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 2020
For the year ended 30 June 2019
2. Results for announcement to the market
The Group has adopted Accounting Standard AASB 16 'Leases' for the year ended 30 June 2020 using the modified retrospective
approach and as such the comparatives have not been restated.
Revenues from ordinary activities
up
14.0% to
Profit from ordinary activities after tax attributable to the owners of Class
Limited
Profit for the year attributable to the owners of Class Limited
down
down
23.8% to
23.8% to
Dividends
$'000
44,023
6,840
6,840
Final dividend for the year ended 30 June 2019 paid on 17 September 2019
Interim dividend for the year ended 30 June 2020 paid on 27 March 2020
Amount per
security
Cents
Franked
amount per
security
Cents
2.50
2.50
2.50
2.50
On 13 August 2020, the Directors declared a fully franked final dividend for the year ended 30 June 2020 of 2.50 cents per ordinary
share with record date of 21 August 2020 and payment date of 18 September 2020.
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
period
Cents
Previous
period
Cents
7.77
19.18
The net tangible assets per ordinary share is calculated based on 122,307,803 (2019: 116,097,056) ordinary shares on issue as at
30 June 2020 excluding 450,604 (2019: 1,565,000) treasury shares. Refer to note 21 of the Financial Report for further details.
4. Control gained over entities
On 31 January 2020, the Group acquired 100% of the shares in NowInfinity 3505 Pty Ltd. Refer to note 33 of the Financial Report
for further details.
Class Limited
Appendix 4E
Preliminary final report
5. 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.
6. Attachments
Details of attachments (if any):
The Annual Report of Class Limited for the year ended 30 June 2020 is attached.
7. Signed
As authorised by the Board of Directors
Signed ___________________________
Date: 13 August 2020
Matthew Quinn
Chairman
Sydney
2020
Annual
Report
We will reimagine a simpler,
more automated world for our
customers and they will love it!
CLASS 2020 ANNUAL REPORT
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2
INTRODUCTION Table of Contents
Message from the Chairman
CEO letter
Strategy update
Our mission
Our WoW
Class rebrands
NowInfinity acquisition
Our Executive Leadership team
Our people
Our COVID-19 response plan
Financial Report 2020
Directors' report
Auditor’s independence declaration
Financial statements
Notes to the financial statements
Directors' declaration
Independent auditor's report
Shareholder information
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6
8
10
12
14
16
18
20
22
26
58
60
65
104
105
109
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INTRODUCTIONCLASS 2020 ANNUAL REPORT CLASS 2020 ANNUAL REPORT
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4
INTRODUCTION MESSAGE FROM THE CHAIRMAN
2020 ANNUAL REPORT
Message from
the Chairman
Matthew Quinn
I am pleased to report that FY20 has been
a successful and transformational year for Class.
The three-year Reimagination strategy – launched
by our new CEO, Andrew Russell, in 2019 – is taking
shape and the board is very satisfied with its
progress in the first year.
Robert Bazzani was formerly a partner with KPMG,
where he served in multiple leadership roles,
including as a member of its National Executive
Committee. He has significant hands-on
experience in strategy and management,
governance, accounting and law.
In FY20, Class delivered strong revenue growth of
15% and a record EBITDA result, while investing
heavily in product development and in improved
technology.
With the development of our new product,
Class Trust, and our move into the document
automation market, facilitated by the acquisition
of NowInfinity, our total addressable market has
expanded considerably – positioning the business
for accelerated performance in the coming years.
Furthermore, even with the increased investment
in the business, we are able to maintain payment
of a dividend of five cents per share.
Acquisitions and expansion
The NowInfinity acquisition is the first step in
evolving Class to an integrated multi-product
offering to our professional services customers,
thus reducing our sole reliance on the SMSF
market. The business has been integrated well into
Class and we look forward to growing NowInfinity
into a market-leading position in this new segment.
A fresh perspective
During FY20 we appointed two new independent
non-executive directors, Simon Martin and Robert
Bazzani, who both bring a wealth of experience
and expertise.
Simon Martin has more than 30 years’ experience
in finance, including as the CFO of MYOB, as well
as significant operational experience in software
companies in Australia and internationally.
Chris Cuffe and Rajarshi Ray retired as directors
in FY20 and, on behalf of the board, I would like
to thank both Chris and Raj for their contribution
to Class. For Raj, this included a term as the CEO
so he has been an important part of the Class
business for many years.
Leadership at Class
This year has seen the rejuvenation of the
executive leadership team (ELT) at Class. The
Reimagination strategy required the addition of
new, more experienced executives, and the board
is confident that the new ELT has the capability
to build Class into a much larger business.
In closing
I would like to thank all Class employees and my
fellow board members for what we have achieved
together in FY20. The board feels that Class is
well positioned to create sustainable revenue
and earnings growth as a leading Australian
technology business.
Together with the board, I would like to thank
our shareholders for your ongoing support.
We look forward to creating value for you in
the coming years.
M A T T H E W Q U I N N
Chairman of the Board
5
CLASS 2020 ANNUAL REPORT CEO LETTER
CLASS 2020 ANNUAL REPORT
CEO
letter
Andrew Russell
A year of Reimagination
To my fellow shareholders, I feel privileged to be
a part of the Class team and to lead the business
through our Reimagination strategy, which will
deliver transformation and accelerated growth
to Class over the coming three years and beyond.
It is with excitement about both our progress to date
and our plans for the future that we share with you
the Class Limited Annual Report, containing the
results of our financial year ended 30 June 2020.
Strategic progress
The essence of the Reimagination strategy is to
bring a laser operational execution focus to our key
priorities. These include re-energising the business
in terms of culture and innovation, bringing new
talent into the organisation, and building momentum
for accelerated growth in FY21/22 and beyond.
Our Reimagination strategy promise for FY20 was:
•
•
•
•
To execute the critical decision to deliver future
innovation by investing in our core technology
platform and product development, ensuring
we have the capacity and capability to develop
quality products and deliver them better
and faster.
To seek accretive acquisitions that will
complement our core offerings to build a suite
of Class products for our customers.
To invest in people and build a world-class
culture.
To astutely manage our expenses, targeting an
EBITDA margin over 40%.
Our progress has been transformational in FY20 and
this report outlines our achievements.
Our reputation for being the leader in the SMSF core
segment remains, with Class maintaining market
leadership positions in both NPS and fastest
growing provider, according to the findings of the
industry-leading Investment Trends 2020 report.
However, to drive future sustained growth, we know
Class must grow its addressable market through
new automated software solutions products that
solve clear pain points for our valued customers.
NowInfinity
The acquisition of NowInfinity grows our business
into an adjacent market space with a multi-product
value proposition, as does the announcement of our
new Class Trust product.
Following feedback from our customers through
our partnership program, NowInfinity was identified
as a product opportunity that has proved to be
strategically important and delivers time and cost
savings to our customers. Moreover, the segments
NowInfinity operates in present a great opportunity
to further grow our business through the
development of smart technology solutions.
NowInfinity was acquired in January 2020 and,
despite the onset of COVID-19, we completed the
integration ahead of time, which is testament to
the capability of our team to acquire and integrate.
It is pleasing to see NowInfinity already performing
well. It will be a key pillar for Class’ growth in FY21.
Class also remains focused on organic growth
through product innovation. Our market research
indicated to us that there is a key pain point for trust
administration, as there was for the self-managed
superannuation sector. Like the SMSF space,
to simplify and automate the trust administration
6
CEO LETTER
CLASS 2020 ANNUAL REPORT
process requires complex, rules-based coding to
develop a software solution. Given that is a key
Class capability, we are well placed
to service our customers by developing a Trust
administration product.
Taking the learning from our Portfolio product
entry, combined with the new product development
capability, Class has been running a pilot with an
ever-growing number of customers to ensure we build
a world-class product that delivers what our customers
expect. Our research indicates that there is an
addressable marketplace of 540k trusts and a revenue
pool of over $100m and, when combined with both the
existing Class and NowInfinity product suites, we
believe we can establish leadership positions in the
documentation, SMSF and Trust administration space.
We will be in a position to launch Class Trust to all our
customers in late 2020.
Culture
For Class to be a world-class technology business,
we must develop a workplace culture that
encourages fresh and innovative thinking, builds
trust internally and externally and, just as
importantly, ensures it is a fun place to work, where
achievement is rewarded. As an important part of
our transformation process, this year we developed
our Class ‘Ways of Working’ (you can read more about
our WoW on page 12).
The Class business is transforming and we have
a growing reputation in the marketplace as an
employer of choice, as shown by our impressive
and improving Great Places to Work (GPTW) survey
results (you can read more on page 20). In addition,
we have successfully recruited new talent across
the organisation – including at the executive and
senior leadership levels, as well as many important
operational areas – to raise our skills and capabilities
for better execution.
Strong operating and financial
performance
The business delivered strong financial performance
in FY20:
• Operating revenue and other income of $44.1
million, up 15% on FY19
• Annualised Recurring Revenue (ARR)* as at 30
June 2020 of $46.8 million, up 22%
• Earnings before interest, tax, depreciation and
amortisation (EBITDA) of $18.2 million, up 1%
• EBITDA margin of 41%
• Operating cashflow of $17.4 million, up from
$12.9 million
Outlook
This year we enter into our Accelerate phase where we
build on the momentum created as a result of phase
one of our Reimagination strategy and focus
on accelerated and sustainable growth as a multi-
product technology business. We have grown our
total addressable market opportunity significantly
in FY20 and we are excited by the opportunity to
grow our leadership position in all segments.
This has been a transformational year for Class and
I am immensely proud of the team we have in place
and their ability to navigate what has been a fast-
paced yet rewarding year of change. While we have
achieved much this year, FY21 will see us continue
our focus on executing our Reimagination strategy
through further investment and executing well from
the platform established in FY20.
Finally, I wish to thank our customers, strategic
partners and shareholders for their continued support
over the past year. In addition, Class’ continued growth
and drive towards its purpose would not be possible
without the support of the board, the executive team
and the strong contributions from all of our hard-
working employees.
Thank you.
A N D R E W R U S S E L L
Chief Executive Officer and Managing Director
*Annualised Recurring Revenue: number of Accounts/Subscriptions at the end of period multiplied by average annual revenue per unit assuming
temporary discounting has ended.
7
STRATEGY UPDATE
CLASS 2020 ANNUAL REPORT
Strategy
Update
Last year, we entered into the biggest
transformation in Class’ history. Our
Reimagination strategy envisages Class as
a world-class technology business.
Class has been successful at building a business
in the SMSF space, delivering automation and
time-saving technology to customers. However,
with a strong market share already established
and a customer retention rate of more than 99%,
we understood that for us to continue to grow and
evolve, we needed to become a multi-product
business and take our ability to automate complex
processes into new areas.
We looked at all parts of our operations and set
out to redefine what it means to be Class. This
has resulted in transformations to our business,
inside and out.
We made commitments to build a world-class
culture, to invest in and develop our technology
and to deliver on what we said we would do.
We have done all of the above, and we have more
to do.
To achieve our ambition of growing the business,
we focused on identifying the pain points our
customers experience and then set out to solve
them. But to do that, first we needed to align
our whole team to the ideals we strive for.
We developed a framework that gave each employee
the opportunity to put forward their views on what
Class is – and what it could be. This feedback
culminated in the development of our Ways of
Working (read more about our WoW on page 12).
Through this process, we established that our
organisation would champion the following:
• We are better together
• We get it done, with heart
• We are built on trust
• We are always reimagining
While we were developing our cultural framework,
we were also reviewing our product roadmap, client
needs and emerging market opportunities. We set in
motion the acquisition of NowInfinity (read more on
page 16) and accelerated the development of our
upcoming Trust platform.
Our aim is to build a world-class technology
business. To achieve this goal, we must integrate
with an ever-increasing number of other technology
platforms while continually saving our customers
time through the automation of complex back-
office processes.
We are pleased to say that the work across the
business this year has delivered revenue growth
and momentum. In this financial year, we enter
the Accelerate phase of the strategy.
8
STRATEGY UPDATE
Reimagination strategy
Growing our core
SMSF market share
Increasing lifetime
value per client
New products to
existing clients
(e.g. Class Trust)
Selling into new
markets
Strengthen and Accelerate Growth
Strategic acquisition and partnership opportunities
Investing for Future Growth
Product Capability Development
People Investment
Investing to deliver new
features and capabilities
in support of new products
and new markets
Investing in technology
development, product,
marketing and sales
9
CLASS 2020 ANNUAL REPORT OUR MISSION
CLASS 2020 ANNUAL REPORT
Our
mission
At Class, our vision is to reimagine
a simpler, more automated world for
our customers and they will love it.
Our purpose is to make processing
and data connection painless.
We reimagine solutions through
the smart application of technology.
Simplify
The Class teams are experts in solving complexity
and we provide ongoing investment, development
and research to enable our teams to build the
platforms of the future. We are always innovating,
not only in our own business evolution but also in
the development and integration of our market-
leading product suite.
We simplify the complex by consulting with our
customers to learn what it is they need, and then
use our data and multiskilled teams to build the
products that solve pain points.
Automate
To achieve this goal, we must champion automation
in industry, as well as its ability to solve complex
back-office processes for our customers so
that they, in turn, can focus their efforts where
they need to – on serving their clients, building
their businesses and nurturing their teams. We
support industry by using the smart application of
technology to take the pain out of processing.
Connect
We aim to be pioneers in the development of
automation solutions that deliver interconnected
workplaces for our customers, led by the power of
our platforms. We will build the tools to connect the
professional services industry through technology.
To achieve our goal, we have developed multiskilled
teams and are focusing on building a strong culture.
We have a clear alignment of vision, mission and
values.
10
OUR MISSION
11
CLASS 2020 ANNUAL REPORT OUR WOW
CLASS 2020 ANNUAL REPORT
Our
WoW
To deliver our Reimagination strategy,
we must have an energised and focused
team that is committed to our vision
and purpose. In FY20, Class undertook
a cultural transformation program that
defined our vision, purpose and Ways
of Working (WoW).
Our vision of simplifying, connecting and
automating the wealth accounting industry
provides clarity to our people and helps them
connect the work they do with what we are
aiming to achieve as a business.
This vision is underpinned by our new Ways
of Working cultural framework, which is the
culmination of internal focus groups with our
people to define what values and behaviours we
need in the business to build the world-class
culture required to deliver our Reimagination
strategy. Through our WoW framework, we are
strategically building the strength and capability
of our people.
At the centre of everything we do is our WoW.
And it was created by our people.
12
We are
built on trust!
We are
better together!
We are always
reimagining!
We get it done,
with heart!
Class WoW
Our WoW is embedded in all of Class’ people
programs: recruitment, recognition, reward,
performance, talent and succession planning.
Talent is assessed not just on what they do,
but also how it is delivered. We celebrate our
people through a monthly WoW recognition
program, culminating in annual awards for
employees who best exemplify the Class WoWs.
Our WoW is the foundation to create a world-class
culture to attract and retain great talent to deliver
on our Reimagination strategy.
OUR WOW
Simplify. Automate. Connect.
Our WoW is building the foundation to create
a world-class culture to attract and retain
world-class talent to deliver on Reimagination.
13
CLASS 2020 ANNUAL REPORT INSIDE OUR REBRAND
CLASS 2020 ANNUAL REPORT
Class
rebrands
This year, we unveiled a new corporate
identity. As we transform the business from
the inside, we also wanted to change how
people viewed us from the outside.
Class was the first software provider to move SMSF
administration to the cloud and we continue to
innovate to drive back-office automation and deliver
greater efficiency for our customers.
We offer the highest-quality feeds directly from
the source and our rules-based processing is
second to none.
Next, our continued focus on simplicity, automation
and connectivity will see us deliver world-class
products to new markets.
Like the transformation we are currently seeing
in the business, our new brand architecture
takes the best of our heritage and moves it forward
with renewed energy and focus.
We are the champions of simplicity, automation
and connectivity. These principles can be seen in
our new look and feel, too.
The logo has evolved; the look is fresh and
contemporary but solid and dependable.
We’ve kept the foundation of three key elements
that represent the three pillars of our business:
our software, our customers and their clients.
But we’ve simplified, automated and connected
the elements so that together they form more
than the sum of the parts.
Our new look and feel is a key part of who we are
and our vision. We will Reimagine a simpler, more
automated world for our customers and they will
love it!
14
INSIDE OUR REBRAND
Previous Logo
Current logo
Sub-brand logos
We’ve kept the foundation of three key elements
that represent the three pillars of our business: our
software, our customers and their clients. But we’ve
simplified, automated and connected the elements so
that together they form more than the sum of the parts.
15
CLASS 2020 ANNUAL REPORT NOWINFINITY
CLASS 2020 ANNUAL REPORT
NowInfinity
acquisition
In January, Class acquired the fintech
business NowInfinity. It was Class’ first
acquisition.
NowInfinity operates a market-leading platform
that offers the Documentation Suite, Corporate
Messenger, Trust Register and Super Comply
products. Through its cloud-based platform,
NowInfinity works with approximately 2,000
accounting firms supporting 500,000 entities,
resulting in reduced costs and streamlined
back-office operations.
More than 400,000 companies are utilising the
NowInfinity corporate compliance service. Some
90,000 trusts and nearly 20,000 SMSFs use the
NowInfinity platform.
Bringing NowInfinity into Class helped solve an
identified problem for customers: simplifying the
legal document creation and entity management
processes and delivering that within our customer
ecosystem. As Class looks to launch new products
and grow the NowInfinity business, we will be able
to deliver increased automation and interactivity
for both Class and NowInfinity customers.
Since the transaction, by the end of financial
year 2020 an additional 25,000 entities had
transitioned to using the NowInfinity platform.
Last financial year was NowInfinity’s biggest
on record, with June its busiest-ever month –
nearly 3,500 entities were incorporated using the
NowInfinity platform in June and almost 25,000
companies were incorporated in the financial year.
This represents 11% of the market*.
Acquiring NowInfinity was an opportunity for Class
to invest in a business that could help us build out
our ability to service our customers, not only for
today but also for the business we envisage Class
will become in the future.
16
*Calculated as number of new companies registered using NowInfinity in FY20 as a percentage of new companies registered in Australia in FY20.
NOWINFINITY
Documentation Suite
Company formation, Trust & SMSF
establishments and more with our
Documentation Suite.
Corporate Compliance
Manage ASIC affairs with our leading
corporate compliance solution –
Corporate Messenger.
Trust Register
Simple administration and
maintenance of trust related
documents in one convenient
repository.
Super Comply
Single source of truth to managing
all your clients’ SMSF documents and
compliance obligations.
17
CLASS 2020 ANNUAL REPORT EXECUTIVE LEADERSHIP TEAM
CLASS 2020 ANNUAL REPORT
Our Executive
Leadership team
Andrew Russell
Chief Executive Officer and Managing Director
Qualifications: 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, London, B.Econ, Economics and Political
Science from Macquarie University and a graduate of the Australian Institute of Company Directors.
Experience and expertise: 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.
Glenn Day
Chief Financial Officer & Company Secretary
Qualifications: Bachelor of Business, majoring in Accounting and is a member of CPA Australia.
Experience and expertise: Mr Day is a senior executive with over 20 years’ experience in financial
services, superannuation and software industries working within start-ups and listed entities.
Mr Day joined Class in 2008 and has overseen the commercialisation and growth of the business.
Prior to joining the Group, Mr Day was the Head of Finance at Tranzact Financial Services Limited.
Mr Day’s responsibilities include overseeing all aspects of the accounting and finance function,
corporate governance, compliance, investor relations, company secretarial and treasury.
Panos Alexandratos
Chief Operating Officer
Qualifications: B. Econ, Majoring in Actuarial and Computer Science from Macquarie University.
Affiliate of the Actuaries Institute.
Experience and expertise: Mr Alexandratos is a superannuation industry professional, with over
30 years’ experience in management, operational, IT and software development consulting. He
specialises in commercialising products for market and building operational frameworks, developing
solutions and bridging the gap between business aspirations and IT capabilities. Mr Alexandratos
pioneered the establishment of a global IT consulting group’s successful practices in both Australia
and the United States. He has held trusted adviser roles with a variety of government departments
and large institutions in the superannuation industry in both Australia and the United States.
Jacqui Levings
Chief People Officer
Qualifications: Graduate Diploma in Human Resources & Industrial Relations from University of Sydney.
Experience and expertise: Ms Levings has 20 years’ experience in HR executive, leadership and
generalist roles with demonstrated experience in ASX listed companies. Prior to joining Class, Ms
Levings held a variety of senior HR leadership roles within the Crane Group Limited & Fletcher Building
Group of Companies. Ms Levings people leadership career spans a range of industries including building
products, manufacturing, information management and hospitality.
18
EXECUTIVE LEADERSHIP TEAM
James Panaretos
Chief of Sales
Qualifications: B. Econ, Majoring in accounting, Master of Taxation, Member of the Institute of
Chartered Accountants, Australia and New Zealand
Experience and expertise: Mr Panaretos has held a number of senior executive roles across the
financial services industry. Prior to joining Class, he was General Manager, Business Development
and Marketing at StatePlus, one of Australia’s largest financial planning networks where he
played an integral role in the growth of that business ahead of its sale to First State Super. He
has worked for BT Financial Group, Mercer and Russell Investments and has been involved in
the implementation of growth strategies and the launch of wealth products for institutional and
retail investors in Australia and abroad. Mr Panaretos is a Chartered Accountant and holds both
a Bachelor of Economics degree from the Australian National University and a Master's Degree in
Taxation from Sydney University.
Glenn Poynton
Chief Strategy Officer
Qualifications: B App Sci Computer Science RMIT, MBA (Exec) AGSM
Experience and expertise: Mr Poynton leads Class’ strategy and corporate development
functions. He is also responsible for Class’ Strategic Partnerships Business focusing on developing
collaborations with partners to drive growth and deliver on customer needs. Prior to Class, Mr
Poynton held commercial strategy, product and technology roles with Macquarie Bank.
Alexis Rouch
Chief Technology Officer
Qualifications: Bachelor of Science (Honours), University of Melbourne & Graduate Diploma in
Applied Information Systems, RMIT. Next Women 50, World 50.
Experience and expertise: Ms Rouch is an experienced executive with expertise in driving strategic
business outcomes using technology. Ms Rouch has held a variety of senior management positions
in international banking and management consulting roles, including at AMP, ANZ, First National
Bank (UK), Accenture (UK) and PwC (Eastern Europe). With over 25 years’ experience, Ms Rouch’s
career has spanned large top 20 organisations to start-ups, both locally and internationally,
including executive roles in the United Kingdom, Eastern Europe and Asia.
Jason Wilson
Chief Customer Officer
Qualifications: B. Commerce, Marketing Major. Harvard Business School – CBA Executive
program, AGSM Influential Leadership program.
Experience and expertise: Mr Wilson brings to the Class Leadership team over 20 years’
experience across a range of financial services institutions including online broking, retail
banking, and wealth management. Prior to joining Class, he was a founding member of the Digital
Leadership team at the Commonwealth Bank which introduced agile at scale as well as several
innovations including the launch of the MyWealth investment platform. His career spans a range of
marketing, customer experience and product development roles within large institutions and start
up technology businesses.
19
CLASS 2020 ANNUAL REPORT OUR PEOPLE
CLASS 2020 ANNUAL REPORT
Our
people
At Class, our people are our number
one asset.
We understand that our ability to deliver on our
Reimagination strategy is underpinned by a world-
class culture and highly engaged talent that deliver
great business outcomes. FY20 has been a year
of cultural and leadership transformation at Class,
and our people have been fundamental in the
revitalisation of the business at every level.
Our people are becoming champions for our culture.
At Class, we are committed to providing an awesome
employee experience that inspires our team to do
their best every day. Class has a high level of
employee engagement, a diverse and talented team,
high employee retention rates, and we focus on the
wellbeing of our people.
Engagement @ Class
We pride ourselves on the Class Ways of Working
(WoW). When we embarked on our Reimagination
journey, we understood that we needed to build a
world-class culture to attract and retain top talent.
In FY20, we participated in the annual Great Places
to Work survey. The results of this survey have
allowed us to measure our progress on embedding
our strategy, purpose and WoW among our people.
Employee engagement improved from last year,
with 85% of our people engaged and citing Class as
a great place to work. The high participation rate of
92% was pleasing, as were employees’ scores of 81%
for trust in management, 83% for pride in what they
do and 88% for enjoying working with their team.
Employees noted that our key areas of strength
were organisational alignment and management
competency, which is a pleasing reflection of our
people’s perception of our leadership refresh and
focus on embedding our vision, purpose and WoW
throughout the year.
Additionally, we also conduct a quarterly employee
Pulse Check survey, gathering regular feedback
from our people to assess employee engagement.
Our employee Net Promoter Score (eNPS) in the
most recent Pulse Check was +32, demonstrating
high employee advocacy for Class as a great place
to work.
Diversity
We believe that diversity adds colour to life at Class
and we are proud of our talented and diverse team.
We believe that the wide array of perspectives
that comes from diversity sparks innovation and
creativity that delivers great business outcomes.
Fostering this diversity makes us more agile, flexible
and productive.
As Class grows, gender equality is an important area
of focus for us. We have a strong representation
of women (46%) across the business. We also have
equal gender representation among our non-
executive directors excluding the Chair. In FY20,
62% of promotions went to female employees. We
continue to be committed to gender pay equity,
reviewing it throughout the year and as part of our
annual remuneration review process. We aim to
ensure no pay gap exists between men and women
in equivalent positions.
20
OUR PEOPLE
Leadership
In FY20, we invested in the
capabilities of our leaders as
the custodians of our culture
with the launch of our inaugural
Class Extraordinary Leaders
program. This six-month
intensive program took a
strengths-based approach to
leadership development and
focused on developing our
leaders’ mindset as coaches and
change agents. We also held
a series of leadership forums
throughout the year, which were
designed to equip our leaders
with the mindset and behaviours
required to lead cultural and
behavioural change at Class.
Wellbeing
Promoting the wellbeing of our
people is critical. During the year,
we launched a wellness program
with a holistic approach that
offered support, resources and
information to employees under
four pillars of wellbeing: mental,
physical, social and financial. We
also provide a confidential
telephone-based counselling
service that provides our people
and their immediate family
members with access to
professional trained counsellors
trained to assist with issues such
as family and relationship
problems, work challenges,
dealing with grief, managing
stress, and guidance on parenting.
Innovation
At Class, we are building a culture
of innovation that encourages
creativity in how we approach and
solve problems for our customers.
To that end, we launched our
inaugural company-wide
Hackathon Day, which brought
together people from different
departments to work on a range
of initiatives of their choice.
These new collaborative ways of
working will be fundamental to
how our teams interact with each
other to deliver great outcomes
for our customers.
21
CLASS 2020 ANNUAL REPORT COVID-19 RESPONSE PLAN
COVID-19: OUR ACTIONS
COVID-19: OUR STAFF
CLASS 2020 ANNUAL REPORT
CLASS 2020 ANNUAL REPORT
Our COVID-19
response plan
At Class, we prioritised the safety and
wellbeing of our people, and minimised
impact to our customers.
skills, so we initiated a series of learning sessions for
our leaders, equipping them with practical
tools and advice to empower them to support
their teams.
When the global COVID-19 pandemic emerged, we
enacted our business continuity plan quickly, swiftly
mandating remote work for all of our people. We
transitioned smoothly and seamlessly to working
from home, with minimal impact to our customers
and operations.
Our CEO regularly attended virtual team meetings
across the business, giving teams the opportunity
to ask questions, raise concerns and obtain clarity
about Class’ response to the crisis. This was
complemented by the creation of an ‘ask the CEO
anything’ channel on our collaboration tool, Slack.
Throughout the ongoing crisis, we have managed
to not only maintain productivity, morale and
engagement, but also improve it. This has been
achieved through the significant efforts of our
leaders communicating, connecting with and
caring for our people.
Communication
The crisis created one of the most uncertain periods
of our people’s lifetime. Class adopted a two-way
communication strategy across different channels,
providing employees with forums to alleviate any
anxiety or uncertainty they may have been feeling.
We created regular videos from the CEO and
leadership team that provided information about
how the business was adapting and how we were
tracking against our goals and objectives, as well
as sharing personal insights.
We also conducted regular surveys to gather
employee feedback on the challenges of working
from home, to assess their mental health and gather
ideas for improvements.
Leading remote teams requires very different
Connection
During this period of crisis, it was critical for our
people to maintain a sense of belonging to Class,
even though we weren’t sharing a workspace.
We focused on ensuring our people remained
connected with the company through technology,
team collaboration and team events.
We streamlined our technology and collaboration
tools to make team connection easy and seamless,
which helped to maintain team productivity and a
link to each other. We also held daily team stand-ups
to set focus, prioritise and connect teams.
We revisited what our social events could be, too.
At Easter, instead of having our traditional social
gathering, the social committee sent everyone an
Easter gift that included the ingredients to make hot
cross buns at home with their families.
Care
We knew that supporting our people’s wellbeing
would help them get through challenging times
while helping to keep them focused, engaged and
22
COVID-19 RESPONSE PLAN
COVID-19: OUR ACTIONS
CLASS 2020 ANNUAL REPORT
motivated. This was an opportunity to develop new
initiatives that could be delivered remotely, so we
launched Wellness Wednesdays, which covered
a new wellness topic each week.
Our physical focus included team fitness challenges,
sponsored health and fitness programs, guided
yoga and Pilates workouts, in addition to providing
working-from-home information and fact sheets.
Our mental focus saw us introduce keynote
speakers on mental health; guided meditations; a
learning series on building resilience; mental health
awareness; mindset; and self-care planning sessions.
We launched a financial wellbeing program in
partnership with Findex, and our social initiatives
included virtual social events, monthly trivia nights
and virtual book, cooking and board-game clubs.
What we have learned
The world is never going to be the same again.
We saw how important automation was during this
time. Being cloud-based enabled our customers
to operate with limited disruption to their ability to
provide administration to both their portfolio and
self-managed super fund.
Class continued to bring on board new customers
even throughout the crisis, highlighting the need for
automation and cloud-based solutions that help our
customers navigate the challenges and meet their
clients’ demands.
Going forward, we will continue to focus on creating
the tools that will help our customers manage their
businesses. We have learned that adaptability
and technology are key to business continuity,
and creating those capabilities for our customers
remains our priority.
Class is committed to solving back-office complexity
through automation, and the COVID-19 pandemic
has illustrated just how powerful that goal is.
Communication
Connection
Care
23
INTRODUCTIONCLASS 2020 ANNUAL REPORT Financial
Report 2020
DIRECTORS' REPORT
CLASS 2020 ANNUAL 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 2020.
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
Robert Bazzani (appointed on 2 January 2020)
Christopher Cuffe (ceased on 2 January 2020)
Kathryn Foster
Simon Martin (appointed on 19 November 2019)
Rajarshi Ray (ceased on 21 October 2019)
• Nicolette Rubinsztein
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, Class
Portfolio and the new Class Trust product.
Significant changes to the business
On 31 January 2020 the Company completed the purchase of the NowInfinity 3505 Pty Ltd (NowInfinity),
one of Australia’s leading technology providers of legally backed documentation for the professional
services industry, including accountants, financial planners and lawyers.
The purchase consideration consisted of:
•
•
•
•
$10m upfront cash payment on completion;
$10m in Class shares, escrowed for two years issued on completion;
adjustments relating to cash, debt and working capital; and
a maximum deferred consideration of $5M contingent on successful integration targets
At 30 June 2020, the sellers have been paid a total of $23.573m with a maximum remaining deferred
consideration of $500,000 subject to successful knowledge transfer, expected to be paid on 31 August 2020
(note 33).
Goodwill arising on the acquisition reflects potential enhanced market coverage, broader product suite
offering and increased opportunities for cross-selling to both new and existing customers.
The transaction is expected to be EPS accretive in FY21.
26
DIRECTORS' REPORT DIRECTORS' REPORT
Review of operations
Operating revenue and other income
2020
$'000
44,052
2019
$'000
38,311
Cost of undertaking business
(25,055)
(20,366)
Acquisition & Corporate Advisory Costs
EBITDA
Interest revenue
Finance cost
Depreciation and amortisation
Tax expense
Statutory net profit after tax
Business combination amortisation (net of tax)
Net profit after tax after adding back business
combination amortisation (net of tax)
(827)
18,170
119
(140)
(8,072)
(3,237)
6,840
(353)
7,193
-
17,945
338
-
(5,744)
(3,564)
8,975
-
Change
$'000
5,741
(4,689)
(827)
225
(219)
(140)
(2,328)
327
(2,135)
(353)
Change
%
15%
(23%)
(100%)
1%
(65%)
(100%)
(41%)
9%
(24%)
(100%)
8,975
(1,782)
(20%)
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 2019 of 2.5 cents per ordinary share
(2019: 2.5 cents)
Interim dividend for the year ended 30 June 2020 of 2.5 cents per ordinary share
(2019: 2.5 cents)
2020
$'000
2,942
3,069
6,011
2019
$'000
2,942
2,934
5,876
On 13 August 2020, the Directors declared a final dividend for the year ended 30 June 2020 of 2.5 cents per
ordinary share with payment date of 18 September 2020 to eligible shareholders on the register as at 21
August 2020. This equates to a total distribution of $3,069,000, based on the number of ordinary shares on
issue as at 30 June 2020. The financial effect of dividends declared after the reporting date is not reflected
in the 30 June 2020 financial statements and will be recognised in subsequent financial reports.
27
DIRECTORS' REPORTCLASS 2020 ANNUAL REPORT DIRECTORS' REPORT
CLASS 2020 ANNUAL REPORT
Matters subsequent to the end of the financial year
The impact of the Coronavirus (COVID-19) pandemic is ongoing and while it has not had a significant
impact for the Group up to 30 June 2020, it is not practicable to estimate the potential impact, positive
or negative, after the reporting date. The situation is rapidly developing and is dependent on measures
imposed by the Australian Government and other countries, such as maintaining social distancing
requirements, quarantine, travel restrictions and any economic stimulus that may be provided.
On 13 August 2020, the Group announced the acquisition of all the shares in Assuriti Pty Ltd ('Smartcorp').
The Share Purchase Agreement was executed on 12 August 2020 with completion date effective 20
August 2020. The maximum enterprise value was $4,200,000 adjusted for net tangible assets, settled by
$2,730,000 upfront cash payment plus the issue of $1,470,000 in the Company’s shares which are subject
to escrow for a period of 18 months from the completion date. The acquisition will be partly funded
through an increase to the existing bank debt facility.
Apart from the dividend declared as discussed above, no other matter or circumstance has arisen since
30 June 2020 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.
28
DIRECTORS' REPORT DIRECTORS' REPORT
Information on Directors
Matthew Quinn
Non-Executive Chairman
Qualifications: First Class Honours Degree in Chemistry & Management Science. Chartered
Accountant.
Experience and expertise: 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, Elders 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), Non-executive
Director Regis Limited (ASX: REG) and Non-executive Director Elders Limited (ASX: ELD).
Former directorships (last 3 years): Non-executive Director Carbonxt Group Limited (ASX:
CG1)
Special responsibilities: Member of the Nomination, Remuneration and Human Resources
Committee and Audit and Risk Committee
Interests in shares: 250,000 ordinary shares
Interests in options: None
Interests in rights: None
Andrew Russell
Chief Executive Officer and Managing Director
Qualifications: Refer to section "Our Executive Leadership Team" on page 18
Experience and expertise: Refer to section "Our Executive Leadership Team" on page 18
Other current directorships: None
Former directorships (last 3 years): None
Interests in shares: 115,151 ordinary shares
Interests in options: None
Interests in rights: 398,473 performance rights
29
DIRECTORS' REPORTCLASS 2020 ANNUAL REPORT CLASS 2020 ANNUAL REPORT
Information on Directors (cont.)
Robert Bazzani
Non-Executive Director
Qualifications: Master of Business Administration (MBA), Bachelor of Law (LLB) and a Bachelor of
Science (BSc).
Experience and expertise: Mr Bazzani was formerly a top level Partner with global consulting firm
KPMG, where he served in multiple leadership roles including as a member of KPMG’s National
Executive Committee (NEC), which oversaw and was responsible for the firm’s turnover, strategic
decision making, profitability and operations. He has significant hands-on experience in running
and growing large scale and complex businesses, and is well skilled in business strategy and
management, governance, accounting and law. He has worked extensively in corporate finance
and advisory roles across a range of industries in both Australia and Asia Pacific. Mr Bazzani is an
advisory board member and/or chairman on a number of private companies.
Other current directorships: Non-executive Director Mach7 Technologies (ASX: M7T)
Former directorships (last 3 years): None
Special responsibilities: Member of the Audit and Risk Committee
Interests in shares: None
Interests in options: None
Interests in rights: None
Kathryn Foster
Non-Executive Director
Qualifications: Bachelor of Science (BSc) - International Marketing from Oregon State University,
Associate of Science (ASc) - Computer Science and Information Systems from Shoreline
Community University.
Experience and expertise: 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: None
Interests in rights: None
30
DIRECTORS' REPORT Information on Directors (cont.)
Nicolette Rubinsztein
Non-Executive Director
Qualifications: BbusSc (hons), qualified actuary, an executive MBA from the Australian Graduate
School of Management and a graduate of the Australian Institute of Company Directors.
Experience and expertise: Ms Rubinsztein joined the Board in April 2017. Ms Rubinsztein is a
Non- executive Director of Zurich Australia Limited/OnePath Insurance, UniSuper, SuperEd, 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 President of the Actuaries
Institute in 2019 and 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: None
Interests in rights: None
Simon Martin
Non-Executive Director
Qualifications: Master of Business Administration and a Bachelor of Commerce from the University
of Melbourne. Member of the Australian Institute of Company Directors.
Experience and expertise: Mr Martin is a director of a number of private, ASX listed, private
equity owned and not for profit organisations. He has held a variety of executive roles in software
companies in Australia and internationally, including CFO of MYOB and CEO of iCareHealth. Mr
Martin has managed and participated in a number of very successful investments, generating
significant shareholder returns.
Other current directorships: None
Former directorships (last 3 years): Webcentral Group Limited (ASX: WCG) formerly Arq Group
Limited - resigned on 27 February 2020
Special responsibilities: Member of the Nomination, Remuneration and Human Resources
Committee
Interests in shares: 157,115 ordinary shares
Interests in options: None
Interests in rights: 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.
31
DIRECTORS' REPORTCLASS 2020 ANNUAL REPORT DIRECTORS' REPORT
CLASS 2020 ANNUAL REPORT
Information on Directors (cont.)
Company Secretary details
Glenn Day was appointed Company Secretary in 2008. Details of Mr Day’s qualifications, experience, are
set our in ‘Our Executive Leadership team’ section of our annual report.
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 2020, and the number of meetings attended by each Director were:
Full Board
Audit and Risk Committee
Nomination, Remuneration and
Human Resources Committee
(‘NRHRC’)
Attended
Held
Attended
Held
Attended
Held
Matthew Quinn
Andrew Russell
Robert Bazzani
Christopher Cuffe
Kathryn Foster
Simon Martin
Rajarshi Ray
Nicolette Rubinsztein
10
10
5
4
10
5
4
10
10
10
5
5
10
5
4
10
4
-
3
1
-
-
1
5
4
-
3
2
-
-
1
5
5
-
-
2
5
3
-
-
5
-
-
2
5
3
-
-
Held: represents the number of meetings held during the time the Director held office or was a member of the
relevant committee.
32
DIRECTOR'S REPORT
Message to our
shareholders
Kathryn Foster
Dear Shareholder,
On behalf of the Nomination, Remuneration and
Human Resources Committee (NRHRC), I am pleased
to present the Group’s Remuneration Report for the
2020 financial year (FY20).
Led by our new CEO, Andrew Russell, FY20 has been
transformational for Class. Through our Reimagination
strategy, we have focused on building the foundations
to set Class up for continued growth with a suite of
products that is leading digital transformation.
Class has continued to deliver pleasing financial
outcomes for our shareholders, with 15% operating
revenue and other income growth and 41% EBITDA
margin. This year has seen healthy organisational
change, with a new vision, purpose and a refreshed
leadership team to deliver on our business goals.
Class has begun executing its three-year strategy by
making significant strategic moves this year,
including the ongoing development of our new Class
Trust product and the acquisition of NowInfinity.
Underpinning this sustained performance and
strategic organisational shift has been Class’
ability to attract and retain industry leaders into
the Class executive team to deliver against its
strategic plan. This is enabled by our robust and
market-competitive remuneration framework
and underpinned by our new Ways of Working
cultural framework.
The Class reward framework remains 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.
Remuneration principles
We believe that performance results must drive
key management personnel (KMP) remuneration
outcomes, with financial measures being a core
component of these outcomes. We also support
the inclusion of non-financial measures to balance
the needs of our shareholders, customers and
people. We believe long-term shareholder value
will be realised through this balance.
In 2018, Class implemented a range of fundamental
changes to its remuneration framework:
•
Increasing variable pay – to place a greater share
of remuneration at risk and subject to ongoing
performance hurdles
• STI deferral mechanism – to deliver meaningful
equity exposure and retention for key executives
•
Introduction of performance rights plan – to
focus KMP on long-term value creation through
performance hurdles linked to the Group’s
strategic financial and customer growth
The NRHRC and Board are confident that this
structure achieves a balance between short- and
long-term performance, is motivating our talent
to perform and aligns with shareholder interests.
We are pleased with our performance outcomes in
FY20 and we are confident that we have the correct
framework in place to help us attract the right people
to enable growth and innovation. We believe we now
have the best team in place to take Class into the
future. As such, we are not recommending any major
changes to our reward framework in FY21.
We appreciate the feedback we have received and
the Board looks forward to continued engagement
with our shareholders.
K A T H R Y N F O S T E R
Chair – Nomination, Remuneration and Human
Resources Committee
33
CLASS 2020 ANNUAL REPORT REMUNERATION REPORT
CLASS 2020 ANNUAL REPORT
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 that is intended to provide a ‘plain English’ explanation for shareholders
of the Key Management Personnel and executives’ remuneration outcomes for FY20 and the existing
remuneration framework.
Key Management Personnel (KMP)
KMP, as defined by Accounting Standard AASB 124 Related Party Disclosures (AASB 124), for the year ended
30 June 2020 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.
Following a review of senior executives against the criteria for determining Executive KMP, it was deemed
that the Chief Executive Officer (CEO) and the Chief Financial Officer (CFO) qualify as executive KMP.
Executive and Non-executive KMP
Name
Chairman
Position
Term
Matthew Quinn
Chairman
Non-executive Directors
Robert Bazzani1
Christopher Cuffe2
Kathryn Foster
Simon Martin3
Rajarshi Ray4
Nicolette Rubinsztein
Executive KMP
Andrew Russell
Glenn Day
Director
Director
Director
Director
Director
Director
CEO & Managing Director
CFO & Company Secretary
Full Year
Part Year1
Part Year2
Full Year
Part Year3
Part Year4
Full Year
Full Year
Full Year
1 Robert Bazzani joined the Board on 2 January 2020.
2 Christopher Cuffe left the Board on 2 January 2020.
3 Simon Martin joined the Board on 19 November 2019.
4 Rajarshi Ray left the Board on 21 October 2019.
34
DIRECTORS' REPORT REMUNERATION REPORT
Executive and Non-executive KMP
The Group has a robust remuneration governance framework overseen by the Board.
Class Board
•
•
Overall responsibility for the remuneration strategy and outcomes for Executive 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
guidelines for executive and senior leaders 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
Remuneration of Executive KMP and other senior
executives who report directly to the CEO (Senior
Executives)
Talent pools available for succession planning into
executive and senior leadership positions
The effectiveness of the Group’s diversity policies
and initiatives, including an annual assessment and
submission to the Workplace Gender Equality Agency
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 internal and external surveys conducted
by the Group in relation to the culture of the
organisation, including monitoring these trends over
periods of time
•
•
Initiatives to improve and drive a strong performance
culture
Assessing performance against the Group’s
compliance with external reporting requirements
CEO & Chief People Officer
External Advisers
Makes recommendations to the NRHRC for:
•
•
•
•
Incentive targets and outcomes relating to short-
and long-term incentive plans
Remuneration policy for all employees
Reviewing long-term incentive participation
Individual remuneration and contractual
arrangements for executives
Provide independent advice, market trend information
and salary benchmark data relevant to remuneration
decisions. No external advisers provided a remuneration
recommendation as defined under section 300A of the
Corporations Act during FY20.
Managing Risk
The Board retains discretion to adjust variable remuneration outcomes as deemed appropriate. All variable
remuneration outcomes are subject to Board approval prior to grant and/or payment. The Board retains discretion to
review the allotment of shares at vesting through clawback provisions.
35
DIRECTORS' REPORTCLASS 2020 ANNUAL REPORT REMUNERATION REPORT
CLASS 2020 ANNUAL REPORT
Executive remuneration framework and programs FY20
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 aligned to delivering profitability, strategy and shareholder value for the Group.
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.
The Group’s remuneration framework is based on the principles that remuneration is performance-driven, aligned
with shareholder interests and provides market-competitive remuneration opportunities.
Remuneration Principles
Remuneration Strategy
Performance-Driven
Aligned with Shareholders
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 internal and external
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.
Ownership of the Company’s
shares is encouraged using equity
as the vehicle for the long-term
incentive (LTI) plan, and through
the short-term incentive (STI) by a
deferred mechanism that applies
to Executive KMP and senior
executives. Executive KMP are
expected to accumulate a minimum
value of shares in accordance with
the Minimum Shareholding Policy.
Market-competitive Remuneration
Opportunities
Remuneration opportunities,
including those elements that can
be earned subject to performance,
are set at competitive levels that
will attract, motivate and retain
high-quality 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.
36
DIRECTORS' REPORT REMUNERATION REPORT
Overview of existing remuneration approach and framework (cont.)
Fixed Remuneration
Variable Remuneration
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 internal and external
measures of financial and
non-financial performance.
A meaningful proportion of
executive remuneration is
‘at risk’.
Variable component of Executive target remuneration mix allows a greater
share of remuneration to be ‘at risk’ and subject to performance.
•
•
•
•
STI (at risk)
LTI (at risk)
STI enables increased equity
exposure, with a portion of
STI paid in shares through
deferred rights.
In FY19, the Employee Share Options
Plan (ESOP) was replaced with the
Executive LTI plan in the form of
performance rights.
STI paid in shares to executives
in FY20 was 50% of total STI.
This will reduce to 25% in FY21
and thereafter.
Deferral is by way of deferred
rights, vesting annually
in equal instalments over
a two-year period.
The Board retains discretion
to review the allotment of
shares at vesting through
clawback provisions.
•
•
Grants are made annually,
with vesting three years
from grant date.
Performance hurdles are
reviewed annually by
the Board to align with the
Group’s strategic plan.
Special Allocation
•
In FY20, a special one-off
LTI allocation was made to
senior executives in the form
of performance rights. This
allocation was on the same
terms and performance hurdles
as the one-off allocation to
the CEO in FY19 and provides
alignment of interests across
the executive team.
•
Vesting will occur three years
from grant date subject to
performance hurdles.
Voting and comments made at the Company’s 2019 Annual General Meeting
At the 2019 Annual General Meeting (AGM), 99.57% of shareholders voted to approve the adoption of the
remuneration report for the year ended 30 June 2019. The Company did not receive any specific concerns
at the AGM regarding its remuneration practices.
Use of remuneration consultants
Throughout FY20, the NRHRC and management received information from Mercer (Australia) Pty Ltd
related to remuneration market data. No external advisers provided a remuneration recommendation
as defined under section 300A of the Corporations Act during FY20.
37
DIRECTORS' REPORTCLASS 2020 ANNUAL REPORT CEO Target Remuneration Mix FY20
Chart 1
CFO Target Remuneration Mix FY20
Chart 2
LTI 37.5%
LTI 30%
FR 50%
FR 50%
FR 60%
FR 60%
LTI 25%
STI 25%
STI 12.5%
FY20
FY19
LTI 20%
STI 20%
STI 10%
FY20
FY19
Target Remuneration Mix
Target Remuneration Mix
Target Remuneration Mix
Target Remuneration Mix
CEO Target Remuneration Mix
Cash vs Equity
CFO Target Remuneration Mix
Cash vs Equity
FY18
77%
8% 15%
FY18
77%
8% 15%
REMUNERATION REPORT
50%
FY19
6%
19%
25%
FY19
60%
20%
5% 15%
CLASS 2020 ANNUAL REPORT
50%
FY20
FY20
12.5% 12.5%
Executive remuneration framework and programs FY20
25%
60%
10% 10%
20%
FY21
The remuneration mix is set with consideration to market benchmarking and is designed to attract and
5%
retain the calibre of executives required to deliver long-term shareholder value.
FY21
60%
50%
25%
15%
19%
6%
20%
A 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 and FY20, 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
STI Cash
to performance hurdles.
Equity
STI Deferred LTI
Equity
STI Deferred LTI
Cash
Fixed
Cash
Fixed
STI Cash
The remuneration mix and the changes since FY18 are shown below:
CEO Target Remuneration Mix
CEO Target Remuneration Mix FY20
Chart 1
CFO Target Remuneration Mix
CFO Target Remuneration Mix FY20
Chart 2
LTI 37.5%
LTI 25%
LTI 30%
LTI 20%
LTI 15%
LTI 25%
STI 8%
FR 50%
FR 50%
FR 50%
STI 25%
FR 77%
LTI 15%
LTI 20%
STI 8%
FR 60%
STI 20%
FR 77%
FR 60%
FR 60%
STI 12.5%
STI 25%
FY20
Target Remuneration Mix
FY19 & Onwards
Target Remuneration Mix
FY19
Target Remuneration Mix
FY18
Target Remuneration Mix
STI 10%
STI 20%
FY20
Target Remuneration Mix
FY19 & Onwards
Target Remuneration Mix
FY19
Target Remuneration Mix
FY18
Target Remuneration Mix
CEO Target Remuneration Mix
Cash vs Equity
CFO Target Remuneration Mix
Cash vs Equity
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
Fixed
STI Cash
Equity
STI Deferred LTI
Cash
Fixed
STI Cash
Equity
STI Deferred LTI
38
CEO Target Remuneration Mix
CFO Target Remuneration Mix
LTI 25%
LTI 20%
LTI 15%
STI 8%
FR 77%
FR 50%
FR 60%
LTI 15%
STI 8%
FR 77%
STI 20%
STI 25%
FY19 & Onwards
Target Remuneration Mix
FY18
Target Remuneration Mix
FY19 & Onwards
Target Remuneration Mix
FY18
Target Remuneration Mix
DIRECTORS' REPORT
REMUNERATION REPORT
Composition of variable or ‘at risk’ remuneration
The following table details the components of the Group’s variable or ‘at risk’ remuneration (STI and LTI)
for FY20:
Scheme
STI (at risk)
Aim
Frequency
Financial measures
Individual performance measures
Overview
In FY19, a new short-term incentive (STI) program was introduced with the
addition of a deferred rights component to deliver meaningful equity exposure
and encourage retention for senior executives.
STI aims to drive both individual and team performance to deliver
annual business objectives, revenue growth, profitability and increase
shareholder value.
Awards are determined on an annual basis, with performance measured over
the reporting period. Payment is normally made in September following the
end of the performance year.
The total quantum of the STI pool is determined by the Board.
Typically, the STI plan is weighted 50% to company 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.
Individual objectives are set for the CEO and CFO by the Board and are
aligned to the Group’s business strategy. These objectives are typically
performance metrics that drive future revenue growth, customer
engagement and people outcomes.
Financial gateway
Minimum financial performance hurdles are set by the Board, below which
Board discretion is required in order for any payment to be made.
Deferral mechanism
The STI program includes a deferral component that aims to deliver
meaningful equity exposure and encourage retention of senior executives.
In FY20, the deferred component was 50% of total STI. This will reduce to
25% in FY21 and thereafter. The Board considers 25% deferral appropriate
given the 100% weighting to equity in the LTI plan.
Deferred rights – risk
The allotment of deferred rights at vesting is subject to forfeiture or clawback
provisions subject to and determined by the Board.
39
DIRECTORS' REPORTCLASS 2020 ANNUAL REPORT REMUNERATION REPORT
CLASS 2020 ANNUAL REPORT
Scheme
Overview
LTI – annual grant (at risk)
Aim
Participation
The LTI plan comprises of Performance Rights to focus Executive KMP and
Senior Executives on creating long-term value for shareholders.
Participants include Executive KMP and other Senior Executives.
Participation is at the annual invitation and discretion of the Board.
Grant frequency
Annually
Performance period
The performance period in FY20 is 1 July 2019 to 30 June 2022.
Performance criteria
The Board set challenging targets in FY20 for growth in Annualised Recurring
Revenue (ARR) and Earnings Before Interest, Tax, Depreciation and
Amortisation (EBITDA), which align to the Company’s strategic plan.
The proportion of Performance Rights that will vest is assessed against the
achievement of those targets.
The specific targets for ARR and EBITDA are not disclosed upfront due to their
commercial sensitivity, and will be disclosed at the end of the performance
period.
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 the performance outcomes.
Dividends
The Performance Rights are not entitled to dividends or voting rights.
Deferred rights – risk
The allotment of deferred rights at vesting is subject to forfeiture or clawback
provisions subject to and determined by the Board.
Scheme
Overview
LTI – Special Allocation (at risk)
Aim
The Special Allocation aligns Executive KMP and Senior Executives to long-
term value creation for shareholders by focusing them on Total Shareholder
Return (TSR).
Grant frequency
One-off
Grant
The Performance Rights were granted for nil cash consideration and are not
transferable. Each Performance Right converts into one fully paid ordinary
share, subject to the satisfaction of the performance criteria and the terms of
the plan.
Vesting and performance period
The performance period for the Special Allocation grant is 14 May 2019 to
13 May 2022. Vesting occurs at the end of the performance period.
Performance criteria
The Board set a challenging hurdle for the Special Allocation grant with vesting
of the Performance Rights subject to the Company’s compound annual TSR
exceeding 25% over the performance period. Further, for every 5% compound
annual TSR above 25%the CEO will receive 40,000 additional shares and the
CFO will receive 20,000 additional shares.
Dividends
The Performance Rights are not entitled to dividends or voting rights.
40
DIRECTORS' REPORT REMUNERATION REPORT
Scheme
Overview
The Employee Share Options Plan (ESOP) was replaced in FY19 by the
Performance Rights & Deferred Rights Plan.
Grants of options under the ESOP were subject to service requirements
and performance vesting criteria over a three-year period requiring 10%
compounding annual share price growth to the last vesting date.
Legacy equity plans (ESOP)
Prior to 30 June 2017, all options were subject to a three-year vesting period.
Options issued in FY18 vest in equal annual instalments.
If performance conditions are met, the Company will either issue new shares
or shares will be purchased on market and transferred to participants.
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 KMP 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 $1,000 in value (being the limit of the tax exemption) for
each eligible participant. Shares vest immediately upon issue to participants.
The shares can only be sold three years after the date of grant, unless the
participant ceases employment prior.
The plans are designed to encourage share ownership for employees and
therefore do not have any performance conditions attached. Participants are
entitled to dividends and other distributions and have full voting rights.
The Group issued 43,710 shares to qualifying employees in FY20.
Other equity incentive plans
41
DIRECTORS' REPORTCLASS 2020 ANNUAL REPORT REMUNERATION REPORT
CLASS 2020 ANNUAL REPORT
Performance and remuneration outcomes in FY20
a. Linking remuneration to performance
A key underlying principle of the Group’s executive remuneration strategy is the link between company
performance and executive reward.
The following table summarises the Group’s performance and incentives awarded to executive KMP,
Senior Executives and other eligible employees.
Summary of financial performance and STIs awarded:
Financial Performance
STI5
Year
Sales
revenue
(’000)
EBITDA6
(’000)
NPBT6
(’000)
NPAT6
(’000)
ARR
(‘000)
Earnings
per
share6
(cents)
Divi-
dends
per
share
(cents)
Share
price7
($)
STI
paid to
Executive
KMP5
($)
STI paid to
all eligible
employees
as
a % of
revenue
FY20
44,052
18,170
10,077
6,840
46,785
5.75
5.00
1.34
304,000
4.3%
FY19
38,311
17,945
12,539
8,975
38,214
7.66
5.00
1.50
79,0408
3.7%
FY18
33,978
15,895
12,559
8,698
36,006
7.39
5.00
2.40
72,051
1.9%
FY17
28,893
13,973
11,702
7,988
30,853
6.82
5.00
3.00
64,231
2.1%
FY16
22,563
10,051
8,588
5,827
24,541
5.19
3.75
3.30
43,800
1.8%
5 Represents approved and expensed STI but paid post year end, including any deferred rights component. STI excludes sales commission paid/payable
but includes superannuation paid on bonus payments.
6 EBITDA, NPBT, NPAT and EPS are calculated before significant items in FY16
7 Closing share price at 30 June.
8 Mr Russell was not eligible for FY19 STI.
42
DIRECTORS' REPORT REMUNERATION REPORT
b. STI performance outcomes
i. STI: financial measures & performance outcomes
Financial measures account for 50% of the STI outcome. The key financial measures in FY20 for
determining the value of STI payments were growth in revenue, ARR growth and EBITDA margin.
In FY20 the Group delivered 15.0% revenue growth, 22%ARR growth and 41.0% EBITDA margin. These are
good results, however did not meet the challenging performance hurdles set by the Board and the Board
therefore determined the Executive KMP achieved 0%.
ii. STI: non-financial measures & performance outcomes
Non-financial measures account for 50% of the STI outcome. The table below sets out the key non-financial
measures for the Executive KMP in FY20 and outcomes achieved. The Board determined the Executive
KMP delivered excellent results against strategic priorities and achieved 160% against these non-financial
measures (against 100% target and 200% maximum).
Strategic & non-financial
Performance Measures
Growth – existing products
FY20 Objective
Outcome
Lead the market in our core
products
Below Target
The Group continued to grow steadily, with an
additional 6,489 Class Super and Class Portfolio
accounts added in FY20.
Growth – new products
New products for existing
markets
Strategy
Build strategic & revenue
generating partnerships and
enter new markets
Above Target
The Group focused on technology improvements
throughout the year to set up the platform for scale
and growth. This will enable the Group’s multi-
product offering, evidenced by 1,683 Class Trust
accounts added during a pilot of this new product.
Above Target
The Group’s focus on delivering value through
partner and strategic alliances continued, with
additional revenue streams added. In FY20, the
Group acquired and successfully integrated
NowInfinity.
43
DIRECTORS' REPORTCLASS 2020 ANNUAL REPORT REMUNERATION REPORT
CLASS 2020 ANNUAL REPORT
Strategic & non-financial
Performance Measures
Customer
FY20 Objective
Outcome
Build a Customer Focused
Culture
Above Target
The Group monitors a range of customer metrics
during the year, including Net Promoter Score and
customer satisfaction.
The Group continues to have the highest Net
Promoter Score (+59) in the sector and the highest
user advocacy of all SMSF admin platform providers
as evidenced by the independent Investment
Trends report
People
Build a World Class Culture
Above Target
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. This
year, 92% of employees completed the survey.
Overall employee engagement improved from last
year, from 75 to 83, which reinforces the emphasis
put on culture transformation and people initiatives
during the year
The company continues to score extremely high in
the areas of diversity, including age (92), race (96),
sex (94) and sexual orientation (99).
44
DIRECTORS' REPORT REMUNERATION REPORT
c. LTI performance outcomes
No performance rights vested in FY20. Outcomes of legacy ESOP is outlined on page 51.
d. Remuneration outcomes
Component
FY20 outcomes
FY20 Fixed
Remuneration
(FR)
Fixed Remuneration (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 CEO and CFO’s FR was reviewed and increases of 0% and 8.9%
respectively were applied in FY20.
FY20 Fixed Remuneration Outcomes
FY19 FR $
Increase $
Increase %
FY20 FR $
Andrew Russell
550,000
-
Glenn Day
275,401
24,599
0.0%
8.9%
550,000
300,000
FY21 Fixed Remuneration Outcomes
Class is focused on delivering its Reimagination strategy by investing more within the
business. As a result, Executive KMP did not seek an increase in FR in FY21.
Based on the Board’s assessment of performance against key performance indicators as outlined
above, the following STIs were awarded:
FY20 STI Outcomes
FY19 STI Outcomes
$
% of
target
% of
maximum
Andrew Russell
220,000
Glenn Day
84,000
80%
80%
40%
40%
$
-
% of
target
% of
maximum
-
-
79,040
82%
41%
Mr Russell was not eligible to participate in the FY19 STI plan.
FY20 STI
outcomes
The deferred component is paid using deferred rights, vesting annually in equal instalments over
a two-year period.
FY20 STI Outcomes $
FY19 STI Outcomes
Upfront
cash (50%)
Deferred
rights
(50%)
Total
Upfront
cash
(25%)
Deferred
rights
(75%)
Andrew Russell
110,000
110,000
220,000
-
-
Total
-
Glenn Day
42,000
42,000
84,000
19,760
59,280
79,040
45
DIRECTORS' REPORTCLASS 2020 ANNUAL REPORT REMUNERATION REPORT
CLASS 2020 ANNUAL REPORT
Component
FY20 Outcomes
LTI grants were made in FY20 in accordance with the target remuneration mix
for each KMP. The hurdles applied to the FY20 grant were based on ARR and
EBITDA at the end of the three-year period.
FY20 LTI grant
In FY20:
•
•
The CEO was granted 198,473 performance rights.
The CFO was granted 80,153 performance rights.
FY20 special one-off
LTI allocation
A special one-off allocation LTI grant was made in FY20 to align KMP to the
special allocation granted to CEO in FY19. The grant was made as a one-off
allocation with vesting in three years subject tothe Company’s compound
annual TSR exceeding 25% over the performance period. In FY20, the CFO
was granted 100,000 performance rights.
Non-executive Directors’ remuneration
Non-executive Directors are paid a base fee for service to the Board.
The NRHRC may 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.
Non-executive Directors will not receive a fee increase in FY21.
The Chairman is paid fees of $145,624 including superannuation (including committee fees).
Other Non-executive Directors are paid fees of $89,615 including superannuation and subcommittee
membership fees as follows:
• Director fees to be inclusive of membership of one committee.
• Additional fee of $5,475, including superannuation for membership of any additional committee.
• Chair of committees to be paid an additional fee of $11,202 including superannuation.
Based on the current Board and committee composition, the total fees for FY21 are anticipated to be $526,487.
46
DIRECTORS' REPORT REMUNERATION REPORT
Remuneration in detail
The following table details the statutory accounting expense of all remuneration-related items for the KMP.
The table below is different to the actual remuneration mix chart on page 38, which shows the fair
value on grant date of LTI in FY20 rather than the accrual of amounts on the statutory accounting basis.
The table has been audited against the relevant Australian Accounting Standards.
Short-term Benefits10
Base
Remuneration11
$
Superannu-
ation
$
STI12
$
Other13
$
Share-
based
Payments
Equity-
settled15
$
Long-term
Benefits
Long
Service
Leave14
$
Total
Statutory
Remuneration
$
Non-executive Directors
Matthew Quinn
FY20
132,990
12,634
FY19
130,000
12,350
Robert Bazzani16
FY20
40,920
3,887
FY19
Christopher Cuffe17
FY20
FY19
Kathryn Foster
FY20
-
43,478
85,000
92,070
-
4,130
8,075
8,747
FY19
90,000
8,550
Simon Martin18
FY20
51,835
3,887
Rajarshi Ray19
FY19
FY20
FY19
-
-
25,181
2,392
80,000
7,600
Nicolette Rubinsztein FY20
92,070
8,747
SUBTOTAL
FY19
FY20
FY19
90,000
8,550
478,544
44,424
475,000
45,125
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
145,624
142,350
44,807
-
47,608
93,075
100,817
98,550
55,722
-
27,573
87,600
100,817
98,550
522,968
520,125
47
DIRECTORS' REPORTCLASS 2020 ANNUAL REPORT REMUNERATION REPORT
CLASS 2020 ANNUAL REPORT
Short-term Benefits10
Base
Remuneration11
$
Superannu-
ation
$
STI12
$
Other13
$
Share-
based
Payments
Equity-
settled15
$
Long-term
Benefits
Long
Service
Leave14
$
Total
Statutory
Remuneration
$
Executive KMP
Andrew Russell20,21
FY20
528,997
21,003
110,000
11,385
1,669
221,820
894,874
Glenn Day22
FY19
FY20
FY19
84,565
5,133
-
155,818
-
49,053
294,569
278,998
21,003
42,000
(10,636)
(9,694)
106,171
427,842
293,126
20,531
19,760
1,741
5,864
44,310
385,332
Kevin Bungard23,24
FY20
-
-
116,451
15,183
-
-
-
-
-
-
210,970
(54,154)
75,140
363,590
SUBTOTAL
TOTAL
FY19
FY20
FY19
FY20
FY19
807,995
42,006 152,000
749
(8,025)
327,991
1,322,716
494,142
40,847
19,760 368,529
(48,290)
168,503
1,043,491
1,286,539
86,430 152,000
749
(8,025)
327,991
1,845,684
969,142
85,972
19,760 368,529
(48,290)
168,503
1,563,616
9 Fixed Remuneration comprises Base Remuneration and Superannuation (post-employment benefit).
10 Short-term Benefits include non-monetary benefits; however, no non-monetary benefits were received by KMP during FY19 or FY20.
11 Base Remuneration includes cash salary received, short-term personal compensated absences and any salary-sacrificed benefits during the year.
12 STI comprises cash bonuses in relation to performance for the year.
13 Other includes short-term annual compensated absences (annual leave movement).
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 Represents remuneration from the date of appointment on 2 January 2020.
17 Represents remuneration up to date of cessation on 2 January 2020.
18 Represents remuneration from the date of appointment on 19 November 2019.
19 Represents remuneration up to date of cessation on 21 October 2019.
20 Represents remuneration from the date of appointment on 14 May 2019.
21 Other for Andrew Russell includes a cash sign-on payment of $150,000.
22 Fixed Remuneration for Mr Day during FY19 includes $38,256 in additional pay for Acting CEO role. Fixed Remuneration for role as CFO for
FY19 was $275,401
23 Represents remuneration up to the date of cessation as on 8 November 2018.
24 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 page 29 of 2019 Annual Report).
48
DIRECTORS' REPORT REMUNERATION REPORT
Minimum Shareholding
Non-executive Directors
The Board has 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.
Executive KMP
Executive KMP are expected to accumulate a minimum value of shares equivalent to:
• CEO: one year’s fixed remuneration
• Other Executive KMP: six months’ fixed remuneration
Until this minimum shareholding is accumulated, Executive KMP are not permitted to sell any shares
awarded under the Performance Rights & Deferred Rights Plan except to the extent required to pay any
tax liability incurred as a result of receiving those Plan Shares. Executive 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
Terms of Service Agreement
Name and title
Andrew Russell, Chief Executive Officer and 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 six months is given. The agreement
entitles the individual to a base salary and superannuation contributions,
as well as eligibility to participate in the STI & LTI plans. The Board retains
absolute discretion relating to the STI & LTI plans, 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 six months
and no less than three months, dependent on the circumstances surrounding
the termination.
49
DIRECTORS' REPORTCLASS 2020 ANNUAL REPORT REMUNERATION REPORT
CLASS 2020 ANNUAL REPORT
KMP
Terms of Service Agreement
Name and 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 three months is given. The agreement
entitles the individual to a base salary and superannuation contributions,
as well as eligibility to participate in the STI & LTI plans. The Board retains
absolute discretion relating to the STI & LTI plans, 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 three months, dependent on the circumstances surrounding
the termination.
KMP have no entitlement to termination payments in the event of removal for misconduct.
50
DIRECTORS' REPORT REMUNERATION REPORT
Share-based compensation
Issue of shares
The CEO was granted 100,000 Performance Rights in FY20 as part of his sign-on payments and they vested
into fully paid ordinary shares on 31 October 2019 as approved by shareholders at the 2019 Annual General
Meeting. No other shares were issued to Directors and other KMP as part of compensation during the year
ended 30 June 2020.
Options – Legacy ESOP
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
Grant date
Value per
option at
grant date
($)25
Value of
options at
grant date
($)26
Number
vested
Exercise
price ($)
Vesting and
first exercise
date
Last exercise
date
Glenn Day
484,377
30/09/2015
0.197
95,422
484,377
1.10
01/01/2017
30/09/2019
120,000
30/09/2015
0.168
20,160
120,000
1.33
30/09/2018
30/09/2020
90,000
29/06/2016
0.661
59,490
90,000
3.81
30/06/2019
30/06/2021
100,000
24/07/2017
0.341
34,100
66,666
3.99
27
15/03/2022
25 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.
26 The share-based payment expense of the option is recognised as an expense with a corresponding increase in equity spread over
the vesting period.
27 Equal annual instalments on 1 July 2018, 1 July 2019 and 1 July 2020.
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 on the following page.
51
DIRECTORS' REPORTCLASS 2020 ANNUAL REPORT REMUNERATION REPORT
CLASS 2020 ANNUAL REPORT
Number of options
granted during
FY20
Number of options
granted during
FY19
Number of options
vested during FY20
Number of options
vested during FY19
-
-
-
-
-
-
-
400,000
33,333
123,333
33,333
523,333
Kevin Bungard
Glenn Day
TOTAL
Option holding
Option holding
The number of options over ordinary shares in the Company held during the financial year by each Director
The number of options over ordinary shares in the Company held during the financial year by each Director
and other KMP members of the Group, including their personally related parties, is set out below:
and other KMP members of the Group, including their personally related parties, is set out below:
Options over
ordinary shares
Balance at the
start of the year
Granted
Exercised
Expired/forfeited/
other
Balance at the
end of the year
Glenn Day
794,377
-
(484,377)
-
310,000
Options over
ordinary shares
Vested and exercisable
Unvested and unexercisable
Glenn Day
276,666
33,334
Performance and deferred rights
The terms and conditions of each grant of performance right and deferred right over ordinary shares
affecting remuneration of Directors and other KMP in this financial year or future reporting years are
as follows:
Granted as
remuneration
Grant date
Value per right
at grant date
($)
Value of rights at
grant date
($)
Number vested
Vesting and first
exercise date
Andrew Russell
100,00028
21/10/2019
200,00028
21/10/2019
90,000
01/11/2019
1.625
0.390
1.793
162,580
100,000
31/10/2019
78,000
355,862
-
-
13/05/2022
31/10/2022
52
DIRECTORS' REPORT REMUNERATION REPORT
Granted as
remuneration
Grant date
Value per right
at grant date
($)
Value of rights at
grant date
($)
Number vested
Vesting and first
exercise date
Glenn Day
45,467
01/11/2018
1.737
100,000
26/07/2019
0.250
45,25229
26/08/2019
80,153
01/11/2019
1.228
1.793
78,985
25,000
55,606
143,714
-
-
-
-
30/06/2021
13/05/2022
29
31/10/2022
Rights granted under the LTI plan and deferred rights under the STI plan are at no cost to the participant
and carry no dividend or voting rights. Vesting is subject to continuity of service and meeting
performance criteria.
The number of performance rights and deferred rights over ordinary shares granted to and vested in
Directors and other KMP as part of compensation is set out below:
Number of
performance rights
granted during
FY20
Number of
performance rights
granted during
FY19
Number of
performance rights
vested during FY20
Number of
performance rights
vested during FY19
Andrew Russell
198,473
300,00028
100,000
Glenn Day
TOTAL
225,405
45,467
-
423,878
345,467
100,000
-
-
-
28 Shareholders approved the grant of 300,000 performance rights, which were allocated to Mr Russell in May 2019 as part of his sign-on package
on 21 October 2019.
29 This represents deferred rights allocated to Mr Day on 26 August 2019 in relation to FY19 STI vesting in equal instalments on 25 August 2020
and 25 August 2021
53
DIRECTORS' REPORTCLASS 2020 ANNUAL REPORT REMUNERATION REPORT
CLASS 2020 ANNUAL REPORT
Performance rights holding
The number of performance rights and deferred rights over ordinary shares in the Company held during
the financial year by each Director and other KMP members 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
300,000
198,473
(100,000)
Glenn Day
45,467
180,153
-
TOTAL
345,467
378,626
(100,000)
-
-
-
398,473
225,620
624,093
Deferred right holding
Deferred 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
TOTAL
-
-
-
-
45,252
45,252
-
-
-
-
-
-
-
45,252
45,252
54
DIRECTORS' REPORT REMUNERATION REPORT
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:
Balance at the
start of the year
Received as
part
of remuneration
Additions
Disposals/
other
Balance at the
end of the year
Non-executive Directors
Matthew Quinn
60,000
Robert Bazzani30
-
Christopher Cuffe31
50,000
Kathryn Foster
162,208
Simon Martin30
-
Rajarshi Ray31
1,248,848
Nicolette Rubinsztein
152,864
Executive KMP
-
-
-
-
-
-
-
190,000
-
-
-
157,115
-
-
Andrew Russell
-
100,000
15,151
Glenn Day
252,500
-
484,377
30 Represents the number of shares held by the director at the date of appointment as KMP.
31 Disposals/other represent the number of shares held by the director at the date of their cessation as KMP.
Loans
There were no loans to KMP during the reporting period.
This concludes the remuneration report, which has been audited.
-
-
(50,000)
-
-
250,000
-
-
162,208
157,115
(1,248,848)
-
-
-
-
152,864
115,151
736,877
55
DIRECTORS' REPORTCLASS 2020 ANNUAL REPORT REMUNERATION REPORT
CLASS 2020 ANNUAL REPORT
Shares under performance and deferred rights
Unissued ordinary shares of Class Limited under performance and deferred rights at the date of this report
are as follows:
Grant Date
Expiry date
Number under rights
1/11/2018
14/05/2019
26/07/2019
26/08/2019
26/08/2019
1/11/2019
20/01/2020
2/03/2020
30/06/2022
13/05/2021
13/05/2022
25/08/2020
25/08/2021
31/10/2022
31/10/2022
31/10/2022
168,664
200,000
500,000
92,516
92,513
616,870
24,510
23,411
1,718,484
No person entitled to exercise the performance and deferred rights had or has any right by virtue of the
performance and deferred right to participate in any share issue of the Company or of any other body
corporate.
Rights granted under performance and deferred rights are at no cost to the employee and carry no dividend
or voting rights. Vesting is subject to continuity of service and meeting performance criteria.
Shares issued on the exercise of options or performance rights
There were no ordinary shares of Class Limited issued on the exercise of options or performance rights
during the year ended 30 June 2020 and up to the date of this report. All exercised options and performance
rights during this period were settled by the allocation of treasury shares (note 21).
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.
56
DIRECTORS' REPORT REMUNERATION REPORT
Proceedings on behalf of the Company
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring
proceedings on behalf of the Company, or to intervene in any proceedings to which the Company is a party
for the purpose of taking responsibility on behalf of the Company for all or part of those proceedings.
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 27 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 27 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
M A T T H E W Q U I N N
Chairman of the Board
13 August 2020
57
DIRECTORS' REPORTCLASS 2020 ANNUAL REPORT 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 for the year ended 30 June 2020, 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
C F Farley
Partner – Audit & Assurance
Sydney,13 August 2020
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.
58
59 Financial
Statements
60 Class Limited
Statement of profit or loss and other comprehensive income
For the year ended 30 June 2020
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
Acquisition and corporate advisory costs
Other expenses
Finance costs
Profit before income tax expense
Income tax expense
Profit after income tax expense for the year attributable to the owners of Class
Limited
Note
5
6
7
7
8
Consolidated
2020
$'000
2019
$'000
43,904
38,283
148
119
28
338
(18,503)
(8,072)
(1,542)
(112)
(1,876)
(827)
(3,022)
(140)
(14,419)
(5,744)
(1,801)
(797)
(1,265)
-
(2,084)
-
10,077
12,539
(3,237)
(3,564)
6,840
8,975
Other comprehensive income for the year, net of tax
-
-
Total comprehensive income for the year attributable to the owners of Class Limited
6,840
8,975
Basic earnings per share
Diluted earnings per share
Cents
Cents
35
35
5.75
5.73
7.66
7.61
The above statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying
notes
61
Class Limited
Statement of financial position
As at 30 June 2020
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Income tax receivable
Other assets
Total current assets
Non-current assets
Investments
Property, plant and equipment
Intangibles
Right-of-use assets
Other assets
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Contract liabilities
Borrowings
Lease liabilities
Income tax provision
Provisions
Deferred consideration
Total current liabilities
Non-current liabilities
Borrowings
Lease liabilities
Deferred tax
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained earnings
Total equity
Consolidated
Note
2020
$'000
2019
$'000
9
10
8
11
12
13
14
15
11
16
17
18
19
8
20
33
18
19
8
20
21
22
16,488
4,018
-
1,107
21,613
3,276
1,004
35,133
973
2,078
42,464
17,464
3,697
697
773
22,631
2,028
779
8,552
-
1,852
13,211
64,077
35,842
4,897
610
1,000
832
735
1,345
500
9,919
9,000
97
2,971
425
12,493
22,412
3,446
408
-
-
-
805
-
4,659
-
-
1,926
360
2,286
6,945
41,665
28,897
34,414
1,522
5,729
22,507
1,490
4,900
41,665
28,897
The above statement of financial position should be read in conjunction with the accompanying notes
62
Class Limited
Statement of changes in equity
For the year ended 30 June 2020
Consolidated
Balance at 1 July 2018
Profit after income tax expense for the year
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
Transactions with owners in their capacity as owners:
Purchase of shares (note 21)
Share-based payments (note 36)
Share plan settlement (note 22)
Dividends paid (note 23)
Issued
capital
$'000
Other
reserves
$'000
Retained
earnings
$'000
Total equity
$'000
25,154
1,706
-
-
-
(2,647)
-
-
-
-
-
-
-
245
(461)
-
1,801
8,975
-
8,975
-
-
-
(5,876)
28,661
8,975
-
8,975
(2,647)
245
(461)
(5,876)
Balance at 30 June 2019
22,507
1,490
4,900
28,897
Consolidated
Balance at 1 July 2019
Profit after income tax expense for the year
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
Transactions with owners in their capacity as owners:
Contributions of equity, net of transaction costs (note 21)
Share-based payments (note 36)
Share plan settlement (note 22)
Dividends paid (note 23)
Balance at 30 June 2020
Issued
capital
$'000
Other
reserves
$'000
Retained
earnings
$'000
Total equity
$'000
22,507
1,490
4,900
28,897
-
-
-
10,808
-
1,099
-
34,414
-
-
-
-
829
(797)
-
6,840
-
6,840
-
-
-
(6,011)
6,840
-
6,840
10,808
829
302
(6,011)
1,522
5,729
41,665
The above statement of changes in equity should be read in conjunction with the accompanying notes
63
Class Limited
Statement of cash flows
For the year ended 30 June 2020
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 paid
Consolidated
Note
2020
$'000
2019
$'000
48,219
(29,284)
147
(140)
(1,580)
41,526
(24,146)
369
-
(4,825)
Net cash from operating activities
34
17,362
12,924
Cash flows from investing activities
Payment for purchase of subsidiary, net of cash acquired
Payments for investments
Payments for property, plant and equipment
Payments for intangibles
Proceeds from disposal of property, plant and equipment
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
Proceeds from borrowings
Repayment of lease liabilities
Dividends paid
Net cash from/(used in) financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
33
12
13
14
34
34
23
(12,867)
(1,100)
(414)
(7,976)
-
-
(2,000)
(309)
(6,653)
3
(22,357)
(8,959)
808
-
10,000
(778)
(6,011)
193
(3,475)
-
-
(5,876)
4,019
(9,158)
(976)
17,464
(5,193)
22,657
Cash and cash equivalents at the end of the financial year
9
16,488
17,464
The above statement of cash flows should be read in conjunction with the accompanying notes
64
Class Limited
Notes to the financial statements
30 June 2020
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 13 August 2020. 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 16 Leases
The Group has adopted AASB 16 from 1 July 2019. The standard replaces AASB 117 'Leases' and for lessees eliminates the
classifications of operating leases and finance leases. Except for short-term leases and leases of low-value assets, right-of-use
assets and corresponding lease liabilities are recognised in the statement of financial position. Straight-line operating lease
expense recognition is replaced with a depreciation charge for the right-of-use assets (included in operating costs) and an
interest expense on the recognised lease liabilities (included in finance costs). In the earlier periods of the lease, the expenses
associated with the lease under AASB 16 will be higher when compared to lease expenses under AASB 117. However, EBITDA
(Earnings Before Interest, Tax, Depreciation and Amortisation) results improve as the operating expense is now replaced by
interest expense and depreciation in profit or loss. For classification within the statement of cash flows, the interest portion is
disclosed in operating activities and the principal portion of the lease payments are separately disclosed in financing activities.
For lessor accounting, the standard does not substantially change how a lessor accounts for leases.
65
Class Limited
Notes to the financial statements
30 June 2020
Note 2. Significant accounting policies (continued)
Impact of adoption
AASB 16 was adopted using the modified retrospective approach and as such the comparatives have not been restated. The
impact of adoption on opening retained profits as at 1 July 2019 was as follows:
Operating lease commitments as at 1 July 2019 (AASB 117)
Operating lease commitments discount based on the weighted average incremental borrowing rate of 4.63%
(AASB 16)
Right-of-use assets (AASB 16)
Lease liabilities - current (AASB 16)
Lease liabilities - non-current (AASB 16)
Impact on opening retained earnings as at 1 July 2019
1 July 2019
$'000
1,496
(65)
1,431
(724)
(707)
-
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.
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 31.
Finance costs
Finance costs attributable to qualifying assets are capitalised as part of the asset. All other finance costs are expensed in the
period in which they are incurred.
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.
66
Class Limited
Notes to the financial statements
30 June 2020
Note 3. Critical accounting judgements, estimates and assumptions (continued)
Coronavirus (COVID-19) pandemic
Judgement has been exercised in considering the impacts that the Coronavirus (COVID-19) pandemic has had, or may have, on
the Group based on known information. This consideration extends to the nature of the products and services offered,
customers, supply chain, staffing and geographic regions in which the Group operates. Other than as addressed in specific notes,
there does not currently appear to be either any significant impact upon the financial statements or any significant uncertainties
with respect to events or conditions which may impact the Group unfavourably as at the date of this report or subsequently
as a result of the Coronavirus (COVID-19) pandemic.
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.
Goodwill and other indefinite life intangible assets
The Group tests annually, or more frequently if events or changes in circumstances indicate impairment, whether goodwill and
other indefinite life intangible assets have suffered any impairment, in accordance with the accounting policy stated in note 14.
The recoverable amounts of cash-generating unit has been determined based on fair value less cost of disposal. Fair value less
cost of disposal has been determined using recent arms' length transaction.
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.
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.
67 Class Limited
Notes to the financial statements
30 June 2020
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 the statement of
financial position for segment assets and liabilities. Information about revenue from products and services is disclosed in note
5.
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 subscription license fees
Service fees
Commission and partner fees
Document sales
Other revenue
Other revenue
Revenue
Consolidated
2020
$'000
2019
$'000
41,496
178
1,689
314
43,677
36,265
192
1,567
-
38,024
227
259
43,904
38,283
68
Class Limited
Notes to the financial statements
30 June 2020
Note 5. Revenue (continued)
Disaggregation of revenue
The disaggregation of revenue from contracts with customers is as follows:
Consolidated - 2020
Major product lines
Class Super -
Class Portfolio -
Class Trust -
Portfolio Engine
NowInfinity - subscription fees
NowInfinity - document sales
Timing of revenue recognition
Services transferred over time
Services transferred at a point in time
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
Document
sales
$'000
Total
$'000
37,319
1,095
86
157
2,839
-
41,496
41,496
-
41,496
178
-
-
-
-
-
178
178
-
178
1,689
-
-
-
-
-
1,689
-
1,689
1,689
-
-
-
-
-
314
314
-
314
314
39,186
1,095
86
157
2,839
314
43,677
41,674
2,003
43,677
Software
licence
fees
$'000
Service
fees
$'000
Commission
and partner
fees
$'000
Document
Sales
$'000
Total
$'000
35,246
858
161
36,265
36,265
-
36,265
192
-
-
192
192
-
192
1,567
-
-
1,567
-
1,567
1,567
-
-
-
-
-
-
-
37,005
858
161
38,024
36,457
1,567
38,024
The revenue from contracts with customers is substantially all in Australia.
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.
69
Class Limited
Notes to the financial statements
30 June 2020
Note 5. Revenue (continued)
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 ei ther 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 subscription 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 bundled 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.
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.
Document sales
The Group recognises revenue at a point in time when the documents are sold to customers on a pay per use basis.
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.
Other revenue
Other revenue is recognised when it is received or when the right to receive payment is established.
Note 6. Other income
Net fair value gain on investments
Consolidated
2020
$'000
2019
$'000
148
28
70 Class Limited
Notes to the financial statements
30 June 2020
Note 7. Expenses
Profit before income tax includes the following specific expenses:
Depreciation
Leasehold improvements
Furniture and fittings
Computer equipment
Office equipment
Office premises right-of-use assets
Total depreciation
Amortisation
Software development
Computer software
Contractual rights
Customer relationships
Customer acquisition costs
Total amortisation
Total depreciation and amortisation
Finance costs
Interest and finance charges paid/payable on borrowings
Interest and finance charges paid/payable on lease liabilities
Finance costs expensed
Leases
Minimum lease payments
Superannuation expense
Defined contribution superannuation expense
Share-based payments expense
Share-based payments expense
Consolidated
2020
$'000
2019
$'000
129
116
174
48
801
1,268
5,268
46
336
305
849
123
109
183
37
-
452
4,209
47
271
-
765
6,804
5,292
8,072
5,744
123
17
140
-
-
-
-
726
1,657
1,244
829
245
71
Class Limited
Notes to the financial statements
30 June 2020
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/(decrease) 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%
Tax effect amounts which are not deductible/(taxable) in calculating taxable income:
Entertainment expenses
Share-based payments
Sundry items
Adjustment recognised for prior periods
Income tax expense
Amounts credited directly to equity
Deferred tax liabilities
Consolidated
2020
$'000
2019
$'000
3,246
(77)
68
2,759
816
(11)
3,237
3,564
(77)
816
10,077
12,539
2,771
3,448
29
228
141
3,169
68
14
66
47
3,575
(11)
3,237
3,564
Consolidated
2020
$'000
2019
$'000
-
(174)
72
Class Limited
Notes to the financial statements
30 June 2020
Note 8. Income tax (continued)
Deferred tax liability
Deferred tax liability comprises temporary differences attributable to:
Amounts recognised in profit or loss:
Customer relationships acquired
Customer acquisition costs
Software development - Research and Development
Employee benefits
Accrued expenses
Carried forward losses on acquisition
Property, plant and equipment
Other
Transaction costs
Amounts recognised in equity:
Transaction costs on share issue
Deferred tax liability
Movements:
Opening balance
Charged/(credited) to profit or loss
Credited to equity
Additions through business combinations (note 33)
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
2020
$'000
2019
$'000
922
572
2,976
(886)
(176)
(118)
(144)
(107)
(68)
-
577
2,339
(292)
(498)
-
(31)
(100)
-
2,971
1,995
-
(69)
2,971
1,926
1,926
(77)
-
1,122
-
2,971
866
816
(174)
-
418
1,926
Consolidated
2020
$'000
2019
$'000
-
697
Consolidated
2020
$'000
2019
$'000
735
-
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.
73
Class Limited
Notes to the financial statements
30 June 2020
Note 8. Income tax (continued)
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.
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. NowInfinity joined the tax consolidation group from 31 January
2020. 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. Cash and cash equivalents
Current assets
Cash on hand and at bank
Consolidated
2020
$'000
2019
$'000
16,488
17,464
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.
74
Class Limited
Notes to the financial statements
30 June 2020
Note 10. Trade and other receivables
Current assets
Trade receivables
Less: Allowance for expected credit losses
Interest receivable
Consolidated
2020
$'000
2019
$'000
4,026
(8)
4,018
-
3,681
(12)
3,669
28
4,018
3,697
Allowance for expected credit losses
The Group has recognised a gain of $4,000 (2019: loss of $10,000) in profit or loss in respect of the expected credit losses for the
year ended 30 June 2020.
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
Expected credit loss rate
Carrying amount
2020
%
2019
%
2020
$'000
2019
$'000
Allowance for expected
credit losses
2020
$'000
2019
$'000
-
-
100%
100%
-
-
100%
100%
3,828
190
3
5
4,026
3,609
60
2
10
3,681
-
-
3
5
8
-
-
2
10
12
The Group has increased its monitoring of debt recovery as there is an increased probability of customers delaying payment, or
being unable to pay, due to the Coronavirus (COVID-19) pandemic. There has been no change to the allowance for expected credit
losses as at 30 June 2020 as a result of this.
Movements in the allowance for expected credit losses are as follows:
Opening balance
Additional provisions recognised/(reversed)
Closing balance
Consolidated
2020
$'000
2019
$'000
12
(4)
8
2
10
12
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.
75
Class Limited
Notes to the financial statements
30 June 2020
Note 11. Other assets
Current assets
Prepayments
Term deposits*
Other current assets
Non-current assets
Customer acquisition costs
Consolidated
2020
$'000
2019
$'000
874
150
83
1,107
623
150
-
773
2,078
1,852
3,185
2,625
*Includes term deposit which is held as security for lease of office premises $150,000 (2019: $150,000).
Reconciliation of customer acquisition costs:
Reconciliations of the written down values at the beginning and end of the current financial year are set out below:
Opening balance
Balance at 1 July 2018 (on adoption of AASB 15)
Additions
Additions through business combinations (note 33)
Amortisation expense
Closing balance
Consolidated
2020
$'000
2019
$'000
1,852
-
649
426
(849)
-
2,024
593
-
(765)
2,078
1,852
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 five 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.
76
Class Limited
Notes to the financial statements
30 June 2020
Note 12. Investments
Non-current assets
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
2020
$'000
2019
$'000
3,276
2,028
2,028
1,100
148
-
2,000
28
3,276
2,028
Refer to note 25 for further information on fair value measurement.
The Group has made an investment in Philo Capital Advisers (‘Philo’), a challenger 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 $1,100,000 was invested as at 30 June 2020.
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, it's 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. Fair value movements are recognised in profit or loss.
77
Class Limited
Notes to the financial statements
30 June 2020
Note 13. Property, plant and equipment
Non-current assets
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
2020
$'000
2019
$'000
666
(523)
143
694
(352)
342
1,590
(1,161)
429
233
(143)
90
1,004
503
(391)
112
536
(191)
345
1,183
(929)
254
163
(95)
68
779
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 2018
Additions
Disposals
Depreciation expense
Balance at 30 June 2019
Additions
Additions through business combinations (note
33)
Depreciation expense
Balance at 30 June 2020
Leasehold
improvements
$'000
Furniture and
fittings
$'000
Computer
equipment
$'000
Office
equipment
$'000
Total
$'000
194
41
-
(123)
112
5
155
(129)
143
422
32
-
(109)
345
7
106
(116)
342
279
163
(5)
(183)
254
332
17
(174)
429
39
73
(7)
(37)
68
70
-
(48)
90
934
309
(12)
(452)
779
414
278
(467)
1,004
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
78
Class Limited
Notes to the financial statements
30 June 2020
Note 13. Property, plant and equipment (continued)
The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each reporting date.
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. Intangibles
Non-current assets
Goodwill - at cost
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
Customer relationships
Less: Accumulated amortisation
Consolidated
2020
$'000
2019
$'000
16,520
49
38,590
(23,478)
15,112
198
(192)
6
362
(267)
95
3,656
(305)
3,351
-
47
26,571
(18,210)
8,361
198
(146)
52
328
(236)
92
-
-
-
35,133
8,552
79
Class Limited
Notes to the financial statements
30 June 2020
Note 14. Intangibles (continued)
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 2018
Additions
Disposals
Transfers in/(out)
Amortisation expense
Balance at 30 June 2019
Additions
Additions through business
combinations (note 33)
Amortisation expense
Balance at 30 June 2020
Goodwill
$'000
Trademarks
and domain
names
$'000
Software
develop-
ment
$'000
Computer Contractual
software
$'000
rights
$'000
Customer
relation-
ships
$'000
Total
$'000
-
-
-
-
-
-
-
16,520
-
16,520
48
-
(1)
-
-
47
-
2
-
49
6,237
6,375
-
(42)
(4,209)
8,361
7,637
4,382
(5,268)
15,112
99
-
-
-
(47)
52
-
-
(46)
6
43
278
-
42
(271)
92
339
-
(336)
-
-
-
-
-
-
-
6,427
6,653
(1)
-
(4,527)
8,552
7,976
3,656
(305)
24,560
(5,955)
95
3,351
35,133
Impairment testing
Goodwill acquired through business combinations have been allocated to the following cash-generating units ('CGU'):
NowInfinity
Consolidated
2020
$'000
2019
$'000
16,520
-
As detailed in note 33, the Group acquired NowInfinity business in January 2020. The recoverable amount of NowInfinity CGU
was determined based on the fair value less cost of disposal (‘FVLCD’) basis. The purchase consideration paid (representing the
market price) for the acquisition of the business during the current financial year is indicative of fair value. The Group considers
this to be appropriate based on the fact that the transaction was completed on an arm’s length basis between willing
and knowledgeable parties. The Group does not consider the market for the acquired business to have significantly changed
since the acquisition date. Since acquisition, NowInfinity business has met their short-term targets and there has
been no indication of impairment to suggest fair value has decreased.
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.
Goodwill
Goodwill arises on the acquisition of a business. Goodwill is not amortised. Instead, goodwill is tested annually for impairment, or
more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated
impairment losses. Impairment losses on goodwill are taken to profit or loss and are not subsequently reversed.
80
Class Limited
Notes to the financial statements
30 June 2020
Note 14. Intangibles (continued)
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.
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 life of three to ten years.
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.
Customer relationships
Customer contracts and relationships acquired in a business combination are amortised on a straight-line basis over the period
of their expected benefit, being their finite life of five years.
Note 15. Right-of-use assets
Non-current assets
Right-of-use assets
Less: Accumulated depreciation
Consolidated
2020
$'000
2019
$'000
1,850
(877)
973
-
-
-
81 Class Limited
Notes to the financial statements
30 June 2020
Note 15. Right-of-use assets (continued)
The Group has leased office premises under operating lease expiring between one to three years, with options to extend. The
lease has various escalation clauses. On renewal, the terms of the leases are renegotiated.
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 2018
Balance at 30 June 2019
Adoption of AASB 16 on 1 July 2019
Additions through business combinations (note 33)
Additions
Depreciation expense
Balance at 30 June 2020
Office
premises
$'000
-
-
1,431
287
56
(801)
973
Accounting policy for right-of-use assets
A right-of-use asset is recognised at the commencement date of a lease. The right-o f-use asset is measured at cost, which
comprises the initial amount of the lease liability, adjusted for, as applicable, any lease payments made at or before the
commencement date net of any lease incentives received, any initial direct costs incurred, and, except where included in the
cost of inventories, an estimate of costs expected to be incurred for dismantling and removing the underlying asset, and
restoring the site or asset.
Right-of-use assets are depreciated on a straight-line basis over the unexpired period of the lease or the estimated useful life
of the asset, whichever is the shorter. Where the Group expects to obtain ownership of the leased asset at the end of the
lease term, the depreciation is over its estimated useful life. Right-o
for any remeasurement of lease liabilities.
f use assets are subject to impairment or adjusted
The Group has elected not to recognise a right-of-use asset and corresponding lease liability for short-term leases with terms of
12 months or less and leases of low-value assets. Lease payments on these assets are expensed to profit or loss as incurred.
Note 16. Trade and other payables
Current liabilities
Trade payables
Accrued expenses
BAS payable
Consolidated
2020
$'000
2019
$'000
904
2,994
999
597
2,113
736
4,897
3,446
Refer to note 24 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.
82
Class Limited
Notes to the financial statements
30 June 2020
Note 17. Contract liabilities
Current liabilities
Contract liabilities
Consolidated
2020
$'000
2019
$'000
610
408
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. Borrowings
Current liabilities
Bank loans
Non-current liabilities
Bank loans
Consolidated
2020
$'000
2019
$'000
1,000
9,000
10,000
-
-
-
Refer to note 24 for further information on financial instruments.
Bank loan facilities
The bank loan facilities are subject to an initial three year fixed rate of 2.97% per annum. The banking facility matures on 31
January 2023. The facilities are secured by fixed and floating charges over the Group's assets. Interest and fees are payable in
the first year. Interest plus quarterly principal repayment of $500,000 are payable from 31 March 2021 with bullet repayment for
the amount outstanding on expiry of the loan term.
Business overdraft facility
In addition to the above, the Group has a business overdraft facility for $2,000,000 which is repayable on call. The facility was not
drawn as at 30 June 2020.
83
Class Limited
Notes to the financial statements
30 June 2020
Note 18. Borrowings (continued)
Financing arrangements
Unrestricted access was available at the reporting date to the following lines of credit:
Total facilities
Bank loans
Business overdraft
Used at the reporting date
Bank loans
Business overdraft
Unused at the reporting date
Bank loans
Business overdraft
Consolidated
2020
$'000
2019
$'000
10,000
2,000
12,000
10,000
-
10,000
-
2,000
2,000
-
-
-
-
-
-
-
-
-
Accounting policy for borrowings
Loans and borrowings are initially recognised at the fair value of the consideration received, net of transaction costs. They are
subsequently measured at amortised cost using the effective interest method.
Note 19. Lease liabilities
Current liabilities
Lease liability
Non-current liabilities
Lease liability
Consolidated
2020
$'000
2019
$'000
832
97
929
-
-
-
Refer to note 24 for further information on financial instruments.
Accounting policy for lease liabilities
A lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised at the present value
of the lease payments to be made over the term of the lease, discounted using the interest rate implicit in the lease or, if that
rate cannot be readily determined, the Group's incremental borrowing rate. Lease payments comprise of fixed payments less any
lease incentives receivable, variable lease payments that depend on an index or a rate, amounts expected to be paid under
residual value guarantees, exercise price of a purchase option when the exercise of the option is reasonably certain to occur, and
any anticipated termination penalties. The variable lease payments that do not depend on an index or a rate are expensed in the
period in which they are incurred.
Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts are remeasured if
there is a change in the following: future lease payments arising from a change in an index or a rate used; residual guarantee;
lease term; certainty of a purchase option and termination penalties. When a lease liability is remeasured, an adjustment is made
to the corresponding right-of-use asset, or to profit or loss if the carrying amount of the right-of-use asset is fully written down.
84
Class Limited
Notes to the financial statements
30 June 2020
Note 20. Provisions
Current liabilities
Annual leave
Long service leave
Lease make good
Non-current liabilities
Long service leave
Lease make good
Consolidated
2020
$'000
2019
$'000
958
224
163
1,345
415
10
425
597
208
-
805
257
103
360
1,770
1,165
Movements in provisions
Movements in each class of provision during the current financial year, other than employee benefits, are set out below:
Consolidated - 2020
Carrying amount at the start of the year
Additional provisions recognised
Additions through business combinations (note 33)
Carrying amount at the end of the year
Lease make
good
$'000
103
60
10
173
Accounting policy for provisions
Provisions are recognised when the Group has a present (legal or constructive) obligation as a result of a past event, it is probable
the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. The
amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the
reporting date, taking into account the risks and uncertainties surrounding the obligation. If the time value of money is material,
provisions are discounted using a current pre-tax rate specific to the liability. The increase in the provision resulting from the
passage of time is recognised as a finance cost.
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. 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.
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.
85
Class Limited
Notes to the financial statements
30 June 2020
Note 20. Provisions (continued)
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.
Note 21. Issued capital
Ordinary shares - fully paid
Less: Treasury shares
Movements in ordinary share capital
Details
Balance
Consolidated
2020
Shares
2019
Shares
2020
$'000
2019
$'000
122,758,407
(450,604)
117,662,056
(1,565,000)
35,154
(740)
25,154
(2,647)
122,307,803
116,097,056
34,414
22,507
Date
Shares
$'000
1 July 2018
117,662,056
25,154
Balance
Issue of shares on acquisition of NowInfinity 3505 Pty Ltd
30 June 2019
31 January 2020
117,662,056
5,096,351
25,154
10,000
Balance
30 June 2020
122,758,407
35,154
Movements in treasury shares
Details
Date
Shares
$'000
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 22)
1 July 2018
October 2018
November 2018
March 2019
April 2019
May 2019
Balance
Payments from option holders on exercise of options
Less: allocation of shares on exercise of options (note 22)
30 June 2019
Various dates
Various dates
-
(236,198)
(500,000)
(524,305)
(583,794)
(152,781)
-
432,078
(1,565,000)
-
1,114,396
-
(457)
(948)
(816)
(994)
(260)
193
635
(2,647)
808
1,099
Balance
30 June 2020
(450,604)
(740)
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.
86
Class Limited
Notes to the financial statements
30 June 2020
Note 21. Issued capital (continued)
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 and performance rights 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.
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 Group is subject to certain financing arrangements covenants and meeting these is given priority in all capital risk
management decisions. There have been no events of default on the financing arrangements during the financial year.
The capital risk management policy remains unchanged from the 30 June 2019 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 22. Reserves
Share-based payments reserve
Employee share acquisition reserve
Acquisition reserve
Consolidated
2020
$'000
2019
$'000
2,833
(1,258)
(53)
2,004
(461)
(53)
1,522
1,490
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.
87 Class Limited
Notes to the financial statements
30 June 2020
Note 22. Reserves (continued)
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.
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 2018
Share-based payments
Transfer from treasury shares
Tax effect on settlement
Balance at 30 June 2019
Share-based payments
Transfer from treasury shares
Tax effect on settlement
Balance at 30 June 2020
Note 23. Dividends
Share-based
payment
reserve
$'000
Share option
purchase
reserve
$'000
Acquisition
reserve
$'000
Total
$'000
1,759
245
-
-
2,004
829
-
-
2,833
-
-
(635)
174
(461)
-
(1,099)
302
(1,258)
(53)
-
-
-
(53)
-
-
-
(53)
1,706
245
(635)
174
1,490
829
(1,099)
302
1,522
Dividends
Dividends paid during the financial year were as follows:
Final dividend for the year ended 30 June 2019 of 2.5 cents per ordinary share
(2019: 2.5 cents)
Interim dividend for the year ended 30 June 2020 of 2.5 cents per ordinary share
(2019: 2.5 cents)
Consolidated
2020
$'000
2019
$'000
2,942
2,942
3,069
2,934
6,011
5,876
On 13 August 2020, the Directors declared a final dividend for the year ended 30 June 2020 of 2.5 cents per ordinary share with
payment date of 18 September 2020 to eligible shareholders on the register as at 21 August 2020. This equates to a total
distribution of $3,069,000, based on the number of ordinary shares on issue as at 30 June 2020. The financial effect of dividends
declared after the reporting date is not reflected in the 30 June 2020 financial statements and will be recognised in subsequent
financial reports.
Franking credits
Consolidated
2020
$'000
2019
$'000
Franking credits available for subsequent financial years based on a tax rate of 27.5%
4,100
4,800
88
Class Limited
Notes to the financial statements
30 June 2020
Note 23. Dividends (continued)
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
Accounting policy for dividends
Dividends are recognised when declared during the financial year and are no longer at the discretion of the Company.
Note 24. 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 main interest rate risk arises from long-term borrowings and cash at bank. Borrowings obtained at variable rates
expose the Group to interest rate risk. Borrowings obtained at fixed rates expose the Group to fair value interest rate risk.
As a result of fixed rate bank loan facilities, 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 (2019:50) basis points would have an adverse/favourable effect on profit
before tax of $82,000 (2019: $87,000) 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.
89
Class Limited
Notes to the financial statements
30 June 2020
Note 24. Financial instruments (continued)
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. As disclosed in note 10, due to the Coronavirus (COVID-19) pandemic, the calculation of expected credit losses has been
revised as at 30 June 2020.
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.
Financing arrangements
Unused borrowing facilities at the reporting date:
Business overdraft
Consolidated
2020
$'000
2019
$'000
2,000
-
The bank overdraft facilities may be drawn at any time and may be terminated by the bank without notice.
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 - 2020
Non-derivatives
Non-interest bearing
Trade payables
Deferred consideration
Interest-bearing - fixed rate
Bank loans
Lease liability
Total non-derivatives
Weighted
average
interest rate
%
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
-
-
2.97%
4.63%
904
500
1,282
868
3,554
-
-
2,238
887
3,125
-
-
7,104
104
7,208
-
-
-
-
-
904
500
10,624
1,859
13,887
90
Class Limited
Notes to the financial statements
30 June 2020
Note 24. Financial instruments (continued)
Consolidated - 2019
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
The cash flows in the maturity analysis above are not expected to occur significantly earlier than contractually disclosed above.
Note 25. Fair value measurement
The following tables detail the Group's assets and liabilities, 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 - 2020
Assets
Convertible notes at fair value through profit or loss
Total assets
Consolidated - 2019
Assets
Convertible notes at fair value through profit or loss
Total assets
Level 1
$'000
Level 2
$'000
Level 3
$'000
Total
$'000
Level 1
$'000
-
-
-
-
Level 2
$'000
-
-
-
-
3,276
3,276
3,276
3,276
Level 3
$'000
Total
$'000
2,028
2,028
2,028
2,028
There were no transfers between levels during the financial year.
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.
Valuation techniques for fair value measurements categorised within level 2 and level 3
Convertible note receivables are held at fair value through profit or loss as the convertible feature does not meet the
requirements of being held to collect solely payment of principal and interest and therefore cannot be carried at amortised
cost or at fair value through other comprehensive income. The coupon rate received periodically over the term of the notes is
classified as part of the fair value gain or loss in other income. The valuation technique used for fair value measurements
categorised within level 3 was based upon a Discounted Cash Flow model. The convertible notes measured within this
category are held for the purpose of converting the notes into equity of Philo Capital Holdings in the future. If the notes are
converted into equity then changes in fair value in future years will be assessed based upon forecast cash flows, revenue and
Funds Under Administration (‘FUA’) targets.
91
Class Limited
Notes to the financial statements
30 June 2020
Note 25. Fair value measurement (continued)
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 2018
Additions
Gains recognised in profit or loss
Balance at 30 June 2019
Gains recognised in profit or loss
Additions
Balance at 30 June 2020
Convertible
notes at fair
value through
profit or
loss
$'000
-
2,000
28
2,028
148
1,100
3,276
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.
92
Class Limited
Notes to the financial statements
30 June 2020
Note 26. 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 27. Remuneration of auditors
Consolidated
2020
$
2019
$
1,525,718
-
(8,025)
327,991
1,357,359
86,044
(48,290)
168,503
1,845,684
1,563,616
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
Due diligence
Tax compliance services
Consolidated
2020
$
2019
$
115,000
81,906
84,697
59,000
-
18,200
143,697
18,200
258,697
100,106
Note 28. Contingent liabilities
The Group has given bank guarantees as at 30 June 2020 of $150,000 (2019: $150,000) to various landlords.
Note 29. Commitments
Lease commitments - operating
Committed at the reporting date but not recognised as liabilities, payable:
Within one year
One to five years
Consolidated
2020
$'000
2019
$'000
-
-
-
736
1,473
2,209
93
Class Limited
Notes to the financial statements
30 June 2020
Note 30. Related party transactions
Parent entity
Class Limited is the parent entity.
Subsidiaries
Interests in subsidiaries are set out in note 32.
Key management personnel
Disclosures relating to key management personnel are set out in note 26 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 31. 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
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
Parent
2020
$'000
2019
$'000
8,127
8,127
6,974
6,974
Parent
2020
$'000
2019
$'000
9,434
9,726
54,937
27,258
6,730
18,412
34,414
2,833
(1,258)
536
3,104
4,788
22,507
2,004
(461)
(1,580)
36,525
22,470
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 2020 and 30 June 2019.
Contingent liabilities
The parent entity had contingent liabilities of $150,000 as at 30 June 2020 (2019: $150,000).
94
Class Limited
Notes to the financial statements
30 June 2020
Note 31. Parent entity information (continued)
Capital commitments - Property, plant and equipment
The parent entity had no capital commitments for property, plant and equipment as at 30 June 2020 and 30 June 2019.
Significant accounting policies
The accounting policies of the parent entity are consistent with those of the Group, as disclosed in note 2, note 38 or in the
respective notes, 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 32. 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, note 38 or in the respective notes:
Name
Class Super Pty Limited
Class Investment Reporter Pty Ltd
NowInfinity 3505 Pty Ltd
NowInfinity Pty Ltd
Note 33. Business combinations
Principal place of business /
Country of incorporation
Australia
Australia
Australia
Australia
Ownership interest
2019
2020
%
%
100%
100%
100%
100%
100%
100%
-
-
On 31 January 2020, the Group acquired 100% of the ordinary shares of NowInfinity 3505 Pty Ltd ('NowInfinity’) for the
total consideration of $24,073,000. NowInfinity operates a market leading platform that offers the Documentation Suite,
Corporate Messenger, Trust Register and Super Comply products. The entity was acquired to to expand the group's product
offering to the accounting and administrator segments.The goodwill of $16,520,000 represents profitability of the
acquired business and the synergistic opportunities that will arise from the acquisition.
The acquired business contributed revenues of $3,148,000 and profit after tax of $843,000 to the Group for the period from 31
January 2020 to 30 June 2020. If the acquisition occurred on 1 July 2019, the full year contributions would have been revenues
of $7,156,000 and profit after tax of $416,000. The values identified in relation to the acquisition of NowInfinity are final as at
30 June 2020.
95
Class Limited
Notes to the financial statements
30 June 2020
Note 33. Business combinations (continued)
Details of the acquisition are as follows:
Cash and cash equivalents
Trade receivables
Prepayments
Other current assets
Customer acquisition costs
Plant and equipment
Right-of-use assets
Software platform acquired
Client relationships acquired
Other intangible assets
Trade payables
Other payables and accruals
Deferred tax liability
Other provisions
Lease liability
Net assets acquired
Goodwill
Acquisition-date fair value of the total consideration transferred
Representing:
Cash paid or payable to vendor
Class Limited shares issued to vendor
Deferred consideration
Acquisition costs expensed to profit or loss
Cash used to acquire business, net of cash acquired:
Cash paid to the vendor
Less: cash and cash equivalents acquired
Net cash used
Fair value
$'000
706
72
177
4
426
278
287
4,382
3,656
2
(143)
(833)
(1,122)
(60)
(279)
7,553
16,520
24,073
13,573
10,000
500
24,073
539
13,573
(706)
12,867
Accounting policy for business combinations
The acquisition method of accounting is used to account for business combinations regardless of whether equity instruments
or other assets are acquired.
The consideration transferred is the sum of the acquisition-date fair values of the assets transferred, equity instruments issued
or liabilities incurred by the acquirer to former owners of the acquiree and the amount of any non-controlling interest in the
acquiree. For each business combination, the non-controlling interest in the acquiree is measured at either fair value or at the
proportionate share of the acquiree's identifiable net assets. All acquisition costs are expensed as incurred to profit or loss.
On the acquisition of a business, the Group assesses the financial assets acquired and liabilities assumed for appropriate
classification and designation in accordance with the contractual terms, economic conditions, the Group's operating or
accounting policies and other pertinent conditions in existence at the acquisition-date.
96
Class Limited
Notes to the financial statements
30 June 2020
Note 33. Business combinations (continued)
Where the business combination is achieved in stages, the Group remeasures its previously held equity interest in the acquiree
at the acquisition-date fair value and the difference between the fair value and the previous carrying amount is recognised in
profit or loss.
Contingent consideration to be transferred by the acquirer is recognised at the acquisition-date fair value. Subsequent changes
in the fair value of the contingent consideration classified as an asset or liability is recognised in profit or loss. Contingent
consideration classified as equity is not remeasured and its subsequent settlement is accounted for within equity.
The difference between the acquisition-date fair value of assets acquired, liabilities assumed and any non-controlling interest in
the acquiree and the fair value of the consideration transferred and the fair value of any pre-existing investment in the acquiree
is recognised as goodwill. If the consideration transferred and the pre-existing fair value is less than the fair value of the
identifiable net assets acquired, being a bargain purchase to the acquirer, the difference is recognised as a gain directly in profit
or loss by the acquirer on the acquisition-date, but only after a reassessment of the identification and measurement of the net
assets acquired, the non-controlling interest in the acquiree, if any, the consideration transferred and the acquirer's previously
held equity interest in the acquirer.
Business combinations are initially accounted for on a provisional basis. The acquirer retrospectively adjusts the provisional
amounts recognised and also recognises additional assets or liabilities during the measurement period, based on new
information obtained about the facts and circumstances that existed at the acquisition-date. The measurement period ends on
either the earlier of (i) 12 months from the date of the acquisition or (ii) when the acquirer receives all the information possible to
determine fair value.
Note 34. Cash flow information
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
Decrease/(increase) in income tax refund due
Increase in prepayments
Increase in other operating assets
Increase in trade and other payables
Increase/(decrease) in contract liabilities
Increase/(decrease) in provision for income tax
Increase in deferred tax liabilities
Increase in employee benefits
Increase in other provisions
Consolidated
2020
$'000
2019
$'000
6,840
8,975
8,072
-
(148)
829
(249)
697
(74)
(728)
416
202
735
225
535
10
5,744
10
(28)
245
(468)
(697)
(93)
(593)
417
(86)
(1,380)
816
28
34
Net cash from operating activities
17,362
12,924
97
Class Limited
Notes to the financial statements
30 June 2020
Note 34. Cash flow information (continued)
Changes in liabilities arising from financing activities
Consolidated
Balance at 1 July 2018
Balance at 30 June 2019
Net cash from/(used in) financing activities
Adoption of AASB 16 on 1 July 2019
Changes through business combinations (note 33)
Other changes
Balance at 30 June 2020
Note 35. Earnings per share
Bank
loan
$'000
Lease
liabilities
$'000
-
-
10,000
-
-
-
10,000
-
-
(778)
1,431
279
(3)
929
Consolidated
2020
$'000
2019
$'000
Profit after income tax attributable to the owners of Class Limited
6,840
8,975
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
Performance rights over ordinary shares
Number
Number
119,055,320
117,152,294
114,558
185,029
765,603
-
Weighted average number of ordinary shares used in calculating diluted earnings per share
119,354,907
117,917,897
Basic earnings per share
Diluted earnings per share
Accounting policy for earnings per share
Cents
Cents
5.75
5.73
7.66
7.61
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.
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.
98
Class Limited
Notes to the financial statements
30 June 2020
Note 36. 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 also has 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).
The share-based payment expense for the year was $829,000 (2019: $245,000). 1,696,627 performance rights were granted
during the year ended 30 June 2020 (2019: 613,291 rights).
Set out below is a summary of the options granted under the plan:
2020
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
1,464,614
793,506
708,202
864,667
3,830,989
Granted
Exercised
Expired/
forfeited/
other
Balance at
the end of
the year
-
-
-
-
-
(1,464,614)
(20,000)
-
-
(1,484,614)
-
-
-
(20,004)
(20,004)
-
773,506
708,202
844,663
2,326,371
Weighted average exercise price
$2.30
$0.00
$1.10
$3.99
$3.05
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)
-
-
(320,000)
(283,333)
(603,333)
1,464,614
793,506
708,202
864,667
3,830,989
Weighted average exercise price
$2.35
$0.00
$1.15
$3.89
$2.30
The weighted average share price during the financial year was $1.56 (2019:$1.73).
The weighted average remaining contractual life of options outstanding at the end of the financial year was 1 year (2019: 1.4 years).
2,105,368 options outstanding as at 30 June 2020 are vested and exercisable (30 June 2019: 3,348,986).
Performance rights
During the year, the Group granted 1,696,627 performance rights for nil cash consideration for the year ended 30 June 2020
(2019:613,291). The performance period is generally for a 3 year period. 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.
99
Class Limited
Notes to the financial statements
30 June 2020
Note 36. Share-based payments (continued)
Set out below are summaries of performance rights granted under the plan:
2020
Grant date
Expiry date
Exercise
price
Balance at
the start of
the year
Granted
Exercised
Expired/
forfeited/
other
Balance at
the end of
the year
30/06/2021
31/10/2019
13/05/2021
31/10/2019
13/05/2022
25/08/2021
31/10/2022
31/10/2022
31/10/2022
01/11/2018
14/05/2019
14/05/2019
24/07/2019
26/07/2019
26/08/2019
01/11/2019
20/01/2020
02/03/2020
2019
Grant date
Expiry date
01/11/2018
14/05/2019
14/05/2019
30/06/2021
31/10/2019
13/05/2021
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
168,664
100,000
200,000
-
-
-
-
-
-
468,664
-
-
-
26,848
700,000
224,835
697,023
24,510
23,411
1,696,627
-
(100,000)
-
(26,848)
-
-
-
-
-
(126,848)
-
-
-
-
(200,000)
(39,806)
(80,153)
-
-
(319,959)
168,664
-
200,000
-
500,000
185,029
616,870
24,510
23,411
1,718,484
Exercise
price
Balance at
the start of
the year
Granted
Exercised
$0.00
$0.00
$0.00
-
-
-
-
313,291
100,000
200,000
613,291
Expired/
forfeited/
other
Balance at
the end of
the year
-
-
-
-
(144,627)
-
-
(144,627)
168,664
100,000
200,000
468,664
NIL performance rights vested and exercisable as at 30 June 2020 (2019: Nil). The weighted average remaining contractual life
of performance rights outstanding at the end of the financial year was 0.9 years (2019: 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
24/07/2019
26/07/2019
26/08/2019
01/11/2019
20/01/2020
02/03/2020
31/10/2019
13/05/2022
25/08/2021
31/10/2022
31/10/2022
31/10/2022
Share price
at grant date
Exercise
price
Expected
volatility
Dividend
yield
Risk-free
Fair value
interest rate at grant date
$1.50
$1.47
$1.31
$1.95
$2.00
$1.54
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
37.00%
37.00%
37.00%
37.00%
37.00%
37.00%
2.60%
2.70%
2.60%
2.60%
2.60%
2.60%
1.20%
0.90%
1.20%
1.20%
1.20%
1.20%
$1.480
$0.250
$1.230
$1.790
$1.850
$1.430
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.
100
Class Limited
Notes to the financial statements
30 June 2020
Note 36. Share-based payments (continued)
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.
Market conditions are taken into consideration in determining fair value. Therefore any awards subject to market conditions are
considered to vest irrespective of whether or not that market condition has been met, provided all other conditions are satisfied.
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.
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 37. Events after the reporting period
The impact of the Coronavirus (COVID-19) pandemic is ongoing and while it has not had a significant impact for the Group up to
30 June 2020, it is not practicable to estimate the potential impact, positive or negative, after the reporting date. The situation
is rapidly developing and is dependent on measures imposed b y the A ustralian Government and other countries, s uch as
maintaining social distancing requirements, quarantine, travel restrictions and any economic stimulus that may be provided.
On 13 August 2020, the Group announced the acquisition of all the shares in Assuriti Pty Ltd ('Smartcorp'). The Share Purchase
Agreement was executed on 12 August 2020 with completion date effective 20 August 2020. The maximum enterprise value
was $4,200,000 adjusted for net tangible assets, settled by $2,730,000 upfront cash payment plus the issue of $1,470,000 in
the Company’s shares which are subject to escrow for a period of 18 months from the completion date. The acquisition will be
partly funded through an increase to the existing bank debt facility.
Apart from the dividend declared as disclosed in note 23, no other matter or circumstance has arisen since 30 June 2020 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 38. 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 2020 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.
in the Group are
Intercompany transactions, balances and unrealised gains on transactions between entities
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.
101 Class Limited
Notes to the financial statements
30 June 2020
Note 38. Other accounting policies (continued)
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.
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.
Impairment of non-financial assets
Goodwill and 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 2020. 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.
102
Class Limited
Notes to the financial statements
30 June 2020
Note 38. Other accounting policies (continued)
Conceptual Framework for Financial Reporting (Conceptual Framework)
The revised Conceptual Framework is applicable to annual reporting periods beginning on or after 1 July 2021 and early adoption
is permitted. The Conceptual Framework contains new definition and recognition criteria as well as new guidance on
measurement that affects several Accounting Standards. Where the Group has relied on the existing framework in determining
its accounting policies for transactions, events or conditions that are not otherwise dealt with under the Australian Accounting
Standards, the Group may need to review such policies under the revised framework. At this time, the application of the
Conceptual Framework is not expected to have a material impact on the Group's financial statements.
103
Class Limited
Directors' declaration
30 June 2020
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 2020
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
13 August 2020
Sydney
104
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 2020, the consolidated statement of profit or loss and other
comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the
year then ended, and notes to the consolidated financial statements, including a summary of significant accounting
policies, and the Directors’ declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including:
a giving a true and fair view of the Group’s financial position as at 30 June 2020 and of its performance for the year
ended on that date; and
b complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are
further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are
independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and
the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for
Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled
our other ethical responsibilities in accordance with the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Grant Thornton Audit Pty Ltd ACN 130 913 594
a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389
www.grantthornton.com.au
‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients
and/or refers to one or more member firms, as the context requires. Grant Thornton Australia Ltd is a member firm of Grant Thornton International
Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are
delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one
another and are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to
Grant Thornton Australia Limited ABN 41 127 556 389 and its Australian subsidiaries and related entities. GTIL is not an Australian related entity to
Grant Thornton Australia Limited.
Liability limited by a scheme approved under Professional Standards Legislation.
105
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 Intangibles
Capitalised software development costs had a net carrying
value of $15,112,000 at 30 June 2020.
Our procedures included, amongst others:
Assessing the Group’s accounting policy in respect of
During the year the Group capitalised $7,637,000 of software
development costs. These intangible assets are being
amortised over a 3-10 year period.
product development costs for adherence to AASB 138,
and evaluating management’s assessment of each project
for compliance with the recognition criteria set out in AASB
138;
AASB 138: Intangible Assets sets out the specific
requirements to be met in order to capitalise software
development costs. Intangible assets should be amortised
over their useful economic lives in accordance with AASB 138.
Testing a sample of amounts capitalised to supporting
documentation and assessing compliance with the
recognition criteria of AASB 138;
Evaluating the reasonableness of useful lives to be applied
in future reporting periods; and
This area is a key audit matter due to subjectivity and
management judgement applied in the assessment of whether
costs meet the development phase criteria described in AASB
138 and in relation to the estimate of the assets’ useful lives.
Acquisition accounting – Note 33 Business combinations
Assessing the adequacy of related disclosures in the
financial statements.
On 31 January 2020 the Group acquired all the shares in
NowInfinity 3505 Pty Ltd. The purchase consideration was
settled by $10,000,000 upfront cash payment, $10,000,000 in
the Company's shares, and deferred consideration payments
of up to $5,000,000.
Our procedures included, amongst others:
Testing the acquisition accounting for appropriateness and
compliance with AASB 3: Business Combinations, including
assessing management’s accounting entries with reference
to the acquisition agreements;
This acquisition is a key audit matter due to judgements and
estimates required in determining the appropriate accounting,
including estimating the fair value of net assets acquired and
estimating the fair value of the purchase consideration. In
addition the intangible assets are material to the Group and
the Group has engaged an expert to assist them in
determining the appropriate asset values.
Evaluating the methodology applied by management to
identify and value the assets and liabilities;
Evaluating the competence, capability and objectivity of the
management’s external expert and performing a detailed
review of their reports to understand the scope of their
engagement and any limitations in the report. In addition
we held discussions with them.
With the assistance of Grant Thornton valuation experts:
– Assessing the identification of intangible assets
acquired including software development and
customer relationships, along with the valuation
methodologies used to value these assets;
– Challenging the associated underlying forecast cash
flows for the software and customer assets intangible
asset valuations and comparing key assumptions to
historical results;
– Evaluating discount rates used by assessing the cost
of capital applied in each valuation by comparing them
to market data and industry research; and
– Testing on a sample basis the mathematical accuracy
of the cash flow models;
106
Key audit matter
How our audit addressed the key audit matter
Assessing the amount and accounting treatment of
acquisition costs by testing a sample of items to supporting
documentation; and
Assessing the adequacy of related disclosures in the
financial statements.
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 2020, but does not include the financial report and our auditor’s report
thereon.
Our opinion on the financial report does not cover the other information and we do not express any form of assurance
conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or
otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are
required to report that fact. We have nothing to report in this regard.
Responsibilities of the Directors for the financial report
The Directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in
accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the Directors
determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material
misstatement, whether due to fraud or error.
In preparing the financial report, the Directors are responsible for assessing the Group’s ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the
Directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing
Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions
of users taken on the basis of this financial report.
A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance
Standards Board website at: http://www.auasb.gov.au/auditors_responsibilities/ar1_2020.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 34 to 55 of the Directors’ report for the year ended 30 June
2020.
In our opinion, the Remuneration Report of Class Limited, for the year ended 30 June 2020 complies with section 300A
of the Corporations Act 2001.
107
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
C F Farley
Partner – Audit & Assurance
Sydney, 13 August 2020
108
SHAREHOLDER INFORMATION
CLASS 2020 ANNUAL REPORT
Shareholder information
The shareholder information set out below was applicable as at 29 July 2020.
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
77
604
578
1,681
1,366
4,306
469
4
26
6
-
-
36
-
6
2
-
-
-
8
-
109
SHAREHOLDER INFORMATION
Shareholder information (cont)
Equity security holders
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
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
STORY OF PRINCIPAL PTY LIMITED
MR JOSEPH CHARLES CAMUGLIA & MRS KIRSTEN INGRET CAMUGLIA
BNP PARIBAS NOMINEES PTY LTD
MR PETER DORIAN KIBBLE & MRS LORRAINE LESTER
MR RODERICK KIBBLE & MRS MICHELLE KIBBLE
FNNI PTY LIMITED
BNP PARIBAS NOMS PTY LTD
HSBC CUSTODY NOMINEES
MR KEVIN BUNGARD
FYLPANE PTY LTD
MR RAJARSHI MANU RAY
THE DAY ASPHALT STOOD UP PTY LIMITED
20
NEWECONOMY COM AU NOMINEES PTY LIMITED
Number of
ordinary shares
%IC
21,016,931
17.12
12,320,592
10.04
8,870,944
7,503,777
5,458,000
5,159,084
3,300,000
2,650,102
2,650,000
2,100,258
1,501,652
1,501,652
1,477,942
1,346,746
1,308,296
7.23
6.11
4.45
4.20
2.69
2.16
2.16
1.71
1.22
1.22
1.20
1.10
1.07
1,023,135
0.83
1,000,000
1,000,000
0.81
0.81
968,307
0.79
916,229
0.75
83,073,647
67.67
110
CLASS 2020 ANNUAL REPORT SHAREHOLDER INFORMATION
CLASS 2020 ANNUAL REPORT
Shareholder information
Shareholder information (cont)
Unquoted equity securities
Number on issue
Number of holders
Options over ordinary shares
Performance Rights over ordinary shares
2,326,371
1,718,484
36
6
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 27 July 2020, it
and its associates had an interest in 7,737,515 shares, which represented 6.30% 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
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
Ordinary shares
31 January 2022
Ordinary shares
18 December 2022 or the day after the date which the shareholder ceases to be
an employee
Number of
shares
15,078
34,980
5,096,351
39,010
111
SHAREHOLDER INFORMATION
Corporate directory
30 June 2020
Directors
Matthew Quinn - Chairman
Andrew Russell
Kathryn Foster
Nicolette Rubinsztein
Simon Martin
Robert Bazzani
Company Secretary
Glenn Day
Registered office and
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
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 Directors and management are committed
to conducting the business of Class
Limited in an ethical manner and in accordance
with the highest standards of corporate
governance. Class Limited has adopted and has
substantially complied with the ASX Corporate
Governance Principles and Recommendations
(Third Edition) ('Recommendations') to the
extent appropriate to the size and nature of its
operations.
The Group’s Corporate Governance Statement,
which sets out the corporate governance
practices that were in operation during the
financial year and identifies and explains any
Recommendations that have not been followed
and ASX Appendix 4G are released to the ASX on
the same day the Annual Report is released. The
Corporate Governance Statement and Corporate
Governance Compliance can be found on the
company’s website at https://investors.class.
com.au/Investors/
112
CLASS 2020 ANNUAL REPORT Class Ltd
ACN 116 802 058
Address
Level 3, 228 Pitt Street
Sydney, NSW, 2000
Phone
1300 851 058
Email
media@class.com.au