Class Limited
Appendix 4E
Preliminary final report
1. Company details
Name of entity:
ABN:
Reporting period:
Previous period:
Class Limited
70 116 802 058
For the year ended 30 June 2019
For the year ended 30 June 2018
2. Results for announcement to the market
The Group has adopted Accounting Standards AASB 9 'Financial Instruments' and AASB 15 'Revenue from Contracts with
Customers' for the year ended 30 June 2019. The Accounting Standards were adopted using the transitional rules that
allow for comparatives not to be restated.
Revenues from ordinary activities
Profit from ordinary activities after tax attributable to the owners of Class
Limited
Profit for the year attributable to the owners of Class Limited
up
up
up
Dividends
$'000
12.3% to
38,621
3.2%
to
3.2% to
8,975
8,975
Franked
Amount per
security
Cents
amount per
security
Cents
Final dividend for the year ended 30 June 2018 paid on 17 September 2018
2.500
2.500
Interim dividend for the year ended 30 June 2019 paid on 19 March 2019
2.500
2.500
On 20 August 2019, the directors declared a fully franked final dividend for the year ended 30 June 2019 of 2.5 cents per
ordinary share with record date of 6 September 2019 and payment date of 27 September 2019.
Comments
Refer to Chairman's letter and CEO's report for further commentary on the results.
3. Net tangible assets
Net tangible assets per ordinary security
Reporting
Previous
period
Cents
period
Cents
19.18
18.69
The net tangible assets per ordinary share is calculated based on 116,097,056 ordinary shares on issue as at 30 June
2019 (excluding 1,565,000 treasury shares).
4. Audit qualification or review
Details of audit/review dispute or qualification (if any):
The financial statements have been audited and an unqualified opinion has been issued.
Class Limited
Appendix 4E
Preliminary final report
5. Attachments
Details of attachments (if any):
The Annual Report of Class Limited for the year ended 30 June 2019 is attached.
6. Signed
Signed ___________________________
Date: 20 August 2019
Matthew Quinn
Chairman
Sydney
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Table of
contents
Financial highlights
Chairman’s letter
CEO’s report
Financial report 2019
Directors’ report
Auditor’s independence declaration
Financial statements
Notes to the financial statements
Directors’ declaration
Independent auditor’s report
Shareholder information
2
4
5
9
10
39
40
44
75
76
79
Class Annual Report 2019 1
Financial highlights
Year ended 30 June 2019
$38.3M 13%
OPERATING
REVENUE
GROWTH
IN FY19
$17.9M 13%
EBITDA
GROWTH
IN FY19
2 Class Annual Report 2019
$9.0M 3%
NPAT
GROWTH
IN FY19
$7.6c 4%
DILUTED
EPS
GROWTH
IN FY19
Class Annual Report 2019 3
Chairman’s letter
Dear shareholder
On behalf of my fellow Directors, I am pleased to present our Annual Report for the
year ended 30 June 2019.
Class was founded with a focus on streamlining and automating the accounting and
administration of self-managed super funds. Our core Class Super product has
cemented a very strong position in this sector, is highly valued by our customers and
generates excellent returns for our shareholders.
We see great opportunity to use our product development skills and strong
customer engagement in the SMSF space as a launch pad to broaden into other
parts of the accounting, administration and wealth management space, and
significantly increase our revenue over the next few years.
The Board decided that we needed fresh leadership and thinking to drive this
strategy, resulting in the appointment of Andrew Russell as CEO. Andrew brings a
wealth of knowledge and experience in technology development in the financial
services sector and we are confident that under his leadership the company will go
from strength to strength.
Andrew has already revamped his Executive Leadership Team (ELT), with key hires
in product development, technology and sales, and has created a new level of
energy and excitement in the team.
The new team has already gained traction in broadening our product offering, and
last month we signed an agreement with one of our major customers, leading wealth
accounting group Findex, to pilot a solution to fully automate and simplify trust
accounting. This is a large market opportunity and we envisage that, over time, Class
Trust will be just as valuable to our customers as Class Super.
These are important strategic steps for Class and we are excited about what the
future holds.
On behalf of the Board I would like to thank our shareholders for your continued
support, our customers for your loyalty and our employees for their hard work and
commitment to the business.
I would also like to thank Rajarshi Ray who is retiring as a Non-Executive Director in
October. Raj played a key role as CEO of the business and was instrumental in
positioning the company for listing in 2015. His contribution on the Board has been
invaluable over the last 10 years. And thank you to Kevin Bungard, our previous CEO,
who steered Class diligently prior to Andrew’s appointment.
Class is in a great position to embark on our next chapter of growth. We have the
people, the technology and the strategy to take advantage of the opportunities that
lie ahead.
We look forward to seeing you at the Annual General Meeting on 21 October 2019.
Yours sincerely
Matthew Quinn
Chairman
4 Class Annual Report 2019
CEO’s report
The close of the 2019 financial year represents the
beginning of a new chapter for Class.
When I joined the business in May I was excited by the opportunity to lead Class in a
new direction and build on the strength of a great underlying business. We are in a
unique and enviable position with incredibly strong recurring revenue, which allows
us to embark on our next chapter of growth.
We have certainly experienced our fair share of change and disruption over the last
few years, however, the business has continued to deliver strong revenue results,
grow account numbers and increase market share.
Delivering on our purpose requires relationships built upon trust and integrity and
we remain focussed on providing our customers with the tools they need to run their
businesses efficiently and profitably.
Our clear competitive advantage is in developing complex, technical rule-based
technology solutions which we will continue to do, delivering value to our customers
and shareholders.
Financial Results
Operating revenue grew by 13% to $38.3m. This was driven primarily by continued
account growth and partner initiatives.
Expenses (excluding amortisation and depreciation) increased by $2.3m. This was
driven by continued investment and recruitment in key areas of the business
including product development, the partner program, sales and marketing.
Earnings before interest, tax, depreciation and amortisation (‘EBITDA’) grew by 13%
to $17.9m.
Our financial performance this year has been solid with an increase in net profit after
tax to $9.0m.
Operation Highlights
Our core product, Class Super, has been rated #1 for Highest Overall Client
Satisfaction for the 5th year in a row. It’s also worth noting we’ve been voted
#1 Value for Money for the 3rd year running, despite being the premium priced
solution in the market.1
Class also won two awards in the 2019 Fintech Business Awards - Software Services
Innovator of the Year (50 employees or more), and Accounting Innovator of the Year.
This is the second year in a row that Class has been awarded Accounting Innovator
of the Year.
1 Source: Investment Trends 2019 SMSF Accountant Report, based on a survey of 644 accountants in
public practice.
Class Annual Report 2019 5
CEO’s report continued
Although Class doesn’t focus on winning awards, what these results highlight is that our commitment to innovation
and product excellence has our customers consistently rating Class Super above our competitors. This enables us
to maintain our exceptional retention rate of over 99% which underpins an annualised recurring revenue of $38.2m.
Customer Retention by Accounts (%)
Retention of Accounts (%)
100%
99%
98%
97%
96%
95%
99.3%
98.9%
99.8%
99.8%
99.4%
99.5%
99.2%
FY13
FY14
FY15
FY16
FY17
FY18
FY19
Accounts and Market Share
At 30 June 2019, Class had a total of 179,082 accounts (30 June 2018: 169,413) including 171,447 self-managed
super funds (SMSFs) on the Class Super product. Class Super’s estimated share of the SMSF market at 30 June
2019 was 28% (estimated total market 600,000 SMSFs).
2
2 Methodology can be found in the FY19 Results Investor Presentation available on our website.
6 Class Annual Report 2019
100100.9101.2101.6101.6102.1102.4102.6103.1103.4103.5103.9104.226.9%27.2%27.2%27.4%27.3%27.5%27.6%27.6%27.8%27.8%27.9%28.0%28.1%100105JUN-2018JUL-2018AUG-2018SEP-2018OCT-2018NOV-2018DEC-2018JAN-2019FEB-2019MAR-2019APR-2019MAY-2019JUN-2019Index = 100Class one year growth in market share: 4.2% (or 1.1 percentage points)Class Market Share Index -FY19(30 Jun 2018 = 100)
Growth levels have certainly remained under pressure this year, but with the federal election behind us and a
renewed focus on product, marketing and sales, we are in a position to build real momentum.
Product Development
Class made an investment of $9.0m towards development this period, an increase of 48%.
We released significant new product features to Class Super to support existing customers and drive prospect
engagement. These include:
• Tax statement automation – a solution for processing tax statements, delivering significant time savings for
accountants and administrators.
• Adviser Dashboard – an easy to use dashboard which gives advisers complete visibility of all the portfolios
they’re managing, helping them guide their clients’ investment strategies and performance.
• Managed accounts support – a new integration between Class and Macquarie which leverages new, improved
managed account data accounting and reporting in Class, delivering significant time savings for this feed and
shortly, many others.
We have learnt important lessons from Class Portfolio and are working closely with Findex and other customers
to develop a new trust accounting solution to add to our suite of products. Trusts are the primary wealth vehicle
outside of SMSFs in Australia requiring complex, rule-based reporting. Class is in a great position to become the
first end to end solution for Trust accounting in the Australian market.
Class Portfolio continues to grow and will remain an important part of the Class suite, providing investment
administration, reporting and client view. We expect administrators and financial advisers who manage investment
portfolios will be the main users of Portfolio and they remain our target market for this product.
Over the next year we expect to invest heavily in the development of the Class suite to deliver new features and
capabilities in support of new products and markets.
“The efficiency gains we’ve seen
with Class have been nothing short
of amazing. They talk about a four
times productivity improvement and
we’ve actually seen that within
our own business.”
Kris Kitto
Intello
Class Annual Report 2019 7
Class Annual Report 2019 7
CEO’s report continued
Reimagination
Class is reimagining itself from an SMSF administration software provider to a world class technology company. We
have a renewed vision, purpose and values, all of which are focussed on customer, people and innovation.
In early March, Class announced an investment in Philo Capital Advisers (Philo), a leader in the provision of services
to the rapidly growing managed discretionary account (MDA) sector.
We invested in Philo because of the strong growth in the MDA sector as well as this transaction resulting in a
change in our earnings profile.
We’re excited by this investment as it supports our strategy to be a leading technology provider as well as
providing an opportunity to participate in the value chain and extend our suite to support financial advisors.
As our integration capabilities increase and with a clear product focus, we are moving towards having a suite of
Class products and services. We have commenced work to develop a range of features that will fully automate and
simplify complex trust accounting requirements. These features will deliver unprecedented efficiencies and provide
timely delivery of information to clients.
In the years ahead, we intend to continue the thoughtful execution of our growth strategy. This includes partnerships
and acquisitions of quality businesses who share our vision and passion for reimagining how the use of innovative
cloud-based technology can transform accounting firms in to modern, efficient, client centric organisations.
Looking ahead
As I look forward into 2020 there’s no doubt this will be a significant period for Class as we position the business
for the future. We will continue to focus on delivering results and accelerating the development of the Class
product suite.
We expect our margins to reduce as we invest in product development, sales and marketing to achieve customer
success, however we see enormous potential for growth once these foundations are strengthened and set in place.
At the heart of Class is a dedicated, diverse and talented workforce. Under an extremely experienced and focused
Executive Leadership Team, we are all working as one, with a clear goal of becoming a world class technology
company.
We are confident we will deliver on our reimagination strategy, providing long-term value to our clients, partners
and shareholders.
Thank you for your continued support.
Andrew Russell
Chief Executive Officer (CEO) & Managing Director
8 Class Annual Report 2019
Financial
report 2019
Class Annual Report 2019 9
Directors’ report
The Directors present their report, together with the financial statements, on the consolidated entity (referred to
hereafter as the ‘Group’) consisting of Class Limited (referred to hereafter as the ‘Company’ or ‘parent entity’) and
the entities it controlled at the end of, or during, the year ended 30 June 2019.
Directors
The following persons were Directors of Class Limited during the whole of the financial year and up to the date of
this report, unless otherwise stated:
Matthew Quinn - Chairman
Andrew Russell (appointed on 14 May 2019)
Kathryn Foster
Rajarshi Ray
Nicolette Rubinsztein
Christopher Cuffe
Kevin Bungard (ceased on 8 November 2018)
Principal activities
During the financial year the principal continuing activities of the Group were to develop and distribute cloud-
based accounting, investment reporting and administration software, namely Class Super and Class Portfolio.
Review of operations
Operating revenue and other income
Cost of undertaking business
EBITDA
Interest revenue
Finance cost
Depreciation and amortisation
Tax expense
Statutory net profit after tax
2019
$’000
38,311
(20,366)
17,945
338
–
(5,744)
(3,564)
8,975
2018
$’000
33,978
(18,083)
15,895
406
(6)
(3,736)
(3,861)
8,698
Change
$’000
4,333
(2,283)
2,050
(68)
6
(2,008)
297
277
Refer to Chairman’s letter and CEO’s report for further commentary on the results.
Dividends
Dividends paid during the financial year were as follows:
Final dividend for the year ended 30 June 2018 of 2.5 cents
per ordinary share (2018: 2 cents)
Interim dividend for the year ended 30 June 2019 of 2.5 cents
per ordinary share (2018: 2.5 cents)
Consolidated
2019
$’000
2,942
2,934
5,876
Change
%
13%
13%
13%
(17%)
(100%)
54%
(8%)
3%
2018
$’000
2,350
2,942
5,292
10 Class Annual Report 2019
On 20 August 2019, the Directors declared a final dividend for the year ended 30 June 2019 of 2.5 cents per
ordinary share with payment date of 27 September 2019 to eligible shareholders on the register as at 6 September
2019. This equates to a total distribution of $2,902,000, based on the number of ordinary shares on issue as at 30
June 2019. The financial effect of dividends declared after the reporting date is not reflected in the 30 June 2019
financial statements and will be recognised in subsequent financial reports.
Significant changes in the state of affairs
There were no significant changes in the state of affairs of the Group during the financial year.
Matters subsequent to the end of the financial year
Apart from the dividend declared as discussed above, no other matter or circumstance has arisen since 30 June
2019 that has significantly affected, or may significantly affect the Group’s operations, the results of those
operations, or the Group’s state of affairs in future financial years.
Likely developments and expected results of operations
Information on likely developments in the operations of the Group and the expected results of those operations are
contained in the Chairman’s letter and CEO’s report.
Environmental regulation
The Group is not subject to any significant environmental regulation under Australian Commonwealth or State law.
Information on Directors
Matthew Quinn
Title:
Qualifications:
Experience and expertise:
Non-Executive Chairman
First Class Honours Degree in Chemistry & Management Science. Chartered
Accountant.
Mr. Quinn joined the Board in July 2015. Mr. Quinn was formerly the Managing
Director of Stockland, an ASX top 50 company, from 2000 to 2013. He was
National President of the Property Council of Australia from 2003 to 2005
and a Director of the Business Council of Australia in 2012. He is now a
Non-executive Director of CSR Limited and Regis Healthcare Limited and is
Chairman of TSA Management Group Holdings Pty Ltd. Mr. Quinn is involved
in a number of not-for-profits and is on the Board of the Australian Business
and Community Network Scholarship Foundation.
Other current directorships:
Non-executive Director CSR Limited (ASX: CSR) and Non-executive Director
Regis Limited (ASX: REG).
Former directorships (last 3 years): Non-executive Director Carbonxt Group Limited (ASX: CG1)
Special responsibilities:
Member of the Nomination Remuneration and Human Resources Committee
Interests in shares:
60,000 ordinary shares
Interests in options:
Interests in rights:
None
None
Class Annual Report 2019 11
Directors’ report continued
Andrew Russell
Title:
Qualifications:
Experience and expertise:
Chief Executive Officer and Managing Director (‘CEO’)
Innovative Technology Leader Program from the Stanford University Graduate
School of Business, Authentic Leadership Development Program from the
Harvard Business School Executive Education and MBA from Cass Business
School, B.Econ, Economics and Political Science from Macquarie University
and a graduate of the Australian Institute of Company Directors.
Mr Russell is an experienced senior executive with expertise in developing
corporate strategy, sales leadership and market entry. In his previous role at
REA he helped spearhead the launch of their financial services business.
Prior to joining REA, Mr Russell was GM and Interim CEO of Mortgage Choice
where he led the successful launch of their wealth management and financial
planning business and prior to that he was appointed by the Virgin Group to
lead the Australian market entry for Virgin Money.
Other current directorships:
None
Former directorships (last 3 years): None
Interests in shares:
Interests in options:
Interests in rights:
Christopher Cuffe
Title:
Qualifications:
Experience and expertise:
Other current directorships:
None
None
300,000 performance rights (Grant subject to approval of the shareholders at
the next Annual General Meeting)
Non-Executive Director
Bachelor of Commerce and a Diploma from the Financial Services Institute of
Australia. A Fellow of Chartered Accountants Australia and New Zealand, a
Fellow of the Institute of Company Directors and an Associate of the Financial
Services Institute of Australasia.
Mr. Cuffe has many years of experience building successful wealth
management practices. Most notably he joined Colonial First State in 1988
and became CEO two years later. In 2003 Mr Cuffe became the CEO of
Challenger Financial Services Group Limited and subsequently headed up
Challenger’s Wealth Management business. Mr. Cuffe was formerly Chairman
of UniSuper. He is the current Chairman of Australian Philanthropic Services
and Atrium Investment Management Pty Ltd. In October 2017, Mr Cuffe was
inducted into the Australian Fund Manager’s RBS Hall of Fame for services to
the investment industry.
Non-executive Director Global Value Fund Limited (ASX: GVF); Non-executive
Director Argo Investments Limited (ASX: ARG) and Non-executive Director
Antipodes Global Investment Company Ltd (ASX: APL).
Former directorships (last 3 years): None
Special responsibilities:
Member of the Audit and Risk Committee and member of the Nomination
Remuneration and Human Resources Committee
Interests in shares:
50,000 ordinary shares
Interests in options:
Interests in rights:
None
None
12 Class Annual Report 2019
Kathryn Foster
Title:
Qualifications:
Experience and expertise:
Non-Executive Director
Bachelor of Science (BSc) - International Marketing from Oregon State
University, Associate of Science (ASc) - Computer Science and Information
Systems from Shoreline Community University.
Ms. Foster has a strong background in technology, sales, and early-stage
start-up companies. Ms. Foster has more than two decades of experience
designing, building and running large internet-based businesses. Prior to
becoming a professional Non-executive Director, Ms. Foster was Executive
Senior Director of Xbox Games Marketplace as well as Microsoft Store online
where she managed the profit and loss and global expansion in over 200
geographies with annual revenue budgets in the low billions of dollars. She
has extensive technical and commercial experience in software and hardware
solutions and advises companies on strategy and technology. Since moving
to Australia, Ms. Foster first joined Class Ltd prior to the IPO in 2015 and is the
Chair of the Nomination, Remuneration and Human Resources Committee.
Ms. Foster is also a Non-executive Director for other listed and unlisted
companies in Australia
Other current directorships:
Non-executive Director Nuheara Limited (ASX:NUH)
Former directorships (last 3 years): Netlinkz Limited (ASX:NET) - resigned on 29 September 2016
Special responsibilities:
Chairperson of the Nomination Remuneration and Human Resources
Committee
Interests in shares:
162,208 ordinary shares
Interests in options:
Interests in rights:
None
None
Rajarshi Ray
Title:
Qualifications:
Experience and expertise:
Non-Executive Director
Bachelor of Information Technology; Graduate Diploma in Accounting;
Graduate Diploma Financial Services. FCA, Chartered Accountants Australia
and New Zealand; SAFin, Financial Services Institute of Australia; GAICD,
Australian Institute of Company Directors.
Mr Ray joined the Board in 2008 and was formerly a Director at American
Express, and also the CEO of Class 2010 to 2014. Mr Ray has over 20 years’
experience in the Australian financial and information technology (IT) sectors,
having held IT and finance roles across a number of Fortune 500 companies
in Europe, Asia, North America and Australia. He is now also a Non Executive
Director of unlisted companies as well as not-for-profits.
Other current directorships:
None
Former directorships (last 3 years): None
Special responsibilities:
Member of the Audit and Risk Committee
Interests in shares:
1,248,848 ordinary shares
Interests in options:
Interests in rights:
None
None
Class Annual Report 2019 13
Directors’ report continued
Nicolette Rubinsztein
Title:
Qualifications:
Experience and expertise:
Non-Executive Director
Qualified actuary, an executive MBA from the Australian Graduate School of
Management and a graduate of the Australian Institute of Company Directors.
Ms Rubinsztein joined the Board in April 2017. Ms Rubinsztein is a Non-
executive Director of Zurich Australia Limited/OnePath Insurance, UniSuper,
SuperEd, The Actuaries Institute, and CBHS Health Fund Ltd. In her executive
career, she held senior roles at CBA / Colonial First State, BT Funds
Management and Towers Perrin. Ms Rubinsztein was also a Director of the
Association of Superannuation Funds of Australia (ASFA) for eight years and
chair of their Super System Design Council.
Other current directorships:
None
Former directorships (last 3 years): None
Special responsibilities:
Chair of the Audit and Risk Committee
Interests in shares:
152,864 ordinary shares
Interests in options:
Interests in rights:
None
None
‘Other current directorships’ quoted above are current directorships for listed entities only and excludes
directorships of all other types of entities, unless otherwise stated.
‘Former directorships (last 3 years)’ quoted above are directorships held in the last 3 years for listed entities only
and excludes directorships of all other types of entities, unless otherwise stated.
Chief Financial Officer and Company Secretary
Glenn Day joined the Group in September 2008. Mr Day holds a Bachelor of Business, majoring in Accounting and
is a member of CPA Australia.
Mr Day is responsible for the financial management of the Group, its corporate affairs and company secretarial
matters. Prior to joining the Group, Mr Day was the Head of Finance of an ASX-listed entity and has more than 15
years’ experience in the financial services and superannuation industries.
14 Class Annual Report 2019
Meetings of Directors
The number of meetings of the Company’s Board of Directors (‘the Board’) and of each Board committee held
during the year ended 30 June 2019, and the number of meetings attended by each Director were:
Matthew Quinn
Andrew Russell
Kathryn Foster
Rajarshi Ray
Nicolette Rubinsztein
Christopher Cuffe
Kevin Bungard
Full Board
Audit and Risk Committee
Nomination, Remuneration
and Human Resources
Committee (‘NRHRC’)
Attended
Held
Attended
Held
Attended
Held
9
2
9
9
8
8
3
9
2
9
9
9
9
3
-
-
-
5
5
5
-
-
-
-
5
5
5
-
5
-
5
-
-
4
-
5
-
5
-
-
5
-
Held: represents the number of meetings held during the time the Director held office or was a member of the
relevant committee.
Class Annual Report 2019 15
Directors’ report continued
A message to our shareholders
Dear Shareholder
On behalf of the Nomination, Remuneration & Human Resources Committee
(NRHRC), I am pleased to present the Group’s Remuneration Report for the 2019
financial year (FY19).
The past year at Class has seen significant change across our Executive Leadership
Team (ELT), bringing increased diversity and new skills to the business. These
changes have increased our capacity and capability to move Class through our next
phase of development and growth.
It has also been a period of change in the Group’s remuneration framework. As
reported in FY18, we have implemented significant changes to both our short and
long term incentive plans, designed to further link remuneration with performance.
Our executive remuneration framework continues to reflect the Group’s desire to
attract, reward and retain the best people in the highly competitive technology
sector.
The Group remains focused on continuing to grow our business through investment
in people and technology. This will enable us to deliver long term future profitability.
Remuneration principles
We believe that performance results must drive Key Management Personnel (KMP)
remuneration outcomes, with financial measures being a core component of these
results. We also support the inclusion of non-financial measures to balance the
needs of our shareholders, customers and employees. We believe with this balance,
long term shareholder value will be created.
Our remuneration policies are designed to:
• Focus on business performance results;
• Reflect the Group’s business, professional and cultural requirements;
• Align with shareholder interests; and
• Provide market competitive remuneration opportunities.
16 Class Annual Report 2019
Remuneration outlook – Changes in FY19
Last year we made some changes to our executive remuneration framework which
aimed to:
•
Increase sophistication of performance and reward practices, without adding
complexity;
• Create long term shareholder value by focusing KMP performance on long term
growth drivers; and
• Provide a compelling remuneration package in the highly competitive technology
sector to attract and retain critical talent.
This was delivered by:
•
Increasing the variable component of executive target remuneration mix to place
a greater share of remuneration at risk and subject to ongoing performance
hurdles;
• An enhanced short term incentive (STI) program with the addition of a deferral
mechanism to deliver meaningful equity exposure and provide retention for key
executives; and
• Replacing the existing options scheme and introducing performance rights to
focus KMP on long term value creation through performance hurdles linked to
the Group’s EPS and customer growth.
The NRHRC and Board are confident that this new structure has achieved a balance
between short and long term performance, motivates our staff to perform and aligns
with shareholder value creation.
The Board is very pleased to have welcomed Andrew Russell as CEO in May. Andrew
will work with the Board and ELT to strengthen the strategy for the Group and the
remuneration framework will continue to support that strategy for growth.
We appreciate the feedback we have received, and the Board looks forward to
continued engagement with our shareholders.
Ms Kathryn Foster
Chair, Nomination, Remuneration & Human Resources Committee
Class Annual Report 2019 17
Directors’ report continued
Remuneration report
This remuneration report provides a summary of the Group’s remuneration policy and practices during the past
financial year as they apply to the Group’s Directors and executives.
The remuneration report has been prepared in accordance with the requirements of section 300A of the
Corporations Act 2001 and Corporations Regulation 2M.3.03 and has been audited by the Group’s external auditor.
The report contains an overview which is intended to provide a ‘plain English’ explanation for shareholders of the
Key Management Personnel (KMP) and executives’ remuneration outcomes for FY19 and the existing remuneration
framework.
Key Management Personnel (KMP)
KMP, as defined by the Accounting Standard AASB 124 Related Party Disclosures (AASB 124), for the year ended
30 June 2019 are detailed in the table below.
Accounting standards define KMP as those executives and non-executive Directors with the authority and
responsibility for planning, directing and controlling the activities of the Group, either directly or indirectly. Given
the flat organisation structure of the Group and following a review of senior executives against the criteria for
determining executive KMP, it was deemed that the CEO and the Chief Financial Officer (CFO) qualify as executive
KMP.
Executives and Non-Executives
Name
Chairman
Matthew Quinn
Current Non-executive Directors
Christopher Cuffe
Kathryn Foster
Rajarshi Ray
Nicolette Rubinsztein
Executive KMP
Andrew Russell
Glenn Day
Kevin Bungard
Position
Chairman
Director
Director
Director
Director
CEO & Managing Director
CFO & Company Secretary
CEO & Managing Director
Term
Full Year
Full Year
Full Year
Full Year
Full Year
Part Year1
Full Year2
Part Year3
1 Andrew Russell joined the business on 14 May 2019.
2 Glenn Day was Acting CEO from 9 November 2018 until 13 May 2019.
3 Kevin Bungard left the business on 8 November 2018.
18 Class Annual Report 2019
Remuneration governance
The Group has a robust remuneration governance framework overseen by the Board.
Class Board
• Overall responsibility for the remuneration strategy and outcomes for executives and Non-executive Directors.
• Reviews and, as appropriate, approves recommendations from the Group’s NRHRC.
Nomination, Remuneration & Human Resources Committee (NRHRC)
Management & Board Remuneration Policy
People, Culture, Talent Management & Diversity
Monitors, recommends and reports to the Board on:
Monitors, recommends and reports to the Board on:
• Alignment of remuneration incentive policies and
• The adequacy of talent pools for senior management
guidelines for executive managers and senior employees
with long-term growth and shareholder value;
• Superannuation arrangements;
• Employee share plans;
• Recruitment, retention and termination policies and
procedures for senior management;
• Board remuneration including the terms and conditions of
appointment and retirement, non-executive remuneration
within the fee pool approved by shareholders;
•
Induction of new Non-executive Directors and evaluation
of Board performance; and
• Remuneration of the CEO and senior executives.
succession;
• The effectiveness of the Group’s diversity policies and
initiatives, including an annual assessment of performance
against measurable objectives and the relative proportion of a
diverse workforce, including women at all levels;
• Management development frameworks and individual
development progress for key talent;
• Monitoring surveys conducted by the Group in relation to the
culture of the organisation;
•
Initiatives to improve and drive a strong performance culture;
and
• Assessing performance against the Group’s compliance with
external reporting requirements.
CEO & Chief People Officer
External Advisors
Makes recommendations to the NRHRC for its endorsement
of:
•
Incentive targets and outcomes;
• Remuneration policy for all employees;
• Long term incentive participation; and
•
Individual remuneration and contractual arrangements for
executives.
Provide independent advice, market trend information and pay
benchmark data relevant to remuneration decisions. No external
advisors provided a remuneration recommendation as defined
under section 300a of the Corporations Act during FY19.
The Board retains discretion to adjust STI outcomes as deemed appropriate.
All variable remuneration outcomes are subject to Board approval prior to grant and/or payment.
Managing Risk
Class Annual Report 2019 19
Directors’ report continued
New CEO remuneration arrangements
Andrew Russell commenced as Chief Executive Officer (CEO) effective 14 May 2019 (Commencement Date). His
remuneration arrangements are summarised in the sections below.
CEO incentives on appointment
On commencement, Mr Russell received one-off incentives in consideration for incentives forgone from his previous
employer that he would have otherwise been entitled to receive
Remuneration Type
Value
Cash
$150,000 (inclusive of minimum
superannuation guarantee)
Performance Rights*
100,000 Performance Rights
Long term incentive (one-off)*
200,000 Performance Rights
Grant Date, Vesting & Conditions
Paid on commencement date
One off allocation issued on commencement,
grant date 21 October 2019*.
Vesting 31 October 2019
One off allocation issued on commencement,
grant date 21 October 2019*.
Vesting three years from commencement
date, subject to achieving 25%
compound annual total shareholder return
(TSR) over the three years, plus 40,000
Performance Rights for every additional 5%
compound TSR.
*Subject to shareholder approval at the AGM on the same date.
CEO fixed remuneration
A number of factors were taken into consideration when determining the fixed remuneration package for
Mr Russell, including current market practice and the necessary skills and experience required during a period of
transformation. This resulted in fixed remuneration of $550,000 per annum.
CEO incentive arrangements
Mr Russell will be eligible to participate in the following incentive arrangements:
Incentive Type
Value
Payment Mechanism
Conditions
Short term incentive (From
FY20 ongoing)
Up to $260,000
Cash and deferred rights, with
deferral rates outlined below:
• FY20 - 50% cash/50%
deferred rights
• FY21 and ongoing – 75%
cash/25% deferred rights
Long term incentive (From
FY20 ongoing)
$260,000
Performance Rights
Annual participation from 1 July
2019.
Subject to meeting performance
hurdles set by the Board.
Deferred rights vest in equal
annual instalments over two
years.
Annual allocation.
Vesting period of three years
from grant date, subject to
meeting long term performance
hurdles set by the Board.
Subject to shareholder approval.
20 Class Annual Report 2019
Executive remuneration framework & programs FY19
Overview of existing remuneration approach and framework
The NRHRC is responsible for reviewing and recommending remuneration arrangements for Directors and
executives. The performance of the Group depends on the quality of its Directors and executives. The executive
remuneration framework is designed to attract and retain high-calibre talent by rewarding them for achieving goals
that are designed to deliver the Group’s profitability, strategy and shareholder value.
The key features of the Group’s executive remuneration and non-executive remuneration frameworks are outlined
below, with further details provided in the body of the report.
Remuneration Principles
The Group’s remuneration framework is based on the principles that remuneration is performance
driven, aligns with shareholder interests and provides market competitive remuneration opportunities.
Remuneration Strategy
Performance Driven
Aligned with Shareholders
Market competitive
remuneration opportunities
Remuneration should reward executives
based on annual performance against
business plans and longer-term
shareholder returns.
The variable components of
remuneration (both short term and long
term) are driven by challenging targets
focused on both external and internal
measures of financial and non-financial
performance.
A meaningful proportion of executive
remuneration is ‘at risk’.
Executives’ remuneration is aligned with
shareholder interests through an
emphasis on variable remuneration.
Incentive plans and performance
measures are aligned with the Group’s
short and long-term success.
Remuneration opportunities, including
those elements which can be earned
subject to performance, are set at
competitive levels that will attract,
motivate and retain high quality
executives.
Ownership of the Company’s shares is
encouraged through the use of equity as
the vehicle for the long term Incentive
(LTI) plan that applies to executive KMP
and some executives.
Executive remuneration is reviewed
annually. The Group aims to provide
market competitive remuneration:
• Fixed remuneration for executives is
targeted at market median; and
• Variable remuneration (through STI
and LTI) provides the opportunity to
earn total remuneration (fixed
remuneration plus variable
remuneration) that reaches the top
quartile of the market for exceptional
performance.
Class Annual Report 2019 21
Directors’ report continued
Overview of existing remuneration approach and framework (Cont.)
Fixed Remuneration
Variable Remuneration
Fixed remuneration is made up of base
salary, superannuation and other
short-term benefits provided by the
Group.
Fixed remuneration is targeted at the
median of the market for jobs of
comparable size and
responsibility. In some cases, strong
market demand for specific job
categories may justify above-median
fixed remuneration.
Base salary is reviewed annually. There
are no guaranteed base salary increases.
Variable component of executive target remuneration mix allows a greater share of
remuneration at risk and subject to performance.
STI (at risk)
LTI (at risk)
• Increased equity exposure and
retention with a portion of STI paid in
shares with deferred vesting.
• STI paid in shares to executives in
FY19 was 75% of total STI in FY19.
This reduces to 50% in FY20 and 25%
thereafter.
• Deferral is by way of performance
rights, vesting annually in equal
instalments over a two-year period.
• The Board retains discretion to review
the allotment of shares at vesting
through claw back provisions.
• STI hurdles applied in FY19 were
based on financial outcomes
(principally NPAT) with performance
metrics typically 50% weighting and
non-financial outcomes with 50%
weighting.
Options scheme has been replaced with
the executive LTI plan in the form of
performance rights.
• Grants made annually with vesting
after three years.
• Performance hurdles reviewed
annually by the Board to align with
the Group’s strategic plan. The hurdles
applied to the FY19 grant was based
on:
- Annualised Recurring Revenue
(ARR) at the end of year three.
- Growth in income from partner
programs and new revenue streams.
- EPS growth over the three year
period.
Voting and comments made at the Company’s 2018 Annual General Meeting (‘AGM’)
At the 2018 AGM, 99.52% of shareholders voted to approve the adoption of the remuneration report for the year
ended 30 June 2018. The Company did not receive any specific concerns at the AGM regarding its remuneration
practices.
Use of remuneration consultants
Throughout FY19, the NRHRC and management received information from QHR Consulting Pty Ltd and Mercer
(Australia) Pty Ltd related to remuneration market data and the design of the STI plan. No external advisors
provided a remuneration recommendation as defined under section 300a of the Corporations Act during FY19.
Composition of remuneration
The following table details the components of the Group’s fixed and variable or ‘at risk’ remuneration (STI and LTI)
for FY19:
Scheme
Overview
Fixed Remuneration
Fixed remuneration is made up of base salary, superannuation and other short-term benefits
provided by the Group. Fixed remuneration is targeted at the median of the market for jobs of
comparable size and responsibility. In some cases, specialist skills or expertise, scope of role or strong
market demand for specific job categories may justify above-median fixed remuneration.
Base salary is reviewed annually. There are no guaranteed base salary increases included in any
executives’ contracts.
22 Class Annual Report 2019
Scheme
STI (at risk)
Aim
Frequency
Financial measures
Overview
In FY19 an enhanced short-term incentive (STI) program was introduced with the addition of a
Deferred Rights component to deliver meaningful equity exposure and provide retention for key
executives.
The STI aims to drive individual and team performance to deliver annual business objectives, short
term profitability and increase shareholder value.
Awards are determined on an annual basis with performance measured over the reporting period.
Payment is normally made in August following the end of the performance year.
The quantum of the STI is determined by the Board.
Typically, the STI plan is weighted 50% to financial metrics and 50% to individual performance
metrics.
The financial targets are set each year by the CEO, in consultation with the executives and are
approved by the Board. The CEO’s targets are set each year by the Board.
A financial performance gateway has been set by the Board, below which no financial component
can be paid.
Individual performance
measures
Individual objectives are set for the CEO & CFO by the Board and are aligned to the Group’s business
plan. These objectives are typically performance metrics that drive growth, customer and people
outcomes.
Financial gateway
Should the Group fail to reach the financial performance gateway set by the Board, then payments
under the STI plan will be at the discretion of the Board.
LTI (at risk)
Aim
Participation
The LTI plan replaces the previous options scheme and introduces performance rights to focus KMP
on long term value creation for shareholders by focusing KMP performance on long term growth
drivers.
Participants include KMP & Executives. Participation is at the annual invitation and discretion of the
Board.
Grant frequency
Annually
Grant
The Performance Rights will be granted for nil cash consideration and are not transferable. Each
Performance Right converts into one fully paid ordinary share in the capital of the company, subject
to the satisfaction of the Performance Criteria and the terms of the plan.
Vesting & performance
period
The performance period for the FY19 Performance Rights grant is 1 July 2018 to 30 June 2021, vesting
three years from grant date.
Performance criteria
The Board has set challenging targets in FY19 for growth in Annualised Recurring Revenue ARR,
Partnerships & New Initiatives Revenue and Earnings Per Share (EPS), which align to the Company’s
strategic plan.
The proportion of Performance Rights which will vest is assessed against the achievement of those
targets.
The specific targets for ARR and Partnerships & New Initiatives Revenue are not disclosed due to
their commercial sensitivity.
The EPS growth target is 16% on a compound annual basis.
Whether the targets in the performance criteria have been achieved will be determined by the Board
in its sole discretion, with due regard to the influence management had on current and future results.
Dividends
The Performance Rights are not entitled to dividends or voting rights.
Class Annual Report 2019 23
Directors’ report continued
Scheme
Overview
Legacy equity plans (ESOP)
Other equity incentive plans
The ESOP options program has been discontinued and was replaced in FY19 by the LTI performance
rights plan.
Grants of options are subject to service requirements and performance vesting criteria. If
performance conditions are met, the Company will either issue new shares or shares will be
purchased on market and transferred to participants.
The ESOP is linked to performance over a three year period with an exercise based on a 10%
compounding annual growth in the share price to the last vesting date.
Prior to 30 June 2017, all options were subject to a three year vesting period.
Options issued in FY18 vest in equal annual instalments.
All options are subject to disposal restrictions being the earlier of three years from grant date or
cessation of employment.
Purpose
To provide employees, other than Directors and senior executives, with the opportunity to own
shares in the company, the Group established the Class Limited Employee Share Plan (ESP).
Features
The ESP enables the Group to issue shares to qualifying employees on a non-discriminatory basis.
Each year, the Board approves the issue of shares up to a maximum of $1,000 in value (being the
limit of the tax exemption) for each eligible participant. Shares vest immediately upon acquisition by
participants. The shares can only be sold three years after the date of grant, unless the participant
ceases employment prior.
The plans are designed to encourage share ownership for employees and therefore do not have any
performance conditions attached. Participants are entitled to dividends and other distributions and
have full voting rights.
Performance outcomes in FY19
a) Linking remuneration to performance
A key underlying principle of the Group’s executive remuneration strategy is the link between company
performance and executive reward.
(i) STI financial measures
STI payments are based on a variety of performance metrics, both financial and non-financial.
Performance metrics will be reviewed annually by the Board to align with the Group’s strategic plan. The key
financial measure in FY19 for determining the value of STI payments was NPAT. Other measures are selected to
ensure a broader view of performance and specific strategic priorities is considered when assessing
performance and incentive outcomes. The measures are aligned to the Group’s business plans. The table below
outlines the key objectives for the CEO for FY19. The objectives for the CFO were aligned to the CEO.
(ii) LTI financial measures
Performance hurdles will be reviewed annually by the Board to align with the Group’s strategic plan. The hurdles
applied to the FY19 grant were based on:
- Annualised Recurring Revenue ARR at the end of year three.
- Growth in income from partner programs and new revenue streams.
- EPS growth over the three-year period.
24 Class Annual Report 2019
The following table summarises the link between company performance and incentives awarded to executive
KMP, senior executives and other eligible employees:
Summary of financial performance and STIs and LTIs awarded:
Financial Performance
EBITDA5
(‘000)
NPBT4
(‘000)
NPAT4
(‘000)
Year
Sales
Revenue
(‘000)
Earnings
per share4
(cents)
Dividends
per share
(cents)
Share
price6
($)
STI4
STI
paid to
Executive
KMP
($)
STI paid to
all eligible
employees as
a % of NPBT
FY19
FY18
FY17
FY16
FY15
38,311
33,978
28,893
22,563
15,598
17,945
15,895
13,973
10,051
5,959
12,539
12,559
11,702
8,588
5,186
8,975
8,698
7,988
5,827
3,406
7.66
7.39
6.82
5.19
3.17
5.00
5.00
5.00
3.75
2.25
1.50
2.40
3.00
3.30
N/A
79,040
72,051
64,231
43,800
40,515
11.4%
5.1%
5.2%
4.8%
4.9%
b) CEO performance & STI outcome
As a result of Mr Bungard’s cessation of employment, he forfeited any award under the FY19 STI plan.
Mr Russell was not eligible to participate in the FY19 STI plan.
c) CFO performance & STI outcome
The CFO remuneration structure in place in FY19 is as set out later in this report. The FY19 STI outcome of
$79,040 (41% of maximum opportunity) reflects the CEO and board’s assessment of the CFO’s performance
against the key objectives including financial & non-financial measures. This STI outcome is comprised of the
executive KMP above of $19,760 and $59,280 in deferred rights.
4 Represents approved and expensed STI for FY19 but paid post year end including any deferred rights component. STI excludes the value
of the shares issued under the ESP and sales commission paid/ payable, but includes superannuation paid on bonus payments.
5 EBITDA, NPBT, NPAT and EPS are calculated before significant items in FY16 (FY16 STI as % of NPBT after significant items totals 5.2%).
6 Closing share price at 30 June.
Class Annual Report 2019 25
Directors’ report continued
d) Class performance – non-financial measures.
Class Performance
Non-financial
Performance
Measures
Strategic
Position
Growth
FY19 Objective
Outcome
• Market share
The Group’s estimated market share has increased to 28% of the
estimated 600,000 SMSFs.
• New accounts
• Partner program
The Group continued to grow steadily with an additional 9,669
accounts added in FY19.
Customer
• Customer retention
• Net Promoter Score
Short
Term
Incentive
People
• Employee engagement
Further the Group’s focus on delivering value through partner &
strategic alliances added additional revenue streams to the Group.
The Group monitors a range of customer service metrics during
the year including net promoter score and customer satisfaction.
These measures demonstrate our focus on improving service for
our customers.
Accountants have again rated Class Super #1 for Highest Overall
Client Satisfaction and #1 for Value for Money in the 2019
Investment Trends SMSF Software Awards. This is the fifth year in
a row Class Super has taken out overall first place in these
independent survey-based awards.
The Group takes part in the annual Great Place to Work® Trust
Index© Employee Survey which is carried out by Great Place to
Work® Australia. Over 89% of employees completed the survey
this year.
The company continues to score extremely high in the areas of
diversity including age (95), race (91), gender (94) and sexual
orientation (96).
Overall employee engagement was down this year from 90 to 83,
however these results are reflective of the significant changes in
leadership occurring at the time the survey was conducted.
26 Class Annual Report 2019
Remuneration outcomes FY19
Component
FY19 Outcomes
FY19 Fixed
Remuneration (FR)
FR is reviewed annually and considers the complexity and expertise required for individual roles. FR is
set in the context of the Group’s competitive market.
To assess the competitiveness of FR, the NRHRC considered market data and published surveys.
Accordingly, the outgoing CEO and CFO & Company Secretary’s FR was reviewed and a marginal
increases of 4.8% and 2.0% respectively were applied.
FY19 Fixed Remuneration Outcomes
FY18 FR
Increase $
Increase %
Andrew Russell
Kevin Bungard
Glenn Day*
-
315,000
270,000
-
15,000
5,401
-
4.8
2.0
FY19 FR
550,000
330,000
275,401
*During FY19 the Group’s CFO & Company Secretary was appointed to the role of Acting CEO following Mr Bungard’s
departure. For the period 9 November 2018 until 14 May 2019, Mr Day received fixed remuneration of $350,000 per annum
(inclusive of superannuation) in recognition of the additional responsibilities associated with performing this acting role.
For the avoidance of doubt, outside this period Mr Day received fixed remuneration of $275,401.
FY19 STI outcomes
• STI outcomes have been improving since FY16 as the Group has moved through a period of
significant growth.
• During FY19 the Group’s operating revenue increased by 13% to $38.3m. EBITDA also increased by
13% to $17.9m while both NPAT and EPS grew steadily by 3% and 4% respectively.
• Based on this and the board’s assessment of performance against key performance indicators the
following STI’s were awarded:
FY19 STI Outcomes
FY18 STI Outcomes
$ % of target
% of
maximum
$ % of target
% of
maximum
Andrew Russell
Kevin Bungard
-
-
-
-
-
-
-
31,536
Glenn Day
79,040
82%
41%
40,415
-
100%
150%
-
50%
75%
FY19 STI had an upfront and a deferred component. The deferred component is paid using
performance rights, vesting annually in equal installments over a two year period
FY19 STI Outcomes
FY18 STI Outcomes
Upfront
Cash
(25%)
Deferred
Rights
(75%)
Total
Upfront
Deferred
Total
Andrew Russell
Kevin Bungard
-
-
-
-
-
-
-
31,536
Glenn Day
19,760
59,280
79,040
40,415
-
-
-
-
31,536
40,415
Class Annual Report 2019 27
Directors’ report continued
Component
FY19 LTI Grant
FY19 Outcomes
LTI grants were made in FY19 in accordance with the target remuneration mix for each KMP. Grants
made annually with vesting after three years. The hurdles applied to the FY19 grant was based on:
- ARR at the end of year three.
- Growth in income from partner programs and new revenue streams.
- EPS growth over the three year period.
Allocations are made at the discretion of the Board. In FY19:
• The CFO was granted 45,467 performance rights, valued at $72,437.
Options vesting
The options issued in FY18 vest in equal instalments on 1 July 2018, 1 July 2019 and 1 July 2020.
Non-executive
Director fees
• Total fee pool available to Non-executive Directors is $750,000, as approved by shareholders at the
Annual General Meeting in October 2017.
• Total amount paid to Non-executive Directors in FY19 was $520,125 (FY18 $542,917).
Remuneration mix
The Board sets a target remuneration mix. The remuneration mix is set with consideration to market benchmarking
and is designed to attract and retain the calibre of executives required to deliver profit and long term, strategic
objectives.
The mix that applied in FY19 as compared to previous year is shown below:
Charts 1 & 2: CEO & CFO Target Remuneration Mix Comparison (FY19 versus FY18)
Chart 1: CEO Target Remuneration Mix FY19
Chart 2: CFO Target Remuneration Mix FY19
LTI 25%
LTI 15%
LTI 20%
LTI 15%
STI 8%
STI 8%
FR 50%
FR 77%
STI 20%
FR 77%
STI 25%
FY19 TARGET
REMUNERATION MIX
FY18 TARGET
REMUNERATION MIX
FR 60%
FY19 TARGET
REMUNERATION MIX
FY18 TARGET
REMUNERATION MIX
Note: Chart 1 illustrative of CEO Target Remuneration Mix FY19. As a result of Mr Bungard’s cessation of employment,
he forfeited any award under the FY19 STI plan. Mr Russell was not eligible to participate in the FY19 STI plan.
28 Class Annual Report 2019
Charts 3 & 4: CEO & CFO Target Remuneration Mix Camparison Cash versus Equity (FY18 to FY21)
Chart 3: CEO Target Remuneration Mix
Cash vs Equity FY18 to FY21
Chart 4: CFO Target Remuneration Mix
Cash vs Equity FY18 to FY21
FY18
77%
8% 15%
FY18
77%
8% 15%
FY19
50%
6% 19%
25%
FY19
60%
5% 15% 20%
FY20
50%
12.5% 12.5% 25%
FY20
60%
10% 10% 20%
FY21
50%
19% 6% 25%
FY21
60%
15% 5% 20%
CASH
EQUITY
Fixed
STI Cash
STI Deferred
LTI
CASH
EQUITY
Fixed
STI Cash
STI Deferred
LTI
The review of the remuneration structure conducted in FY18 highlighted that the pay mix for the KMP was skewed
towards fixed remuneration with insufficient pay at risk. In FY19 a higher proportion of pay for the KMP was at risk,
a portion of STI was subject to deferral into shares and LTI was subject to performance hurdles.
Remuneration in detail
The following table details the statutory accounting expense of all remuneration related items for the KMP.
This includes remuneration costs in relation to both FY19 and FY18. The table below is different to the actual
remuneration mix chart on page 28, which shows the fair value on grant date of LTI in FY19 rather than the accrual
of amounts on the statutory accounting basis. The table has been developed and audited against the relevant
Australian Accounting Standards. Refer to the footnotes for more detail on each remuneration type.
Executive exit arrangements
The table below outlines the exit arrangements for Mr Bungard. Further detail is provided in the statutory
disclosure table.
KMP
Exit arrangement
Kevin Bungard
(CEO & Managing Director)
• Ceased as KMP on 8 November 2018
• Three months’ payment in lieu of notice period
• Non-compete payment of three months base remuneration.
• Automatic vesting of:
– 200,000 remaining unvested share options expiring in June 2021, exercisable at $3.81 per share;
– 133,333 remaining unvested share options expiring in March 2022, exercisable at $3.99 per share;
and
• Provision of performance rights approved at the 2018 AGM was not awarded.
Class Annual Report 2019 29
Directors’ report continued
Fixed Remuneration7
Short-term Benefits8
Long-term
Benefits
Share-based
Payments
Base
Remuner-
ation9
$
Super-
annuation
$
STI10
$
Other11,12,13
$
Long
Service
Leave14
$
Equity-
settled15
$
Total
Statutory
Remuner-
ation
$
130,000
130,000
85,000
58,276
90,000
82,500
80,000
80,000
90,000
82,500
475,000
495,815
84,565
–
116,451
294,952
293,126
249,953
494,142
544,904
969,142
12,350
12,350
8,075
5,536
8,550
7,837
7,600
7,600
8,550
7,837
45,125
47,202
5,133
–
15,183
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
155,818
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
142,350
142,350
93,075
63,812
98,550
90,337
87,600
87,600
98,550
90,337
520,125
542,917
49,053
294,569
–
–
210,970
(54,154)
75,140
363,590
20,049
31,536
(15,274)
20,531
19,760
20,049
40,515
1,741
7,057
6,233
5,864
11,741
100,669
44,310
47,017
438,165
385,332
376,332
40,847
19,760
368,529
(48,290)
168,503
1,043,491
40,098
72,051
(8,217)
17,974
147,686
814,496
85,972
19,760
368,529
(48,290)
168,503
1,563,616
1,040,719
87,200
72,051
(8,217)
17,974
147,686
1,357,413
Non-executive Directors
Matthew Quinn
Christopher Cuffe
Kathryn Foster
Rajarshi Ray
Nicolette
Rubinsztein
SUB TOTAL
Executive KMP
Andrew Russell17
Kevin Bungard18
Glenn Day19
SUB TOTAL
TOTAL
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
201816
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
7 Fixed Remuneration comprises of Base Remuneration and Superannuation (post-employment benefit).
8 Short-term benefits include non-monetary benefits, however no non-monetary benefits were received by Non-executives and Executive
Directors during the year ended 30 June 2019.
9 Base Remuneration includes cash salary received, short-term personal compensated absences and any salary sacrificed benefits during the year.
10 Executive KMP participate in an STI plan. STI includes cash bonuses in relation to performance for the year ended 30 June.
11 Other includes short-term annual compensated absences (annual leave movement).
12 Other for Andrew Russell includes a cash sign on payment of $150,000.
13 Other for Kevin Bungard includes a component for a non-compete amount, as well as the payment of other entitlements on cessation of
employment (refer to ‘Executive exit arrangements’ on page 29.
14 Long service entitlements accrued during the year as well as impact of changes to long service valuation assumption, which are
determined in line with Australian Accounting Standards.
15 The cost of equity-settled share-based payments recognised during the year is measured at fair value on grant date. This valuation
assumption is in line with Australian Accounting Standards.
16 Mr Anthony Fenning received $68,481 which comprised $62,540 in Base Remuneration and $5,941 in Superannuation prior to his cessation
on 11 April 2018.
17 Represents remuneration from the date of appointment as KMP for Andrew Russell on 14 May 2019.
18 Represents remuneration up to the date of cessation as KMP for Kevin Bungard on 8 November 2018.
19 Fixed Remuneration for Mr Day includes $38,256 in additional pay for Acting CEO role. Fixed pay for role as CFO was $275,401.
30 Class Annual Report 2019
Non-executive Directors remuneration
Non-executive Directors are paid a base fee for service to the Board.
The NRHRC may, from time to time, receive advice from independent remuneration consultants to ensure the
Chairman and other Non-executive Directors’ fees and payments are appropriate and in line with the market for
companies of a similar size and complexity.
The fee pool is currently $750,000 per annum including superannuation as approved at the 2017 AGM.
The Chairman is paid fees of $130,000 plus superannuation and other Non-executive Directors are paid fees of
$80,000 plus superannuation. In addition, Non-executive Directors will be paid sub-committee membership fees
as follows:
• Director fees to be inclusive of membership of one sub-committee;
• Additional fee of $5,000 plus superannuation to be paid to Non-executive Directors for membership of any
additional sub-committee; and
• Chair of sub-committees to be paid an additional fee of $10,000 plus superannuation.
Based on the current Board and sub-committee composition, total fees for FY19 was $520,125.
Non-executive Director – minimum shareholding
The Board has confirmed and agreed the expectation that all Non-executive Directors should, within a reasonable
period of their initial appointment, establish and maintain a shareholding in the Company which is at least
equivalent in value based on higher of market price or purchase cost to one year’s Directors’ fees, to further align
their interests with those of other shareholders.
KMP – minimum shareholding
It is expected that KMP hold a minimum number of shares equivalent in value to one year’s fixed remuneration.
Until this minimum shareholding is accumulated KMP are not permitted to sell any shares awarded under the
Performance Rights and Deferred Rights Plan. KMP must also maintain such minimum shareholding.
Service agreements
Non-executive Directors do not have fixed term contracts with the Group. On appointment to the Board, all
Non-executive Directors enter into a service agreement in the form of a letter of appointment. The letter
summarises the Board policies and terms, including compensation. Non-executive Directors retire by whichever is
the longer period: the third annual general meeting following their appointment, or the third anniversary from the
date of appointment, but may then be eligible for re-election.
Remuneration and other terms of employment for executives are formalised in service agreements, summarised as
follows:
KMP
Exit arrangement
Name & Title
Andrew Russell, Chief Executive Officer & Managing Director (CEO)
Agreement commenced
14 May 2019
Term of agreement
Ongoing
Details
The terms of employment and remuneration of the CEO are detailed in a tailored service agreement.
The agreement is not of a fixed duration and may be terminated by either party, providing a
notice period of 6 months is given. The agreement entitles the individual to a base salary and
superannuation contributions, as well as eligibility to participate in the EIP. The Board retains absolute
discretion relating to the EIP, its continuance and whether any payments will be made in any given
year. Upon termination, the individual is bound by restraint clauses spanning a period of up to 6
months and no less than 3 months, dependent on the circumstances surrounding the termination.
Class Annual Report 2019 31
Directors’ report continued
KMP
Exit arrangement
Name & Title
Glenn Day, Chief Financial Officer and Company Secretary (CFO)
Agreement commenced
8 October 2015
Term of agreement
Ongoing
Details
The terms of employment and remuneration of the CFO are detailed in a tailored service agreement.
The agreement is not of a fixed duration and may be terminated by either party, providing a
notice period of 3 months is given. The agreement entitles the individual to a base salary and
superannuation contributions, as well as eligibility to participate in the EIP. The Board retains absolute
discretion relating to the EIP, its continuance and whether any payments will be made in any given
year. Upon termination, the individual is bound by restraint clauses spanning a period of up to
12 months and no less than 3 months, dependent on the circumstances surrounding the termination.
KMP have no entitlement to termination payments in the event of removal for misconduct.
Share based compensation
Issue of shares
There were no shares issued to Directors and other KMP as part of compensation during the year ended
30 June 2019.
Options
The terms and conditions of each grant of options over ordinary shares affecting remuneration of Directors and
other KMP in this financial year or future reporting years are as follows:
Number
granted
Kevin Bungard
Grant date
495,860
30/09/2015
280,000
30/09/2015
200,000
29/06/2016
200,000
24/07/2017
Glenn Day
484,377
120,000
90,000
100,000
30/09/2015
30/09/2015
29/06/2016
24/07/2017
Value per
option at
grant date
($)20
Value of
options at
grant date
($)21
Number
vested
Exercise
price
($)
Vesting
and first
exercise
date
Last
exercise
date
0.197
0.168
0.661
0.341
0.197
0.168
0.661
0.341
97,684
47,040
495,860
280,000
132,200
200,000
1.10
1.33
3.81
01/01/2017
30/09/2019
30/09/2018
30/09/2020
08/11/2019
30/06/2021
68,200
200,000
3.99
08/11/2019
15/03/2022
95,422
20,160
59,490
34,100
484,377
120,000
90,000
33,333
1.10
1.33
3.81
3.99
01/01/2017
30/09/2019
30/09/2018
30/09/2020
30/06/2019
30/06/2021
22
15/03/2022
20 The options granted are measured at the fair value on grant date. Fair value is determined using either the Binomial or Black-Scholes
option pricing model that considers the exercise price, term of the option, impact of dilution, share price at grant date and expected
price volatility of the underlying share, expected dividend yield and the risk-free interest rate for the term of the option, together with
the non-vesting conditions that do not determine whether the Group receives the services that entitle the employees to receive
payment. This valuation assumption is in line with Australian Accounting Standards.
21 The share-based payment expense of the option is recognised as an expense with a corresponding increase in equity spread over the
vesting period.
22 Equal annual instalments on 1 July 2018, 1 July 2019 and 1 July 2020.
32 Class Annual Report 2019
Options granted under the ESOP carry no dividend or voting rights. Vesting is subject to continuity of service and
there are no performance conditions.
The number of options over ordinary shares granted to and vested in Directors and other KMP as part of
compensation is set out below:
Number of options
granted during the
FY19
Number of options
granted during the
FY18
Number of options
vested during the
FY19
Number of options
vested during the
FY18
–
–
–
200,000
100,000
300,000
400,000
123,333
523,333
–
–
–
Kevin Bungard
Glenn Day
Option holding
The number of options over ordinary shares in the Company held during the financial year by each Director and
other members of KMP of the Group, including their personally related parties, is set out below:
Options over
ordinary shares
Kevin Bungard
Glenn Day
Options over
ordinary shares
Kevin Bungard
Glenn Day
Balance at the
start of the year
Granted
Exercised
Expired/
forfeited/ other
Balance at the
end of the year
1,175,880
794,377
1,970,237
–
–
–
–
–
–
(1,175,880)
–
(1,175,880)
–
794,377
794,377
Vested and
exercisable
Vested and
unexercisable
–
727,710
727,710
–
–
–
* Other represents 1,175,860 option held on the date Kevin Bungard ceased to be a Director. No options expired or were forfeited during
the period.
Class Annual Report 2019 33
Directors’ report continued
Performance Rights
The terms and conditions of each grant of performance rights over ordinary shares affecting remuneration of
Directors and other KMP in this financial year or future reporting years are as follows:
Value per
performance
right at
grant date
($)23
Value of
performance
rights at
grant date
($)24
Grant date
Number
vested
Exercise
price
($)
Vesting
and first
exercise
date
Last
exercise
date
21/10/201925
21/10/201923
1.625
0.390
162,500
78,000
01/11/2018
1.723
72,437
-
-
-
0.00
0.00
31/10/2019
31/10/2019
13/05/2021
13/05/2021
0.00
30/06/2021
30/06/2021
Granted as
remuneration
Andrew Russell
100,000
200,000
Glenn Day
45,467
Performance rights granted under LTI plan carry no dividend or voting rights. Vesting is subject to continuity of
service and meeting performance criteria (this excludes sign on amounts issued to Mr Russell).
The number of performance rights over ordinary shares granted to and vested in Directors and other KMP as part
of compensation is set out below:
Andrew Russell
Glenn Day
Number of
performance rights
granted during the
FY19
Number of
performance rights
granted during the
FY18
Number of
performance rights
vested during the
FY19
Number of
performance rights
vested during the
FY18
300,000*
45,467
345,467
–
–
–
–
–
–
–
–
–
* The grant of performance rights is subject to shareholder approval and to be sought in October 2019.
23 The performance rights granted are measured at the fair value on grant date. Fair value is determined using either the Binomial,
Black-Scholes or Monte-Carlo performance right pricing model that considers the exercise price, term of the performance right, impact
of dilution, share price at grant date and expected price volatility of the underlying share, expected dividend yield and the risk-free
interest rate for the term of the performance right, together with the non-vesting conditions that do not determine whether the Group
receives the services that entitle the employees to receive payment. This valuation assumption is in line with Australian Accounting
Standards.
24 The share-based payment expense of the performance right is recognised as an expense with a corresponding increase in equity spread
over the vesting period.
25 Andrew Russell has been allocated 300,000 performance rights that are subject to shareholder approval. Actual grant date will be after
shareholder approval is received at the AGM to be held October 2019.
34 Class Annual Report 2019
Performance right holding
The number of performance rights over ordinary shares in the Company held during the financial year by each
Director and other members of KMP of the Group, including their personally related parties, is set out below:
Performance rights
over ordinary shares
Balance at the
start of the year
Granted
Exercised
Expired/
forfeited/ other
Balance at the
end of the year
Andrew Russell
Glenn Day
–
–
–
300,000*
45,467
345,467
–
–
–
–
–
–
300,000
45,467
345,467
Performance rights
over ordinary shares
Vested and
exercisable
Vested and
unexercisable
Andrew Russell
Glenn Day
–
–
–
–
–
–
* The grant of performance rights is subject to shareholder approval and to be sought in October 2019.
Class Annual Report 2019 35
Directors’ report continued
Additional disclosures relating to KMP
Shares held by Key Management Personnel
The number of ordinary shares in the Company held during the financial year by each Director and other KMP,
including their personally related parties, is set out below:
Non-executive Directors
Matthew Quinn
Christopher Cuffe
Kathryn Foster
Rajarshi Ray
Nicolette Rubinsztein
Executive KMP
Andrew Russell
Glenn Day
Kevin Bungard26
Balance at the
start of the year
Received
as part of
remuneration
Additions
Disposals/
other
60,000
10,000
162,208
1,248,848
20,000
–
–
–
–
–
–
40,000
–
–
132,864
–
–
–
–
–
Balance at
the end of
the year
60,000
50,000
162,208
1,248,848
152,864
–
–
–
–
–
252,500
–
–
–
252,500
1,905,572
3,659,128
–
–
–
–
(1,905,572)
-
(1,905,572)
1,926,420
Loans
There were no loans to KMP during the reporting period.
This concludes the remuneration report, which has been audited.
Shares under option
Unissued ordinary shares of Class Limited under option at the date of this report are as follows:
Grant date
Expiry date
Exercise price
30/09/2015
30/09/2019
30/09/2015
30/09/2020
29/06/2016
30/06/2021
24/07/2017
15/03/2022
$1.10
$1.33
$3.81
$3.99
Number
under option
1,464,614
793,506
708,202
864,667
3,830,989
No person entitled to exercise the options had or has any right by virtue of the option to participate in any share
issue of the Company or of any other body corporate.
26 Disposals/Other represents shares held at cessation date.
36 Class Annual Report 2019
Shares under performance rights
Unissued ordinary shares of Class Limited under performance rights at the date of this report are as follows:
Grant date
Expiry date
Exercise price
01/11/2008
30/06/2021
21/10/2019*
31/10/2019
21/10/2019*
13/05/2021
26/07/2019
13/05/2021
$0.00
$0.00
$0.00
$0.00
Number
under rights
168,664
100,000
200,000
700,000
1,168,664
*Subject to shareholder approval at the AGM on the same date.
No person entitled to exercise the performance rights had or has any right by virtue of the performance right to
participate in any share issue of the Company or of any other body corporate.
Shares issued on the exercise of options
The following ordinary shares of Class Limited were issued during the year ended 30 June 2019 and up to the date
of this report on the exercise of options granted:
Date options
granted
30/09/2015
30/09/2015
Exercise price
Number of
shares issued
$1.10
$1.33
484,377
145,000
629,377
Shares issued on the exercise of performance rights
There were no ordinary shares of Class Limited issued on the exercise of performance rights during the year ended
30 June 2019 and up to the date of this report.
Indemnity and insurance of officers
The Company has indemnified the Directors and executives of the Company for costs incurred, in their capacity as
a Director or executive, for which they may be held personally liable, except where there is a lack of good faith.
During the financial year, the Company paid a premium in respect of a contract to insure the Directors and
executives of the Company against a liability to the extent permitted by the Corporations Act 2001. The contract
of insurance prohibits disclosure of the nature of the liability and the amount of the premium.
Indemnity and insurance of auditor
The Company has not, during or since the end of the financial year, indemnified or agreed to indemnify the auditor
of the Company or any related entity against a liability incurred by the auditor.
During the financial year, the Company has not paid a premium in respect of a contract to insure the auditor of the
Company or any related entity.
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 for the purpose of
taking responsibility on behalf of the Company for all or part of those proceedings.
Class Annual Report 2019 37
Directors’ report continued
Non-audit services
Details of the amounts paid or payable to the auditor for non-audit services provided during the financial year by
the auditor are outlined in note 25 to the financial statements.
The Directors are satisfied that the provision of non-audit services during the financial year, by the auditor (or by
another person or firm on the auditor’s behalf), is compatible with the general standard of independence for
auditors imposed by the Corporations Act 2001.
The Directors are of the opinion that the services as disclosed in note 25 to the financial statements do not
compromise the external auditor’s independence requirements of the Corporations Act 2001 for the following
reasons:
•
•
all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and
objectivity of the auditor; and
none of the services undermine the general principles relating to auditor independence as set out in APES 110
Code of Ethics for Professional Accountants issued by the Accounting Professional and Ethical Standards
Board, including reviewing or auditing the auditor’s own work, acting in a management or decision-making
capacity for the Company, acting as advocate for the Company or jointly sharing economic risks and rewards.
Officers of the Company who are former partners of Grant Thornton
There are no officers of the Company who are former partners of Grant Thornton.
Rounding of amounts
The Company is of a kind referred to in Corporations Instrument 2016/191, issued by the Australian Securities and
Investments Commission, relating to ‘rounding-off’. Amounts in this report have been rounded off in accordance
with that Corporations Instrument to the nearest thousand dollars, or in certain cases, the nearest dollar.
Auditor’s independence declaration
A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is
set out immediately after this Directors’ report.
Auditor
Grant Thornton continues in office in accordance with section 327 of the Corporations Act 2001.
This report is made in accordance with a resolution of Directors, pursuant to section 298(2)(a) of the Corporations
Act 2001.
On behalf of the Directors
Matthew Quinn
Chairman
38 Class Annual Report 2019
Level 17, 383 Kent Street
Sydney NSW 2000
Correspondence to:
Locked Bag Q800
QVB Post Office
Sydney NSW 1230
T +61 2 8297 2400
F +61 2 9299 4445
E info.nsw@au.gt.com
W www.grantthornton.com.au
Auditor’s Independence Declaration
To the Directors of Class Limited
In accordance with the requirements of section 307C of the Corporations Act 2001, as lead auditor for the audit of Class
Limited the year ended 30 June 2019, 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
M R Leivesley
Partner – Audit & Assurance
Sydney, 20 August 2019
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.
Level 17, 383 Kent Street
Sydney NSW 2000
Correspondence to:
Locked Bag Q800
QVB Post Office
Sydney NSW 1230
T +61 2 8297 2400
F +61 2 9299 4445
E info.nsw@au.gt.com
W www.grantthornton.com.au
Auditor’s Independence Declaration
To the Directors of Class Limited
In accordance with the requirements of section 307C of the Corporations Act 2001, as lead auditor for the audit of Class
Limited the year ended 30 June 2019, 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
M R Leivesley
Partner – Audit & Assurance
Sydney, 20 August 2019
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.
Class Annual Report 2019 39
POSITIONAL
Financial statements
Class Limited
Statement of profit or loss and other comprehensive income
For the year ended 30 June 2019
Revenue
Other income
Interest revenue calculated using the effective interest method
Expenses
Employee benefits expense
Depreciation and amortisation expense
Selling and marketing expenses
Occupancy expenses
Technology and data costs
Other expenses
Finance costs
Profit before income tax expense
Income tax expense
Note
Consolidated
2019
$'000
2018
$'000
5
6
7
7
8
38,283
33,978
28
338
-
406
(14,419)
(5,744)
(1,801)
(797)
(1,265)
(2,084)
-
(13,091)
(3,736)
(1,722)
(674)
(1,053)
(1,543)
(6)
12,539
12,559
(3,564)
(3,861)
Profit after income tax expense for the year attributable to the owners of
Class Limited
8,975
8,698
Other comprehensive income for the year, net of tax
-
-
Total comprehensive income for the year attributable to the owners of
Class Limited
Basic earnings per share
Diluted earnings per share
8,975
8,698
Cents
Cents
33
33
7.66
7.61
7.39
7.29
The above statement of profit or loss and other comprehensive income should be read in conjunction with the
accompanying notes.
40 Class Annual Report 2019
Class Limited
Statement of financial position
As at 30 June 2019
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Income tax receivable
Other
Total current assets
Non-current assets
Investments
Property, plant and equipment
Intangibles
Customer acquisition costs
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Contract liabilities
Income tax provision
Provisions
Total current liabilities
Non-current liabilities
Deferred tax
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained earnings
Total equity
Note
Consolidated
2019
$'000
2018
$'000
9
10
8
11
12
13
14
15
16
17
8
18
8
19
17,464
3,697
697
773
22,631
2,028
779
8,552
1,852
13,211
22,657
3,229
-
680
26,566
-
934
6,427
-
7,361
35,842
33,927
3,446
408
-
805
4,659
1,926
360
2,286
3,029
-
1,380
727
5,136
866
376
1,242
6,945
6,378
28,897
27,549
20
21
22,507
1,490
4,900
25,154
1,706
689
28,897
27,549
The above statement of financial position should be read in conjunction with the accompanying notes.
Class Annual Report 2019 41
Financial statements continued
Class Limited
Statement of changes in equity
For the year ended 30 June 2019
Consolidated
Balance at 1 July 2017
Issued
capital
$'000
Other
reserves
$'000
Retained
earnings
$'000
Total equity
$'000
24,994
1,126
(2,717)
23,403
Profit after income tax expense for the year
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
-
-
-
-
-
-
8,698
-
8,698
-
8,698
8,698
Transactions with owners in their capacity as owners:
Contributions of equity, net of transaction costs (note
20)
Share-based payments (note 34)
Dividends paid (note 22)
160
-
-
-
580
-
-
-
(5,292)
160
580
(5,292)
Balance at 30 June 2018
25,154
1,706
689
27,549
Consolidated
Balance at 1 July 2018
Issued
capital
$'000
Other
reserves
$'000
Retained
earnings
$'000
Total equity
$'000
25,154
1,706
689
27,549
Adjustment for change in accounting policy (note 2)
-
-
1,112
1,112
Balance at 1 July 2018 - restated
25,154
1,706
1,801
28,661
Profit after income tax expense for the year
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
-
-
-
-
-
-
8,975
-
8,975
-
8,975
8,975
Transactions with owners in their capacity as owners:
Purchase of shares (note 20)
Share based payment (note 34)
Share plan settlement (note 21)
Dividends paid (note 22)
(2,647)
-
-
-
-
245
(461)
-
-
-
-
(5,876)
(2,647)
245
(461)
(5,876)
Balance at 30 June 2019
22,507
1,490
4,900
28,897
The above statement of changes in equity should be read in conjunction with the accompanying notes.
42 Class Annual Report 2019
Class Limited
Statement of cash flows
For the year ended 30 June 2019
Cash flows from operating activities
Receipts from customers (inclusive of GST)
Payments to suppliers and employees (inclusive of GST)
Interest received
Interest and other finance costs paid
Income taxes refunded/(paid)
Note
Consolidated
2019
$'000
2018
$'000
41,526
(24,146)
369
-
(4,825)
37,273
(20,013)
400
(6)
(4,062)
Net cash from operating activities
32
12,924
13,592
Cash flows from investing activities
Payments for investments
Payments for property, plant and equipment
Payments for intangibles
Proceeds from disposal of property, plant and equipment
Proceeds from release of term deposits
Net cash used in investing activities
Cash flows from financing activities
Proceeds received on exercise of employee share options
Payments for share purchase by employee share trust - treasury shares
Dividends paid
22
Net cash used in financing activities
(2,000)
(309)
(6,653)
3
-
-
(500)
(4,770)
-
54
(8,959)
(5,216)
193
(3,475)
(5,876)
160
-
(5,292)
(9,158)
(5,132)
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
(5,193)
22,657
3,244
19,413
Cash and cash equivalents at the end of the financial year
9
17,464
22,657
The above statement of cash flows should be read in conjunction with the accompanying notes.
Class Annual Report 2019 43
Notes to the financial statements
Note 1. General information
These financial statements represent the consolidated financial statements of the Group consisting of Class
Limited (the Company) and its subsidiaries. The financial statements are presented in Australian dollars, which
is the Company's functional and presentation currency.
Class Limited is a listed public company limited by shares, incorporated and domiciled in Australia. Its registered
office and principal place of business is:
Class Limited
Level 3, 228 Pitt Street
Sydney, NSW 2000
A description of the nature of the Group's operations and its principal activities are included in the directors'
report, which is not part of the financial statements.
The financial statements were authorised for issue, in accordance with a resolution of directors, on 20 August
2019. The directors have the power to amend and reissue the financial statements.
Note 2. Significant accounting policies
The principal accounting policies adopted in the preparation of the financial statements are set out either in the
respective notes or below. These policies have been consistently applied to all the years presented, unless
otherwise stated.
New or amended Accounting Standards and Interpretations adopted
The Group has adopted all of the new or amended Accounting Standards and Interpretations issued by the
Australian Accounting Standards Board ('AASB') that are mandatory for the current reporting period.
Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early
adopted.
The following Accounting Standards and Interpretations adopted during the year are most relevant to the
Group:
AASB 9 Financial Instruments
The Group has adopted AASB 9 from 1 July 2018. The standard introduced new classification and measurement
models for financial assets. A financial asset shall be measured at amortised cost if it is held within a business
model whose objective is to hold assets in order to collect contractual cash flows which arise on specified dates
and that are solely principal and interest. A debt investment shall be measured at fair value through other
comprehensive income if it is held within a business model whose objective is to both hold assets in order to
collect contractual cash flows which arise on specified dates that are solely principal and interest as well as
selling the asset on the basis of its fair value. All other financial assets are classified and measured at fair value
through profit or loss unless the entity makes an irrevocable election on initial recognition to present gains and
losses on equity instruments (that are not held-for-trading or contingent consideration recognised in a business
combination) in other comprehensive income ('OCI'). Despite these requirements, a financial asset may be
irrevocably designated as measured at fair value through profit or loss to reduce the effect of, or eliminate, an
accounting mismatch. For financial liabilities designated at fair value through profit or loss, the standard requires
the portion of the change in fair value that relates to the entity's own credit risk to be presented in OCI (unless
it would create an accounting mismatch). New simpler hedge accounting requirements are intended to more
closely align the accounting treatment with the risk management activities of the entity. New impairment
requirements use an 'expected credit loss' ('ECL') model to recognise an allowance. Impairment is measured
using a 12-month ECL method unless the credit risk on a financial instrument has increased significantly since
initial recognition in which case the lifetime ECL method is adopted. For receivables, a simplified approach to
measuring expected credit losses using a lifetime expected loss allowance is available.
44 Class Annual Report 2019
Note 2. Significant accounting policies (continued)
AASB 15 Revenue from Contracts with Customers
The Group has adopted AASB 15 from 1 July 2018. The standard provides a single comprehensive model for
revenue recognition. The core principle of the standard is that an entity shall recognise revenue to depict the
transfer of promised goods or services to customers at an amount that reflects the consideration to which the
entity expects to be entitled in exchange for those goods or services. The standard introduced a new contract-
based revenue recognition model with a measurement approach that is based on an allocation of the transaction
price. This is described further in the accounting policies below. Credit risk is presented separately as an expense
rather than adjusted against revenue. Contracts with customers are presented in an entity's statement of
financial position as a contract liability, a contract asset, or a receivable, depending on the relationship between
the entity's performance and the customer's payment. Customer acquisition costs and costs to fulfil a contract
can, subject to certain criteria, be capitalised as an asset and amortised over the contract period.
The impact of adoption of AASB 15 on various revenue streams is as follows:
●
●
Revenue from Software licence fees: No significant impact;
Revenue from service fees: Customers can request to have the Group load data from their existing system
onto one of the Group's products. Under the previous standards this revenue was recognised in the year
the services were performed. Under AASB 15 the revenue for these services is combined with other
performance obligations with other performance obligations, deferred and recognised over an estimated
contract period which includes expectations on renewal periods beyond the initial term of the service
contract. On 1 July 2018, the Group recognised a contract liability of $494,000, a deferred tax asset of
$136,000 and a corresponding adjustment to opening retained earnings;
Commission and partner fees: No significant impact;
Customer acquisition costs: Under AASB 15, commission and transaction costs incurred will be capitalised
as an asset where such costs are incremental to obtaining a contract with a customer and where such
costs are expected to be recovered. They will be amortised over the estimated life of the related service
contract, being 5 years. The previous accounting policy required commissions and transition costs to be
expensed to the statement of profit or loss. On 1 July 2018, the Group recognised customer acquisition
costs of $2,024,000, a deferred tax liability of $554,000 and a corresponding adjustment to opening
retained earnings.
●
●
Impact of adoption
AASB 9 and AASB 15 were adopted using the transitional rules that allow for comparatives not to be restated.
The impact of adoption on the opening retained earnings as at 1 July 2018 was as follows:
Capitalised customer acquisition cost (AASB 15)
Deferred revenue (AASB 15)
Tax effect on the above adjustments
Impact on opening retained profits as at 1 July 2018
1 July 2019
$'000
2,024
(494)
(418)
1,112
Basis of preparation
These general purpose financial statements have been prepared in accordance with Australian Accounting
Standards and Interpretations issued by the Australian Accounting Standards Board ('AASB') and the
Corporations Act 2001, as appropriate for for-profit oriented entities. These financial statements also comply
with International Financial Reporting Standards as issued by the International Accounting Standards Board
('IASB').
Historical cost convention
The financial statements have been prepared under the historical cost convention, except for investments
measured at fair value.
Critical accounting estimates
The preparation of the financial statements requires the use of certain critical accounting estimates. It also
requires management to exercise its judgement in the process of applying the Group's accounting policies. The
areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are
significant to the financial statements, are disclosed in note 3.
Class Annual Report 2019 45
Notes to the financial statements continued
Note 2. Significant accounting policies (continued)
Parent entity information
In accordance with the Corporations Act 2001, these financial statements present the results of the Group only.
Supplementary information about the parent entity is disclosed in note 30.
Rounding of amounts
The Company is of a kind referred to in Corporations Instrument 2016/191, issued by the Australian Securities
and Investments Commission, relating to 'rounding-off'. Amounts in this report have been rounded off in
accordance with that Corporations Instrument to the nearest thousand dollars, or in certain cases, the nearest
dollar.
Note 3. Critical accounting judgements, estimates and assumptions
The preparation of the financial statements requires management to make judgements, estimates and
assumptions that affect the reported amounts in the financial statements. Management continually evaluates
its judgements and estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses.
Management bases its judgements, estimates and assumptions on historical experience and on other various
factors, including expectations of future events, management believes to be reasonable under the
circumstances. The resulting accounting judgements and estimates will seldom equal the related actual results.
The judgements, estimates and assumptions that have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities (refer to the respective notes) within the next financial year are
discussed below.
Capitalised software development costs
Distinguishing the research and development phases of a new customised software project and determining
whether the recognition requirements for the capitalisation of development costs are met requires judgement.
After capitalisation, management monitors whether the recognition requirements continue to be met and
whether there are any indicators that capitalised costs may be impaired.
Fair value measurement hierarchy
The Group is required to classify all assets and liabilities, measured at fair value, using a three level hierarchy,
based on the lowest level of input that is significant to the entire fair value measurement, being: Level 1: Quoted
prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the
measurement date; Level 2: Inputs other than quoted prices included within Level 1 that are observable for the
asset or liability, either directly or indirectly; and Level 3: Unobservable inputs for the asset or liability.
Considerable judgement is required to determine what is significant to fair value and therefore which category
the asset or liability is placed in can be subjective.
The fair value of assets and liabilities classified as level 3 is determined by the use of valuation models. These
include discounted cash flow analysis or the use of observable inputs that require significant adjustments based
on unobservable inputs.
Estimation of useful lives of assets
The Group determines the estimated useful lives and related depreciation and amortisation charges for its
property, plant and equipment and finite life intangible assets. The useful lives could change significantly as a
result of technical innovations or some other event. The depreciation and amortisation charge will increase
where the useful lives are less than previously estimated. Technically obsolete or non-strategic assets that have
been abandoned or sold will be written off or written down.
Impairment of non-financial assets
The Group assesses impairment of non-financial assets at each reporting date by evaluating conditions specific
to the Group and to the particular asset that may lead to impairment. If an impairment trigger exists, the
recoverable amount of the asset is determined. This involves fair value less costs of disposal or value-in-use
calculations, which incorporate a number of key estimates and assumptions.
46 Class Annual Report 2019
Note 3. Critical accounting judgements, estimates and assumptions (continued)
Income tax
The Group is subject to income taxes in the jurisdictions in which it operates. Significant judgement is required
in determining the provision for income tax. There are many transactions and calculations undertaken during
the ordinary course of business for which the ultimate tax determination is uncertain. The Group recognises
liabilities for anticipated tax audit issues based on the Group's current understanding of the tax law. Where the
final tax outcome of these matters is different from the carrying amounts, such differences will impact the
current and deferred tax provisions in the period in which such determination is made.
Note 4. Operating segments
The Group's operating segments are based on the internal reports that are reviewed and used by the Board of
Directors (who are identified as the Chief Operating Decision Makers ('CODM')) in assessing performance and
in determining the allocation of resources.
The Directors have determined that there is one operating segment identified and located in Australia. The
information reported to the CODM is the consolidated results of the Group.
The segment results are as shown in the statement of profit or loss and other comprehensive income. Refer to
statement of financial position for segment assets and liabilities.
Major customers
There are no major customers that contributed more than 10% of revenue to the Group.
Accounting policy for operating segments
Operating segments are presented using the 'management approach', where the information presented is on
the same basis as the internal reports provided to the CODM. The CODM is responsible for the allocation of
resources to operating segments and assessing their performance.
Note 5. Revenue
Revenue from contracts with customers
Software licence fees
Service fees
Commission and partner fees
Other revenue
Other revenue
Revenue
Consolidated
2019
$'000
2018
$'000
36,265
192
1,567
38,024
32,361
164
1,453
33,978
259
-
38,283
33,978
Class Annual Report 2019 47
Notes to the financial statements continued
Note 5. Revenue (continued)
Disaggregation of revenue
The disaggregation of revenue from contracts with customers is as follows:
Consolidated - 2019
Major product lines
Class Super
Class Portfolio
Portfolio Engine
Timing of revenue recognition
Services transferred over time
Services transferred at a point in time
Software
licence
fees
$'000
Service
fees
$'000
Commission
and partner
fees
$'000
Total
$'000
35,246
858
161
36,265
36,265
-
36,265
192
-
-
192
192
-
192
1,567
-
-
37,005
858
161
1,567
38,024
-
1,567
36,457
1,567
1,567
38,024
The revenue from contracts with customers is substantially all in Australia. AASB 15 was adopted using the
modified retrospective approach and as such comparatives relating to disaggregation of revenue have not been
presented.
Accounting policy for revenue recognition
The Group recognises revenue as follows:
Revenue from contracts with customers
Revenue is recognised at an amount that reflects the consideration to which the Group is expected to be entitled
in exchange for transferring goods or services to a customer. For each contract with a customer, the Group:
identifies the contract with a customer; identifies the performance obligations in the contract; determines the
transaction price which takes into account estimates of variable consideration and the time value of money;
allocates the transaction price to the separate performance obligations on the basis of the relative stand-alone
selling price of each distinct good or service to be delivered; and recognises revenue when or as each
performance obligation is satisfied in a manner that depicts the transfer to the customer of the goods or services
promised.
Variable consideration within the transaction price, if any, reflects concessions provided to the customer such
as discounts, rebates and refunds, any potential bonuses receivable from the customer and any other contingent
events. Such estimates are determined using either the 'expected value' or 'most likely amount' method. The
measurement of variable consideration is subject to a constraining principle whereby revenue will only be
recognised to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue
recognised will not occur. The measurement constraint continues until the uncertainty associated with the
variable consideration is subsequently resolved. Amounts received that are subject to the constraining principle
are recognised as a refund liability.
Software licence fees
The Group recognises revenue pursuant to software licence agreements upon the provision of access to its
customers of the Group’s intellectual property as it exists at any given time during the period of the license.
Revenue is recognised over the duration of the agreement or for as long as the customer has been provided
access when persuasive evidence of an arrangement exists, the fee is fixed or determinable and collectability is
probable.
Service fees
Fees for the provision of services are recognised as revenue as the services are rendered, in accordance with
the terms and conditions of the service agreement. Services that are combined with other performance
obligations with other performance obligations are deferred and recognised over an estimated contract
period which includes expectations on renewal periods beyond the initial term of the service contract.
48 Class Annual Report 2019
Note 5. Revenue (continued)
Commission and partner fees
The Group recognises commission and partner fees at a point in time when it sells a third party’s products to
customers which provides these customers with access to products and services.
Interest
Interest revenue is recognised as interest accrues using the effective interest method. This is a method of
calculating the amortised cost of a financial asset and allocating the interest income over the relevant period
using the effective interest rate, which is the rate that exactly discounts estimated future cash receipts through
the expected life of the financial asset to the net carrying amount of the financial asset.
Note 6. Other income
Net fair value gain on investments
Note 7. Expenses
Profit before income tax includes the following specific expenses:
Depreciation
Leasehold improvements
Furniture and fittings
Computer equipment
Office equipment
Total depreciation
Amortisation
Website tools development
Software development
Computer software
Contractual rights
Customer acquisition costs
Total amortisation
Total depreciation and amortisation
Rental expense relating to operating leases
Minimum lease payments
Superannuation expense
Defined contribution superannuation expense
Share-based payments expense
Share-based payments expense
2019
$'000
Consolidated
2018
$'000
28
-
Consolidated
2019
$'000
2018
$'000
123
109
183
37
452
-
4,209
47
271
765
96
33
216
23
368
16
3,100
43
209
-
5,292
3,368
5,744
3,736
726
568
1,244
1,048
245
580
Class Annual Report 2019 49
Notes to the financial statements continued
Note 8. Income tax
Income tax expense
Current tax
Deferred tax - origination and reversal of temporary differences
Adjustment recognised for prior periods
Aggregate income tax expense
Deferred tax included in income tax expense comprises:
Increase in deferred tax liabilities
Numerical reconciliation of income tax expense and tax at the statutory rate
Profit before income tax expense
Tax at the statutory tax rate of 27.5% (2018: 30%)
Tax effect amounts which are not deductible/(taxable) in calculating taxable
income:
Entertainment expenses
Share-based payments
Sundry items
Adjustment recognised for prior periods
Adjustment to deferred tax balances as a result of change in statutory tax rate
Income tax expense
Amounts credited directly to equity
Deferred tax liabilities
Consolidated
2019
$'000
2018
$'000
2,759
816
(11)
3,658
184
19
3,564
3,861
816
184
12,539
12,559
3,448
3,768
14
66
47
3,575
(11)
-
16
174
(37)
3,921
19
(79)
3,564
3,861
Consolidated
2019
$'000
2018
$'000
(174)
-
50 Class Annual Report 2019
Note 8. Income tax (continued)
Deferred tax liability
Deferred tax liability comprises temporary differences attributable to:
Amounts recognised in profit or loss:
Customer acquisition costs
Software development - Research and Development
Employee benefits
Accrued expenses
Property, plant and equipment
Other
Amounts recognised in equity:
Transaction costs on share issue
Deferred tax liability
Movements:
Opening balance
Charged to profit or loss
Credited to equity
Adjustment to opening retained earnings (on adoption on AASB 15)
Closing balance
Income tax refund due
Income tax refund due
Provision for income tax
Provision for income tax
Consolidated
2019
$'000
2018
$'000
577
2,339
(292)
(498)
(31)
(100)
-
1,741
(284)
(386)
(68)
2
1,995
1,005
(69)
(139)
1,926
866
866
816
(174)
418
682
184
-
-
1,926
866
Consolidated
2019
$'000
2018
$'000
697
-
Consolidated
2019
$'000
2018
$'000
-
1,380
Accounting policy for income tax
The income tax expense or benefit for the period is the tax payable on that period's taxable income based on
the applicable income tax rate for each jurisdiction, adjusted by the changes in deferred tax assets and liabilities
attributable to temporary differences, unused tax losses and the adjustment recognised for prior periods, where
applicable.
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to be
applied when the assets are recovered or liabilities are settled, based on those tax rates that are enacted or
substantively enacted, except for:
●
When the deferred income tax asset or liability arises from the initial recognition of goodwill or an asset or
liability in a transaction that is not a business combination and that, at the time of the transaction, affects
neither the accounting nor taxable profits; or
When the taxable temporary difference is associated with interests in subsidiaries, associates or joint
ventures, and the timing of the reversal can be controlled and it is probable that the temporary difference
will not reverse in the foreseeable future.
●
Class Annual Report 2019 51
Notes to the financial statements continued
Note 8. Income tax (continued)
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is
probable that future taxable amounts will be available to utilise those temporary differences and losses.
The carrying amount of recognised and unrecognised deferred tax assets are reviewed at each reporting date.
Deferred tax assets recognised are reduced to the extent that it is no longer probable that future taxable profits
will be available for the carrying amount to be recovered. Previously unrecognised deferred tax assets are
recognised to the extent that it is probable that there are future taxable profits available to recover the asset.
Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset current tax
assets against current tax liabilities and deferred tax assets against deferred tax liabilities; and they relate to the
same taxable authority on either the same taxable entity or different taxable entities which intend to settle
simultaneously.
Class Limited (the 'head entity') and its wholly-owned Australian subsidiaries have formed an income tax
consolidated group under the tax consolidation regime with effect from 1 July 2014. The head entity and each
subsidiary in the tax consolidated group continue to account for their own current and deferred tax amounts.
The tax consolidated group has applied the 'separate taxpayer within group' approach in determining the
appropriate amount of taxes to allocate to members of the tax consolidated group.
In addition to its own current and deferred tax amounts, the head entity also recognises the current tax liabilities
(or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from
each subsidiary in the tax consolidated group.
Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as
amounts receivable from or payable to other entities in the tax consolidated group. The tax funding
arrangement ensures that the intercompany charge equals the current tax liability or benefit of each tax
consolidated group member, resulting in neither a contribution by the head entity to the subsidiaries nor a
distribution by the subsidiaries to the head entity.
Note 9. Current assets - cash and cash equivalents
Cash on hand and at bank
Consolidated
2019
$'000
2018
$'000
17,464
22,657
Accounting policy for cash and cash equivalents
Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-
term, highly liquid investments with original maturities of three months or less that are readily convertible to
known amounts of cash and which are subject to an insignificant risk of changes in value.
Note 10. Current assets - trade and other receivables
Trade receivables
Less: Allowance for expected credit losses
Interest receivable
52 Class Annual Report 2019
Consolidated
2019
$'000
3,681
(12)
3,669
2018
$'000
3,172
(2)
3,170
28
59
3,697
3,229
Note 10. Current assets - trade and other receivables (continued)
Allowance for expected credit losses
The Group has recognised a loss of $10,000 (2018: gain of $5,000) in profit or loss in respect of the expected
credit losses for the year ended 30 June 2019.
The ageing of the receivables and allowance for expected credit losses provided for above are as follows:
Consolidated
Not overdue
0 to 3 months overdue
3 to 6 months overdue
Over 6 months overdue
Movements in the allowance for expected credit losses are as follows:
Opening balance
Additional provisions recognised
Receivables written off during the year as uncollectable
Unused amounts reversed
Closing balance
Expected
credit loss
rate
2019
%
Carrying
amount
2019
$'000
Allowance for
expected
credit losses
2019
$'000
-
-
100%
100%
3,609
60
2
10
3,681
-
-
2
10
12
Consolidated
2019
$'000
2018
$'000
2
10
-
-
12
12
2
(5)
(7)
2
Accounting policy for trade and other receivables
Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the
effective interest method, less any allowance for expected credit losses. Trade receivables are generally due for
settlement within 30 and 90 days.
The Group has applied the simplified approach to measuring expected credit losses, which uses a lifetime
expected loss allowance. To measure the expected credit losses, trade receivables have been grouped based
on days overdue.
Other receivables are recognised at amortised cost, less any allowance for expected credit losses.
Note 11. Current assets - other
Prepayments
Term deposits*
Consolidated
2019
$'000
623
150
773
2018
$'000
530
150
680
*Includes term deposit which is held as security for lease of office premises $150,000 (2018: $150,000).
Class Annual Report 2019 53
Notes to the financial statements continued
Note 12. Non-current assets - investments
Convertible notes at fair value through profit or loss
Reconciliation
Reconciliation of the fair values at the beginning and end of the current and
previous financial year are set out below:
Opening fair value
Additions
Revaluation increments
Closing fair value
Consolidated
2019
$'000
2,028
2018
$'000
-
-
2,000
28
2,028
-
-
-
-
Refer to note 24 for further information on fair value measurement.
The Group has made an investment in Philo Capital Advisers (‘Philo’), a leader in the provision of services to the
rapidly growing managed discretionary account (‘MDA’) sector. The investment is via convertible notes, with
$2,000,000 invested as at 30 June 2019. A further $2,000,000 is to be invested by 31 March 2020, subject to
Philo meeting performance milestones.
Accounting policy for investments
Investments are initially measured at fair value. Transaction costs are included as part of the initial measurement,
except for financial assets at fair value through profit or loss. Such assets are subsequently measured at either
amortised cost or fair value depending on their classification. Classification is determined based on both the
business model within which such assets are held and the contractual cash flow characteristics of the financial
asset unless, an accounting mismatch is being avoided.
Financial assets are derecognised when the rights to receive cash flows have expired or have been transferred
and the Group has transferred substantially all the risks and rewards of ownership. When there is no reasonable
expectation of recovering part or all of a financial asset, its carrying value is written off.
Financial assets at fair value through profit or loss
Financial assets not measured at amortised cost or at fair value through other comprehensive income are
classified as financial assets at fair value through profit or loss. Typically, such financial assets will be either: (i)
held for trading, where they are acquired for the purpose of selling in the short-term with an intention of making
a profit, or a derivative; or (ii) designated as such upon initial recognition where permitted or required.
Fair value movements are recognised in profit or loss.
54 Class Annual Report 2019
Note 13. Non-current assets - property, plant and equipment
Leasehold improvements - at cost
Less: Accumulated depreciation
Furniture and fittings - at cost
Less: Accumulated depreciation
Computer equipment - at cost
Less: Accumulated depreciation
Office equipment - at cost
Less: Accumulated depreciation
Consolidated
2019
$'000
503
(391)
112
536
(191)
345
1,183
(929)
254
163
(95)
68
779
2018
$'000
462
(268)
194
504
(82)
422
1,051
(772)
279
141
(102)
39
934
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year
are set out below:
Consolidated
Balance at 1 July 2017
Additions
Disposals
Depreciation expense
Balance at 30 June 2018
Additions
Disposals
Depreciation expense
Leasehold Furniture and
fittings
$'000
improvements
$'000
Computer
equipment
$'000
Office
equipment
$'000
164
126
-
(96)
194
41
-
(123)
239
249
(33)
(33)
422
32
-
(109)
385
110
-
(216)
279
163
(5)
(183)
254
47
15
-
(23)
39
73
(7)
(37)
68
Total
$'000
835
500
(33)
(368)
934
309
(12)
(452)
779
Balance at 30 June 2019
112
345
Accounting policy for property, plant and equipment
Plant and equipment is stated at historical cost less accumulated depreciation and impairment. Historical cost
includes expenditure that is directly attributable to the acquisition of the items.
Depreciation is calculated on a straight-line basis to write off the net cost of each item of property, plant and
equipment over their expected useful lives as follows:
Leasehold improvements
Furniture and fittings
Computer equipment
Office equipment
3-5 years
3-20 years
3-5 years
3-10 years
The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each
reporting date.
Class Annual Report 2019 55
Notes to the financial statements continued
Note 13. Non-current assets - property, plant and equipment (continued)
Leasehold improvements are depreciated over the unexpired period of the lease or the estimated useful life of
the assets, whichever is shorter.
An item of property, plant and equipment is derecognised upon disposal or when there is no future economic
benefit to the Group. Gains and losses between the carrying amount and the disposal proceeds are taken to
profit or loss.
Note 14. Non-current assets - intangibles
Website tools development - at cost
Less: Accumulated amortisation
Trademarks and domain names - at cost
Software development - at cost
Less: Accumulated amortisation
Computer software - at cost
Less: Accumulated amortisation
Contractual rights - at cost
Less: Accumulated amortisation
Consolidated
2019
$'000
-
-
-
2018
$'000
156
(156)
-
47
48
26,571
(18,210)
8,361
20,246
(14,009)
6,237
198
(146)
52
328
(236)
92
198
(99)
99
252
(209)
43
8,552
6,427
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year
are set out below:
Consolidated
Balance at 1 July 2017
Additions
Amortisation expense
Balance at 30 June 2018
Additions
Disposals
Transfers in/(out)
Amortisation expense
Balance at 30 June 2019
Website tools
development
$'000
Trademarks
and domain
Software
names development
$'000
$'000
Computer
software
$'000
Contractual
rights
$'000
16
-
(16)
-
-
-
-
-
-
46
2
-
48
-
(1)
-
-
47
4,919
4,418
(3,100)
6,237
6,375
-
(42)
(4,209)
8,361
44
98
(43)
99
-
-
-
(47)
52
Total
$'000
5,025
4,770
(3,368)
6,427
6,653
(1)
-
(4,527)
-
252
(209)
43
278
-
42
(271)
92
8,552
56 Class Annual Report 2019
Note 14. Non-current assets - intangibles (continued)
Accounting policy for intangible assets
Intangible assets acquired as part of a business combination, other than goodwill, are initially measured at their
fair value at the date of the acquisition. Intangible assets acquired separately are initially recognised at cost.
Indefinite life intangible assets are not amortised and are subsequently measured at cost less any impairment.
Finite life intangible assets are subsequently measured at cost less amortisation and any impairment. The gains
or losses recognised in profit or loss arising from the derecognition of intangible assets are measured as the
difference between net disposal proceeds and the carrying amount of the intangible asset. The method and
useful lives of finite life intangible assets are reviewed annually. Changes in the expected pattern of consumption
or useful life are accounted for prospectively by changing the amortisation method or period.
Website tool and software development
Research costs are expensed in the period in which they are incurred. Development costs are capitalised when:
it is probable that the project will be a success considering its commercial and technical feasibility; the Group is
able to use or sell the asset; the Group has sufficient resources and intent to complete the internal development;
and the costs incurred can be measured reliably. These capitalised costs are amortised commencing from the
time the asset's development reaches the condition necessary for it to be capable of operation in the manner
intended by management. Amortisation is on a straight-line basis over the period of the asset's expected
benefit, being its finite useful lives of three years.
Trademarks and domain names
Significant costs associated with trademarks and domain names are capitalised. Such assets are not amortised
on the basis that they are deemed to have an indefinite life. This assumption is reassessed every year. Instead,
trademarks and domain names are tested annually for impairment, or more frequently if events or changes in
circumstances indicate that they might be impaired. They are carried at cost less accumulated impairment
losses.
Computer software
Software purchased from third parties is capitalised and amortised on a straight-line basis over the period of its
expected benefit of between three to five years.
Contractual rights
Costs relating to contractual rights are capitalised as an asset and are amortised on a straight-line basis over
the period of their expected benefit, being their finite life of one year.
Note 15. Non-current assets - customer acquisition costs
Customer acquisition costs
Consolidated
2019
$'000
1,852
2018
$'000
-
Reconciliations:
Reconciliations of the written down values at the beginning and end of the current financial year are set out
below:
Balance at 1 July 2018 (on adoption of AASB 15)
Additions
Amortisation expense
Closing balance
Consolidated
2019
$'000
2,024
593
(765)
1,852
Class Annual Report 2019 57
Notes to the financial statements continued
Note 15. Non-current assets - customer acquisition costs (continued)
Accounting policy for customer acquisition costs
Customer acquisition costs are capitalised as an asset where such costs are incremental to obtaining a contract
with a customer and are expected to be recovered. Customer acquisition costs are amortised on a straight-line
basis over the estimated contract life of 5 years.
Costs to obtain a contract that would have been incurred regardless of whether the contract was obtained or
which are not otherwise recoverable from a customer are expensed as incurred to profit or loss. Incremental
costs of obtaining a contract where the contract term is less than one year are immediately expensed to profit
or loss.
Note 16. Current liabilities - trade and other payables
Trade payables
Accrued expenses
BAS payable
Consolidated
2019
$'000
597
2,113
736
2018
$'000
841
1,438
750
3,446
3,029
Refer to note 23 for further information on financial instruments.
Accounting policy for trade and other payables
These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial
year and which are unpaid. Due to their short-term nature they are measured at amortised cost and are not
discounted. The amounts are unsecured and are usually paid within 30 days of recognition.
Note 17. Current liabilities - contract liabilities
Contract liabilities
Consolidated
2019
$'000
408
2018
$'000
-
Accounting policy for contract liabilities
Contract liabilities represent the Group's obligation to transfer goods or services to a customer and are
recognised when a customer pays consideration, or when the Group recognises a receivable to reflect its
unconditional right to consideration (whichever is earlier) before the Group has transferred the goods or
services to the customer.
Note 18. Current liabilities - provisions
Annual leave
Long service leave
58 Class Annual Report 2019
Consolidated
2019
$'000
597
208
805
2018
$'000
532
195
727
Note 18. Current liabilities - provisions (continued)
Accounting policy for employee benefits
Short-term employee benefits
Liabilities for wages and salaries, including non-monetary benefits, annual leave and long service leave expected
to be settled wholly within 12 months of the reporting date are measured at the amounts expected to be paid
when the liabilities are settled. The liability for annual leave not expected to be settled within 12 months of the
reporting date but for which employees have a current entitlement is measured as the present value of expected
future payments to be made in respect of services provided by employees up to the reporting date (refer to
the accounting policy in note 19 for further details). Such amounts are presented as current liabilities as the
Group does not have an unconditional right to defer settlement. However, based on past experience, the Group
does not expect all employees to take the full amount of accrued leave or require payment within the next 12
months.
Note 19. Non-current liabilities - provisions
Long service leave
Lease make good
Consolidated
2019
$'000
257
103
360
2018
$'000
307
69
376
Lease make good
The provision represents the present value of the estimated costs to make good the premises leased by the
Group at the end of the respective lease terms.
Movements in provisions
Movements in each class of provision (current and non-current) during the current financial year, other than
employee benefits, are set out below:
Consolidated - 2019
Carrying amount at the start of the year
Additional provisions recognised
Carrying amount at the end of the year
Lease make
good
$'000
69
34
103
Accounting policy for other long-term employee benefits
The liability for long service leave not expected to be settled within 12 months of the reporting date is measured
as the present value of expected future payments to be made in respect of services provided by employees up
to the reporting date. Pursuant to this method, consideration is given to expected future wage and salary levels,
past experience of employee departures and periods of service. Expected future payments are discounted using
market yields at the reporting date on high quality corporate bonds with terms to maturity and currency that
match, as closely as possible, the estimated future cash outflows.
Class Annual Report 2019 59
Notes to the financial statements continued
Note 20. Equity - issued capital
Consolidated
2019
Shares
2018
Shares
2019
$'000
2018
$'000
Ordinary shares - fully paid
Less: Treasury shares
117,662,056 117,662,056
-
(1,565,000)
25,154
(2,647)
25,154
-
116,097,056 117,662,056
22,507
25,154
Movements in ordinary share capital
Details
Date
Shares
$'000
Balance
Shares issued on exercise of options
Shares issued under tax exempt Employee Share Plan for nil
consideration
1 July 2017
23 August 2017
117,515,849
120,000
24,994
160
19 December 2017
26,207
-
Balance
Balance
Movements in treasury shares
Details
Balance
Balance
Purchase of shares by Employee Share Trust
Purchase of shares by Employee Share Trust
Purchase of shares by Employee Share Trust
Purchase of shares by Employee Share Trust
Purchase of shares by Employee Share Trust
Payments from option holders on exercise of options
Less: allocation of shares on exercise of options (Note 15)
30 June 2018
117,662,056
25,154
30 June 2019
117,662,056
25,154
Date
1 July 2017
30 June 2018
October 2018
November 2018
March 2019
April 2019
May 2019
Shares
$'000
-
-
-
(236,198)
(500,000)
(524,305)
(583,794)
(152,781)
-
432,078
-
(457)
(948)
(816)
(994)
(260)
193
635
Balance
30 June 2019
(1,565,000)
(2,647)
Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the
Company in proportion to the number of and amounts paid on the shares held. The fully paid ordinary shares
have no par value and the Company does not have a limited amount of authorised capital.
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a
poll each share shall have one vote.
Share buy-back
There is no current on-market share buy-back.
Treasury shares
Treasury shares relate to purchase of shares by the Employee Share Trust in the open market. The shares
acquired by the Employee Share Trust are used to settle share options/awards on satisfaction of vesting
conditions. The cost of purchase is funded by the Company. Un-allocated shares held by the trust are controlled
by the Company and are recorded as treasury shares representing a deduction against issued capital.
60 Class Annual Report 2019
Note 20. Equity - issued capital (continued)
Capital risk management
The Group's objectives when managing capital is to safeguard its ability to continue as a going concern, so that
it can provide returns for shareholders and benefits for other stakeholders and to maintain an optimum capital
structure and reduce the cost of capital.
Capital is regarded as total equity, as recognised in the statement of financial position, plus net debt. Net debt
is calculated as total borrowings less cash and cash equivalents.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to
shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.
The Group would look to raise capital when an opportunity to invest in a business or company was seen as
value adding relative to the current Company's share price at the time of the investment.
The Group has complied with the capital requirements prescribed under its Australian Financial Service Licence.
The capital risk management policy remains unchanged from the 30 June 2018 Annual Report.
Accounting policy for issued capital
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction,
net of tax, from the proceeds.
Note 21. Equity - reserves
Share-based payments reserve
Employee share acquisition reserve
Acquisition reserve
Consolidated
2019
$'000
2,004
(461)
(53)
2018
$'000
1,759
-
(53)
1,490
1,706
Share-based payments reserve
The reserve is used to recognise the value of equity benefits provided to employees and directors as part of
their remuneration.
Employee share acquisition reserve
The reserve is used to recognise the net cost of acquiring shares allocated by the Employee Share Trust on
exercise of options. Net cost of acquisition comprises the cost of purchasing the shares in the open market less
exercise price received.
Acquisition reserve
The reserve resulted from the acquisition of non-controlling interests in a subsidiary. The acquisition of non-
controlling interests is not a business combination but is an equity transaction between owners. Accordingly,
the difference between consideration paid and fair value of identifiable net assets of the non-controlling interest
has been accounted for in the acquisition reserve.
Class Annual Report 2019 61
Notes to the financial statements continued
Note 21. Equity - reserves (continued)
Movements in reserves
Movements in each class of reserve during the current and previous financial year are set out below:
Consolidated
Balance at 1 July 2017
Share based payment
Balance at 30 June 2018
Share based payment
Transfer from treasury shares
Tax effect on settlement
Share-based
payment
reserve
$'000
Share option
purchase
reserve
$'000
Acquisition
reserve
$'000
1,179
580
1,759
245
-
-
-
-
-
-
(635)
174
Total
$'000
1,126
580
1,706
245
(635)
174
1,490
(53)
-
(53)
-
-
-
(53)
Balance at 30 June 2019
2,004
(461)
Note 22. Equity - dividends
Dividends
Dividends paid during the financial year were as follows:
Final dividend for the year ended 30 June 2018 of 2.5 cents per ordinary share
(2018: 2 cents)
Interim dividend for the year ended 30 June 2019 of 2.5 cents per ordinary share
(2018: 2.5 cents)
Consolidated
2019
$'000
2018
$'000
2,942
2,350
2,934
2,942
5,876
5,292
On 20 August 2019, the directors declared a final dividend for the year ended 30 June 2019 of 2.5 cents per
ordinary share with payment date of 27 September 2019 to eligible shareholders on the register as at
6 September 2019. This equates to a total distribution of $2,902,000, based on the number of ordinary shares
on issue as at 30 June 2019. The financial effect of dividends declared after the reporting date is not reflected
in the 30 June 2019 financial statements and will be recognised in subsequent financial reports.
Franking credits
Franking credits available for subsequent financial years based on a tax rate of
27.5% (2018: 30%)
4,800
2,204
Consolidated
2019
$'000
2018
$'000
The above amounts represent the balance of the franking account as at the end of the financial year, adjusted
for:
●
franking credits that will arise from the payment of the amount of the provision for income tax at the
reporting date
franking debits that will arise from the payment of dividends recognised as a liability at the reporting date
franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date
●
●
62 Class Annual Report 2019
Note 22. Equity - dividends (continued)
Accounting policy for dividends
Dividends are recognised when declared during the financial year and are no longer at the discretion of the
Company.
Note 23. Financial instruments
Financial risk management objectives
The Group's activities expose it to a variety of financial risks: market risk (including foreign currency risk, price
risk and interest rate risk), credit risk and liquidity risk. The Group's overall risk management program focuses
on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial
performance of the Group. The Group uses different methods to measure different types of risk to which it is
exposed. These methods include sensitivity analysis in the case of interest rate, foreign exchange and other
price risks and ageing analysis for credit risk.
Risk management is carried out by senior finance executives ('finance') under policies approved by the Board
of Directors ('the Board'). These policies include identification and analysis of the risk exposure of the Group
and appropriate procedures, controls and risk limits. Finance identifies, evaluates and hedges financial risks
within the Group's operating units.
Market risk
Foreign currency risk
The Group is not exposed to any significant foreign currency risk.
Price risk
The Group is not exposed to any significant price risk.
Interest rate risk
The Group's exposure to interest rate risk is limited to cash at bank and short term deposits.
An official increase/decrease in interest rates of 50 (2018:50) basis points would have an adverse/favourable
effect on profit before tax of $87,000 (2018: $114,000) per annum. The percentage change is based on the
expected volatility of interest rates using market data and analysts' forecasts.
Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial
loss to the Group. The Group has a strict code of credit, including obtaining agency credit information,
confirming references and setting appropriate credit limits. The Group obtains guarantees where appropriate
to mitigate credit risk. The maximum exposure to credit risk at the reporting date to recognised financial assets
is the carrying amount, net of any provisions for impairment of those assets, as disclosed in the statement of
financial position and notes to the financial statements. The Group does not hold any collateral.
The Group has adopted a lifetime expected loss allowance in estimating expected credit losses to trade
receivables through the use of a provisions matrix using fixed rates of credit loss provisioning. These provisions
are considered representative across all customers of the Group based on recent sales experience, historical
collection rates and forward-looking information that is available.
Generally, trade receivables are written off when there is no reasonable expectation of recovery. Indicators of
this include the failure of a debtor to engage in a repayment plan, no active enforcement activity and a failure
to make contractual payments for a period greater than 1 year.
Liquidity risk
Vigilant liquidity risk management requires the Group to maintain sufficient liquid assets (mainly cash and cash
equivalents) to be able to pay debts as and when they become due and payable.
The Group manages liquidity risk by maintaining adequate cash reserves by continuously monitoring actual and
forecast cash flows and matching the maturity profiles of financial assets and liabilities.
Class Annual Report 2019 63
Notes to the financial statements continued
Note 23. Financial instruments (continued)
Remaining contractual maturities
The following tables detail the Group's remaining contractual maturity for its financial instrument liabilities. The
tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest
date on which the financial liabilities are required to be paid. The tables include both interest and principal cash
flows disclosed as remaining contractual maturities and therefore these totals may differ from their carrying
amount in the statement of financial position.
Consolidated - 2019
Non-derivatives
Non-interest bearing
Trade payables
Total non-derivatives
Consolidated - 2018
Non-derivatives
Non-interest bearing
Trade payables
Total non-derivatives
1 year or less
$'000
Between 1 and
2 years
$'000
Between 2
and 5 years
$'000
Over 5 years
$'000
Remaining
contractual
maturities
$'000
597
597
-
-
-
-
-
-
597
597
1 year or less
$'000
Between 1 and
2 years
$'000
Between 2
and 5 years
$'000
Over 5 years
$'000
Remaining
contractual
maturities
$'000
841
841
-
-
-
-
-
-
841
841
The cash flows in the maturity analysis above are not expected to occur significantly earlier than contractually
disclosed above.
Note 24. Fair value measurement
The following table details the Group's assets, measured or disclosed at fair value, using a three level hierarchy,
based on the lowest level of input that is significant to the entire fair value measurement, being:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access
at the measurement date
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability,
either directly or indirectly
Level 3: Unobservable inputs for the asset or liability
Consolidated - 2019
Level 1
$'000
Level 2
$'000
Level 3
$'000
Total
$'000
Assets
Convertible notes at fair value through profit or loss
Total assets
-
-
-
-
2,028
2,028
2,028
2,028
There were no transfers between levels during the financial year.
There were no assets and liabilities measured at fair value for the year ended 30 June 2018.
Unless otherwise stated, the carrying amounts of financial instruments reflect their fair value. The carrying
amounts of trade and other receivables and trade and other payables approximate their fair values due to their
short term nature. The fair value of financial liabilities is estimated by discounting the remaining contractual
maturities at the current market interest rate that is available for similar financial liabilities.
64 Class Annual Report 2019
Note 24. Fair value measurement (continued)
Valuation techniques for fair value measurements categorised within level 2 and level 3
The valuation technique used for fair value measurements categorised within level 3 was based upon a
Discounted Cash Flow model and revenue multiple model using comparable revenue multiples in determining
the transaction price. The convertible notes measured within this category are held for the purpose of
converting into equity of Philo Capital Holdings in the future. With the transaction recently completed and
issuance of the Convertible Note close to 30 June 2019 and no significant changes in the Company, the fair
value has been assessed as the value of the trnsaction executed. Changes in fair value in future years will be
assessed based upon forecast cash flows, revenue and Funds Under Administration (‘FUA’) targets.
Level 3 assets and liabilities
Movements in level 3 assets and liabilities during the current and previous financial year are set out below:
Consolidated
Balance at 1 July 2017
Balance at 30 June 2018
Additions
Gains recognised in profit or loss
Balance at 30 June 2019
Convertible
notes at fair
value through
profit or
loss
$'000
-
-
2,000
28
2,028
Accounting policy for fair value measurement
When an asset or liability, financial or non-financial, is measured at fair value for recognition or disclosure
purposes, the fair value is based on the price that would be received to sell an asset or paid to transfer a liability
in an orderly transaction between market participants at the measurement date; and assumes that the
transaction will take place either: in the principal market; or in the absence of a principal market, in the most
advantageous market.
Fair value is measured using the assumptions that market participants would use when pricing the asset or
liability, assuming they act in their economic best interests. Valuation techniques that are appropriate in the
circumstances and for which sufficient data are available to measure fair value, are used, maximising the use of
relevant observable inputs and minimising the use of unobservable inputs.
Assets and liabilities measured at fair value are classified into three levels, using a fair value hierarchy that
reflects the significance of the inputs used in making the measurements. Classifications are reviewed at each
reporting date and transfers between levels are determined based on a reassessment of the lowest level of
input that is significant to the fair value measurement.
For recurring and non-recurring fair value measurements, external valuers may be used when internal expertise
is either not available or when the valuation is deemed to be significant. External valuers are selected based on
market knowledge and reputation. Where there is a significant change in fair value of an asset or liability from
one period to another, an analysis is undertaken, which includes a verification of the major inputs applied in the
latest valuation and a comparison, where applicable, with external sources of data.
Class Annual Report 2019 65
Notes to the financial statements continued
Note 25. Key management personnel disclosures
Compensation
The aggregate compensation made to directors and other members of key management personnel of the Group
is set out below:
Short-term employee benefits
Post-employment benefits
Long-term benefits
Share-based payments
Note 26. Remuneration of auditors
Consolidated
2019
$
2018
$
1,357,359
86,044
(48,290)
168,503
1,104,555
87,199
17,974
147,686
1,563,616
1,357,414
During the financial year the following fees were paid or payable for services provided by Grant Thornton, the
auditor of the Company:
Audit services - Grant Thornton
Audit or review of the financial statements
Other services - Grant Thornton
Tax compliance services
Taxation advisory services
Consolidated
2019
$
2018
$
81,906
81,542
18,200
-
23,249
14,800
18,200
38,049
100,106
119,591
Note 27. Contingent liabilities
The Group has given bank guarantees as at 30 June 2019 of $150,000 (2018: $150,000) to various landlords.
66 Class Annual Report 2019
Note 28. Commitments
Convertible note commitments
Where performance milestones have been achieved, additional amounts will be payable to Philo Capital
Holdings on future convertible note subscriptions. Details of this transaction are included within note 12.
Lease commitments - operating
Committed at the reporting date but not recognised as liabilities, payable:
Within one year
One to five years
Consolidated
2019
$'000
2018
$'000
736
1,473
724
1,449
2,209
2,173
Operating lease commitments relate to leases of office premises under non-cancellable operating leases
expiring within three years with options to extend for three years. The leases have various escalation clauses.
On renewal, the terms of the leases are renegotiated.
Note 29. Related party transactions
Parent entity
Class Limited is the parent entity.
Subsidiaries
Interests in subsidiaries are set out in note 31.
Key management personnel
Disclosures relating to key management personnel are set out in note 25 and the remuneration report included
in the directors' report.
Transactions with related parties
There were no transactions with related parties during the current and previous financial year.
Note 30. Parent entity information
Set out below is the supplementary information about the parent entity.
Statement of profit or loss and other comprehensive income
Profit after income tax
Total comprehensive income
2019
$'000
Parent
2018
$'000
6,974
6,474
6,974
6,474
Class Annual Report 2019 67
Notes to the financial statements continued
Note 30. Parent entity information (continued)
Statement of financial position
Total current assets
Total assets
Total current liabilities
Total liabilities
Equity
Issued capital
Share-based payments reserve
Employee share acquisition reserve
Retained earnings
Total equity
2019
$'000
Parent
2018
$'000
9,726
15,741
27,258
29,366
3,104
3,899
4,788
5,131
22,507
2,004
(461)
(1,580)
25,154
1,759
-
(2,678)
22,470
24,235
Guarantees entered into by the parent entity in relation to the debts of its subsidiaries
The parent entity had no guarantees in relation to the debts of its subsidiaries as at 30 June 2019 and 30 June
2018.
Contingent liabilities
The parent entity had contingent liabilities of $150,000 as at 30 June 2019 (2018: $150,000).
Capital commitments - Property, plant and equipment
The parent entity had no capital commitments for property, plant and equipment as at 30 June 2019 and 30
June 2018.
Significant accounting policies
The accounting policies of the parent entity are consistent with those of the Group, as disclosed in note 2,
except for the following:
●
●
Investments in subsidiaries are accounted for at cost, less any impairment, in the parent entity.
Dividends received from subsidiaries are recognised as other income by the parent entity and its receipt
may be an indicator of an impairment of the investment.
Note 31. Interests in subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries
in accordance with the accounting policy described in note 2:
Name
Principal place of business /
Country of incorporation
Ownership interest
2018
%
2019
%
Class Super Pty Limited
Class Investment Reporter Pty Ltd
Super IP Incentive Pty Ltd*
Australia
Australia
Australia
100%
100%
0%
100%
100%
100%
*Super IP Incentive Pty Ltd was voluntarily wound up on 8 March 2019.
68 Class Annual Report 2019
Note 32. Reconciliation of profit after income tax to net cash from operating activities
Profit after income tax expense for the year
Adjustments for:
Depreciation and amortisation
Net loss on disposal of property, plant and equipment
Net fair value gain on investments
Share-based payments
Change in operating assets and liabilities:
Increase in trade and other receivables
Increase in income tax refund due
Increase in prepayments
Increase in other operating assets
Increase in trade and other payables
Decrease in contract liabilities
Decrease in provision for income tax
Increase in deferred tax liabilities
Increase in employee benefits
Increase in other provisions
Consolidated
2019
$'000
2018
$'000
8,975
8,698
5,744
10
(28)
245
(468)
(697)
(93)
(593)
417
(86)
(1,380)
816
28
34
3,736
33
-
580
(109)
-
(2)
-
645
-
(385)
184
204
8
Net cash from operating activities
12,924
13,592
Note 33. Earnings per share
Consolidated
2019
$'000
2018
$'000
Profit after income tax attributable to the owners of Class Limited
8,975
8,698
Weighted average number of ordinary shares used in calculating basic earnings
per share
Adjustments for calculation of diluted earnings per share:
Options over ordinary shares
117,152,294
117,632,354
765,603
1,618,087
Weighted average number of ordinary shares used in calculating diluted earnings
per share
117,917,897
119,250,441
Number
Number
Basic earnings per share
Diluted earnings per share
Accounting policy for earnings per share
Cents
Cents
7.66
7.61
7.39
7.29
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to the owners of Class Limited,
excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary
shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the
financial year.
Class Annual Report 2019 69
Notes to the financial statements continued
Note 33. Earnings per share (continued)
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into
account the after income tax effect of interest and other financing costs associated with dilutive potential
ordinary shares and the weighted average number of shares assumed to have been issued for no consideration
in relation to dilutive potential ordinary shares.
Note 34. Share-based payments
The Group has established the Class Limited Tax Exempt Employee Share Plan ('Tax Exempt ESP') to assist the
Group in rewarding employees by providing them with the opportunity to own shares in the Company. The Tax
Exempt ESP enables the Group to issue shares to qualifying employees on a non-discriminatory basis so as to
permit the application of section 83A-35 of the Income Tax Assessment Act 1997.
The Group had previously established the Class Limited Employee Share Option Plan ('ESOP') as a long term
incentive plan ('LTIP') to assist the Group in retaining and attracting current and future employees by providing
them with the opportunity to allow them to acquire options or rights as part of the remuneration for their
services. The ESOP was by invitation of the Board (or a committee of the Board).
At the 2018 AGM, the new Performance Rights and Deferred Rights Plan was approved by shareholders. The
plan is by invitation of the Board (or a committee of the Board).
The share-based payment expense for the year was $245,000 (2018: $580,000). 613,291 performance rights
were granted during the year ended 30 June 2019 (2018: 1,168,000 options).
Set out below is a summary of the options granted under the plan:
2019
Grant date
Expiry date
30/09/2015
30/09/2015
29/06/2016
24/07/2017
30/09/2019
30/09/2020
30/06/2021
15/03/2022
Exercise
price
Balance at
the start of
the year
$1.10
$1.33
$3.81
$3.99
1,948,991
938,506
1,028,202
1,148,000
5,063,699
Granted
Exercised
Expired/
forfeited/
other
Balance at
the end of
the year
-
-
-
-
-
(484,377)
(145,000)
-
-
(629,377)
1,464,614
-
793,506
-
708,202
(320,000)
(283,333)
864,667
(603,333) 3,830,989
Weighted average exercise price
$2.35
$0.00
$1.15
$3.89
$2.30
2018
Grant date
Expiry date
30/09/2015
30/09/2015
29/06/2016
24/07/2017
30/09/2019
30/09/2020
30/06/2021
15/03/2022
Exercise
price
Balance at
the start of
the year
Granted
Exercised
Expired/
forfeited/
other
Balance at
the end of
the year
$1.10
$1.33
$3.81
$3.99
1,948,991
1,058,506
1,058,202
-
4,065,699
-
-
-
1,168,000
1,168,000
-
(120,000)
-
-
(120,000)
1,948,991
-
938,506
-
1,028,202
(30,000)
(20,000)
1,148,000
(50,000) 5,063,699
Weighted average exercise price
$1.87
$3.99
$1.33
$3.88
$2.35
The weighted average share price during the financial year was $1.73 (2018:$2.81).
The weighted average remaining contractual life of options outstanding at the end of the financial year was 1.4
years (2018: 2 years).
3,348,986 options outstanding as at 30 June 2019 are vested and exercisable (30 June 2018: 1,948,991).
70 Class Annual Report 2019
Note 34. Share-based payments (continued)
Performance rights
During the year, the Group granted 613,291 performance rights for nil cash consideration. The performance
period is generally for a 3 year period between 1 July 2018 to 30 June 2021. Vesting of the performance rights
is subject to meeting predetermined market and non-market conditions including Total Shareholder Return
('TSR'), revenue and EPS growth targets over the performance period.
Set out below are summaries of performance rights granted under the plan:
2019
Grant date
Expiry date
01/11/2018
14/05/2019
14/05/2019
30/06/2021
31/10/2019
13/05/2021
Exercise
price
$0.00
$0.00
$0.00
Balance at
the start of
the year
Granted
Exercised
Expired/
forfeited/
other
Balance at
the end of
the year
-
-
-
-
313,291
100,000
200,000
613,291
-
-
-
-
(144,627)
-
-
(144,627)
168,664
100,000
200,000
468,664
Performance rights vested and exercisable as at 30 June 2019 Nil. The weighted average remaining contractual
life of performance rights outstanding at the end of the financial year was 1.6 years.
For the performance rights granted during the current financial year, the valuation model inputs used to
determine the fair value at the grant date, are as follows:
Grant date
Expiry date
Share price
at grant date
Exercise
price
Expected
volatility
Dividend
yield
Risk-free
Fair value
interest rate at grant date
01/11/2018
14/05/2019
14/05/2019
30/06/2021
31/10/2019
13/05/2021
$1.90
$1.66
$1.66
$0.00
$0.00
$0.00
39.16%
39.16%
37.00%
3.16%
3.16%
2.62%
2.00%
2.00%
1.24%
$1.723
$1.625
$0.390
300,000 performance rights granted on 14 May 2019 is subject to approval of the shareholders at the next
Annual General Meeting.
Accounting policy for share-based payments
Equity-settled share-based compensation benefits are provided to employees.
Equity-settled transactions are awards of shares, or options over shares, that are provided to employees in
exchange for the rendering of services.
The cost of equity-settled transactions is measured at fair value on grant date. Fair value is determined using
either the Binomial or Black-Scholes option pricing model that takes into account the exercise price, the term
of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying
share, the expected dividend yield and the risk free interest rate for the term of the option, together with non-
vesting conditions that do not determine whether the Group receives the services that entitle the employees to
receive payment. No account is taken of any other vesting conditions.
The cost of equity-settled transactions is recognised as an expense with a corresponding increase in equity
over the vesting period. The cumulative charge to profit or loss is calculated based on the grant date fair value
of the award, the best estimate of the number of awards that are likely to vest and the expired portion of the
vesting period. The amount recognised in profit or loss for the period is the cumulative amount calculated at
each reporting date less amounts already recognised in previous periods.
If equity-settled awards are modified, as a minimum an expense is recognised as if the modification has not
been made. An additional expense is recognised, over the remaining vesting period, for any modification that
increases the total fair value of the share-based compensation benefit as at the date of modification.
Class Annual Report 2019 71
Notes to the financial statements continued
Note 34. Share-based payments (continued)
If the non-vesting condition is within the control of the Group or employee, the failure to satisfy the condition
is treated as a cancellation. If the condition is not within the control of the Group or employee and is not satisfied
during the vesting period, any remaining expense for the award is recognised over the remaining vesting period,
unless the award is forfeited.
If equity-settled awards are cancelled, it is treated as if it has vested on the date of cancellation, and any
remaining expense is recognised immediately. If a new replacement award is substituted for the cancelled
award, the cancelled and new award is treated as if they were a modification.
Note 35. Events after the reporting period
Apart from the dividend declared as disclosed in note 22, no other matter or circumstance has arisen since 30
June 2019 that has significantly affected, or may significantly affect the Group's operations, the results of those
operations, or the Group's state of affairs in future financial years.
Note 36. Other accounting policies
Principles of consolidation
The consolidated financial statements incorporate the assets and liabilities of Class Limited ('Company' or
'parent entity') as at 30 June 2019 and the results of all subsidiaries for the year then ended. Class Limited and
its subsidiaries together are referred to in these financial statements as the 'Group'.
Subsidiaries are all those entities over which the Group has control. The Group controls an entity when the
Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to
affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated
from the date on which control is transferred to the Group. They are de-consolidated from the date that control
ceases.
Intercompany transactions, balances and unrealised gains on transactions between entities in the Group are
eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of
the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure
consistency with the policies adopted by the Group.
The acquisition of subsidiaries is accounted for using the acquisition method of accounting. A change in
ownership interest, without the loss of control, is accounted for as an equity transaction, where the difference
between the consideration transferred and the book value of the share of the non-controlling interest acquired
is recognised directly in equity attributable to the parent.
Where the Group loses control over a subsidiary, it derecognises the assets including goodwill, liabilities and
non-controlling interests in the subsidiary together with any cumulative translation differences recognised in
equity. The Group recognises the fair value of the consideration received and the fair value of any investment
retained together with any gain or loss in profit or loss.
Current and non-current classification
Assets and liabilities are presented in the statement of financial position based on current and non-current
classification.
An asset is classified as current when: it is either expected to be realised or intended to be sold or consumed in
the Group's normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised
within 12 months after the reporting period; or the asset is cash or cash equivalent unless restricted from being
exchanged or used to settle a liability for at least 12 months after the reporting period. All other assets are
classified as non-current.
72 Class Annual Report 2019
Note 36. Other accounting policies (continued)
A liability is classified as current when: it is either expected to be settled in the Group's normal operating cycle;
it is held primarily for the purpose of trading; it is due to be settled within 12 months after the reporting period;
or there is no unconditional right to defer the settlement of the liability for at least 12 months after the reporting
period. All other liabilities are classified as non-current.
Deferred tax assets and liabilities are always classified as non-current.
Leases
The determination of whether an arrangement is or contains a lease is based on the substance of the
arrangement and requires an assessment of whether the fulfilment of the arrangement is dependent on the use
of a specific asset or assets and the arrangement conveys a right to use the asset.
A distinction is made between finance leases, which effectively transfer from the lessor to the lessee
substantially all the risks and benefits incidental to the ownership of leased assets, and operating leases, under
which the lessor effectively retains substantially all such risks and benefits.
Finance leases are capitalised. A lease asset and liability are established at the fair value of the leased assets, or
if lower, the present value of minimum lease payments. Lease payments are allocated between the principal
component of the lease liability and the finance costs, so as to achieve a constant rate of interest on the
remaining balance of the liability.
Leased assets acquired under a finance lease are depreciated over the asset's useful life or over the shorter of
the asset's useful life and the lease term if there is no reasonable certainty that the Group will obtain ownership
at the end of the lease term.
Operating lease payments, net of any incentives received from the lessor, are charged to profit or loss on a
straight-line basis over the term of the lease.
Impairment of non-financial assets
Other intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually
for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired.
Other non-financial assets are reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which
the asset's carrying amount exceeds its recoverable amount.
Recoverable amount is the higher of an asset's fair value less costs of disposal and value-in-use. The value-in-
use is the present value of the estimated future cash flows relating to the asset using a pre-tax discount rate
specific to the asset or cash-generating unit to which the asset belongs. Assets that do not have independent
cash flows are grouped together to form a cash-generating unit.
Goods and Services Tax ('GST') and other similar taxes
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is
not recoverable from the tax authority. In this case it is recognised as part of the cost of the acquisition of the
asset or as part of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of
GST recoverable from, or payable to, the tax authority is included in other receivables or other payables in the
statement of financial position.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing
activities which are recoverable from, or payable to the tax authority, are presented as operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the
tax authority.
New Accounting Standards and Interpretations not yet mandatory or early adopted
Australian Accounting Standards and Interpretations that have recently been issued or amended but are not
yet mandatory, have not been early adopted by the Group for the annual reporting period ended 30 June 2019.
The Group's assessment of the impact of these new or amended Accounting Standards and Interpretations,
most relevant to the Group, are set out below.
Class Annual Report 2019 73
Notes to the financial statements continued
Note 36. Other accounting policies (continued)
AASB 16 Leases
This standard is applicable to annual reporting periods beginning on or after 1 January 2019. For lessee
accounting, the standard eliminates the ‘operating lease’ and ‘finance lease’ classification required by AASB 117
‘Leases’. Subject to exceptions, a ‘right-of-use’ asset will be capitalised in the statement of financial position,
measured as the present value of the unavoidable future lease payments to be made over the lease term. The
exceptions relate to short-term leases of 12 months or less and leases of low-value assets (such as
personal computers and office furniture) where an accounting policy choice exists whereby either a ‘right-of-
use’ asset is recognised or lease payments are expensed to profit or loss as incurred. A liability
corresponding to the capitalised lease will also be recognised, adjusted for lease prepayments, lease
incentives received, initial direct costs incurred and an estimate of any future restoration, removal or
dismantling costs. Straight-line operating lease expense recognition will be replaced with a depreciation
charge for the leased asset (included in operating costs) and an interest expense on the recognised lease
liability (included in finance costs). For classification within the statement of cash flows, the lease
payments will be separated into both a principal (financing activities) and interest (either operating or
financing activities) components. For lessor accounting, the standard does not substantially change how a
lessor accounts for leases. The impact of adoption of this standard as at 1 July 2019, using the modified
retrospective approach, will result in the recognition of a right-of-use asset of approximately $1,491,144 with
a corresponding increase in lease liability, in respect of the Group’s operating leases over premises. Refer to
note 28 for undiscounted commitments in relation to non-cancellable operating leases as at 30 June 2019.
New Conceptual Framework for Financial Reporting
A revised Conceptual Framework for Financial Reporting is applicable for annual reporting periods beginning
on or after 1 January 2020. This release impacts for-profit private sector entities that have public accountability
that are required by legislation to comply with Australian Accounting Standards and other for-profit
entities that voluntarily elect to apply the Conceptual Framework. Phase 2 of the framework is yet to be
released which will impact for-profit private sector entities. The application of new definition and recognition
criteria as well as new guidance on measurement will result
in amendments to several accounting
standards. The issue of AASB 2019-1 Amendments to Australian Accounting Standards – References to
the Conceptual Framework, also applicable from 1 January 2020, includes such amendments. Where the
Group has relied on the conceptual framework in determining its accounting policies for transactions, events or
conditions that are not otherwise dealt with under Australian Accounting Standards, the Group may need to
revisit such policies. The Group will apply the revised conceptual framework from 1 July 2020 and there is not
expected to be any material impact.
74 Class Annual Report 2019
Directors’ declaration
Class Limited
Corporate directory
30 June 2019
In the directors' opinion:
●
●
●
●
the attached financial statements and notes comply with the Corporations Act 2001, the Accounting
Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements;
the attached financial statements and notes comply with International Financial Reporting Standards as
issued by the International Accounting Standards Board as described in note 2 to the financial statements;
the attached financial statements and notes give a true and fair view of the Group's financial position as at
30 June 2019 and of its performance for the financial year ended on that date; and
there are reasonable grounds to believe that the Company will be able to pay its debts as and when they
become due and payable.
The directors have been given the declarations required by section 295A of the Corporations Act 2001.
Signed in accordance with a resolution of directors made pursuant to section 295(5)(a) of the Corporations Act
2001.
On behalf of the directors
___________________________
Matthew Quinn
Chairman
20 August 2019
Sydney
Class Annual Report 2019 75
76 Class Annual Report 2019
Header 1POSITIONAL Grant Thornton Audit Pty Ltd ACN 130 913 594 a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389 ‘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. www.grantthornton.com.au Level 17, 383 Kent Street Sydney NSW 2000 Correspondence to: Locked Bag Q800 QVB Post Office Sydney NSW 1230 T +61 2 8297 2400 F +61 2 9299 4445 E info.nsw@au.gt.com W www.grantthornton.com.au Independent Auditor’s Report To the Members of Class Limited Report on the audit of the financial report Opinion We have audited the financial report of Class Limited (the Company) and its subsidiaries (the Group), which comprises the consolidated statement of financial position as at 30 June 2019, 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 Company is in accordance with the Corporations Act 2001, including: a Giving a true and fair view of the Company’s financial position as at 30 June 2019 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. 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 Measurement and recognition of capitalised development costs – Note 14 Non-current assets - intangibles The Group capitalises costs incurred in the development of its software. These costs are then amortised over the estimated useful life of the software. The Group’s processes for calculating the value of internally developed software involves judgement as it includes estimating the time which staff spend developing software and determining the value attributable to that time. The Group’s capitalised costs and its accounting policy for intangible assets are disclosed in Note 14 to the financial statements. Our procedures included, amongst others: agreeing a sample of internal salary costs and external contractor invoices capitalised to supporting documentation and assessing those amounts against the recognition criteria of AASB 138; assessing the company’s accounting policy for software development costs for adherence to AASB 138; assessing the consistency of the capitalisation methodology applied by the Group in comparison to the prior reporting period; considering the reasonableness of useful lives applied to amortise intangible assets; and assessing the adequacy of disclosures included in the financial report for adherence to AASB 138. 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 2019, 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 accordingly 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 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. Class Annual Report 2019 77
Grant Thornton Audit Pty Ltd ACN 130 913 594 a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389 ‘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. www.grantthornton.com.au Level 17, 383 Kent Street Sydney NSW 2000 Correspondence to: Locked Bag Q800 QVB Post Office Sydney NSW 1230 T +61 2 8297 2400 F +61 2 9299 4445 E info.nsw@au.gt.com W www.grantthornton.com.au Independent Auditor’s Report To the Members of Class Limited Report on the audit of the financial report Opinion We have audited the financial report of Class Limited (the Company) and its subsidiaries (the Group), which comprises the consolidated statement of financial position as at 30 June 2019, 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 Company is in accordance with the Corporations Act 2001, including: a Giving a true and fair view of the Company’s financial position as at 30 June 2019 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. 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 Measurement and recognition of capitalised development costs – Note 14 Non-current assets - intangibles The Group capitalises costs incurred in the development of its software. These costs are then amortised over the estimated useful life of the software. The Group’s processes for calculating the value of internally developed software involves judgement as it includes estimating the time which staff spend developing software and determining the value attributable to that time. The Group’s capitalised costs and its accounting policy for intangible assets are disclosed in Note 14 to the financial statements. Our procedures included, amongst others: agreeing a sample of internal salary costs and external contractor invoices capitalised to supporting documentation and assessing those amounts against the recognition criteria of AASB 138; assessing the company’s accounting policy for software development costs for adherence to AASB 138; assessing the consistency of the capitalisation methodology applied by the Group in comparison to the prior reporting period; considering the reasonableness of useful lives applied to amortise intangible assets; and assessing the adequacy of disclosures included in the financial report for adherence to AASB 138. 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 2019, 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 accordingly 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 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. Independent Auditor’s Report continued
78 Class Annual Report 2019
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 18 to 36 of the directors’ report for the year ended 30 June 2019. In our opinion, the Remuneration Report of Class Limited, for the year ended 30 June 2019, 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 M R Leivesley Partner – Audit & Assurance Sydney, 20 August 2019 Shareholder information
The shareholder information set out below was applicable as at 1 August 2019.
Distribution of equitable securities
Analysis of the number of equitable security holders by the size of holding:
Number of holders of
ordinary shares
Number of holders of options
over ordinary shares
Number of holders of
performance rights over
ordinary shares
100,001 and Over
10,001 to 100,000
5,001 to 10,000
1,001 to 5,000
1 to 1,000
Total
Holding less than a marketable parcel
Equity security holders
63
565
651
1,837
1,430
4,546
403
4
22
10
–
–
36
–
The names of the twenty largest security holders of quoted equity securities are listed below:
Rank
Name
1
2
3
4
5
6
7
8
9
10
11
12
12
13
14
15
16
17
18
19
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
TRONCELL PTY LTD
NATIONAL NOMINEES LIMITED
TRONCELL PTY LTD
CITICORP NOMINEES PTY LIMITED
ARMELEK PTY LTD
MR JOSEPH CHARLES CAMUGLIA & MRS KIRSTEN INGRET CAMUGLIA
BNP PARIBAS NOMS PTY LTD
BNP PARIBAS NOMINEES PTY LTD
PACIFIC CUSTODIANS PTY LIMITED
MR PETER DORIAN KIBBLE & MRS LORRAINE LESTER
MR RODERICK KIBBLE & MRS MICHELLE KIBBLE
FYLPANE PTY LTD
MR KEITH FINKELDE & MRS ANNE FINKELDE & MR WAYNE FINKELDE
MR KEVIN BUNGARD
MR RAJARSHI MANU RAY
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED-GSCO ECA
MR KEVIN BUNGARD & MRS STEPHANIE ANNE BUNGARD
MR KEITH REX FINKELDE & MRS ANNE MARGARET FINKELDE & MR WAYNE TREVOR
FINKELDE
01 Aug 2019
25,409,887
9,456,634
8,870,944
8,536,765
5,458,000
4,398,839
3,300,000
2,650,000
1,722,984
1,623,498
1,565,000
1,501,652
1,501,652
1,483,707
1,459,427
1,023,135
1,000,000
944,687
882,437
535,277
–
3
–
–
–
3
–
%IC
21.60
8.04
7.54
7.26
4.64
3.74
2.80
2.25
1.46
1.38
1.33
1.28
1.28
1.26
1.24
0.87
0.85
0.80
0.75
0.45
20
NEWECONOMY COM AU NOMINEES PTY LIMITED
476,415
83,800,940
0.40
71.22
Class Annual Report 2019 79
Shareholder information continued
Unquoted equity securities
Number on issue
Number of holders
Options over ordinary shares
Performance Rights over ordinary shares
Performance Rights over ordinary shares
subject to shareholder approval
3,830,989
168,664
300,000
36
3
1
Substantial holders
Spheria Asset Management Pty Ltd advised that as of 15 May 2019, it and its associates had an interest in 22,611,526
shares, which represented 19.22% of Class’ issued capital at that time.
Pinnacle Investment Management Group Limited (and its subsidiaries) advised that as of 2 August 2018, it and its
associates had an interest in 18,834,272 shares, which represented 16.01% of Class’ issued capital at that time.
Troncell Pty Limited, Roderick Kibble, Peter Dorian Kibble, Michelle Kibble & Lorraine Lester advised that as of 21
September 2017, they and their associates had an interest in 18,239,216 shares, which represented 15.51% of Class’
issued capital at that time.
Voting rights
The voting rights attached to ordinary shares are set out below:
Ordinary shares
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll
each share shall have one vote.
There are no other classes of equity securities.
Restricted securities
Class
Expiry Date
Ordinary shares
20 December 2019 or the day after the date which the shareholder ceases to be an employee
Ordinary shares
19 December 2020 or the day after the date which the shareholder ceases to be an employee
Ordinary shares
18 December 2021 or the day after the date which the shareholder ceases to be an employee
Number of
shares
13,880
19,386
45,156
78,149
80 Class Annual Report 2019
Corporate directory 30 June 2019
Auditor
Grant Thornton Audit Pty Ltd
Level 17
383 Kent Street
Sydney NSW 2000
Solicitors
Addisons
Level 12
60 Carrington Street
Sydney NSW 2000
Ph: 02 8915 1000
Stock exchange listing
Class Limited shares are listed on the Australian
Securities Exchange (ASX code: CL1)
Website
www.class.com.au
Corporate Governance Statement
The Corporate Governance Statement which was
approved at the same time as the Annual Report can
be found at https://investors.class.com.au/Investors/
Directors
Matthew Quinn - Chairman
Andrew Russell
Kathryn Foster
Rajarshi Ray
Nicolette Rubinsztein
Christopher Cuffe
Company Secretary
Glenn Day
Notice of Annual General Meeting
The details of the Annual General Meeting
of Class Limited are:
Hilton Sydney
Level 1, 488 George Street
Sydney NSW 2000
Monday 15 October 2018 at 3:00pm
Registered office
Level 3
228 Pitt Street
Sydney NSW 2000
Ph: 1300 851 057
Principal place of business
Level 3
228 Pitt Street
Sydney NSW 2000
Ph: 1300 851 057
Share register
Link Market Services Limited
Level 12
680 George Street
Sydney NSW 2000
Ph: 1300 554 474
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CLASS LIMITED
ACN 116 802 058
class.com.au