Catapult Group International Limited 81 Deferred Tax Liabili- ties/(Assets) 1 July 2016 $’000 Recognised directly in equity $’000 Recognised in Business Combin- ation $’000 Recognised in Profit & Loss $’000 Exchange Differences $’000 30 June 2017 $’000 Deferred Tax Assets Property, plant and equipment Provision for annual leave Provision for long service leave Other employee obligations Professional fees and doubtful debts Other provisions Tax losses Section 40-880 Expenditure Deferred Tax Liabilities Other intangible assets Capitalised R&D Foreign exchange Deferred Tax Movement 1 142 72 97 0 19 3,680 489 – – – – – – – 1,385 – – – – – – 3,677 – (1) 75 (7) 171 45 197 570 (445) 4,500 1,385 3,677 605 (282) – – (282) – – – – (1,959) (1,327) – – (865) 324 (1,959) (1,868) 1,385 1,718 (1,263) – – – – – – – – – – – – – – 217 65 268 45 216 7,927 1,429 10,167 (3,568) (865) 324 (4,109) The amounts recognised in other comprehensive income relate to exchange differences on translating foreign operations. See Note 25 for the amount of the income tax relating to these components of other comprehensive income. The Group has accumulated tax losses across multiple jurisdictions of $84,885,000 (FY17 71,345,000). The amount of tax losses and other tax credits recognised in the statement of financial position is $27,154,000 (FY17 $ 26,336,000). Annual Report 2018 82 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.) 17. TRADE AND OTHER PAYABLES Trade and other payables consist of the following: Current: Trade payables Total Trade and other payables 2018 $’000 2017 $’000 11,199 11,199 8,542 8,542 All amounts are short-term. The carrying values of trade payables and other payables are considered to be a reasonable approximation of fair value. 18. DEFERRED REVENUE AND OTHER LIABILITIES Deferred Revenue and Other liabilities consist of the following: Deferred Revenue Advances received for future service work Deferred gain (lease incentive) Other Other liabilities – Current Deferred gain (lease incentive) Other liabilities – Non-Current Deferred revenue Deferred revenue – Non-Current 2018 $’000 25,657 2018 $’000 7 347 1,440 1,794 582 582 584 584 2017 $’000 22,380 2017 $’000 364 142 619 1,125 395 395 698 698 The deferred gain relates to the lease incentives associated with the Aurora Lane, Chicago and Prahran premises commencing March 2014, May 2016 and August 2017 respectively. The excess of proceeds received over fair value was deferred and is being amortised over the lease term of each lease. In 2018, deferred gain of $68,064 (2017: $157,961) was recognised in profit or loss relating to this transaction. The subsequent leasing agreement is treated as an operating lease. The non-current part of the deferred gain will be amortised between 2018 and the end of each lease term. All amounts recognised relating to deferred revenue are assessed for current versus non-current classification and are applied to revenue as recognised in relation to the timing of the client contract. The Group expects to recognise $25,657,022 of deferred revenue during FY 2019, with the balance falling into FY 2019 and 2020. Catapult Group International Limited 19. FINANCIAL ASSETS AND LIABILITIES 19.1 Categories of financial assets and liabilities Note 4.13 provides a description of each category of financial assets and financial liabilities and the related accounting policies. The carrying amounts of financial assets and financial liabilities in each category are as follows: 83 30 June 2018 Financial assets Other long-term financial assets Trade and other receivables Cash and cash equivalents 30 June 2018 Financial liabilities Trade and other payables Borrowings Non Current Borrowings Contingent consideration on business combination 30 June 2017 Financial assets Other long-term financial assets Trade and other receivables Cash and cash equivalents Loans and receivables $’000 Other assets $’000 Notes Total $’000 (carried at amortised cost) (carried at amortised cost) 11 11 10 275 28,310 – 28,585 – – 31,715 31,715 275 28,310 31,715 60,300 Notes Other Liabilities $’000 (carried at amortised cost) Other Liabilities at FVTPL $’000 (carried at fair value) 17 19.2 19.2 37 11,199 3,452 103 – 14,754 – – – 438 438 Loans and receivables $’000 Other assets $’000 Notes (carried at amortised cost) (carried at amortised cost) 11 11 10 208 25,011 – 25,219 – – 16,686 16,686 Total $’000 11,199 3,452 103 438 15,192 Total $’000 208 25,011 16,686 41,905 Annual Report 2018 84 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.) 19. FINANCIAL ASSETS AND LIABILITIES (CONTINUED) 19.1 Categories of financial assets and liabilities (continued) Vesting period for Performance Rights (continued) 30 June 2017 Financial liabilities Trade and other payables Borrowings Note 17 19.2 Other Liabilities $’000 (carried at amortised cost) Other Liabilities at FVTPL $’000 (carried at fair value) 8,542 3,252 11,794 – – – Total $’000 8,542 3,252 11,794 The carrying amount of the following financial assets and liabilities is considered a reasonable approximation of fair value: • trade and other receivables • other long term financial assets • cash and cash equivalents • trade and other payables 19.2 Borrowings Borrowings include the following financial liabilities: Financial Liabilities At amortised cost: US-Dollar Loans Finance loans 2018 $’000 3,301 151 3,452 Current 2017 $’000 Non-Current 2018 $’000 2017 $’000 3,141 – 3,141 – 103 103 – – – Borrowings at amortised cost Other bank borrowings are secured by land and buildings owned by the group, while finance loans are secured against the computer equipment purchased. Current interest rates on the bank borrowing are variable and average 6.25% (2017: 5.50%) while the Finance loans are variable ranging from 5.50% – 6.50%. The carrying amount of the other bank borrowings and finance loans are considered to be a reasonable approximation of the fair value. Catapult Group International Limited 20. EMPLOYEE REMUNERATION 20.1 Employee benefits expense Expenses recognised for employee benefits are analysed below: Wages and salaries Social security costs Share-based payments Superannuation – Defined Contribution Plans Employee benefits expense 20.2 Share-base employee remuneration 85 2018 $’000 35,192 1,222 1,512 1,591 2017 $’000 26,517 874 3,256 1,010 39,517 31,657 Catapult has continued to utilise its established Employee Share Plan (Employee Plan) to assist in the motivation, retention and reward of executives and employees. The Employee Plan is designed to align the interests of employees with the interests of Shareholders by providing an opportunity for eligible employees (including any person who is a full-time or permanent part-time employee or officer, or director of Catapult or any related body corporate of Catapult) to receive an equity interest in Catapult through the granting of Options, Performance Rights or other Awards. The Shares held by the Employee Plan Trustee are Restricted Securities such that the Employee Plan Trustee is not able to dispose of them within 24 months of Official Quotation. The key terms of the Employee Plan are set out below: Eligibility Eligibility to participate in the Employee Plan and the number of Options, Performance Rights or other Awards offered to each individual participant, will be determined by the Board. Grants Under the rules of the Employee Plan, Options, Performance Rights and/or other Awards may be offered or granted to eligible employees of Catapult or any related body corporate of Catapult from time to time, subject to the discretion of the Board. Terms and conditions The Board has the discretion to set the terms and conditions (including conditions in relation to vesting, disposal restrictions or forfeiture and any applicable exercise price) on which it will offer or grant Options, Performance Rights or other Awards under the Employee Plan and may set different terms and conditions which apply to different participants in the Employee Plan. The Board will determine the procedure for offering or granting Options, Performance Rights and/or other Awards (including the form, terms and content of any offer, invitation or acceptance procedure) in accordance with the rules of the Employee Plan. Vesting conditions Options and Performance Rights and other Awards will vest and become exercisable to the extent that the applicable performance, service, or other vesting conditions specified at the time of the grant are satisfied (collectively the “Vesting Conditions”). Vesting Conditions may include conditions relating to continuous employment or service, the individual performance of the participant and/or Catapult’s performance and the exercise price (if any) being less than the current market price of the underlying Share as at vesting. Annual Report 2018 86 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.) 20. EMPLOYEE REMUNERATION (CONTINUED) 20.2 Share-base employee remuneration (continued) Vesting conditions (continued) Typically, the Vesting Conditions must be satisfied within a predetermined vesting period. Both the Vesting Conditions and the vesting period are set by the Board in its discretion, and may be waived by the Board in its discretion. Vesting period for Options For Options granted during the current financial period, the Board has retained a general policy of 3 years from the Options grant date. Of the Options issued during the year, the Board made exceptions to a total of 1,675,000 Options, where their vesting periods permitted partial vesting of the Options granted on the annual anniversary over a three – five year period. Vesting period for Performance Rights The Board has set a vesting period for the grant of the Performance Rights prior to the Original Prospectus Date and for the offer of Performance Rights to Eligible Employees pursuant to the Employee Offer under the Prospectus as 3 years from the date on which the Performance Rights are granted. Shares issued (including Shares issued upon exercise of Options or Performance Rights granted) under the Employee Plan will rank equally in all respects with the other issued Shares. Subject to satisfaction of Vesting Conditions, a participant may exercise an Option, Performance Right or other Award by lodging an exercise notice with Catapult and complying with any requirements under the Employee Plan. A participant will have a vested and indefeasible entitlement to any dividends declared and distributed by Catapult on any Shares which, at the books closing date for determining entitlement to those dividends, are standing to the account of the participant. A participant may exercise any voting rights attaching to Shares registered in the participant’s name. Catapult may, in its discretion, issue new Shares or cause existing Shares to be acquired or transferred to the participant, or a combination of both alternatives, to satisfy Catapult’s obligations under the Employee Plan. If Catapult determines to cause the transfer of Shares to a participant, the Shares may be acquired in such manner as Catapult considers appropriate, including from a trustee appointed under the Employee Plan. Pursuant to the Employee Plan, Catapult has appointed the Employee Plan Trustee to acquire and hold Shares on behalf of participants and for the purposes of the Employee Plan. Catapult may give directions to the Employee Plan Trustee as contemplated in the trust deed or if in connection with any Award. The Employee Plan Trustee holds 2,490,898 Shares on behalf of participants and for the purposes of the Employee Plan. The Employee Plan Trustee has entered into a restriction agreement with Catapult, pursuant to which those Shares are subject to escrow for a period of 24 months commencing on the date of Official Quotation. Options, Performance Rights and other Awards which have not been exercised will be forfeited if the applicable Vesting Conditions and any other conditions to exercise are not met during the prescribed vesting period or if they are not exercised before the applicable expiry date. In addition, Options, Performance Rights and other Awards will lapse if the participant deals with the Options, Performance Rights or other Awards in breach of the rules of the Employee Plan or in the opinion of the Directors, a participant has acted fraudulently or with gross misconduct. Options, Performance Rights and other Awards will not be quoted on ASX. Catapult will apply for official quotation of any Shares allotted under the Employee Plan, unless the Board resolves otherwise. The Board may in its absolute discretion determine that a participant is required to pay an exercise price to exercise the Options, Performance Rights or other Awards offered or granted to that participant. Catapult Group International Limited 87 Grants of Options, Performance Rights or other Awards under the Employee Plan to a Director may be subject to the approval of Shareholders, to the extent required under the ASX Listing Rules. Participants in the Employee Plan must not enter into transactions or arrangements, including by way of derivatives or similar financial products, which limit the economic risk of holding unvested Awards. Subject to the rules of the Employee Plan, the Board must not offer Options, Performance Rights or other Awards if the total of the following exceeds 5% of the number of Shares on issue at the time of the offer: • the number of Shares which are the subject of the offer of Awards; • the number of Shares which are the subject of any outstanding offers of Awards; • the number of Shares issued during the previous 5 years under the Employee Plan, but not including existing Shares transferred to a participant after having been acquired for that purpose; and • the number of Shares which would be issued under all outstanding Awards that have been granted but which have not yet been exercised, terminated or expired, assuming all such Awards were exercised ignoring any Vesting Conditions, but disregarding any offer made, or Award offered or issued or Share issued by way or as a result of: – an offer that does not meet disclosure to investors because of section 708 or section 1012D of the Corporations Act; – an offer made pursuant to a disclosure document or product disclosure statement; or – other offers that are excluded from the disclosure requirements under the Corporations Act. The Board may impose restrictions on dealing in Shares or Awards which are acquired under the Employee Plan, for example, by prohibiting them from being sold, transferred, mortgaged, pledged, charged or otherwise disposed of or encumbered for a period of time. If the Board determines that for taxation, legal, regulatory or compliance reasons it is not appropriate to issue or transfer Shares, Catapult may in lieu of and in final satisfaction of Catapult’s obligation to issue or transfer Shares as required upon the exercise of an Award by a participant, make a cash payment to the participant equivalent to the fair market value of the Awards. Where there is a change of control of Catapult, including where any person acquires a relevant interest in more than 50% of the Shares, or where the Board concludes that there has been a change in the control of Catapult, the Board will determine, in its sole and absolute discretion, the manner in which all unvested and vested Awards will be dealt with. Where there is a takeover bid made for all of the Shares or a scheme of arrangement, selective capital reduction or other transaction is initiated which has a similar effect to a full takeover bid for Shares, then participants are entitled to accept into the takeover offer or participate in the other transaction in respect of all or part of their Awards notwithstanding any restriction period has not expired. Further, the Board may in its discretion waive unsatisfied Vesting Conditions in relation to some or all Awards in the event of such a takeover or other transaction. If, prior to the exercise of an Award, Catapult makes a pro-rata bonus issue to Shareholders, and the Award is not exercised prior to the record date in respect of the bonus issue, the Award will, when exercised, entitle the participant to one Share plus the number of bonus shares which would have been issued to the participant if the Award had been exercised prior to the record date. If Catapult undergoes a capital reorganisation, then the terms of the Awards for the participant will be changed to the extent necessary to comply with the ASX Listing Rules. Annual Report 2018 88 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.) 20. EMPLOYEE REMUNERATION (CONTINUED) 20.2 Share-base employee remuneration (continued) The Employee Plan also contains terms having regard to Australian law for dealing with the administration, variation and termination of the Employee Plan. Share options and weighted average exercise prices are as follows for the reporting periods presented: Outstanding at 1 July 2017 Granted Forfeited Exercised Expired Outstanding at 30 June 2018 Exercisable at 30 June 2018 Options Program Performance Rights Number of Shares 9,846,567 2,495,000 (2,204,476) (758,000) (500,000) 8,879,091 2,449,334 Weighted average exercise price ($) 2.4261 1.8910 0.9886 0.5903 4.2840 2.2954 1.3235 Number of Shares 760,000 – (70,000) (590,000) – 100,000 – Weighted average exercise price ($) 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 Options Program Performance Rights Outstanding at 1 July 2016 4,033,488 1.0030 440,000 Number of Shares Weighted average exercise price ($) Number of Shares Granted Forfeited Exercised Expired Outstanding at 30 June 2017 Exercisable at 30 June 2017 20.3 Employee benefits 6,600,000 3.2541 405,000 (674,819) (112,102) – 9,846,567 1,693,000 0.7409 0.8385 – 2.4261 1.3123 (60,000) (25,000) – 760,000 5,000 The liabilities recognised for employee benefits consist of the following amounts: Weighted average exercise price ($) 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 Current Wages and salaries Social security costs & payroll taxes Defined contribution plans Accrued leave entitlements Total current employee benefits Non-current Accrued leave entitlements Total non-current employee benefits 2018 $’000 2017 $’000 6,329 129 946 1,394 8,798 53 53 4,104 148 469 1,363 6,084 62 62 Catapult Group International Limited 89 The current portion of these liabilities represents the Group’s obligations to its current and former employees that are expected to be settled during the next 12 months and its accrued annual leave liabilities and current accrued long service leave. 21. SHARE CAPITAL The share capital of Catapult Group International Ltd consists only of fully paid ordinary shares; the shares do not have a par value. All shares are equally eligible to receive dividends and the repayment of capital and represent one vote at the shareholders’ meeting of Catapult Group International Ltd. Shares issued and fully paid for: Beginning of the year Shares issued for cash Shares issued for acquisition of Kodaplay Shares issued on for acquisition of AMS Share issue costs Deferred tax credit recognised directly on share issue costs Exercise of performance options and equity options Other Total contributed equity at end of reporting year Other equity securities 30 June 2018 Shares 30 June 2017 Shares 30 June 2018 $’000 30 June 2017 $’000 Note 167,923,667 124,425,588 138,724 23,587 167,923,667 124,425,588 22,727,273 43,073,500 138,724 25,000 – 424,579 – – – 144,176 – – 100,000 – 250 (1,139) 342 1,147 23,587 116,674 1,673 – (4,700) 1,465 – 25 190,895,116 167,923,667 164,324 138,724 Treasury Shares 21. (a) (2,490,898) (3,738,898) – – Total contributed equity 188,404,218 164,184,769 164,324 138,724 On 6 September 2017, the Group issued 100,000 shares on exercise of performance rights vested at $0.00 per share. The amount raised was $Nil. On 28 February 2018, the Group issued 144,176 shares on satisfaction of purchase consideration for AMS acquisition at $1.73 per share. The fair value of shares issued as consideration was $250,000. On 29 March 2018, the Group undertook a capital raising 22,727,273 shares at $1.10 per share. The amount raised was $25,000,000. During the 12 months to 30 June 2018 the Group issued 2,495,000 options as part of the Employee Share Plan. The options were issued at an average exercise price of $1.891 and average fair value of $0.80. Annual Report 2018 90 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.) 21. SHARE CAPITAL (CONTINUED) 21. (a) Treasury Shares Treasury shares are shares in Catapult Group International Limited that are held by the Catapult Sports Employee Share Plan Trust for the purpose of issuing shares under the Catapult Sports Employee Share Plan in respect of options and performance rights issued under that Plan: Opening balance at 1 July 2017 Transactions during the year Closing balance at 30 June 2018 2018 Shares 2017 Shares 3,738,898 3,876,000 (1,248,000) (137,102) 2,490,898 3,738,898 During the financial period a number of shares were issued under the Employee Share Purchase option plan vested. The amount of shares exercised under this option plan was 555,000 at an average exercise price of $0.6050 per share. The amount raised was $335,776. During the financial period a number of shares were issued under the Employee Share Purchase option plan vested. The amount of shares exercised under this option plan was 184,818 at an average exercise price of $0.55 per share. The amount raised was $101,650. During the financial period a number of shares were issued under the Employee Share Purchase option plan vested. The amount of shares exercised under this option plan was 18,182 at an average exercise price of $0.8385 per share. The amount raised was $10,000. During the financial period a number of shares were issued under the Employee Share Purchase performance rights plan vested. The amount of shares exercised under this performance right plan was 490,000 at an average exercise price of $0.00 per share. The amount raised was $Nil. 21. (b) Options and performance rights on issue The following sets out the weighted average exercise price calculations for all outstanding options (however, excluding the effect of the performance rights as detailed at Note 20.2): Outstanding at beginning of year Outstanding at end of year Currently exercisable Weighted average exercise price 2.4261 2.2954 1.3235 Catapult Group International Limited 91 22. LEASES 22.1 Finance leases as lessee The Group has certain computer equipment held under finance lease arrangements. As of 30 June 2018, the net carrying amount of the computer equipment held under finance lease arrangements (included as part of Office Equipment) is $224,217 (2017: Nil). The Group’s finance lease liabilities, which are secured by the related assets held under finance leases, are classified as follows: Finance lease liabilities Current: • finance lease liabilities Non-current: • finance lease liabilities 2018 $’000 2017 $’000 151 103 – – Future minimum finance lease payments at the end of each reporting period under review were as follows: 30 June 2018 Lease payments Finance charges Net present values 30 June 2017 Lease payments Finance charges Net present values Minimum lease payments due Within 1 year $’000 1-5 years $’000 After 5 years $’000 Total $’000 151 12 125 – – – 103 3 82 – – – – – – – – – 254 15 207 – – – During the year The Group entered into 3 lease agreements relating to the purchase of computer equipment which includes fixed lease payments and a purchase option at the end of the 2/3 year lease term. The agreement is non-cancellable but does not contain any further restrictions. Annual Report 2018 92 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.) 22. LEASES (CONTINUED) 22.2 Operating leases as lessee The Group leases an office and production building under an operating lease. The future minimum lease payments are as follows: 30 June 2018 30 June 2017 Minimum Lease Payments Due Within 1 year $’000 1,917 1,495 2-5 years $’000 5,030 3,773 After 5 years $’000 90 952 Total $’000 7,037 6,220 Lease expense during the period amounted to $2,273,363 (2017: $1,323,299) representing the minimum lease payments. 22.3 Operating leases as lessor The Group leases out wearable athlete tracking units and laptops on a subscription basis to its clients. The future minimum revenues are as follows: 30 June 2018 30 June 2017 Minimum Lease Payments Due Within 1 year $’000 19,717 16,774 1-5 years $’000 19,023 20,363 After 5 years $’000 – – Total $’000 38,740 37,137 Lease revenues during the period amounted to $20,831,726 (2017: $16,341,988) representing the minimum subscription payments for these lease units. Subscription agreements are in place with over 600 clients (2017: 400 clients) with a broad range of expiry dates, based on the commencement of this kind of arrangement in 2012 and contracts typically of 36 months with standard wording incorporating rolling renewals of these agreements upon expiry of the initial term. The athlete tracking units and their associated equipment are included as The Group’s Rental and Loan Units and are depreciated over their useful life of 4 years (see Note 13). 23. FINANCE COSTS AND FINANCE INCOME Finance costs for the reporting periods consist of the following: Interest expenses for borrowings at amortised cost: Interest expense Amortisation of borrowing costs Finance income for the reporting periods consists of the following: Interest income from cash and cash equivalents 2018 $’000 2017 $’000 76 76 21 21 2018 $’000 2017 $’000 169 169 67 67 Catapult Group International Limited 24. OTHER FINANCIAL ITEMS Other financial items consist of the following: Loss on exchange differences on payables and receivables 93 2018 $’000 (266) (266) 2017 $’000 (385) (385) 25. INCOME TAX EXPENSE The major components of tax expense and the reconciliation of the expected tax expense based on the domestic effective tax rate of Catapult Group International Ltd at 30% (2016: 30%) are: Loss before tax 2018 $’000 2017 $’000 (16,259) (14,046) Expected tax expense at domestic tax rate for parent at 30% (4,878) (4,214) Overseas tax rate differential Change in tax rate in foreign jurisdictions Tax losses not recognised Prior year tax losses utilised in current period Adjustment for tax-effect of non-deductible expenses: Adjustment for prior periods Net R&D tax offset Other non-deductible expenses Actual tax benefit Tax benefit comprises: Adjustment for prior periods Current tax Deferred tax Income tax expense/(benefit) 756 1,132 4,272 (390) (17) – 226 1,101 (17) 116 1,002 1,101 698 – 1,332 (1,427) (24) (630) 3,800 (465) (24) (1,704) 1,263 (465) Deferred tax benefit recognised directly in equity relating to share issue costs (342) (1,385) Note 16 provides information on deferred tax assets and liabilities. Annual Report 2018 94 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.) 26. AUDITOR REMUNERATION Assurance services Auditors of the company – Grant Thornton Australia Audit and review of the Financial Statements Other assurance services Overseas Grant Thornton Network firms: Other services Auditors of the company – Grant Thornton Australia Taxation compliance and general accounting advice Other review services Overseas Grant Thornton Network firms: Taxation compliance and general accounting advice Other review services Total other service remuneration Total auditor’s remuneration 27. EARNINGS PER SHARE 2018 $ 2017 $ 237,396 – 28,426 195,222 22,699 55,529 265,822 273,450 78,340 4,507 – 8,745 – 91,592 357,414 117,091 29,070 – 7,466 3,284 156,911 430,361 Both the basic and diluted earnings per share have been calculated using the loss attributable to shareholders of the Parent Company (Catapult Group International Ltd) as the numerator (i.e no adjustments to profit were necessary in 2016 or 2017). 8,879,091 options and performance rights have not been included in calculating diluted EPS because their effect is anti-dilutive. The reconciliation of the weighted average number of shares for the purpose of diluted earnings per share to the weighted average number of ordinary shares used in the calculation of basic earnings per share are as follows: 2018 shares 2017 shares 173,844 157,379 Weighted average number of shares used in basic and diluted earnings per share 28. DIVIDENDS Nil paid in the period. 28.1 Dividends paid and proposed Nil. Catapult Group International Limited 95 28.2 Franking credits The amount of the franking credits available for subsequent reporting periods are: Balance of franking account at the beginning of the year Deferred debit that will arise from the receipt of the R&D tax offset for the current year Balance of franking account adjusted for deferred debits arising from past R&D tax offsets received and expected R&D tax offset to be received for the current year 2018 $’000 2017 $’000 (3,841) (3,841) – – (3,841) (3,841) 29. RECONCILIATION OF CASH FLOWS FROM OPERATING ACTIVITIES Reconciliation of Cash Flows from Operating Activities Cash flows from operating activities Loss for the period Adjustments for: 2018 $’000 2017 $’000 (17,360) (13,581) Depreciation, amortisation and impairment 14,141 9,994 Foreign exchange differences Net interest and dividends received included in investing and financing Share based payments expense Net changes in working capital: Change in inventories Change in trade and other receivables Change in other assets Change in current tax assets Change in trade and other payables Change in other employee obligations Change in deferred tax, excluding amounts recognised directly in equity Change in income tax payable Change in other liabilities 107 (93) 1,512 (1,693) (477) (3,985) – 1,924 2,657 2,714 1,023 (53) 4,310 8,113 117 (67) 3,256 (281) (987) (7,116) 465 (1,991) 2,138 2,620 (209) 83 (3,566) (8,563) Net cash from operating activities 6,420 (8,844) Annual Report 2018 96 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.) 30. RELATED PARTY TRANSACTIONS The Group’s related parties include its associates and joint venture, key management, post-employment benefit plans for the Group’s employees and others as described below. Unless otherwise stated, none of the transactions incorporate special terms and conditions and no guarantees were given or received. Outstanding balances are usually settled in cash. Transactions with key management 2018 $ 34,160 34,160 2017 $ 69,376 69,376 Calvin Ng is a director of Aura Group Pty Ltd. During the year, the Group engaged Aura Capital Pty Ltd (a subsidiary of Aura Group Services Ltd) for advisory services amounting to $5,189 (2017: $1,127) and had an amount payable as at 30 June 2018 of $Nil (2017: $Nil). Catapult rents office space from Aura Group Services Ltd in Sydney and Singapore for a total cost of $28,971 (2017: $39,806) and had an amount payable as at 30 June 2018 of $6,794 (2017: $21,369). 30.1 Transactions with key management personnel Key management of the Group are the executive members of Catapult Group International’s Board of Directors and executive team. Short term employee benefits Salaries including bonuses and leave accruals Social security costs Total short term employee benefits Long service leave Total other long-term benefits Share-based payments Total remuneration 31. FINANCIAL INSTRUMENT RISK 31.1 Risk management objectives an polices 2018 $ 2017 $ 3,651,802 3,326,356 148,637 106,921 3,800,439 3,433,277 (44,591) (44,591) 7,609 7,609 1,503,673 1,206,389 5,259,521 4,647,275 The Group is exposed to various risks in relation to financial instruments. The Group’s financial assets and liabilities by category are summarised in Note 19.1. The main types of risks are market risk, credit risk and liquidity risk. The Group’s risk management is coordinated in close cooperation with the Board of Directors, and focuses on actively securing the Group’s short to medium-term cash flows by minimising the exposure to financial markets The Group does not actively engage in the trading of financial assets for speculative purposes nor does it write options. The most significant financial risks to which the Group is exposed are described below. Catapult Group International Limited 97 31.2 Market risk analysis The Group is exposed to currency risk resulting from its operating activities. Foreign Currency Sensitivity Exposures to currency exchange rates arise from the Group’s overseas sales and purchases, which are primarily denominated in US dollars (USD), Pound Sterling (GBP), Euro (EUR),Japanese Yen (JPY). Foreign currency denominated financial assets and liabilities which expose the Group to currency risk are disclosed below. The amounts shown are those translated into $AUD at the closing rate: Short Term Exposure 30 June 2018 Financial assets Financial liabilities Total Exposure Long Term Exposure 30 June 2018 Financial assets Financial liabilities Total Exposure Short Term Exposure 30 June 2017 Financial assets Financial liabilities Total Exposure Long Term Exposure 30 June 2017 Financial assets Financial liabilities Total Exposure USD $’000 GBP $’000 EUR $’000 JPY $’000 AED $’000 Other Currencies $’000 29,848 (4,428) 25,420 1,793 (830) 963 4,333 (103) 4,230 65 (3) 62 – – – 50 (48) 2 USD $’000 GBP $’000 EUR $’000 JPY $’000 AED $’000 Other Currencies $’000 – – – – – – – – – – – – – – – – – – USD $’000 GBP $’000 EUR $’000 JPY $’000 AED $’000 Other Currencies $’000 24,768 (6,220) 18,548 2,320 (789) 1,531 2,053 (220) 1,833 3 1 4 – (7) (7) – – – USD $’000 GBP $’000 EUR $’000 JPY $’000 AED $’000 Other Currencies $’000 – – – – – – – – – – – – – – – – – – The following table illustrates the sensitivity of profit and equity in regards to the Group’s financial assets and financial liabilities and the various exchange rates ‘all other things are equal’. It assumes a +/– 10% change of the various exchange rate for the year ended at 30 June 2018 (2017:10%). Annual Report 2018 98 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.) 31. FINANCIAL INSTRUMENT RISK (CONTINUED) 31.2 Market risk analysis (continued) Foreign Currency Sensitivity (continued) If the AUD had strengthened by 10% against the respective currencies then this would have had the following impact: 30 June 2018 30 June 2017 USD $’000 (2,311) (1,686) GBP $’000 (88) (139) EUR $’000 (385) (167) JPY $’000 Other currencies $’000 (6) – (0) – Total $’000 (2,790) (1,992) If the AUD had weakened by 10% against the respective currencies then this would have had the following impact: 30 June 2018 30 June 2017 USD $’000 2,824 2,061 GBP $’000 107 170 EUR $’000 470 204 JPY $’000 7 – Other currencies $’000 – – Total $’000 3,408 2,435 Exposures to foreign exchange rates vary during the year depending on the volume of overseas transactions. Nonetheless, the analysis above is considered to be representative of the Group’s exposure to currency risk. 31.3 Credit risk analysis Credit risk is the risk that a counterparty fails to discharge an obligation to the Group. The Group is exposed to this risk for receivables to customers. The Group’s maximum exposure to credit risk is limited to the carrying amount of the financial assets recognised at the reporting date, as summarised below: Classes of financial assets • cash and cash equivalents • trade receivables • other long term financial assets 2018 $’000 2017 $’000 31,715 28,310 275 16,686 25,011 208 60,300 41,905 The Group continuously monitors defaults of customers and other counterparties, identified either individually or by group, and incorporates this information into its credit risk controls. Where available at reasonable cost, external credit ratings and/or reports on customers and other counterparties are obtained and used. The Group’s policy is to deal only with creditworthy counterparties. The Group’s management considers that all of the above financial assets that are not impaired or past due for each of the 30 June reporting dates under review are of good credit quality. At 30 June the Group has certain trade receivables that have not been settled by the contractual due date but are not considered to be impaired. The amounts at 30 June, analysed by the length of time past due, are: Catapult Group International Limited Not more three (3) months More than three (3) months but not more than six (6) months More than six (6) months but not more than one (1) year More than one (1) year Total 99 2018 $’000 2017 $’000 24,634 22,500 1,032 493 33 220 326 82 26,192 23,128 In respect of trade receivables, the Group is not exposed to any significant credit risk exposure to any single counterparty or any group of counterparties having similar characteristics. Trade receivables consist of a large number of customers in various sports and geographical areas. Based on historical information about customer default rates management consider the credit quality of trade receivables that are not past due or impaired to be good. The credit risk for cash and cash equivalents is considered negligible, since the counterparties are reputable banks with high quality external credit ratings. 31.4 Liquidity risk analysis Liquidity risk is the risk that the Group might be unable to meet its obligations. The Group manages its liquidity needs by monitoring scheduled debt servicing payments for long-term financial liabilities as well as forecast cash inflows and outflows due in day-to-day business. Liquidity needs are monitored on a week-to-week basis, as well as on the basis of a rolling 90-day projection. The Group’s US subsidiary, XOS Technologies Inc, entered into a secured loan facility with Western Alliance Bank in April 2017. The total facility is for up to AUD 8.1 million. At 30 June 2018 the available amount was AUD 7.1 million. Of this amount, AUD 3.4 million was drawn down at 30 June 2018. (Note – the loan facility is denominated in USD. The AUD:USD exchange rate applied to reported amounts in AUD is 0.739). As at 30 June 2018, the Group’s non-derivative financial liabilities have contractual maturities (including interest payments where applicable) as summarised below: 30 June 2018 US-Dollar loans Trade and other payables Total Within 6 months $’000 Current 6–12 months $’000 1–5 years $’000 Non-current 5+ years $’000 – 11,199 11,199 3,641 – 3,641 103 – 103 – – – This compares to the maturity of the Group’s non-derivative financial liabilities in the previous reporting periods as follows: 30 June 2017 US-Dollar loans Trade and other payables Total Within 6 months $’000 Current 6–12 months $’000 1–5 years $’000 Non-current 5+ years $’000 – 8,542 8,542 3,342 – 3,342 – – – – – – The above amounts reflect the contractual undiscounted cash flows, which may differ to the carrying values of the liabilities at the reporting date. Annual Report 2018 100 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.) 32. CAPITAL MANAGEMENT POLICIES AND PROCEDURES The Group’s objectives when managing capital are to safeguard its ability to continue as a going concern, to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. Consistent with others in the industry, the Group monitors capital on the basis of its gearing ratio. In order to maintain or adjust its capital structure, the group considers its issue of new capital, return of capital to shareholders and dividend policy as well as its plan for acquisition or disposal of assets. The Group was fully compliant with all bank facility covenants during the financial year. 33. CONTINGENT LIABILITIES There were no contingent liabilities as at 30 June 2018. 34. PARENT ENTITY INFORMATION Information relating to Catapult Group International Ltd (‘the Parent Entity’): Statement of financial position Current assets Total assets Current liabilities Total liabilities Net assets Issued capital Foreign currency reserve Retained earnings Share option reserve Total equity Statement of profit and loss and other comprehensive income Loss for the year Other comprehensive income/(loss) Total comprehensive income/(loss) The Parent Entity has no capital commitments at year end (2017: $Nil). Parent entity guarantees in respect of debts of its subsidiaries. The parent entity entered into the following guarantee on the 26 June 2017: 2018 $’000 2017 $’000 470 8,317 154,670 133,436 599 2,754 152,386 164,340 (3,832) (12,968) 4,846 152,386 176 936 132,500 138,740 (2,045) (8,927) 4,033 131,802 (4,041) (1,787) (5,828) (7,659) (2,045) (9,704) A Deed of cross Guarantee with the effect that the Company guarantees debts in respect of one of its subsidiaries. Further details to the Deed Cross Guarantee and the subsidiaries subject to the deed, are disclosed in Note 35. Catapult Group International Limited 101 35. DEED OF CROSS GUARANTEE A consolidation income statement and consolidation balance sheet comprising the Company and controlled entity which are a party to the Deed of Gross Guarantee (members of the “Closed Group”), after eliminating all transactions between parties to the Deed of Gross Guarantee are as follows. Closed Group 2018 $’000 2017 $’000 Summarised income statement and statement of comprehensive income and accumulated losses Profit/(Loss) before income tax expense (10,209) (13,860) Income tax benefit/(expense) Profit after income tax Accumulated losses at the beginning of the financial year Dividends Paid (1,111) (11,320) (18,466) – 699 (13,161) (5,305) – Accumulated losses at the end of the financial year (29,786) (18,466) Statement of Financial position Current assets Cash and cash equivalents Trade and other receivables Inventories Other current assets Total current assets Non current assets Property, plant and equipment Intangible assets Investments Deferred tax assets Other non current assets Total non current assets Total assets Current liabilities Trade and other payables Employee benefits Other current liabilities Total current liabilities 22,115 11,726 2,178 1,706 37,725 6,080 8,801 12,637 3,843 89,072 120,433 158,158 5,649 3,750 8,040 17,439 9,818 11,391 1,937 3,261 26,407 5,136 4,911 – 3,548 93,338 106,933 133,340 6,427 1,982 1,698 10,107 Annual Report 2018 102 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.) 35. DEED OF CROSS GUARANTEE (CONTINUED) Non current liabilities Employee benefits Other non current liabilities Total non current liabilities Total Liabilities Net assets Shareholders’ equity Issued capital Share option reserve Foreign currency reserve Accumulated losses Total Shareholders’ equity Closed Group 2018 $’000 2017 $’000 53 2,309 2,362 19,801 138,357 51 760 811 10,918 122,422 164,324 138,740 4,847 (1,028) 4,033 (1,885) (29,786) (18,466) 138,357 122,422 The members of the Closed Group comprise Catapult Group International Limited and Catapult Sports Pty Ltd. 36. POST-REPORTING DATE EVENTS The board are not aware of any events at the time of signing that would necessitate a disclosure herewith. Catapult Group International Limited 37. ACQUISITION OF ATHLETE MANAGEMENT SYSTEM (AMS) On 4 August 2017, Catapult acquired the SportsMed Elite and Baseline Athlete Management System (AMS) products and clients and recruited key personnel, from SMG Technologies Pty Ltd (SMG) for consideration ranging between $1.4 million and $3.9 million depending on performance metrics and incremental revenue generated in the two years following the acquisition. 103 Fair value of consideration transferred: Amount settled in cash Contingent consideration Amount settled in shares Recognised amounts of Identifiable net assets Property, plant and equipment Identifiable Intangible Assets Total non-current assets Deferrred revenue Employee benefits Liabilities Identifiable Net Assets Goodwill recognised on acquisition Consideration transferred settled in cash Cash acquired Net cash outflow on acquisition Measurement of fair values $’000 1,534 438 250 2,222 – 1,280 1,280 (173) (26) (199) 1,081 1,141 1,534 – 1,534 The valuation technique used for measuring the fair value of Intangible assets was the multi-period excess earnings method considering the present value of net cash flows expected to be generated, excluding any cash flows related to contibutory assets with cross check to replacement cost. Acquisition-related costs Acquisition related costs amounting to $386k are not included as part of consideration transferred and have been recognised as an expense in the consolidated statement of profit or loss and other comprehensive income, as part of ‘other expenses’. Fair values measured on a provisional basis The following amounts have been measured on a provisional basis. The Group has agreed to pay the selling shareholders contingent consideration up to $2 million based on future revenue earned over a period of 24 months from acquisition. The Group has included $438K in contingent consideration reflecting the present value of the best estimate of the deferred consideration that will be paid based on forecast earnings. The Group will continue to measure the revenue earn-out over the post acquisition period and revise the provisional estimate for acquisition accounting. Annual Report 2018 104 DIRECTORS’ DECLARATION 1 In the opinion of the Directors of Catapult Group International Ltd: a the consolidated financial statements and notes of Catapult Group International Ltd are in accordance with the Corporations Act 2001, including: i ii giving a true and fair view of its financial position as at 30 June 2018 and of its performance for the year ended on that date; and complying with Australian Accounting Standards (including Australian Accounting Interpretations) and the Corporations Regulations 2001; and b there are reasonable grounds to believe that Catapult Group International Ltd will be able to pay its debts as and when they become due and payable. 2 The Directors have been given the declarations required by Section 295A of the Corporations Act 2001 from the Chief Executive Officer and Chief Financial Officer for the financial year ended 30 June 2018. 3 Note 2 confirms that the consolidated financial statements also comply with International Financial Reporting Standards. 4 At the date of the declaration, there are reasonable grounds to believe that the members of the extended closed group identified in note 36 will be able to meet any obligations or liabilities to which that are, or may become, subject by virtue of the deed of cross guarantee described in note 36. Signed in accordance with a resolution of the Directors: Adir Shiffman Director Dated the 16th day of August 2018 Catapult Group International Limited INDEPENDENT AUDITOR’S REVIEW REPORT 105 Collins Square, Tower 1 727 Collins Street Docklands VIC 3008 Correspondence to: GPO Box 4736 Melbourne VIC 3001 T +61 3 8320 2222 F +61 3 8320 2200 E info.vic@au.gt.com W www.grantthornton.com.au Independent Auditor’s Report To the Members of Catapult Group International Limited Report on the audit of the financial report Opinion We have audited the financial report of Catapult Group International Limited (the Company) and its subsidiaries (the Group), which comprises the consolidated statement of financial position as at 30 June 2018, the consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies, and the Directors’ declaration. In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including: a giving a true and fair view of the Group’s financial position as at 30 June 2018 and of its performance for the year ended on that date; and b complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Grant Thornton Audit Pty Ltd ACN 130 913 594 a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389 www.grantthornton.com.au ‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the context requires. Grant Thornton Australia Ltd is a member firm of Grant Thornton International Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one another and are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to Grant Thornton Australia Limited ABN 41 127 556 389 and its Australian subsidiaries and related entities. GTIL is not an Australian related entity to Grant Thornton Australia Limited. Liability limited by a scheme approved under Professional Standards Legislation. Annual Report 2018 106 DIRECTORS’ DECLARATION (CONT.) Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Key audit matter How our audit addressed the key audit matter Revenue recognition of long-term contracts which contain separately identifiable components of a single transaction – Notes 4.5 & 8 There is significant judgment relating to revenue recognition for long term contracts which contain hardware and Software as a Service (“SaaS”) as separately identifiable components of a single transaction. Revenue recognition for separately identifiable components of a single transaction can be complex and involves management judgement. These judgements include: • identification of each separately identifiable component in the arrangements; • determination of the appropriate allocation of the amount of revenue to each separately identifiable component in particular as many of the Group’s arrangements involve the delivery of hardware, software licences and other services; and • determining when the performance obligation of each separately identifiable component is satisfied and associated revenue can be recognised. This area is a key audit matter due to the complexity surrounding the long-term contract revenue recognition. Our procedures included, amongst others: • documenting our understanding of the various SaaS arrangements used by the Group and evaluating management’s revenue recognition of the separately identifiable components they contained, including the determination of revenue allocation to each component, to assess compliance with accounting standard AASB 118: Revenue; • testing a sample of revenue transactions recognised to contracts with customers to assess whether revenue is being recognised in accordance with the Group’s revenue recognition policies; • assessing sales selected in our sample referenced above, where applicable, for the accuracy of revenue to be deferred at year end; • performing predictive analytical procedures on deferred revenue balances at reporting period end for exceptions and anomalies against expectations; • substantiating a sample of revenue transactions around reporting date and agreeing transactions to supporting documents to assess whether revenue is recognised in the correct periods; • considering whether management’s assessment of the impact on adopting AASB 15, Revenues from Contracts with Customers appears reasonable; and • assessing the adequacy of disclosures for compliance with the revenue recognition requirements of Australian Accounting Standards (AASBs). Catapult Group International Limited 107 Key audit matter How our audit addressed the key audit matter Impairment of goodwill and other intangible assets – Notes 4.8-4.9 and 14-15 Given the nature of the industry in which the Group operates, there is a risk that there could be a material impairment to goodwill and intangible asset balances. Determination as to whether an impairment exists relating to an asset or Cash Generating Unit (CGU) involves significant judgment about the future cash flows and plans for these assets and CGUs. • These judgements include: • identifying the existence of impairment indicators; • determining the appropriate CGUs; • forecasting future cash flows; and • determining the relevant assumptions such as discount and growth rates. This area was determined to be a key audit matter due to the abovementioned judgments involved in preparing a value-in-use model for determining recoverable amount in management’s impairment assessments. Our procedures included, amongst others: • assessing management’s identification of each of the Group’s CGUs based on our understanding of the nature of the Group’s business and cash flows; involving our valuation specialists to assess the impairment models and evaluate the reasonableness of key assumptions including the discount rate, terminal growth rates and forecast growth assumptions; • assessing the reasonableness of the approved cash flow projections used in the impairment models as well as the Group’s historical ability to forecast accurately; • challenging management’s assumptions and estimates used to determine the recoverable value of its CGUs, including those relating to forecast revenue, costs, and discount rates, and where available, corroborating the key market-related assumptions to external data; and • assessing the adequacy of disclosures for compliance in accordance with the Australian Accounting Standards (AASBs). Annual Report 2018 108 DIRECTORS’ DECLARATION (CONT.) Key audit matter How our audit addressed the key audit matter Business combinations – acquisition of SportsMed Elite and Baseline athlete management software (AMS) – Note 37 In August 2017 the Group acquired the SportsMed Elite and Baseline Asset Management Software (AMS) from SMG Technologies Pty Ltd for a consideration of $2.275 million in accordance with accounting standard AASB 3, Business Combinations. The accounting for business combinations requires significant judgement and estimates to be made in relation to: • The fair value of the purchase consideration, including any contingent consideration; • The fair value of the assets and liabilities acquired, including separately identifiable intangible assets; and • Evaluating the fair value of assets and liabilities acquired during the provisional accounting period. This has been deemed a key audit matter given the judgment involved in determining the fair value of assets and liabilities acquired. Our procedures included, amongst others: • reading the underlying sale and purchase agreements to obtain an understanding of key terms and conditions of the transaction; • assessing the qualifications and experience of the independent expert engaged by management and their suitability to perform the valuation engagement; • engaging our internal valuation specialists to review the work contained in the purchase price allocation valuation report to determine whether: - - - the appropriate intangible assets had been identified; the appropriate valuation methodologies had been used; and assumptions used were reasonable compared with external benchmarks and our knowledge of the Group and its industry; • testing the mathematical accuracy of the underlying calculations; • evaluating the forecasts provided by management which the valuations were based on by assessing forecast revenues, operating costs and capital expenditure based on our knowledge of the group and market sector trends; • evaluating the reasonableness of any adjustments made to the provisional amounts implied in the purchase price allocation of assets acquired as defined in AASB 3; and • assessing the adequacy of the Group’s disclosures with respect to the business acquisitions against the requirements of AASB 3. Information other than the financial report and auditor’s report thereon The Directors are responsible for the other information. The other information comprises the information included in the Group’s annual report for the year ended 30 June 2018, but does not include the financial report and our auditor’s report thereon. Our opinion on the financial report does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. 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 in this regard. Catapult Group International Limited 109 Responsibilities of the Directors’ for the financial report The Directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the Directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the Directors are responsible for assessing the Group’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 to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities for the audit of the financial report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s 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 the Australian Auditing Standards 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 this financial report. A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance Standards Board website at: http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf. This description forms part of our auditor’s report. Report on the remuneration report Opinion on the remuneration report We have audited the Remuneration Report included in pages 21 to 36 of the Directors’ report for the year ended 30 June 2018. In our opinion, the Remuneration Report of Catapult Group International Limited, for the year ended 30 June 2018 complies with section 300A of the Corporations Act 2001. Responsibilities The Directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. Grant Thornton Audit Pty Ltd Chartered Accountants B A Mackenzie Partner – Audit & Assurance Melbourne, 16 August 2018 Annual Report 2018 110 SHAREHOLDINGS (AS AT 30 JUNE 2018) Additional information required by the ASX Limited Listing Rules and not disclosed elsewhere in this report is set out below. 1. CORPORATE GOVERNANCE STATEMENT Catapult’s corporate governance statement for the financial year ended 30 June 2018 is available at the following URL: www.catapultsports.com/investor/corporate-governance/ 2. SUBSTANTIAL SHAREHOLDERS Substantial holder Disruptive Capital Pty Ltd; Aura Group Pty Ltd, Ng Capital Management Pty Ltd; Calvin Ng; Daring Investments Pty Ltd; John Kolenda; Milenka Kolenda; Caveau Capital Investments Pty Ltd; Eric King Wai Chan Shares held Notice date 21,434,420 28 July 2016 Manton Robin Pty Ltd; Manton Robin Pty Ltd; Shaun Holthouse 21,275,000 8 June 2017 Charlaja Pty Ltd; Charlaja Pty Ltd ; Igor Van De Griendt 20,508,000 7 June 2017 BBHF Pty Ltd; A & R Shiffman Superannuation Pty Ltd ; Adir Shiffman 28,239,600 9 May 2017 3. NUMBER OF HOLDERS OF EACH CLASS OF EQUITY SECURITY Equity security class Ordinary shares Employee options and performance rights Number of holders 7,285 79 4. VOTING RIGHTS ATTACHED TO EACH CLASS OF EQUITY SECURITY At a general meeting, every Shareholder present in person or by proxy, body corporate representative, or attorney has one vote on a show of hands and one vote for each Share held on a poll. Votes are cast by a show of hands unless a poll is demanded. A poll may be demanded by the chairperson or at least five Shareholders entitled to vote on the resolution or Shareholders with at least 5% of the votes that may be cast on the resolution on a poll. Option and performance rights holders do not have voting rights. Catapult Group International Limited 5. DISTRIBUTION SCHEDULE IN EACH CLASS OF EQUITY SECURITIES Ordinary shares Range (size of holding) 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over Total holders 2,281 4,150 Number of shares 1,286,962 15,926,340 785 19,713,945 44 25 10,501,560 140,072,641 Employee options and performance rights Range (size of holding) Total holders 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over 0 1 18 44 16 Number of shares 0 5,000 175,001 1,800,484 7,241,606 111 % 0.67 8.34 10.33 5.50 75.16 % 0.000 0.054 1.898 19.524 78.525 6. UNMARKETABLE PARCELS Number of holders holding less than a marketable parcel of the Company’s main class of securities (in this case, fully paid ordinary shares) based on the closing market price at $1.225. Minimum $500.00 parcel (at $1.225 per share) Number of holders 795 Annual Report 2018 112 SHAREHOLDINGS (CONT.) (AS AT 30 JUNE 2018) (CONT.) 7. 20 LARGEST SHAREHOLDERS The 20 largest holders of ordinary shares and number of ordinary shares and percentage of capital held by each are follows. Rank Shareholder Shares held % held 1 2 3 4 5 6 7 8 9 10 11 12 J P Morgan Nominees Australia Limited One Managed Investment Funds Manton Robin Pty Ltd Charlaja Pty Ltd HSBC Custody Nominees (Australia) Limited BNP Paribas Nominees Pty Ltd B B H F Pty Ltd Citicorp Nominees Pty Limited HSBC Custody Nominees (Australia) Limited – A/C 2 National Nominees Limited AET SFS Pty Ltd UBS Nominees Pty Ltd 13 Mirabooka Investments Limited 14 15 Perle Ventures Pty Ltd <877 CAP Investments 2 A/C> Radical Investments LP 16 Mr Mark Cuban 17 18 19 Stydon Capital Pty Ltd Hezi Investments Pty Ltd Aotearoa Investment Company Pty Limited 21,503,366 21,363,600 21,257,000 20,490,000 15,849,909 11,311,552 6,859,000 4,299,759 4,263,570 2,641,415 2,490,898 1,609,307 1,458,288 1,127,372 763,800 727,272 706,241 646,667 640,304 20 GALSM Investments Pty Ltd 637,166 11.26 11.19 11.14 10.73 8.03 5.93 3.59 2.25 2.23 1.38 1.30 0.84 0.76 0.59 0.40 0.38 0.37 0.34 0.34 0.33 Catapult Group International Limited CORPORATE DIRECTORY SHAREHOLDER INFORMATION Shareholder enquiries Shareholders with queries should contact the Group’s share registry, Computershare, on phone 1300 850 505 (investors within Australia), +61 (0)3 9415 4000 (investors) or fax +61 (0)3 9473 2500, or through its website (www.computershare.com.au) or write to: Computershare Investor Services Pty Limited 452 Johnston Street Abbotsford, VIC, 3067 Securities exchange listing The Group’s shares are listed on the Australian Securities Exchange (ticker: CAT) General enquiries Company Secretary: Markus Ziemer 75 High Street, Prahran, VIC, 3181 Australia Telephone: +61 (0)3 9095 8409 The address and telephone of the Company’s registered office is: 75 High Street, Prahran, VIC, 3181 Australia Telephone: +61 (0)3 9095 8401 Website: www.catapultsports.com www.colliercreative.com.au #CAT0012 Annual Report 2018 C a t a p u l t G r o u p I n t e r n a t i o n a l L i m i t e d A n n u a l R e p o r t 2 0 1 8 catapultsports.com