2021
Annual
Report
We will reimagine a simpler,
more automated world
for our customers
and they will love it!
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I N T R O D U C T I O N
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C L A S S 2 0 2 1 A N N U A L R E P O R T
Table of Contents
Message from the Chairman & CEO
5
Reimagination Strategy
7
Our Executive Leadership Team
8
Our People
9
Financial Report 2021
Directors’ report
14
Auditor’s independence declaration
44
Financial statements
45
Notes to the financial statements
50
Directors’ declaration
97
Independent auditor’s report
98
Shareholder information
102
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I N T R O D U C T I O N
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C L A S S 2 0 2 1 A N N U A L R E P O R T
Message from
the Chairman
& CEO
We are pleased to report that FY21 has been another
successful and transformational year for Class.
This marks the completion of the second year of the
three-year Reimagination Strategy.
The essence of the Reimagination Strategy is to
transform Class by developing new revenue streams,
growing our Total Addressable Market (TAM), increasing
scale and improving operating capability.
There are four areas of focus:
1.
Maintaining SMSF product leadership and launching
Class Trust
2. Accelerating growth through strategically aligned
acquisitions
3. Growing the number of wealth accounting
customer relationships
4. Creating a next generation, world class technology
stack
Our progress so far has been impressive and fast paced
which has seen Class significantly increasing its TAM.
FY21 Overview
•
We achieved the revenue and EBITDA targets
communicated to you at the start of the year.
•
Class delivered record revenue of $54.9m and 15%
growth in underlying EBITDA.
•
We launched Class Trust ahead of schedule.
•
We acquired two businesses in the corporate
compliance space and we are now the clear
market leader.
•
Our technology investment has been fast tracked.
•
We now have over 7800 active customers and
product relationships with 81 of the top 100
Australian accounting firms.
•
We have increased the proportion of female
employees to 54%.
•
The Class culture is strong and we pride ourselves
on being able to attract world class talent, aligned
behind our core values and ways of working.
We are pleased with these achievements,
demonstrating the resilience of Class even when faced
with a global pandemic.
Acquisitions and Product expansion
The NowInfinity acquisition was an integral step in
evolving Class to an integrated multi-product offering
to our professional services customers, thus reducing
our sole reliance on the SMSF market and expanding
our TAM.
Both of the subsequent acquisitions of Smartcorp and
Reckon Docs have been successfully integrated under
the NowInfinity banner, and we recently announced the
acquisition of Topdocs, which will further enhance our
market leading position.
Over the past two years, Class has funded four EPS
accretive acquisitions in the corporate compliance
segment for total value of $54.4m. Our acquisitions
have been targeted and well executed, in line with our
strategy to fast track our market entry into corporate
compliance by buying businesses that are profitable
and EPS accretive. This has delivered an enviable
client base with good cross-sell opportunities for our
multi‑product strategy.
Matthew Quinn
Andrew Russell
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M E S S A G E F R O M T H E C H A I R M A N & C E O
Class has funded the acquisitions primarily with
cash and debt to minimise dilution for shareholders.
The balance sheet is very healthy and free cash
flow from operations is increasing as the business
grows and achieves economies of scale. Class has
identified a number of further opportunities to grow
through acquisition, and the Board will review the
company’s capital management strategy, including
dividend payout, in the first half of FY22 to maintain
a strong balance sheet and optimise total shareholder
returns through internal funding of growth initiatives.
Class paid a fully franked dividend for FY21 of 5 cents.
The launch of Class Trust was a significant
milestone in the Reimagination Strategy. Our market
research showed there is a key pain point for trust
administration, as there was for the self-managed
superannuation, which can be addressed through
Class software to simplify and automate processes
and improve workflow efficiencies.
We are pleased with the product launch results to date
and the positive feedback from our customers. Our plan
to scale involves targeted ‘sell through’ to our large and
growing customer base and the successful execution of
this strategy will ensure Class Trust revenue grows over
the coming years.
Strategy and Outlook
We are now turning our thinking to the next horizon and
will explore opportunities to further grow our TAM and
leverage our capability through:
1.
Adjacencies where complex administration rules
exist that can be automated by technology.
2. Opportunities in commercialising our data
aggregation and analytics.
3. Offshore opportunities where our technology
products can simplify and automate workflows.
Clearly there are currently some constraints with
COVID, however we are building our knowledge base,
and this will be followed by a structured approach for
opportunity assessment and prioritisation.
Our ambition for sustainable growth is as strong as ever
and we will communicate a clear strategic runway for
FY23 and beyond as we complete these assessments
over the next year.
In closing
Simon Martin retired as director in FY21 due to health
reasons, and on behalf of the Board and management
we thank Simon for his contribution to Class and wish
him all the best in his recovery.
We would like to thank all Class employees and our
fellow Board members for what we have achieved
in FY21, positioning Class well to create sustainable
revenue and earnings growth as a leading Australian
technology business.
On behalf of the Board, we would like to thank our
shareholders for your ongoing support and we look
forward to creating value for you in the coming years.
MATTHEW QUINN
Chairman of the Board
ANDREW RUSSELL
Chief Executive Officer and Managing Director
Maintaining SMSF
product leadership and
Launching Class Trust
Accelerating
growth through
strategically aligned
acquisitions
Growing the
number of wealth
accounting customer
relationships
Rejuvenating the
technology stack for
Next Generation, world
class capabilities
Year 2 of the 3 Year Reimagination Strategy was focused
on accelerating our growth, capability and improving the
scale of offerings to our customers
• Growth in Class
products
• Successful launch
of Class Trust, ahead
of schedule
• Multi industry awards
in FY21, ‘SMSF
Software provider
of the Year’ – SMSF
Adviser & Digital
Technology Awards
• Acquisition of
Smartcorp, Reckon
Docs and most
recently, Topdocs
• FY21 acquisitions
successfully
integrated and
organically
outperforming
• Redesign of our
customer engagement
and sales strategy
• Segmentation / sell
through strategy
to drive increased
product penetration
and increased
Customer Lifetime
Value (LTV)
• Fully ISO /27001
compliant
• ASAE3402 – security
and audit review of
data feeds and tax
statements
• Material progress
in tech and
product capability
transformation
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C L A S S 2 0 2 1 A N N U A L R E P O R T
Reimagination Strategy
Momentum
Strengthen and Diversify
Launch new enterprise cloud
based platform which will
strengthened our Core
Build, buy or partner new
product capability
FY20
Accelerate
Enter new markets with
compelling customer
offerings which build towards
our Class product suite vision
Scaling the business
through the execution of
the multi product strategy
accelerating the financial
performance
FY21
Make our Mark
Market leadership in all
our market segments with
technology solutions our
customers love
FY22
8
O U R E X E C U T I V E L E A D E R S H I P T E A M
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 and a MBA from the Cass Business
School, University of 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, market entry and scale up. Mr Russell has held senior positions in international institutional
and retail financial services organisations in both Australian and the United Kingdom. In his previous role at REA Group,
Mr Russell was the founding leader who spearheaded the launch and development of their financial services business.
Mr Russell was GM and Interim CEO of Mortgage Choice where he led the successful launch of their financial planning
business and growth of their mortgage franchise network. Mr Russell also was appointed by the Virgin Group to lead the
Australian market entry for Virgin Money superannuation and mortgages.
Panos Alexandratos Chief Operating Officer
Qualifications: B. Econ, 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. Mr Alexandratos 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.
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, University Western Sydney. Harvard Business School – CBA Executive
program, AGSM Influential Leadership program.
Experience and expertise: Mr Wilson is a senior executive with 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.
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C L A S S 2 0 2 1 A N N U A L R E P O R T
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
customer outcomes.
To attract world-class talent, we need to have a
world‑class culture. In 2019, we gave every employee
the opportunity to put forward their views on what
Class is – and what it could be.
This feedback culminated in the development of the
Class Ways of Working (WoW). Through this collaborative
and employee-led process, we established that our
people would champion the following values:
We are
better together!
We are better together –
defined by customer centricity,
collaboration and teamwork
We get it done,
with heart!
We get it done, with heart –
defined by accountability,
ownership and delivery focus
We are
built on trust!
We are built on trust – defined
by reliability, honesty and
empowerment
We are always
reimagining!
We are always reimagining –
defined by curiosity, innovation
and growth mindset
And because our employees created our WoW, they are
our strongest culture champions.
We are Reimagineers.
Powering Technology.
Delivering with Heart.
Engagement@Class
Class takes part in the annual Best Places to Work
Employee Survey which is carried out by WRK+ Australia.
80% of employees completed the survey this year.
Employee engagement in 2021 was 79%, with 82%
of employees stating that the company was ‘a great
place to work’.
Class continues to score very well in the areas
of diversity with a score of 94 for the statement
‘my company encourages and promotes diversity
of backgrounds, talents and perspectives’.
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 +34, demonstrating high
employee advocacy for Class as a great place to work.
Our Promise to Our People
At Class we are customer centric, collaborative
and curious. We look for people who can bring
new perspectives and life experiences into
our teams. We aspire to be the place to work
in Tech. We create an amazing employee
experience that offers attractive benefits,
awesome people and new ways of working
to help our people thrive.
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O U R P E O P L E
Understanding the
diversity of our people
We created a set of information-
gathering questions in our people
system to better understand the
backgrounds and identities of our
people. The questions address
ethnicity, sexual orientation,
religious or spiritual belief systems,
disability and gender identity. They
are optional, confidential and are
used to better prioritise the diversity
initiatives we create for our people.
Attracting
female tech talent
To attract a greater pool of
female talent in the heavily
male‑dominated technology
industry, we have adopted a
‘gendered language’ decoding tool
to ensure our job advertisements
were balanced in their terminology.
Leaders are additionally coached
by our talent acquisition team to
eliminate bias from their decision
making. The results have been
significant with 60% of our new
hires to 31 March 2021 being female.
Shining a light on
people with a disability
In FY21 we launched biannual
hearing checks at Class through a
partnership with Audika.
We also celebrated the International
Day for People with a Disability in
2020 with a panel of guest speakers
sharing their experiences to raise
disability awareness.
Building our internal
female talent pool
Class is committed to gender
equality. We are building solid
foundations towards our path
to gender equality at Class.
We are proud to have a female Chief
Technology Officer leading our
technology team. In 2021 we achieved
a significant milestone being equal
female representation across Class
with 54% of our staff being female.
We are also building our pool of
female leaders with 35%of leaders
within Class being female.
Celebrating different cultures
Class is proud of the cultural diversity
of its people. Throughout the year
we held many virtual and onsite
celebrations such as Diwali, Eid
al‑Fitr, Christmas and Lunar New
Year. We have raised awareness of
these cultural celebrations by our
people sharing their experiences
through recorded videos to raise
better awareness and understanding.
Inclusive Leadership
Class has launched an inclusive
leadership program, aimed at raising
awareness of unconscious bias with
our leaders. In 2021, 34 of our leaders
attended the program.
Diversity@Class
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.
We want all employees to feel comfortable to bring their whole
selves to work and to feel safe and supported in doing so.
In FY21 we launched a number of new initiatives to enable this.
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C L A S S 2 0 2 1 A N N U A L R E P O R T
Families@Class
Class is committed to supporting
our new and expectant parents
during an exciting and sometimes
challenging time of their lives.
We launched our Families@Class
information hub to provide our
people with access to a range
of resources and support tools.
We additionally partnered with
the Gidget Foundation to launch
the ‘Empowered’ return to work
program which supports our people
in their transition back to work from
parental leave. During the period we
were proud to achieve 100% return
rate for employees who had taken
parental leave.
Learning@Class
This year we launched our
Learning@Class framework which
creates ongoing personal growth
and professional development
experiences for our people.
During the period we invested in
building the capabilities of our
leaders and high potential talent
through a six-month strengths-
based development program
including executive coaching.
We also designed a series of
short courses run by our internal
knowledge experts and external
innovation speakers, held weekly
during the ‘Class Learning Hour’
that all our people are encouraged
to attend.
GiveBack@Class
In FY21 Class partnered with
Solarbuddy as its first official
Corporate Charity Partnership.
Solarbuddy is a global charity that
produces solar lights for children
to study, read and learn in energy
poverty areas during the hours after
dark. Class has a goal of donating
3500 lights.
To date, we have donated 1,887
lights which has impacted the lives
of 9,435 people.
Employees can opt into the Class
workplace giving program (WPG)
by donating via salary sacrifice
on a regular payment plan or make
a one off donation.
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O U R P E O P L E
Financial: supporting our people
to gain financial freedom
This year we partnered with Findex to run multiple financial
education sessions for our people. The partnership also
included Class funded financial advice sessions with
a Findex advisor.
Physical: promoting physical health
to support mental health
Class holds regular team fitness challenges to cater for the
different needs of our people.
Throughout the year we sponsored membership to a range
of health programs such as step challenges, nutrition advice
and group sessions.
Social: maintaining healthy relationships
and connection
Central to wellbeing is maintaining a sense of social
connection. During the period our connected monthly
virtual social events and dedicated slack channels give our
people the opportunity to share personal stories and photos.
Wellbeing@Class
This year saw a rise in mental health issues related to
COVID-19 and long-term remote work.
Class shifted to 100% remote work, and quickly recognised
the need to support our people’s wellbeing to maintain
connection, productivity, and engagement.
This led to the launch of Wellbeing@Class to create a positive,
healthy workplace and a culture of wellness at Class.
Our Wellbeing Statement
“At Class we aim to enhance our people’s wellbeing to be
their best self at Class and at home”
Wellbeing@Class is our holistic wellbeing approach under
four pillars.
Hybrid@Class
At Class, our people have flexibility to perform their work
through a blend of in-office and at-home experiences.
At the outbreak of COVID-19, our people quickly and
smoothly shifted to 100% remote work, whilst maintaining
productivity and delivering great customer outcomes.
Over the past year, through a blend of return-to-work
trials and regular feedback from our people, Class has
transformed to adopt a ‘hybrid way of working’ model to
pay respect to individual needs, work type, priorities,
operational requirements.
We work in close partnership with our leaders and people
to encourage meaningful conversations about work-life
blend and how Class can best assist their unique needs.
Our eNPS score collected from our internal pulse check
on ‘I would recommend Class’ flexible work program’ has
improved significantly as a result of these changes from
-1 (May 20) to +56 (Oct 20).
Creating our own
Hybrid Playbook
Supporting our people
through the pandemic
WELLBEING@CLASS
Mental Health: reducing the stigma
Class offers a 100% confidential, 24/7 telephone-based
counselling service to our employees and their families.
In 2020 during the emerging COVID-19 crisis, we additionally
offered this service to our clients.
In FY21 we trained a number of our people to become RUOK?
Check-In Champions to proactively reach out and support
our people during the crisis.
On RUOK Day 2020 a number of our leaders shared their
personal stories to help reduce the stigma around mental
health and to promote awareness.
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C L A S S 2 0 2 1 A N N U A L R E P O R T
Financial
Report
2021
14
D I R E C T O R S ’ R E P O R T
Directors’
Report
The Directors present their report, together with
the financial statements, on the consolidated entity
(referred to hereafter as the ‘Group’) consisting of
Class Limited (referred to hereafter as the ‘Company’
or ‘parent entity’) and the entities it controlled at the
end of, or during, the year ended 30 June 2021.
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
•
Kathryn Giudes (Foster)
•
Simon Martin (ceased on 31 May 2021)
•
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, document and corporate compliance and
administration software.
Review of operations
2021
$’000
2020
$’000
Change
$’000
Change
%
Operating revenue and
other income
54,941
44,052
10,889
25%
Cost of undertaking
business
(33,037)
(25,055)
(7,982)
32%
Underlying EBITDA
21,904
18,997
2,907
15%
Acquisition & Corporate
Advisory Costs
(948)
(827)
(121)
4%
Loss on financial assets
at fair value
1
(3,242)
0
(3,242)
(100%)
EBITDA
17,714
18,170
(456)
(3%)
Interest revenue
7
119
(112)
(94%)
Finance cost
(451)
(140)
(311)
222%
Depreciation and
amortisation
(11,438)
(8,072)
(3,366)
42%
Tax expense
(2,166)
(3,237)
1,071
(33%)
Statutory net profit
after tax
3,666
6,840
(3,174)
(46%)
1
Loss on financial assets at fair value refers to the revaluation of the
Groups investment in Philo Capital.
Refer to Chairman’s letter and CEO’s report for further
commentary on the Group’s results.
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C L A S S 2 0 2 1 A N N U A L R E P O R T
Dividends
Dividends paid during the financial year were as follows:
2021
$’000
2020
$’000
Final dividend for the year ended
30 June 2020 of 2.5 cents per ordinary
share (2020: 2.5 cents)
3,094
2,942
Interim dividend for the year ended
30 June 2021 of 2.5 cents per ordinary
share (2020: 2.5 cents)
3,094
3,069
6,188
6,011
On 17 August 2021, the Directors declared a final
dividend for the year ended 30 June 2021 of
2.5 cents per ordinary share with a payment date
of 23 September 2021 to eligible shareholders
on the register as at 25 August 2021. This equates
to a total distribution of $3,094,000 based on the
number of ordinary shares on issue as at 30 June
2021. The financial effect of dividends declared after
the reporting date is not reflected in the 30 June
2021 financial statements and will be recognised
in subsequent financial reports.
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 2021, 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 2 August 2021, the Group executed the transfer
of the Philo convertible notes for a cash consideration
of $175,000.
On 17 August 2021, the Group announced the acquisition
of all the shares in Topdocs Pty Ltd. The Share Purchase
Agreement was executed on 16 August 2021 with an
expected effective date of 1 September 2021 and a
maximum enterprise value of $13 million. The purchase
consideration is expected to be settled by $11.7 million
upfront cash payment, plus $1.3 million in the
Company's shares. The acquisition will be partly funded
through an increase to the existing bank debt facility.
As part of the transaction, the Topdocs platform and
customer base will be acquired and is expected to
deliver an estimated revenue contribution of $3 million
in FY22.
No other matter or circumstance has arisen since
30 June 2021 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.
16
I N F O R M A T I O N O N D I R E C T O R S
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 Member of the Audit and Risk Committee
Interests in shares:
370,000 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 8.
Experience and expertise: Refer to section 'Our Executive Leadership Team' on page 8.
Other current directorships: None
Former directorships (last 3 years): None
Interests in shares:
127,151 ordinary shares
Interests in options:
None
Interests in rights:
694,626 performance rights
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C L A S S 2 0 2 1 A N N U A L R E P O R T
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), Non-executive Director
Keypath Education International Inc (ASX: KED), Non-executive Chairman of ORDE Financial
Former directorships (last 3 years): None
Special responsibilities: Member of the Audit and Risk Committee and Chair of the Remuneration and Human
Resources Committee from June 2021.
Interests in shares:
50,000 ordinary shares
Interests in options:
None
Interests in rights:
None
Kathryn Giudes (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 Giudes (Foster) has a strong background in technology, sales, and early-stage
start-up companies. Ms Giudes (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 Giudes (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 Giudes
(Foster) first joined Class Ltd prior to the IPO in 2015 and was the Chair of the Nomination, Remuneration and
Human Resources Committee until 21 June 2021, where now sits as a member. Ms Giudes (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), Non-executive Director
Livehire Limited (ASX: LVH)
Former directorships (last 3 years): None
Special responsibilities: Chair of the Nomination Remuneration and Human Resources Committee
until June 2021.
Interests in shares:
82,208 ordinary shares
Interests in options:
None
Interests in rights:
None
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I N F O R M A T I O N O N D I R E C T O R S
Nicolette Rubinsztein Non-Executive Director
Qualifications: BBusSc (hons), qualified actuary (FIAA), an executive MBA from the Australian Graduate School
of Management and a fellow 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, Greenpeace Australia Pacific
Limited 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
‘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.
Company Secretary details
Mr Glenn Day was appointed Company Secretary in 2008 and retired on 28 May 2021.
Ms Jasmin Chew, General Counsel, was appointed as Acting Company Secretary on 28 May 2021.
Jasmin Chew General Counsel & Acting Company Secretary
Qualifications: Bachelor of Laws (LLB), Bachelor of Arts (BA), Postgraduate Diploma in Business Administration
(PGDipBus) (University of Auckland, NZ); Admitted to the Supreme Court of NSW and the High Court of NZ;
Member of the Australian Institute of Company Directors; State Bar of California (in progress).
Experience and expertise: Ms Chew is a practising lawyer with legal, risk management, company secretariat,
corporate governance and regulatory compliance expertise. Ms Chew has held a variety of senior legal advisory,
consulting and management positions at financial institutions including JPMorgan, Westpac, Standard
Chartered Bank, Morgan Stanley, HSBC, Colonial First State Global Asset Management, MUFG, AMP, ANZ and
corporations including Hewlett Packard, Optus, Travelex, TEG Pty Ltd (Nine Entertainment). With over 20 years
of experience gained from top tier law firms (Bell Gully, DLA Piper), international investment banks and local
tech start-ups, Ms Chew’s career has spanned Asia, UK & USA.
Information
on Directors cont.
19
C L A S S 2 0 2 1 A N N U A L R E P O R T
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 2021, 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
9
9
6
6
5
5
Andrew Russell
9
9
–
–
–
–
Robert Bazzani
1
9
9
6
6
1
1
1
Kathryn Giudes (Foster)
9
9
–
–
5
5
Simon Martin
2
8
8
–
–
4
4
Nicolette Rubinsztein
9
9
6
6
–
–
1. Robert Bazzani joined the NRHRC in June 2021.
2. Simon Martin left the Board on 31 May 2021.
Held: represents the number of meetings held during the time the Director held office or was a member of the
relevant committee.
20
M E S S A G E T O O U R S H A R E H O L D E R S
Message
to our
shareholders
Robert Bazzani
On behalf of the Nomination, Remuneration and
Human Resources Committee (NRHRC), I am pleased
to present the Group’s Remuneration Report for the
2021 financial year (FY21). In June 2021, I was honored
to take over the role of Chair of the NRHRC from
Ms Kathryn Giudes (Foster). The Board wishes to thank
Ms Giudes (Foster) for her guidance and governance
of the NRHRC over the past 6 years.
Led by our CEO, Andrew Russell and his executive
leadership team, FY21 has been pivotal to the continued
transformation and growth of Class. Despite the
challenges faced by the Covid-19 global pandemic,
the Class team has successfully executed against its
strategic plan by continuing to accelerate revenue
growth and scaling the business.
Class continues to deliver strong financial outcomes for
our shareholders, with 21% recurring revenue growth
and 40% Underlying EBITDA margin.
The Class Reimagination Strategy has been successful
in achieving its goals to date. Class is positioned for
sustainable growth in FY22 and beyond following the
successful and continued delivery of key strategic
initiatives. Highlights this year include the launch of
Class Trust and further strengthening of our market
leading position in Legal Documents & Corporate
Compliance through the acquisitions of Smartcorp &
Reckon Docs.
Critical to sustaining this superior performance and
strategy execution is Class’ ability to attract and retain
industry leaders and top talent to deliver against its
strategic plan. As a growing technology company,
the global shortage for technology talent is creating
increased competition for Class to attract such talent.
Class’ ability to compete for top talent is enabled by
our remuneration framework and underpinned by our
Ways of Working cultural framework.
The Class reward framework is 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.
21
C L A S S 2 0 2 1 A N N U A L R E P O R T
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.
Our executive remuneration framework has been
purposefully designed to enable this through:
•
Fixed remuneration competitive with the market
•
Short term incentives based on challenging
individual and company targets, with a deferral
mechanism to deliver meaningful equity exposure
and retention for key executives
•
Long term incentives aligned to Class’ strategy that
focuses executives on long-term value creation
through performance hurdles linked to the Group’s
strategic financial and customer growth
Remuneration outlook – changes in FY22
Looking ahead, the NRHRC has considered the current
remuneration framework in the context of the growing
challenges faced by technology companies in attracting
and retaining talent. It is critical that our remuneration
policies evolve with the market to ensure they remain
compelling and competitive.
Consequently, the Board has determined that the
FY22 long term incentive grant to the CEO will
introduce the ability for outperformance of up to
100% of fixed remuneration. This will be subject to
the achievement of challenging performance hurdles
set by the Board linked to the execution of strategic,
transformational activities. The introduction of this
change will be subject to shareholder approval at the
Group’s AGM in October 2021.
The NRHRC and Board consider this change together
with the robustness of our existing framework will help
us attract and retain the right talented people to deliver
our growth aspirations.
We appreciate the ongoing feedback we receive from
our shareholders and the Board looks forward to
continuing this engagement.
ROBERT BAZZANI
Chair – Nomination, Remuneration and
Human Resources Committee
22
R E M U N E R A T I O N R E P O R T
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 to shareholders of the
Key Management Personnel and executives’ remuneration outcomes for FY21 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 2021 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
Position
Term
Chairman
Matthew Quinn
Chairman
Full Year
Non-executive Directors
Robert Bazzani
Director
Full Year
Kathryn Giudes (Foster)
Director
Full Year
Simon Martin
1
Director
Part Year
1
Nicolette Rubinsztein
Director
Full Year
Executive KMP
Andrew Russell
CEO & Managing Director
Full Year
Glenn Day
2
CFO & Company Secretary
Part Year
2
1
Simon Martin left the Board on 31 May 2021.
2 Glenn Day left the Group on 28 May 2021.
23
C L A S S 2 0 2 1 A N N U A L R E P O R T
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
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)
People, Culture, Talent Management & Diversity
Monitors, recommends and reports to the Board on:
•
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.
Throughout FY21, the NRHRC and management received
information from external consultants (Mercer (Australia)
Pty Ltd & Boyden Australia) in relation to remuneration
market data.
As part of the Group’s remuneration governance framework,
the NRHRC may obtain independent advice, independent
of management, to ensure decisions are made in the best
interest of the Group and its shareholders.
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 claw back provisions.
24
R E M U N E R A T I O N R E P O R T
Executive remuneration framework and programs FY21
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 director remuneration framework
is outlined below, with further details provided in the body of the report.
Remuneration Principles
The Group’s remuneration framework is based on the principles that remuneration is performance-driven, aligned with
shareholder interests and provides market-competitive remuneration opportunities.
Remuneration Strategy
Performance-Driven
Aligned with Shareholders
Market-competitive
Remuneration Opportunities
Remuneration should reward
executives based on annual
performance against business plans
and longer-term shareholder returns.
The variable components of
remuneration (both short term and
long term) are driven by challenging
targets focused on 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.
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.
25
C L A S S 2 0 2 1 A N N U A L R E P O R T
Overview of existing remuneration approach and framework (cont.)
Component
Description
Link to strategy and
performance
Fixed Remuneration
•
Comprises of base salary and superannuation.
Reviewed annually based on
market data, individual skills,
experience, accountability,
performance, leadership and
behaviours.
Variable
Remuneration
(summary)
•
Variable component of executive target remuneration
mix allows a greater share of remuneration to be
‘at risk’ and subject to performance.
•
Executives are rewarded based on performance
against annual 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 internal and external
measures of financial and
non-financial performance.
Variable
Remuneration –
Short-term incentive
(STI)
•
An at-risk component set as a percentage of
fixed remuneration.
•
Calculated based on achievement against a range of
financial and non-financial measures.
•
Paid after a 12-month performance period.
•
STI enables increased equity exposure, with a portion
of STI paid in equity through deferred rights, vesting
annually in equal instalments over a two-year period.
•
STI allocated in deferred rights to executives in FY21
was 25% of total STI.
•
The Board retains discretion to review the allotment
of shares at vesting through claw back provisions.
Rewards delivery and
execution of key strategic
and financial objectives in
line with the Group’s annual
business plan.
Variable
Remuneration – Long-
term Incentive (LTI)
•
An at-risk component set as a percentage of fixed
remuneration.
•
Grants are made annually to eligible executives,
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
•
No special allocation was made in FY21. 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.
Rewards execution against
long- term strategy and
shareholder value creation.
Creates alignment between
shareholder and executive
outcomes.
26
R E M U N E R A T I O N R E P O R T
Voting and comments made at the Company’s 2020 Annual General Meeting
At the 2020 Annual General Meeting (AGM), 99.31% of shareholders voted to approve the adoption of the
remuneration report for the year ended 30 June 2020. The Company did not receive any specific concerns at the
AGM regarding its remuneration practices.
Use of remuneration consultants
Throughout FY21, the NRHRC and management received information from external consultants (Mercer (Australia)
Pty Ltd & Boyden Australia) in relation to remuneration market data. This forms part of the Group’s remuneration
governance framework. The NRHRC may obtain independent advice, independent of management, to ensure
decisions are made in the best interest of the Group and its shareholders.
No external advisers provided a remuneration recommendation as defined under section 300A of the Corporations
Act during FY21.
Remuneration Comparator Group
Executive remuneration is benchmarked to an ASX technology peer group that is determined to be similar to the
Group’s current size, scale and operations. The peer group is periodically reviewed by the Group in conjunction with
an independent remuneration consultant.
Executive remuneration framework and programs FY21
The remuneration mix is set with consideration to market benchmarking and is designed to attract and retain the
calibre of executives required to deliver long-term shareholder value.
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. From FY19 onwards, a higher proportion of pay for the KMP
is at risk, a portion of STI is subject to deferral into shares and LTI is subject to performance hurdles.
The current remuneration mix is shown below:
FR 60%
STI 20%
LTI 20%
CEO Target Remuneration Mix
CFO Target Remuneration Mix
CEO Target Remuneration Mix
Cash vs Equity
CFO Target Remuneration Mix
Cash vs Equity
FR 50%
STI 25%
LTI 25%
FY21
50%
6%
19%
25%
FY21
60%
%
5
%
0
2
%
5
1
Cash
Fixed
STI Cash
Equity
STI Deferred
LTI
Cash
Fixed
STI Cash
Equity
STI Deferred
LTI
27
C L A S S 2 0 2 1 A N N U A L R E P O R T
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 FY21:
Scheme
Overview
STI (at risk)
Aim
The Group’s short-term incentive (STI) program aims to drive both individual
and team performance to deliver annual business objectives, revenue growth,
profitability and increase shareholder value.
STI includes a deferred rights component to deliver meaningful equity exposure
and encourage retention for senior executives.
Target Opportunity
(% Fixed Remuneration)
CEO 50%, CFO 35%
Maximum Opportunity
(% Fixed Remuneration)
CEO 100%, CFO 70%
Frequency
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.
Weightings
In FY21, the STI plan is weighted 50% to company financial metrics and 50% to
individual performance metrics.
In FY22, the STI plan will be weighted 70% to company financial metrics and 30%
to individual performance metrics.
Financial measures (50%)
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.
Non-financial measures
(50%)
Individual objectives are set for the CEO and CFO by the Board and are aligned
to the Group’s business strategy and annual business plan.
In FY21, the Executive KMP’s objectives were based on:
•
Transformation – developing capability to lead a world-class technology
company;
•
Growth – creating value from multi-product strategy;
•
Strategy – building long term value from acquisitions; and
•
People – building a world class culture.
Financial gateway
Minimum financial performance hurdles are set by the Board, below which
Board discretion is required for any payment to be made.
28
R E M U N E R A T I O N R E P O R T
STI (at risk)
Pay mechanism
The STI program includes a deferral component that aims to deliver meaningful
equity exposure and encourage retention of senior executives.
In FY21, 75% of STI is paid in cash, with the remaining 25% issued in
deferred rights.
The Board considers 25% deferral appropriate given the 100% weighting
to equity in the LTI plan and as a mechanism to attract high-caliber
executive talent.
Deferred rights – risk
The allotment of deferred rights at vesting is subject to forfeiture or claw back
provisions subject to and determined by the Board.
Scheme
Overview
LTI – annual grant (at risk)
Aim
Rewards delivery against longer-term strategy and sustained shareholder value
creation. Provides alignment between the Group’s shareholder and executive
outcomes through three‑year vesting.
The LTI plan comprises of Performance Rights to focus Executive KMP and
senior executives on creating long-term value for shareholders.
Participation
Participants include Executive KMP and other senior executives.
Participation is at the annual invitation and discretion of the Board.
Target Opportunity
(% Fixed Remuneration)
CEO 50%, CFO 35% (no maximum opportunity)
Maximum Opportunity
(% Fixed Remuneration)
– change in FY22
The NRHRC has considered the LTI in the context of the growing challenges
faced by technology companies in attracting and retaining talent.
As such, the Board has determined that the FY22 long term incentive grant
to the CEO will introduce the ability for outperformance of up to 100% of
fixed remuneration. This will be subject to the achievement of challenging
performance hurdles set by the Board linked to the execution of strategic,
transformational activities.
The introduction of this change in FY22 will be subject to shareholder approval
at the Group’s AGM in October 2021.
FY21 grant: CEO & CFO no maximum opportunity
FY22 grant: CEO 100%, CFO (no change, no maximum opportunity)
Grant Frequency
Annually
Performance Period
The performance period for the FY21 grant is 1 July 2020 to 30 June 2023.
29
C L A S S 2 0 2 1 A N N U A L R E P O R T
LTI – annual grant (at risk)
Performance criteria
The Board set challenging targets in FY21 for growth in Roll-Forward Revenue
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.
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).
Participation
Participants include Executive KMP and other senior executives.
Participation was at the invitation and discretion of the Board.
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.
Performance Period
& Vesting
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.
30
R E M U N E R A T I O N R E P O R T
LTI – Special Allocation (at risk)
Legacy equity plans (ESOP)
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.
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.
Other equity incentive plans
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 $1,000 in value (being the limit of the tax exemption) for each
eligible participant. Shares vest immediately upon issue to participants.
The shares can only be sold three years after the date of grant, unless the
participant ceases employment prior.
The plans are designed to encourage share ownership for employees and
therefore do not have any performance conditions attached. Participants are
entitled to dividends and other distributions and have full voting rights.
The Group issued 63,252 shares to qualifying employees in FY21.
31
C L A S S 2 0 2 1 A N N U A L R E P O R T
Performance and remuneration outcomes in FY21
a.
Linking remuneration to performance
A key underlying principle of the Group’s executive remuneration strategy is the link between company performance
and executive reward. Under the Reimagination strategy, the Group has been successful in achieving its goals
to date. Through strong revenue and earnings performance the Group is building momentum for sustainable and
profitable growth in FY22 and beyond.
The following table summarises the Group’s performance and incentives awarded to executive KMP, Senior Executives
and other eligible employees.
Summary of financial performance and STIs awarded:
Financial Performance
STI
Year
Sales
revenue
($’000)
Underlying
EBITDA
($’000)
1
NPBT
($’000)
NPAT
($’000)
Roll forward
Revenue
($‘000)
2
Earnings
per share
(cents)
Share
price
3
($)
STI paid to
Executive
KMP
4
($)
STI paid to
all eligible
employees as a
% of revenue
FY21
54,941
21,904
5,832
5
3,666
5
59,779
2.97
5
1.66
261,000
5.2%
FY20
44,052
18,997
10,077
6,840
49,162
5.75
1.34
304,000
4.3%
FY19
38,311
17,945
12,539
8,975
38,214
7.66
1.50
79,040
3.7%
FY18
33,978
15,895
12,559
8,698
36,006
7.39
2.40
72,051
1.9%
FY17
28,893
13,973
11,702
7,988
30,853
6.82
3.00
64,231
2.1%
1
Underlying EBITDA excludes one-off acquisition related costs
2 Revenue that is recurring in nature calculated as ARR + PAYG Revenue for last 12 months
3 Closing share price at 30 June
4 Represents approved and expensed STI but paid post year end, including any deferred rights component
5 FY21 includes a one-off ($3.2m) revaluation to the investment in Philo Capital through convertible notes
b.
STI performance outcomes
i.
STI: financial measures & performance outcomes
Financial measures account for 50% of the STI outcome. The key financial measures in FY21 for determining the
value of STI payments were recurring rollforward revenue growth and EBITDA margin.
In FY21 the Group delivered 21% recurring revenue growth and 40.0% Underlying EBITDA margin. These are strong
financial outcomes and exceeded the minimum threshold requirements under the STI.
The Board determined that the Executive KMP achieved 70% of the target business performance outcome
(against 100% target and 200% maximum).
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 FY21 and outcomes achieved.
The Board determined the CEO delivered strong results against most measures within the annual business plan
to achieve the Group’s strategic priorities.
The Board therefore determined that the CEO achieved 120% against these non-financial measures
(against 100% target and 200% maximum).
32
R E M U N E R A T I O N R E P O R T
Strategic &
non‑financial
Performance
Measures
FY21
Objective
Outcome
Transformation
Develop
capability
to lead a
world-class
technology
company
Above Target
The Group continued to deliver its transformation at speed with the
development of world-class practices through improved agile maturity
within the technology team.
Mergers & acquisitions (M&A) is now a core capability within the Group
following the successful identification, execution and integration of M&A
activity against agreed milestones. The Group is well placed to continue
to deliver on its future growth aspirations.
People capability improved considerably in FY21 with investments made
in leadership development and the creation of a senior leadership team
to build pipeline of internal successors for executive leadership team.
Growth
Create Value
from Multi-
Product
Strategy
Below Target
The Group achieved 21% recurring revenue growth in FY21 through cross
sell and upsell activity across its customer bases. However, the Group
did not meet the challenging performance targets set by the Board on
this objective.
Existing Products
The Group continued to grow steadily, with an additional 1,624 net Class
Super and Class Portfolio accounts added in FY21.
New Products
In FY21, the Group successfully launched Class Trust on time with 1,588
accounts added during the period. The Group is focused on continuing
technology improvements to set up the platform for scale and future
growth.
Strategy
Build long term
value from
acquisitions
Above Target
The Group is delivering strong value from acquisitions with revenue
contribution from its NowInfinity business performing ahead of
expectations.
The Group further strengthened its position in the Documents &
Corporate Compliance market with the successful acquisition and
integration of a further two businesses, Smartcorp & Reckon Docs
which have both performed above expectations.
33
C L A S S 2 0 2 1 A N N U A L R E P O R T
Strategic &
non‑financial
Performance
Measures
FY21
Objective
Outcome
People
Build a world-
class culture
On Target
The Group takes part in the annual Best Places to Work Employee Survey
which is carried out by WRK+ Australia. 80% of employees completed
the survey this year.
The company continues to score extremely high in the areas of diversity
with a score of 94 for the statement ‘my company encourages and
promotes diversity of backgrounds, talents and perspectives’.
Employee engagement in 2021 was 79, with 82% of employees stating
that the company was a ‘great place to work’.
c.
LTI performance outcomes
Board therefore awarded an outcome of 0% achievement.
The CEO was not a participant in the FY18 (Tranche 1) performance rights grant, with this grant allocated In FY21
the Group did not meet the challenging performance hurdles set by the Board for the FY18 (Tranche 1) performance
rights grant. The prior to his commencement.
The targets for the FY18 (Tranche 1) performance rights grant are retrospectively disclosed below.
LTI – Tranche 1 Measures
Weighting
Target
Threshold
%
Target
%
Outcome
ACMR Target
1/3
$59.475m
90%
100%
0%
Partner & New Initiatives Revenue Target
1/3
$5.0m
80%
100%
0%
EPS Target
1/3
16% EPS Growth (CAGR)
90%
100%
0%
Total LTI Vesting Outcome
0%
Outcomes of legacy ESOP is outlined on page 38.
34
R E M U N E R A T I O N R E P O R T
d.
Remuneration outcomes
Component
FY21 outcomes
FY21 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.
The CEO & CFO’s FR was considered against the uncertainty of the external market at the
time of the FY21 remuneration review. As a result, there was no change to the FR of the
Group’s Executive KMP in FY21.
FY20 FR $
Increase $
Increase %
FY21 FR $
Andrew Russell
550,000
–
0.0%
550,000
Glenn Day
1
300,000
–
0.0%
300,000
FY22 outcomes
The Group’s CEO FR has not increased since his commencement in May 2019.
To assess the competitiveness of the Group’s FR in order to retain executive talent, the
NRHRC considers market data and published surveys.
For the CEO, the FY22 remuneration review process resulted in his FR increasing to
$600,000 as of 1 July 2021.
FY21 STI
outcomes
Based on the Board’s assessment of performance against key performance indicators as
outlined above, the following STIs were awarded:
FY21 STI Outcomes
FY20 STI Outcomes
$
% of target
% of maximum
$
% of target
% of maximum
Andrew Russell
261,000
95%
48%
220,000
80%
40%
Glenn Day
1
–
–
–
84,000
80%
40%
The deferred component is paid using deferred rights, vesting annually in equal instalments
over a two-year period.
FY21 STI Outcomes $
FY20 STI Outcomes
Upfront cash
(75%)
Deferred rights
(25%)
Total
Upfront cash
(50%)
Deferred rights
(50%)
Total
Andrew Russell
195,750
65,250
261,000
110,000
110,000
220,000
Glenn Day
1
–
–
–
42,000
42,000
84,000
1
Glenn Day left the Group on 28 May 2021 and as such forfeited his STI. The Board determined within its discretion to award an ex-gratia separation
payment in lieu of forfeited STI to Mr Glenn Day.
35
C L A S S 2 0 2 1 A N N U A L R E P O R T
Component
FY21 outcomes
FY21 LTI Grant
LTI grants were made in FY21 in accordance with the target remuneration mix for each
Executive KMP. The hurdles applied to the FY21 grant were based on ARR and EBITDA at the
end of the three-year period.
In FY21:
•
The CEO was granted 211,538 performance rights.
•
The CFO was granted 80,769 performance rights.
1
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 to the Company’s compound annual TSR exceeding 25% over the
performance period.
In FY20, the CFO was granted 100,000 performance rights.
1
1
The Board determined that as the CFO departed in FY21 under a Qualifying Reason, a pro-rated value of 192,492 Performance Rights allocated under the
Class Long Term Incentive Plan will be held in the Class Trust and be subject to continued vesting to be determined against set performance criteria and
in accordance with Plan Rules.
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 did not receive a fee increase in FY21.
In FY22,Non-executive Directors will receive an increase of 1.4% in line with the Wage Price Index (WPI),
effective from 1 July 2021.
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.
In FY22, Non-executive Directors will receive an increase of 1.4% in line with the Wage Price Index (WPI), effective
from 1 July 2021.
Based on the current Board and committee composition, the total fees for FY22 are anticipated to be $536,295.
36
R E M U N E R A T I O N R E P O R T
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 26, which shows the fair value on grant
date of LTI in FY21 rather than the accrual of amounts on the statutory accounting basis. The table has been audited
against the relevant Australian Accounting Standards.
Short-term Benefits
1
Long-term
Benefits
Share-based
Payments
Base
Remuneration
2
$
Super-
annuation
$
STI
3
$
Other
4
$
Long Service
Leave
5
$
Equity-
settled
6
$
Total Statutory
Remuneration
$
Non-executive Directors
Matthew Quinn
FY21
132,990
12,634
–
–
–
–
145,624
FY20
132,990
12,634
–
–
–
–
145,624
Christopher Cuffe
FY21
–
–
–
–
–
–
FY20
43,478
4130
–
–
–
–
47,608
Rajarshi Ray
FY21
–
–
–
–
–
–
–
FY20
25,181
2,392
–
–
–
–
27,573
Robert Bazzani
FY21
81,840
7,775
–
–
–
–
89,615
FY20
40,920
3,887
–
–
–
–
44,807
Kathryn Giudes (Foster)
FY21
92,070
8,747
–
–
–
–
100,817
FY20
92,070
8,747
–
–
–
–
100,817
Simon Martin
7
FY21
75,020
7,127
–
–
–
–
82,147
FY20
51,835
3,887
–
–
–
–
55,722
Nicolette Rubinsztein
FY21
92,070
8,747
–
–
–
–
100,817
FY20
92,070
8,747
–
–
–
–
100,817
SUBTOTAL
FY21
473,990
45,030
–
–
–
–
519,020
FY20
478,544
44,424
–
–
–
–
522,968
Executive KMP
Andrew Russell
FY21
528,306
21,694
195,750
(88)
4,609
321,411
1,071,682
FY20
528,997
21,003
110,000
11,385
1,669
221,820
894,874
Glenn Day
8
FY21
251,383
21,694
–
80,115
(2,280)
81,149
432,061
FY20
278,998
21,003
42,000
(10,636)
(9,694)
106,171
427,842
SUBTOTAL
FY21
779,689
43,388
195,750
80,027
2,329
402,560
1,503,743
FY20
807,995
42,006
152,000
749
(8,025)
327,991
1,322,716
TOTAL
FY21
1,253,679
88,418
195,750
80,027
2,329
402,560
2,022,763
FY20
1,286,539
86,430
152,000
749
(8,025)
327,991
1,845,684
1. Short-term Benefits include non-monetary benefits; however, no non-monetary benefits were received by KMP during FY20 or FY21.
2. Base Remuneration includes cash salary received, short-term personal compensated absences and any salary-sacrificed benefits during FY21.
3. STI comprises cash bonuses in relation to performance for the year.
4. Other includes short-term annual compensated absences (annual leave movement) and an ex-gratia separation payment in lieu of forfeited STI granted
at Board discretion.
5. 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.
6. The cost of equity-settled share-based payments in relation to options and rights that are recognised during the year is measured at fair value on grant
date. This valuation assumption is in line with Australian Accounting Standards.
7. Represents remuneration up to the date of cessation on 31 May 2021.
8. Represents remuneration up to the date of cessation on 28 May 2021.
37
C L A S S 2 0 2 1 A N N U A L R E P O R T
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.
38
R E M U N E R A T I O N R E P O R T
KMP
Terms of Service Agreement
Name and title
Glenn Day, Chief Financial Officer and Company Secretary (CFO) 1
Agreement commenced
8 October 2015
1
Term of agreement
Ongoing
1
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.
1
Glenn Day left the Group on 28 May 2021
KMP have no entitlement to termination payments in the event of removal for misconduct.
Share-based compensation
Issue of shares
No shares were issued to Directors and other KMP as part of compensation during the year ended 30 June 2021.
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 ($)
1
Value of options
at grant date
($)
2
Number
vested
Exercise
price ($)
Vesting and
first exercise
date
Last
exercise
date
Glenn Day
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
3
15/03/2022
1
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.
2 The share-based payment expense of the option is recognised as an expense with a corresponding increase in equity spread over the vesting period.
3 Equal annual instalments on 1 July 2018, 1 July 2019 and 1 July 2020.
39
C L A S S 2 0 2 1 A N N U A L R E P O R T
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.
Number of options
granted during FY21
Number of options
granted during FY20
Number of options
vested during FY21
Number of options
vested during FY20
Andrew Russell
–
–
–
–
Glenn Day
–
–
33,334
33,333
TOTAL
–
–
33,334
33,333
Option holding
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:
Options over
ordinary shares
Balance at the
start of the year
Granted as
compensation
Exercised
Expired/
forfeited/other
Balance at the
end of the year
Glenn Day
310,000
–
(120,000)
(90,000)
100,000
Options over ordinary shares
Balance at the start of the year
Granted
Glenn Day
100,000
–
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
($)
Number vested
Vesting and first
exercise date
Andrew Russell
200,000
1
21/10/2019
0.390
78,000
–
13/05/2022
90,000
01/11/2019
1.793
355,862
–
31/10/2022
84,615
2
07/07/2020
1.310
110,819
–
06/07/2021
211,538
3
20/10/2020
1.9118
404,409
–
19/10/2023
1
Shareholders approved the grant of 200,000 performance rights, which were allocated to Mr Russell in May 2019 as part of his sign-on package
on 21 October 2019.
2 This represents deferred rights allocated to Mr Russell on 07 July 2020 in relation to FY20 STI vesting in equal instalments on 06 July 2021
and 06 July 2022.
3 This represents Performance rights allocated to Mr Russell on 10 October 2020 in relation to FY20 LTIP.
40
R E M U N E R A T I O N R E P O R T
Granted as
remuneration
Grant date
Value per right
at grant date ($)
Value of rights
at grant date
($)
Number vested
Vesting and first
exercise date
Glenn Day
45,467
01/11/2018
1.737
78,985
45,467
30/06/2021
100,000
26/07/2019
0.250
25,000
–
13/05/2022
45,252
26/08/2019
1.228
55,606
45,252
28/05/2021
80,153
01/11/2019
1.793
143,714
–
31/10/2022
32,3072
1
07/07/2020
1.310
42,312
32,307
28/05/2021
80,769
10/10/2020
1.912
154,410
–
19/10/2023
1
This represents deferred rights allocated to Mr Day on 07 July 2020 in relation to FY20 STI vesting on 28 May 2021
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 FY21
Number of performance
rights granted during FY20
Number of performance
rights vested during FY21
Number of performance
rights vested during FY20
Andrew Russell
296,153
198,473
–
100,000
Glenn Day
113,076
225,405
123,026
–
TOTAL
409,229
423,878
123,026
100,000
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 holding
Performance rights
over ordinary shares
Balance at the
start of the year
Granted as
compensation
Exercised
Expired/
forfeited/other
Balance at the
end of the year
Andrew Russell
398,473
211,538
–
–
610,011
Glenn Day
225,620
80,769
–
(159,364)
147,025
TOTAL
624,093
292,307
–
(159,364)
757,036
41
C L A S S 2 0 2 1 A N N U A L R E P O R T
Deferred rights holding
Deferred rights
over ordinary shares
Balance at the
start of the year
Granted as
compensation
Vested &
Exercised
Expired/
forfeited/other
Balance at the
end of the year
Andrew Russell
–
84,615
–
–
84,615
Glenn Day
1
45,252
32,307
(77,559)
–
–
TOTAL
45,252
116,922
(77,559)
–
84,615
1
The Board exercised its discretion to vest 54,933 Deferred Rights that were granted to the CFO under the Company’s Performance Rights and Deferred
Rights Plan.
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 on the
exercise of rights
Additions
Disposals/
other
1
Balance at the
end of the year
Non-executive
Directors
Matthew Quinn
250,000
–
120,000
–
370,000
Robert Bazzani
–
–
50,000
–
50,000
Kathryn Giudes (Foster)
162,208
–
–
(80,000)
82,208
Simon Martin
157,115
–
–
(157,115)
–
Nicolette Rubinsztein
152,864
–
–
–
152,864
Executive KMP
Andrew Russell
115,151
–
12,000
–
127,151
Glenn Day
736,877
77,559
–
–
814,436
1
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.
42
R E M U N E R A T I O N R E P O R T
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
14/05/2019
13/05/2022
200,000
26/07/2019
13/05/2022
366,667
26/08/2019
25/08/2021
44,977
1/11/2019
31/10/2022
500,648
2/03/2020
31/10/2022
23,411
7/07/2020
6/07/2022
102,305
29/10/2020
19/10/2023
588,729
1,826,737
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 2021 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 any related entity.
Proceedings on behalf of the Company
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on
behalf of the Company, or to intervene in any proceedings to which the Company is a party for the purpose of taking
responsibility on behalf of the Company for all or part of those proceedings.
43
C L A S S 2 0 2 1 A N N U A L R E P O R T
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
MATTHEW QUINN
Chairman of the Board
17 August 2021
44
CLASS LIMITED
AUDITOR’S INDEPENDENCE DECLARATION
Grant Thornton Audit Pty Ltd ACN 130 913 594
a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389
‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients
and/or refers to one or more member firms, as the context requires. Grant Thornton Australia Ltd is a member firm of Grant Thornton International
Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are
delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one
another and are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to
Grant Thornton Australia Limited ABN 41 127 556 389 and its Australian subsidiaries and related entities. GTIL is not an Australian related entity to
Grant Thornton Australia Limited.
Liability limited by a scheme approved under Professional Standards Legislation.
www.grantthornton.com.au
Level 17, 383 Kent Street
Sydney NSW 2000
Correspondence to:
Locked Bag Q800
QVB Post Office
Sydney NSW 1230
T +61 2 8297 2400
F +61 2 9299 4445
E info.nsw@au.gt.com
W www.grantthornton.com.au
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 2021, I declare that, to the best of my knowledge and belief, there have been:
a
no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
b
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, 17 August 2021
45
C L A S S 2 0 2 1 A N N U A L R E P O R T
Class Limited ABN 70 116 802 058
Financial
Statements
30 June 2021
46
F I N A N C I A L R E P O R T 2 0 2 1
CLASS LIMITED
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
For the year ended 30 June 2021
Note
Consolidated
2021
$’000
2020
$’000
Revenue
5
54,784
43,904
Other income
6
157
148
Interest revenue calculated using the effective interest method
7
119
Expenses
Employee benefits expense
(24,008)
(18,503)
Depreciation and amortisation expense
7
(11,438)
(8,072)
Selling and marketing expenses
(1,132)
(1,542)
Occupancy expenses
(335)
(112)
Technology, product and data costs
(3,253)
(1,876)
Acquisition and corporate advisory costs
(948)
(827)
Net loss on financial assets at fair value through profit or loss
12
(3,242)
–
Other expenses
(4,309)
(3,022)
Finance costs
7
(451)
(140)
Profit before income tax expense
5,832
10,077
Income tax expense
8
(2,166)
(3,237)
Profit after income tax expense for the year attributable to the owners of Class Limited
3,666
6,840
Other comprehensive income for the year, net of tax
–
–
Total comprehensive income for the year attributable to the owners of Class Limited
3,666
6,840
Cents
Cents
Basic earnings per share
34
2.97
5.75
Diluted earnings per share
34
2.96
5.73
The above statement of profit or loss and other comprehensive income should be read in conjunction with the
accompanying notes.
47
C L A S S 2 0 2 1 A N N U A L R E P O R T
CLASS LIMITED
STATEMENT OF FINANCIAL POSITION
As at 30 June 2021
Note
Consolidated
2021
$’000
2020
$’000
Assets
Current assets
9
10,363
16,488
Cash and cash equivalents
Trade and other receivables
10
5,042
4,018
Other assets
11
1,661
1,107
Income tax receivable
8
2,012
–
Total current assets
19,078
21,613
Non-current assets
Investments
12
175
3,276
Property, plant and equipment
13
858
1,004
Intangibles
14
58,899
35,133
Right-of-use assets
15
6,757
973
Customer acquisition assets
11
1,847
2,078
Total non-current assets
68,536
42,464
Total assets
87,614
64,077
Liabilities
Current liabilities
Trade and other payables
16
9,013
4,897
Contract liabilities
17
235
610
Borrowings
18
4,932
1,000
Lease liabilities
19
1,110
832
Provisions
20
1,765
1,345
Income tax provision
8
–
735
Deferred consideration
32
–
500
Total current liabilities
17,055
9,919
Non-current liabilities
Borrowings
18
15,215
9,000
Lease liabilities
19
5,341
97
Provisions
20
850
425
Deferred tax
8
7,511
2,971
Total non-current liabilities
28,917
12,493
Total liabilities
45,972
22,412
Net assets
41,642
41,665
Equity
Issued capital
21
36,513
34,414
Reserves
22
1,922
1,522
Retained earnings
3,207
5,729
Total equity
41,642
41,665
The above statement of financial position should be read in conjunction with the accompanying notes.
48
F I N A N C I A L R E P O R T 2 0 2 1
CLASS LIMITED
STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June 2021
Issued
capital
Reserves
Retained
earnings
Total
equity
Consolidated
$’000
$’000
$’000
$’000
Balance at 1 July 2019
22,507
1,490
4,900
28,897
Profit after income tax expense for the year
–
–
6,840
6,840
Other comprehensive income for the year, net of tax
–
–
–
–
Total comprehensive income for the year
–
–
6,840
6,840
Transactions with owners in their capacity as owners:
Contributions of equity, net of transaction costs (note 21)
10,808
–
–
10,808
Share-based payments (note 35)
–
829
–
829
Share plan settlement (note 22)
1,099
(797)
–
302
Dividends paid (note 23)
–
–
(6,011)
(6,011)
Balance at 30 June 2020
34,414
1,522
5,729
41,665
Issued
capital
Reserves
Retained
earnings
Total
equity
Consolidated
$’000
$’000
$’000
$’000
Balance at 1 July 2020
34,414
1,522
5,729
41,665
Profit after income tax expense for the year
–
–
3,666
3,666
Other comprehensive income for the year, net of tax
–
–
–
–
Total comprehensive income for the year
–
–
3,666
3,666
Transactions with owners in their capacity as owners:
Contributions of equity, net of transaction costs (note 21)
1,346
–
–
1,346
Share-based payments (note 35)
–
927
–
927
Share plan settlement (note 22)
753
(527)
–
226
Dividends paid (note 23)
–
–
(6,188)
(6,188)
Balance at 30 June 2021
36,513
1,922
3,207
41,642
The above statement of changes in equity should be read in conjunction with the accompanying notes.
49
C L A S S 2 0 2 1 A N N U A L R E P O R T
CLASS LIMITED
STATEMENT OF CASH FLOWS
For the year ended 30 June 2021
Note
2021
$’000
2020
$’000
Cash flows from operating activities
Receipts from customers (inclusive of GST)
58,734
48,219
Payments to suppliers and employees (inclusive of GST)
(35,381)
(29,284)
Interest received
7
147
Other revenue
16
–
Interest and other finance costs paid
(451)
(140)
Income taxes paid
(3,949)
(1,580)
Net cash from operating activities
33
18,976
17,362
Cash flows from investing activities
Payment for purchase of subsidiary, net of cash acquired
32
(14,997)
(12,867)
Payment for prior year business combinations
(500)
–
Payments for investments
12
–
(1,100)
Payments for property, plant and equipment
13
(486)
(414)
Payments for intangibles
14
(11,447)
(7,976)
Payments for security deposits
(92)
–
Net cash used in investing activities
(27,522)
(22,357)
Cash flows from financing activities
Proceeds received on exercise of employee share options
174
808
Payments for share purchase by employee share trust–treasury shares
(769)
–
Proceeds from borrowings
33
11,830
10,000
Repayment of borrowings
33
(1,683)
–
Repayment of lease liabilities
33
(943)
(778)
Dividends paid
23
(6,188)
(6,011)
Net cash from financing activities
2,421
4,019
Net decrease in cash and cash equivalents
(6,125)
(976)
Cash and cash equivalents at the beginning of the financial year
16,488
17,464
Cash and cash equivalents at the end of the financial year
9
10,363
16,488
The above statement of cash flows should be read in conjunction with the accompanying notes.
50
F I N A N C I A L R E P O R T 2 0 2 1
CLASS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
30 JUNE 2021
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:
Level 20, 580 George 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 17 August 2021.
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 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:
Conceptual Framework for Financial Reporting (Conceptual Framework)
The Group has adopted the revised Conceptual Framework from 1 July 2020. The Conceptual Framework contains
new definition and recognition criteria as well as new guidance on measurement that affects several Accounting
Standards, but it has not had a material impact on the Group’s financial statements.
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.
51
C L A S S 2 0 2 1 A N N U A L R E P O R T
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 30.
Rounding of amounts
The Company is of a kind referred to in Corporations Instrument 2016/191, issued by the Australian Securities and
Investments Commission, relating to ‘rounding-off’. Amounts in this report have been rounded off in accordance
with that Corporations Instrument to the nearest thousand dollars, or in certain cases, the nearest dollar.
Note 3. Critical accounting judgements, estimates and assumptions
The preparation of the financial statements requires management to make judgements, estimates and
assumptions that affect the reported amounts in the financial statements. Management continually evaluates
its judgements and estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses.
Management bases its judgements, estimates and assumptions on historical experience and on other various
factors, including expectations of future events, management believes to be reasonable under the circumstances.
The resulting accounting judgements and estimates will seldom equal the related actual results. The judgements,
estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts
of assets and liabilities (refer to the respective notes) within the next financial year are discussed below.
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 reporting date 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
CLASS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
30 JUNE 2021
Note 2. Significant accounting policies (continued)
52
F I N A N C I A L R E P O R T 2 0 2 1
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. The valuation of the convertible notes in Philo Capital Advisers (‘Philo’) was
determined using the consideration of $175,000 for the sale of the notes. Refer to note 37 for further information.
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 units have been determined
based on value-in-use calculations. These calculations require the use of assumptions, including estimated
discount rates based on the current cost of capital and growth rates of the estimated future cash flows.
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 assessing the value of the asset at fair value less costs
of disposal and using value- in-use models 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 and
estimates are required in recognising and measuring current and deferred tax amounts. For any uncertain tax
treatment adopted relating to transactions or events, the Group recognises and measures tax related amounts
having regard to both the probability that such amounts may be challenged by a tax authority and the expected
resolution of such uncertainties. In such circumstances, tax balances are determined based on either most-likely
amount or expected-value probability based outcomes. Where final tax outcomes vary from what is estimated,
such differences will impact the current and deferred tax provisions recognised in the financial statements.
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 being the
development and distribution of cloud based software. The information reported to the CODM is the consolidated
results of the Group.
CLASS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
30 JUNE 2021
Note 3. Critical accounting judgements, estimates and assumptions (continued)
53
C L A S S 2 0 2 1 A N N U A L R E P O R T
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
Consolidated
2021
$’000
2020
$’000
Revenue from contracts with customers
Software subscription license fees
47,624
41,496
Document sales
4,885
314
Commission and partner fees
2,131
1,689
Service fees
144
178
54,784
43,677
Other revenue
Other revenue
–
227
Revenue
54,784
43,904
Disaggregation of revenue
The revenue from contracts with customers are all in Australia. Software subscription license fees and service fees
are recognised over time. Commission and partner fees and document sales are recognised at a point in time.
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
CLASS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
30 JUNE 2021
Note 4. Operating segments (continued)
54
F I N A N C I A L R E P O R T 2 0 2 1
of each distinct good or service to be delivered; and recognises revenue when or as each performance obligation
is satisfied in a manner that depicts the transfer to the customer of the goods or services promised.
Variable consideration within the transaction price, if any, reflects concessions provided to the customer such
as discounts, rebates and refunds, any potential bonuses receivable from the customer and any other contingent
events. Such estimates are determined using either the ‘expected value’ or ‘most likely amount’ method.
The measurement of variable consideration is subject to a constraining principle whereby revenue will only be
recognised to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue
recognised will not occur. The measurement constraint continues until the uncertainty associated with the variable
consideration is subsequently resolved. Amounts received that are subject to the constraining principle are
recognised as a refund liability.
Software subscription license 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 time 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.
Document sales
The Group recognises revenue at a point in time when the documents are sold to customers on a pay per use basis.
Commission and partner fees
The Group recognises commission and partner fees at the point in time of sale of a third party’s products to
customers which provides these customers with a right to access such products.
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.
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.
CLASS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
30 JUNE 2021
Note 5. Revenue (continued)
55
C L A S S 2 0 2 1 A N N U A L R E P O R T
Note 6. Other income
Consolidated
2021
$’000
2020
$’000
Net fair value gain on investments from financial assets at Fair value through profit and loss
141
148
Other income
16
–
Other income
157
148
Note 7. Expenses
Consolidated
2021
$’000
2020
$’000
Profit before income tax includes the following specific expenses:
Depreciation
Leasehold improvements
100
129
Furniture and fittings
250
116
Computer equipment
248
174
Office equipment
80
48
Office premises right-of-use assets
1,102
801
Total depreciation
1,780
1,268
Amortisation
Software development
7,089
5,268
Computer software
6
46
Contractual rights
335
336
Customer relationships
1,358
305
Customer acquisition costs
870
849
Total amortisation
9,658
6,804
Total depreciation and amortisation
11,438
8,072
Finance costs
Interest and finance charges paid/payable on borrowings
396
123
Interest and finance charges paid/payable on lease liabilities
55
17
Finance costs expensed
451
140
Superannuation expense
Defined contribution superannuation expense
2,088
1,657
Share-based payments expense
Share-based payments expense
927
829
CLASS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
30 JUNE 2021
56
F I N A N C I A L R E P O R T 2 0 2 1
Note 8. Income tax
Consolidated
2021
$’000
2020
$’000
Income tax expense
Current tax
2,559
3,246
Deferred tax–origination and reversal of temporary differences
799
(77)
Adjustment recognised for prior periods
(9)
68
Adjustment recognised for prior period research and development tax incentive*
(1,183)
–
Aggregate income tax expense
2,166
3,237
Deferred tax included in income tax expense comprises:
Increase/(decrease) in deferred tax liabilities
799
(77)
Numerical reconciliation of income tax expense and tax at the statutory rate
Profit before income tax expense
5,832
10,077
Tax at the statutory tax rate of 30% (2020: 27.5%)
1,750
2,771
Tax effect amounts which are not deductible/(taxable) in calculating taxable income:
Entertainment expenses
26
29
Net loss on financial assets at fair value through profit or loss
878
–
Share-based payments
278
228
Non allowable deductions
912
–
Lease make good
(28)
–
Sundry items
(458)
141
3,358
3,169
Adjustment recognised for prior periods
(9)
68
Adjustment recognised for prior period research and development tax incentive*
(1,183)
–
Income tax expense
2,166
3,237
*
Research and development tax incentive recognised:
The recognised research and development tax (‘R&D’) incentive relates to the financial year ended 30 June 2020. The incentive has been recognised
during the current financial year based on the approved application to register R&D activities with AusIndustry and expert advice with consultation
on the eligibility and calculation of the incentive due for R&D activities.
CLASS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
30 JUNE 2021
57
C L A S S 2 0 2 1 A N N U A L R E P O R T
Note 8. Income tax (continued)
Consolidated
2021
$’000
2020
$’000
Deferred tax liability
Deferred tax liability comprises temporary differences attributable to:
Amounts recognised in profit or loss:
Software development–research and development
4,639
2,976
Customer relationships acquired
4,428
922
Customer acquisition costs
483
572
Prepayments
2
–
Accrued expenses
(1,017)
(176)
Employee benefits
(683)
(886)
Blackhole expenditure
(149)
–
Carried forward losses on acquisition
–
(118)
Property, plant and equipment
4
(144)
Other
(33)
(107)
Transaction costs
–
(68)
Unearned revenue
(163)
–
Deferred tax liability
7,511
2,971
Movements:
Opening balance
2,971
1,926
Charged/(credited) to profit or loss
799
(77)
Additions through business combinations (note 32)
3,741
1,122
Closing balance
7,511
2,971
Consolidated
2021
$’000
2020
$’000
Income tax refund due
Income tax refund due
2,012
—
Consolidated
2021
$’000
2020
$’000
Provision for income tax
Provision for income tax
–
735
CLASS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
30 JUNE 2021
58
F I N A N C I A L R E P O R T 2 0 2 1
Note 8. Income tax (continued)
Accounting policy for income tax
The income tax expense or benefit for the period is the tax payable on that period’s taxable income based on the
applicable income tax rate for each jurisdiction, adjusted by the changes in deferred tax assets and liabilities
attributable to temporary differences, unused tax losses and the adjustment recognised for prior periods,
where applicable.
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to be applied
when the assets are recovered or liabilities are settled, based on those tax rates that are enacted or substantively
enacted, except for:
•
when the deferred income tax asset or liability arises from the initial recognition of goodwill or an asset or
liability in a transaction that is not a business combination and that, at the time of the transaction, affects
neither the accounting nor taxable profits; or
•
when the taxable temporary difference is associated with interests in subsidiaries, associates or joint ventures,
and the timing of the reversal can be controlled and it is probable that the temporary difference will not reverse
in the foreseeable future.
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. 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.
CLASS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
30 JUNE 2021
59
C L A S S 2 0 2 1 A N N U A L R E P O R T
Note 9. Cash and cash equivalents
Consolidated
2021
$’000
2020
$’000
Current assets
Cash on hand and at bank
10,363
16,488
Accounting policy for cash and cash equivalents
Cash and cash equivalents include cash on hand, deposits held at call with financial institutions, other short-term,
highly liquid investments with original maturities of three months or less that are readily convertible to known
amounts of cash and which are subject to an insignificant risk of changes in value.
Note 10. Trade and other receivables
Consolidated
2021
$’000
2020
$’000
Current assets
Trade receivables
5,093
4,026
Less: Allowance for expected credit losses
(51)
(8)
5,042
4,018
Allowance for expected credit losses
The Group has recognised a loss of $43,000 (2020: gain of $4,000) in profit or loss in respect of the expected credit
losses for the year ended 30 June 2021.
The ageing of the receivables and allowance for expected credit losses provided for above are as follows:
Consolidated
Expected credit
loss rate
Carrying amount
Allowance for
expected credit losses
2021
%
2020
%
2021
$’000
2020
$’000
2021
$’000
2020
$’000
Not overdue
–
–
4,417
3,828
–
–
0 to 3 months overdue
3%
–
607
190
18
–
3 to 6 months overdue
35%
100%
49
3
17
3
Over 6 months overdue
80%
100%
20
5
16
5
5,093
4,026
51
8
CLASS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
30 JUNE 2021
60
F I N A N C I A L R E P O R T 2 0 2 1
Note 10. Trade and other receivables (continued)
Movements in the allowance for expected credit losses are as follows:
Consolidated
2021
$’000
2020
$’000
Opening balance
8
12
Additional provisions recognised
51
–
Unused amounts reversed
(8)
(4)
Closing balance
51
8
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.
Note 11. Other assets
Consolidated
2021
$’000
2020
$’000
Current assets
Prepayments
1,111
874
Term deposits*
242
150
Other current assets
308
83
1,661
1,107
Non-current assets
Customer acquisition costs
1,847
2,078
3,508
3,185
*
Includes term deposit which is held as security for lease of office premises $150,000 (2020: $150,000).
CLASS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
30 JUNE 2021
61
C L A S S 2 0 2 1 A N N U A L R E P O R T
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:
Consolidated
2021
$’000
2020
$’000
Opening balance
2,078
1,852
Additions
639
649
Additions through business combinations (note 33)
–
426
Amortisation expense
(870)
(849)
Closing balance
1,847
2,078
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.
Note 12. Investments
Consolidated
2021
$’000
2020
$’000
Non-current assets
Convertible notes at fair value through profit or loss
175
3,276
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
3,276
2,028
Additions
–
1,100
Revaluation increments
141
148
Revaluation decrements
(3,242)
–
Closing fair value
175
3,276
Refer to note 25 for further information on fair value measurement.
Note 11. Other assets (continued)
CLASS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
30 JUNE 2021
62
F I N A N C I A L R E P O R T 2 0 2 1
The Group had made an investment in Philo Capital Advisers ('Philo') by way of convertible notes prior to the
reimagination strategy introduced by the Group in 2019. In advance of the convertible notes' maturity date of
30 June 2021, which was subsequently extended to 6 August 2021, the Group undertook a strategic review of Philo
and concluded that it is not on strategy and continuing to invest in the Philo business is not in the best interests
of the Company's shareholders. Accordingly, the Group recorded net loss on revaluation of the investment of
$3,242,000 during the current financial year.
The fair value of the notes was determined by the consideration of $175,000 that the Group expected to receive
in accordance with the signed Non- Binding Indicative Offer with the directors of Philo. On 2 August 2021, the Group
executed the transfer of the convertible notes for a cash consideration of $175,000.
Accounting policy for investments
Investments are initially measured at fair value. Transaction costs are included as part of the initial measurement,
except for financial assets at fair value through profit or loss. Such assets are subsequently measured at either
amortised cost or fair value depending on their classification. Classification is determined based on both the
business model within which such assets are held and the contractual cash flow characteristics of the financial
asset unless, an accounting mismatch is being avoided.
Financial assets are derecognised when the rights to receive cash flows have expired or have been transferred
and the Group has transferred substantially all the risks and rewards of ownership. When there is no reasonable
expectation of recovering part or all of a financial asset, its carrying value is written off.
Financial assets at fair value through profit or loss
Financial assets not measured at amortised cost or at fair value through other comprehensive income are
classified as financial assets at fair value through profit or loss. Typically, such financial assets will be either:
(i) held for trading, where they are acquired for the purpose of selling in the short-term with an intention of making
a profit, or a derivative; or (ii) designated as such upon initial recognition where permitted. Fair value movements
are recognised in profit or loss.
Note 13. Property, plant and equipment
Consolidated
2021
$’000
2020
$’000
Non-current assets
Leasehold improvements – at cost
636
666
Less: Accumulated depreciation
(589)
(523)
47
143
Furniture and fittings – at cost
459
694
Less: Accumulated depreciation
(334)
(352)
125
342
Note 12. Investments (continued)
CLASS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
30 JUNE 2021
63
C L A S S 2 0 2 1 A N N U A L R E P O R T
Note 13. Property, plant and equipment (continued)
Consolidated
2021
$’000
2020
$’000
Computer equipment – at cost
2,300
1,590
Less: Accumulated depreciation
(1,633)
(1,161)
667
429
Office equipment – at cost
263
233
Less: Accumulated depreciation
(244)
(143)
19
90
858
1,004
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are
set out below:
Consolidated
Leasehold
improvements
$’000
Furniture
and fittings
$’000
Computer
equipment
$’000
Office
equipment
$’000
Total
$’000
Balance at 1 July 2019
112
345
254
68
779
Additions
5
7
332
70
414
Additions through business combinations (note 32)
155
106
17
–
278
Depreciation expense
(129)
(116)
(174)
(48)
(467)
Balance at 30 June 2020
143
342
429
90
1,004
Additions
–
33
447
6
486
Additions through business combinations (note 32)
4
–
39
3
46
Depreciation expense
(100)
(250)
(248)
(80)
(678)
Balance at 30 June 2021
47
125
667
19
858
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:
CLASS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
30 JUNE 2021
64
F I N A N C I A L R E P O R T 2 0 2 1
Leasehold improvements
3–5 years
Furniture and fittings
3–20 years
Computer equipment
3–5 years
Office equipment
3–10 years
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
Consolidated
2021
$’000
2020
$’000
Non-current assets
Goodwill–at cost
24,974
16,520
Trademarks and domain names – at cost
65
49
Software development – at cost
49,692
38,590
Less: Accumulated amortisation
(30,569)
(23,478)
19,123
15,112
Computer software – at cost
198
198
Less: Accumulated amortisation
(198)
(192)
–
6
Contractual rights – at cost
704
362
Less: Accumulated amortisation
(602)
(267)
102
95
Customer relationships
16,298
3,656
Less: Accumulated amortisation
(1,663)
(305)
14,635
3,351
58,899
35,133
Note 13. Property, plant and equipment (continued)
CLASS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
30 JUNE 2021
65
C L A S S 2 0 2 1 A N N U A L R E P O R T
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are
set out below:
Consolidated
Goodwill
$’000
Trademarks
and domain
names
$’000
Software
development
$’000
Computer
software
$’000
Contractual
rights
$’000
Customer
relationships
$’000
Total
$’000
Balance at 1 July 2019
–
47
8,361
52
92
–
8,552
Additions
–
–
7,637
–
339
–
7,976
Additions through business
combinations (note 32)
16,520
2
4,382
–
–
3,656
24,560
Amortisation expense
(5,268)
(46)
(336)
(305)
(5,955)
Balance at 30 June 2020
16,520
49
15,112
6
95
3,351
35,133
Additions
–
5
11,100
–
342
–
11,447
Additions through business
combinations (note 32)
8,454
11
–
–
–
12,642
21,107
Amortisation expense
(7,089)
(6)
(335)
(1,358)
(8,788)
Balance at 30 June 2021
24,974
65
19,123
–
102
14,635
58,899
Goodwill and indefinite life intangible assets have been allocated to Document and Corporate Compliance
cash‑generating unit ('CGU'). The recoverable amount of the goodwill and indefinite life intangible assets of
the Document and Corporate Compliance CGU has been determined by a value-in- use (‘VIU’) calculation using
a discounted cash flow model, based on a 3 year projection period approved by management and extrapolated for
a further 2 years using a steady rate, together with a terminal value.
Key assumptions
Key assumptions are those to which the recoverable amount of an asset or cash-generating units is most sensitive.
The following key assumptions were used in the VIU model for the Document and Corporate Compliance CGU.
(a) Earnings before interest, depreciation and amortisation (‘EBITDA’) of 49% for financial year 2022 (‘FY22’) and
then range of 52%–53% for each year FY23–FY26;
(b) Revenue growth rate of 47% for FY22, 11% in FY23 and then 9% growth each year for FY24–FY26;
(c) Pre-tax discount rate of 13%; and
(d) Terminal growth rate of 2.5%.
The discount rate of 13% pre-tax reflects management’s estimate of the time value of money and the Group’s
weighted average cost of capital adjusted for the risk-free rate and the volatility of the share price relative
to market movements.
CLASS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
30 JUNE 2021
Note 14. Intangibles (continued)
66
F I N A N C I A L R E P O R T 2 0 2 1
Sensitivity analysis
Management estimates that reasonable changes in the key assumptions on which the recoverable amount
of the Group’s goodwill is based would not cause the cash-generating unit’s carrying amount to exceed its
recoverable amount.
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.
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 lives 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.
CLASS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
30 JUNE 2021
Note 14. Intangibles (continued)
67
C L A S S 2 0 2 1 A N N U A L R E P O R T
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 to ten years.
Note 15. Right-of-use assets
Consolidated
2021
$’000
2020
$’000
Non-current assets
Right-of-use assets
8,738
1,850
Less: Accumulated depreciation
(1,981)
(877)
6,757
973
The Group has leased office premises under operating leases expiring between one to five years, with options
to extend. The leases have various escalation clauses. On renewal, the terms of the lease 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
Office premises
$’000
Balance at 1 July 2019
–
Adoption of AASB 16 on 1 July 2019
1,431
Additions
56
Additions through business combinations (note 32)
287
Depreciation expense
(801)
Balance at 30 June 2020
973
Additions
6,465
Capitalised lease make good provisions
421
Depreciation expense
(1,102)
Balance at 30 June 2021
6,757
For other AASB 16 lease-related disclosures refer to the following:
•
Refer note 7 for details of depreciation on right-of-use assets and interest on lease liabilities;
•
Refer note 19 and note 33 for details of lease liabilities at the beginning and end of the reporting period;
CLASS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
30 JUNE 2021
Note 14. Intangibles (continued)
68
F I N A N C I A L R E P O R T 2 0 2 1
•
Refer note 24 for the maturity analysis of lease liabilities; and
•
Refer to the statement of cash flows for repayment of lease liabilities.
Accounting policy for right-of-use assets
A right-of-use asset is recognised at the commencement date of a lease. The right-of-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 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-of use assets are subject
to impairment or adjusted for any remeasurement of lease liabilities.
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
Consolidated
2021
$’000
2020
$’000
Current liabilities
Trade payables
2,654
904
Accrued expenses
5,000
2,994
BAS payable
1,359
999
9,013
4,897
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.
Note 17. Contract liabilities
Consolidated
2021
$’000
2020
$’000
Current liabilities
Contract liabilities
235
610
CLASS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
30 JUNE 2021
Note 15. Right-of-use assets (continued)
69
C L A S S 2 0 2 1 A N N U A L R E P O R T
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
Consolidated
2021
$’000
2020
$’000
Current liabilities
Bank loans
4,932
1,000
Non-current liabilities
Bank loans
15,215
9,000
20,147
10,000
Refer to note 24 for further information on financial instruments.
Bank loan facilities
The existing bank loan facility of $10,000,000 is subject to an initial three year fixed rate of 2.97% per annum.
The banking facility matures on 30 January 2023. 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.
The Group obtained an additional borrowing facility of $2,730,000 during the financial year which it drew
upon to fund the Smartcorp business acquisition. The new facility is subject to a variable rate of 1.9% per
annum. Interest plus a quarterly principal repayment of $228,000 are payable from 20 August 2020 for 3 years.
The new facility matures on 19 August 2023.
The Group obtained a further borrowing facility of $9,100,000 during the financial year which it drew upon to
fund Reckon Docs business acquisition. The new facility is subject to a variable rate of 2% per annum. Interest
plus a quarterly principal repayment of $506,000 are payable from 1 September 2021 for 3 years. The new facility
matures on 1 March 2024.
The facilities are secured by fixed and floating charges over the Group’s assets.
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 2021.
CLASS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
30 JUNE 2021
70
F I N A N C I A L R E P O R T 2 0 2 1
Financing arrangements
Unrestricted access was available at the reporting date to the following lines of credit:
Consolidated
2021
$’000
2020
$’000
Total facilities
Bank loans
20,147
10,000
Business overdraft
2,000
2,000
22,147
12,000
Used at the reporting date
Bank loans
20,147
10,000
Business overdraft
–
–
20,147
10,000
Unused at the reporting date
Bank loans
–
–
Business overdraft
2,000
2,000
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
Consolidated
2021
$’000
2020
$’000
Current liabilities
Lease liability
1,110
832
Non-current liabilities
Lease liability
5,341
97
6,451
929
Refer to note 24 for maturity analysis of lease liabilities.
CLASS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
30 JUNE 2021
Note 18. Borrowings (continued)
71
C L A S S 2 0 2 1 A N N U A L R E P O R T
Note 19. Lease liabilities (continued)
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.
Note 20. Provisions
Consolidated
2021
$’000
2020
$’000
Current liabilities
Annual leave
1,345
958
Long service leave
420
224
Lease make-good
–
163
1,765
1,345
Non-current liabilities
Long service leave
514
415
Lease make-good
336
10
850
425
2,615
1,770
Movements in provisions
Movements in each class of provision during the current financial year, other than employee benefits, are set out below:
CLASS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
30 JUNE 2021
72
F I N A N C I A L R E P O R T 2 0 2 1
Note 20. Provisions (continued)
Consolidated – 2021
Lease make-good
$’000
Carrying amount at the start of the year
173
Additional provisions recognised
420
Payments
(257)
Carrying amount at the end of the year
336
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. 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.
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.
CLASS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
30 JUNE 2021
73
C L A S S 2 0 2 1 A N N U A L R E P O R T
Note 21. Issued capital
Consolidated
2021
Shares
2020
Shares
2021
$’000
2020
$’000
Ordinary shares–fully paid
123,758,834
122,758,407
37,095
35,154
Less: Treasury shares
(265,219)
(450,604)
(582)
(740)
123,493,615
122,307,803
36,513
34,414
Movements in ordinary share capital
Details
Date
Shares
$’000
Balance
1 July 2019
117,662,056
25,154
Issue of shares on acquisition of NowInfinity 3505 Pty Ltd
31 January 2020
5,096,351
10,000
Balance
30 June 2020
122,758,407
35,154
Issue of shares on acquisition of Assuriti Pty Ltd (note 32)
20 August 2020
1,000,427
1,941
Balance
30 June 2021
123,758,834
37,095
Movements in treasury shares
Details
Date
Shares
$’000
Balance
1 July 2019
(1,565,000)
(2,647)
Payments from option holders on exercise of options
Various dates
–
808
Less: allocation of shares on exercise of options (note 22)
Various dates
1,114,396
1,099
Balance
30 June 2020
(450,604)
(740)
Purchase of shares by Employee Share Trust (note 22)
Various dates
(350,000)
(769)
Less: allocation of shares on exercise of options (note 22)
Various dates
535,385
753
Payments from option holders on exercise of options
–
174
Balance
30 June 2021
(265,219)
(582)
CLASS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
30 JUNE 2021
74
F I N A N C I A L R E P O R T 2 0 2 1
Note 21. Issued capital (continued)
Ordinary shares
Ordinary shares entitle the holder to participate in any dividends declared and any proceeds attributable to
shareholders should the company be wound up in proportions that consider both the number of shares held and the
extent to which those shares are paid up. The fully paid ordinary shares have no par value and the Company does
not have a limited amount of authorised capital.
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll
each share shall have one vote.
Share buy-back
There is no current on-market share buy-back.
Treasury shares
Treasury shares relate to the 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 the
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 covenants on its financing arrangements 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 2020 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.
CLASS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
30 JUNE 2021
75
C L A S S 2 0 2 1 A N N U A L R E P O R T
Note 22. Reserves
Consolidated
2021
$’000
2020
$’000
Share-based payments reserve
3,760
2,833
Employee share acquisition reserve
(1,785)
(1,258)
Acquisition reserve
(53)
(53)
1,922
1,522
Share-based payments reserve
The reserve is used to recognise the value of equity benefits provided to employees and Directors as part
of their remuneration.
Employee share acquisition reserve
The reserve is used to recognise the net cost of acquiring shares allocated by the Employee Share Trust on exercise
of options. Net cost of acquisition comprises the cost of purchasing the shares in the open market less exercise
price received.
Acquisition reserve
The reserve resulted from the acquisition of non-controlling interests in a subsidiary. The acquisition
of non‑controlling interests is not a business combination but is an equity transaction between owners.
Accordingly, the difference between consideration paid and fair value of identifiable net assets of the
non‑controlling interest has been accounted for in the acquisition reserve.
Movements in reserves
Movements in each class of reserve during the current and previous financial year are set out below:
Consolidated
Share-based
payment reserve
$’000
Employee share
acquisition reserve
$’000
Acquisition
reserve
$’000
Total
$’000
Balance at 1 July 2019
2,004
(461)
(53)
1,490
Share-based payments
829
–
–
829
Transfer from treasury shares
–
(1,099)
–
(1,099)
Tax effect on settlement
–
302
–
302
Balance at 30 June 2020
2,833
(1,258)
(53)
1,522
Share-based payments
927
–
–
927
Transfer from treasury shares
–
(753)
–
(753)
Tax effect on settlement
–
226
–
226
Balance at 30 June 2021
3,760
(1,785)
(53)
1,922
CLASS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
30 JUNE 2021
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F I N A N C I A L R E P O R T 2 0 2 1
Note 23. Dividends
Dividends
Dividends paid during the financial year were as follows:
Consolidated
2021
$’000
2020
$’000
Final dividend for the year ended 30 June 2020 of 2.5 cents per ordinary share
(2020: 2.5 cents)
3,094
2,942
Interim dividend for the year ended 30 June 2021 of 2.5 cents per ordinary share
(2020: 2.5 cents)
3,094
3,069
6,188
6,011
On 17 August 2021, the Directors declared a final dividend for the year ended 30 June 2021 of 2.5 cents per ordinary
share with payment date of 23 September 2021 to eligible shareholders on the register on 25 August 2021.
This equates to a total distribution of $3,094,000, based on the number of ordinary shares on issue as
at 30 June 2021. The financial effect of dividends declared after the reporting date is not reflected in the 30 June
2021 financial statements and will be recognised in subsequent financial reports.
Franking credits
Consolidated
2021
$’000
2020
$’000
Franking credits available for subsequent financial years based on a tax rate of 30% (2020: 27.5%)
5,894
4,100
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.
CLASS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
30 JUNE 2021
77
C L A S S 2 0 2 1 A N N U A L R E P O R T
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. 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 at the reporting date, the Group had the following variable rate borrowings outstanding:
Consolidated
2021
2020
Weighted average
interest rate
%
Balance
$’000
Weighted average
interest rate
%
Balance
$’000
Bank loans
1.99%
11,148
–
–
Net exposure to cash flow interest rate risk
11,148
–
An analysis by remaining contractual maturities in shown in ‘liquidity and interest rate risk management’ below.
An official increase/decrease in interest rates of 50 basis points would have an adverse/favourable effect on profit
before tax of $56,000 per annum (2020: Not applicable). 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
CLASS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
30 JUNE 2021
78
F I N A N C I A L R E P O R T 2 0 2 1
credit risk. The maximum exposure to credit risk at the reporting date to recognised financial assets is the carrying
amount, net of any provisions for impairment of those assets, as disclosed in the statement of financial position
and notes to the financial statements. The Group does not hold any collateral.
The Group has adopted a lifetime expected loss allowance in estimating expected credit losses to trade receivables
through the use of a provisions matrix using fixed rates of credit loss provisioning. These provisions are considered
representative across all customers of the Group based on recent sales experience, historical collection rates and
forward-looking information that is available. 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 2021.
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 and available borrowing facilities
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:
Consolidated
2021
$’000
2020
$’000
Business overdraft
2,000
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.
CLASS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
30 JUNE 2021
Note 24. Financial instruments (continued)
79
C L A S S 2 0 2 1 A N N U A L R E P O R T
Note 24. Financial instruments (continued)
Consolidated – 2021
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
Non-derivatives
Non-interest bearing
Trade payables
–
2,654
–
–
–
2,654
Interest-bearing – variable
Bank loans
1.99%
3,126
3,068
5,414
–
11,608
Interest-bearing – fixed rate
Bank loans
2.97%
2,240
7,099
–
–
9,339
Lease liability
2.60%
1,133
1,180
4,826
–
7,139
Total non-derivatives
9,153
11,347
10,240
–
30,740
Consolidated – 2020
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
Non-derivatives
Non-interest bearing
Trade payables
–
904
–
–
–
904
Deferred consideration
–
500
–
–
–
500
Interest-bearing – fixed rate
Bank loans
2.97%
1,282
2,238
7,104
–
10,624
Lease liability
4.63%
868
887
104
–
1,859
Total non-derivatives
3,554
3,125
7,208
–
13,887
The cash flows in the maturity analysis above are not expected to occur significantly earlier than contractually
disclosed above.
CLASS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
30 JUNE 2021
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F I N A N C I A L R E P O R T 2 0 2 1
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 – 2021
Level 1
$’000
Level 2
$’000
Level 3
$’000
Total
$’000
Assets
Convertible notes at fair value through profit or loss
–
–
175
175
Total assets
–
–
175
175
Consolidated – 2020
Level 1
$’000
Level 2
$’000
Level 3
$’000
Total
$’000
Assets
Convertible notes at fair value through profit or loss
–
–
3,276
3,276
Total assets
–
–
3,276
3,276
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
The valuation of the convertible notes was based upon the negotiated transfer price of $175,000.
As a result of the strategic review detailed in note 12, the Group recorded a loss on investment of $3,242,000 during
the current financial year.
Level 3 assets and liabilities
Refer to note 12 ‘Investments’ for movements in level 3 assets and liabilities during the current and previous
financial year.
CLASS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
30 JUNE 2021
81
C L A S S 2 0 2 1 A N N U A L R E P O R T
Note 25. Fair value measurement (continued)
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 used to measure fair value are those that
are appropriate in the circumstances and which maximise the use of relevant observable inputs and minimise 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.
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:
Consolidated
2021
$
2020
$
Short-term employee benefits
1,529,456
1,439,288
Post-employment benefits
88,418
86,430
Long-term benefits
2,329
(8,025)
Share-based payments
402,560
327,991
2,022,763
1,845,684
CLASS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
30 JUNE 2021
82
F I N A N C I A L R E P O R T 2 0 2 1
Note 26. Remuneration of auditors
During the financial year the following fees were paid or payable for services provided by Grant Thornton, the auditor
of the Company:
Consolidated
2021
$
2020
$
Audit services – Grant Thornton
Audit or review of the financial statements
159,500
115,000
Other services – Grant Thornton
Due diligence
–
84,697
Tax compliance services
51,000
59,000
51,000
143,697
210,500
258,697
Note 28. Contingent liabilities
The Group has given bank guarantees as at 30 June 2021 of $547,000 (2020: $150,000) to various landlords.
Note 29. Related party transactions
Parent entity
Class Limited is the parent entity.
Subsidiaries
Interests in subsidiaries are set out in note 31.
Key management personnel
Disclosures relating to key management personnel are set out in note 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.
CLASS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
30 JUNE 2021
83
C L A S S 2 0 2 1 A N N U A L R E P O R T
Note 30. Parent entity information
Set out below is the supplementary information about the parent entity.
Statement of profit or loss and other comprehensive income
Parent
2021
$’000
2020
$’000
Profit/(loss) after income tax
(768)
8,127
Total comprehensive income
(768)
8,127
Statement of financial position
Parent
2021
$’000
2020
$’000
Total current assets
12,374
9,434
Total assets
67,570
54,937
Total current liabilities
13,250
6,730
Total liabilities
35,502
18,412
Equity
Issued capital
36,513
34,414
Share-based payments reserve
3,760
2,833
Employee share acquisition reserve
(1,785)
(1,258)
Retained earnings
(6,420)
536
Total equity
32,068
36,525
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 2021 and 30 June 2020.
Contingent liabilities
The parent entity had contingent liabilities of $150,000 as at 30 June 2021 (2020: $150,000).
Capital commitments–Property, plant and equipment
The parent entity had no capital commitments for property, plant and equipment as at 30 June 2021 and 30 June 2020.
CLASS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
30 JUNE 2021
84
F I N A N C I A L R E P O R T 2 0 2 1
Note 30. Parent entity information (continued)
Significant accounting policies
The accounting policies of the parent entity are consistent with those of the Group, as disclosed in note 2, note 36
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 31. Interests in subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries
in accordance with the accounting policy described in note 2, note 36 or in the respective notes:
Name
Principal place of business/
Country of incorporation
Ownership interest
2021
%
2020
%
Class Technology Pty Limited
Australia
100%
100%
Class Investment Reporter Pty Ltd
Australia
100%
100%
NowInfinity 3505 Pty Ltd
Australia
100%
100%
NowInfinity Pty Ltd
Australia
100%
100%
Assuriti Pty Ltd
Australia
100%
–
Company Dynamics Pty Ltd
Australia
100%
–
Accounting and Legal Dynamics Pty Ltd
Australia
100%
–
Note 32. Business combinations
Assuriti Pty Ltd (‘Smartcorp’)
On 20 August 2020, the Group acquired 100% of the ordinary shares of Assuriti Pty Ltd (‘Smartcorp’) for the total
consideration of $4,846,000. Smartcorp was founded in 1979 and in 2003 launched Australia’s first online company
ordering and ASIC compliance system. Smartcorp is expected to complement the Group’s NowInfinity business
and will help in growing the Group’s footprint in the document and corporate compliance market. The goodwill of
$2,113,000 represents the profitability of the acquired business and the synergistic opportunities that will arise
from the acquisition.
The acquired business contributed revenues of $2,040,000 to the Group for the period from 20 August 2020 to
30 June 2021. If the acquisition occurred on 1 July 2020, the full-year contributions would have been revenues
of $2,378,000. Due to the business being integrated, the Group is unable to provide the impact to profit after tax
attributable to Smartcorp business. The values identified in relation to the acquisition of Smartcorp are final
as at 30 June 2021.
CLASS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
30 JUNE 2021
85
C L A S S 2 0 2 1 A N N U A L R E P O R T
Note 32. Business combinations (continued)
Reckon Docs
On 1 March 2021, the Group acquired the assets and certain liabilities of Reckon Docs business for the total
consideration of $12,473,000. The goodwill of $6,341,000 represents the profitability of the acquired business and
the synergistic opportunities that will arise from the acquisition.
The acquired business contributed revenues of $1,890,000 to the Group for the period from 1 March 2021 to 30 June
2021. If the acquisition occurred on 1 July 2020, the full-year contributions would have been revenues of $4,819,000.
Due to the business being integrated, the Group is unable to provide the impact to profit after tax attributable to
Reckon Docs business. The values identified in relation to the acquisition of Reckon Docs are final as at 30 June 2021.
Details of the acquisition are as follows:
Smartcorp
Fair value
$’000
Reckon Docs
Fair value
$’000
Total
$’000
Cash and cash equivalents
381
–
381
Trade receivables
73
–
73
Inventories
–
8
8
Prepayments
28
–
28
Other current assets
67
99
166
Plant and equipment
46
–
46
Patents and trademarks
11
–
11
Acquired customer relationships
3,882
8,760
12,642
Trade payables
(19)
–
(19)
Other payables and accruals
(188)
–
(188)
Contract liabilities
(202)
–
(202)
Provision for income tax
(72)
–
(72)
Deferred tax liability
(1,113)
(2,628)
(3,741)
Employee benefits
(161)
(107)
(268)
Net assets acquired
2,733
6,132
8,865
Goodwill
2,113
6,341
8,454
Acquisition – date fair value of the total consideration transferred
4,846
12,473
17,319
Representing:
Cash paid or payable to vendor
2,905
12,473
15,378
Class Limited shares issued to vendor*
1,941
–
1,941
4,846
12,473
17,319
Acquisition costs expensed to profit or loss
187
170
357
Cash used to acquire business, net of cash acquired: Cash paid to vendor
2,905
12,473
15,378
Less: cash and cash equivalents
(381)
–
(381)
Net cash used
2,524
12,473
14,997
*
Consideration for the Smartcorp acquisition included 1,000,427 shares based on a $1.47 share price before the market announcement. The fair value of
shares issued to the vendor was 1.94 per share, representing the closing share price of Class Limited on acquisition date 20 August 2020. The issued
capital remains unchanged.
CLASS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
30 JUNE 2021
86
F I N A N C I A L R E P O R T 2 0 2 1
Note 32. Business combinations (continued)
NowInfinity 3505 Pty Ltd (comparative period)
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 expand the
Group’s product offering to the accounting and administrator segments. The goodwill of $16,520,000 represents the
profitability of the acquired business and the synergistic opportunities that will arise from the acquisition.
The values identified in relation to the acquisition of NowInfinity are final as at 30 June 2020. Details of the
acquisition are as follows:
Fair value
$’000
Cash and cash equivalents
706
Trade receivables
72
Prepayments
177
Other current assets
4
Customer acquisition costs
426
Plant and equipment
278
Right-of-use assets
287
Software platform acquired
4,382
Client relationships acquired
3,656
Other intangible assets
2
Trade payables
(143)
Other payables and accruals
(833)
Deferred tax liability
(1,122)
Other provisions
(60)
Lease liability
(279)
Net assets acquired
7,553
Goodwill
16,520
Acquisition – date fair value of the total consideration transferred
24,073
CLASS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
30 JUNE 2021
87
C L A S S 2 0 2 1 A N N U A L R E P O R T
Fair value
$’000
Representing:
Cash paid or payable to vendor
13,573
Class Limited shares issued to vendor
10,000
Deferred consideration
500
24,073
Acquisition costs expensed to profit or loss
539
Cash used to acquire business, net of cash acquired: Cash paid to the vendor
13,573
Less: cash and cash equivalents acquired
(706)
Net cash used
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.
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
CLASS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
30 JUNE 2021
Note 32. Business combinations (continued)
88
F I N A N C I A L R E P O R T 2 0 2 1
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 33. Cash flow information
Reconciliation of profit after income tax to net cash from operating activities
Consolidated
2021
$’000
2020
$’000
Profit after income tax expense for the year
3,666
6,840
Adjustments for:
Depreciation and amortisation
11,438
8,072
Net fair value gain on investments
(141)
(148)
Net fair value loss on other financial assets
3,242
–
Share-based payments
927
829
Change in operating assets and liabilities:
Increase in trade and other receivables
(951)
(249)
Decrease/(increase) in income tax refund due
(2,012)
697
Increase in prepayments
(209)
(74)
Increase in other operating assets
(797)
(728)
Increase in trade and other payables
3,898
416
Increase/(decrease) in contract liabilities
(577)
202
Increase/(decrease) in provision for income tax
(796)
735
Increase in deferred tax liabilities
1,025
225
Increase in employee benefits
521
535
Increase/(decrease) in other provisions
(258)
10
CLASS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
30 JUNE 2021
Note 32. Business combinations (continued)
89
C L A S S 2 0 2 1 A N N U A L R E P O R T
Reconciliation of profit after income tax to net cash from operating activities
Consolidated
2021
$’000
2020
$’000
Net cash from operating activities
18,976
17,362
Note 33. Cash flow information (continued)
Non-cash investing and financing activities
Consolidated
2021
$’000
2020
$’000
Additions to the right-of-use assets
6,465
1,487
Shares issued in relation to business combinations
1,941
10,000
8,406
11,487
Changes in liabilities arising from financing activities
Consolidated
Bank loan
$’000
Lease liabilities
$’000
Total
$’000
Balance at 1 July 2019
–
–
–
Adoption of AASB 16 on 1 July 2019
–
1,431
1,431
Changes through business combinations (note 32)
–
279
279
Other changes
–
(3)
(3)
Net cash from/(used in) financing activities
10,000
(778)
9,222
Balance at 30 June 2020
10,000
929
10,929
Acquisition of leases
–
6,465
6,465
Net cash from/(used in) financing activities
10,147
(943)
9,204
Balance at 30 June 2021
20,147
6,451
26,598
CLASS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
30 JUNE 2021
90
F I N A N C I A L R E P O R T 2 0 2 1
Note 34. Earnings per share
Consolidated
2021
$’000
2020
$’000
Profit after income tax attributable to the owners of Class Limited
3,666
6,840
Number
Number
Weighted average number of ordinary shares used in calculating basic earnings per share
123,327,594
119,055,320
Adjustments for calculation of diluted earnings per share:
Options over ordinary shares
–
114,558
Performance rights over ordinary shares
433,021
185,029
Weighted average number of ordinary shares used in calculating diluted earnings per share
123,760,615
119,354,907
Cents
Cents
Basic earnings per share
2.97
5.75
Diluted earnings per share
2.96
5.73
Accounting policy for earnings per share
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.
Note 35. 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
CLASS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
30 JUNE 2021
91
C L A S S 2 0 2 1 A N N U A L R E P O R T
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 $927,000 (2020: $829,000). 1,006,994 performance rights were
granted during the year ended 30 June 2021 (2020: 1,696,627 rights).
Set out below is a summary of the options granted under the plan:
2021
Grant date
Expiry
date
Exercise
price
Balance at the
start of the year
Granted
Exercised
Expired/
forfeited
Balance at the
end of the year
30/09/2015
30/09/2020
$1.33
773,506
–
–
(773,506)
–
29/06/2016
30/06/2021
$3.81
708,202
–
–
(708,202)
–
24/07/2017
15/03/2022
$3.99
844,663
–
–
–
844,663
2,326,371
–
–
(1,481,708)
844,663
Weighted average exercise price
$3.05
$0.00
$0.00
$2.52
$3.99
2020
Grant date
Expiry
date
Exercise
price
Balance at the
start of the year
Granted
Exercised
Expired/
forfeited
Balance at the
end of the year
30/09/2015
30/09/2019
$1.10
1,464,614
–
(1,464,614)
–
–
30/09/2015
30/09/2020
$1.33
793,506
–
(20,000)
–
773,506
29/06/2016
30/06/2021
$3.81
708,202
–
–
–
708,202
24/07/2017
15/03/2022
$3.99
864,667
–
–
(20,004)
844,663
3,830,989
(1,484,614)
(20,004)
2,326,371
Weighted average exercise price
$2.30
$0.00
$1.10
$3.99
$3.05
The weighted average share price during the financial year was $1.82 (2020: $1.56).
The weighted average remaining contractual life of options outstanding at the end of the financial year was 0.7 year
(2020: 1 year).
844,663 options outstanding as at 30 June 2021 are vested and exercisable (30 June 2020: 2,105,368).
Performance rights
During the year, the Group granted 1,006,994 performance rights for nil cash consideration for the year ended
30 June 2021 (2020: 1,696,627). The performance period is generally for a 3 year period. Vesting of the performance
CLASS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
30 JUNE 2021
Note 35. Share-based payments (continued)
92
F I N A N C I A L R E P O R T 2 0 2 1
rights is subject to meeting predetermined market and non-market conditions including Total Shareholder Return
(‘TSR’), revenue and EPS growth targets over the performance period.
Set out below are summaries of performance rights granted under the plan:
2021
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
01/11/2018
30/06/2021
$0.00
168,664
–
–
(168,664)
–
14/05/2019
13/05/2022
$0.00
200,000
–
–
–
200,000
26/07/2019
13/05/2022
$0.00
500,000
–
–
(133,333)
366,667
26/08/2019
30/06/2021
$0.00
185,029
–
(115,142)
(24,910)
44,977
01/11/2019
31/10/2022
$0.00
616,870
–
–
(116,222)
500,648
20/01/2020
31/10/2022
$0.00
24,510
–
–
(24,510)
–
02/03/2020
31/10/2022
$0.00
23,411
–
–
–
23,411
07/07/2020
07/06/2022
$0.00
–
274,227
(32,307)
(37,307)
204,613
20/10/2020
19/10/2023
$0.00
–
732,767
–
(144,038)
588,729
1,718,484
1,006,994
(147,449)
(648,984)
1,929,045
2020
Grant date
Expiry
date
Exercise
price
Balance at the
start of the year
Granted
Exercised
Expired/
forfeited
Balance at the
end of the year
01/11/2018
30/06/2021
$0.00
168,664
–
–
–
168,664
14/05/2019
31/10/2019
$0.00
100,000
–
(100,000)
–
–
14/05/2019
13/05/2022
$0.00
200,000
–
–
–
200,000
24/07/2019
31/10/2019
$0.00
–
26,848
(26,848)
–
–
26/07/2019
13/05/2022
$0.00
–
700,000
–
(200,000)
500,000
26/08/2019
30/06/2021
$0.00
–
224,835
–
(39,806)
185,029
01/11/2019
31/10/2022
$0.00
–
697,023
–
(80,153)
616,870
20/01/2020
31/10/2022
$0.00
–
24,510
–
–
24,510
02/03/2020
31/10/2022
$0.00
–
23,411
–
–
23,411
468,664
1,696,627
(126,848)
(319,959)
1,718,484
CLASS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
30 JUNE 2021
Note 35. Share-based payments (continued)
93
C L A S S 2 0 2 1 A N N U A L R E P O R T
Note 35. Share-based payments (continued)
Performance rights that had vested and were exercisable as at 30 June 2021 was nil (2020: nil). The weighted
average remaining contractual life of performance rights outstanding at the end of the financial year was 1.4 years
(2020: 0.9 years).
For the performance rights granted during the current financial year, the valuation model inputs used to determine
the fair value at the grant date, are as follows:
Grant date
Expiry date
Share price
at grant date
Exercise
price
Expected
volatility
Dividend
yield
Risk-free
interest rate
Fair value
at grant date
07/07/2020
07/06/2022
$1.40
$0.00
37.00%
3.21%
0.25%
$1.310
20/10/2020
19/10/2023
$2.10
$0.00
37.00%
2.96%
0.13%
$1.912
Accounting policy for share-based payments
Equity-settled share-based compensation benefits are provided to employees.
Equity-settled transactions are awards of shares, or options over shares, that are provided to employees in
exchange for the rendering of services.
The cost of equity-settled transactions is measured at fair value on grant date. Fair value is determined using
either the Binomial or Black-Scholes option pricing model that takes into account the exercise price, the term of
the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share,
the expected dividend yield and the risk free interest rate for the term of the option, together with non-vesting
conditions that do not determine whether the Group receives the services that entitle the employees to receive
payment. No account is taken of any other vesting conditions.
The cost of equity-settled transactions is recognised as an expense with a corresponding increase in equity over
the vesting period. The cumulative charge to profit or loss is calculated based on the grant date fair value of the
award, the best estimate of the number of awards that are likely to vest and the expired portion of the vesting
period. The amount recognised in profit or loss for the period is the cumulative amount calculated at each reporting
date less amounts already recognised in previous periods.
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.
CLASS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
30 JUNE 2021
94
F I N A N C I A L R E P O R T 2 0 2 1
Note 36. Other accounting policies
Principles of consolidation
The consolidated financial statements incorporate the assets and liabilities of Class Limited (‘Company’ or
‘parent entity’) as at 30 June 2021 and the results of all subsidiaries for the year then ended. Class Limited and its
subsidiaries together are referred to in these financial statements as the ‘Group’.
Subsidiaries are all those entities over which the Group has control. The Group controls an entity when the Group
is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect
those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the
date on which control is transferred to the Group. They are de-consolidated from the date that control ceases.
Intercompany transactions, balances and unrealised gains on transactions between entities in the Group are
eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the
asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency
with the policies adopted by the Group.
The acquisition of subsidiaries is accounted for using the acquisition method of accounting. A change in ownership
interest, without the loss of control, is accounted for as an equity transaction, where the difference between the
consideration transferred and the book value of the share of the non-controlling interest acquired is recognised
directly in equity attributable to the parent.
Where the Group loses control over a subsidiary, it derecognises the assets including goodwill, liabilities and
non‑controlling interests in the subsidiary together with any cumulative translation differences recognised in
equity. The Group recognises the fair value of the consideration received and the fair value of any investment
retained together with any gain or loss in profit or loss.
Current and non-current classification
Assets and liabilities are presented in the statement of financial position based on current and non-current
classification.
An asset is classified as current when: it is either expected to be realised or intended to be sold or consumed
in the Group’s normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised
within 12 months after the reporting period; or the asset is cash or cash equivalent unless restricted from being
exchanged or used to settle a liability for at least 12 months after the reporting period. All other assets are classified
as non-current.
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.
CLASS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
30 JUNE 2021
95
C L A S S 2 0 2 1 A N N U A L R E P O R T
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.
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.
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 2021.
The adoption of these Accounting Standards and Interpretations is not expected to have any significant impact
on the Group’s financial statements.
Note 37. Events after the reporting period
The consequences of the Coronavirus (COVID-19) pandemic are continuing to be felt around the world, and its
impact on the Group, if any, has been reflected in its published results to date. Whilst it would appear that control
measures and related government policies have started to mitigate the risks caused by COVID-19, it is not possible
at this time to state that the pandemic will not subsequently impact the Group’s operations going forward.
The Group now has experience in the swift implementation of business continuation processes should future
lockdowns of the population occur, and these processes continue to evolve to minimise any operational disruption.
Management continues to monitor the situation both locally and internationally.
On 2 August 2021, the Group executed the transfer of the Philo convertible notes for a cash consideration of $175,000.
On 17 August 2021, the Group announced the acquisition of all the shares in Topdocs Pty Ltd. The Share Purchase
Agreement was executed on 16 August 2021 with an expected effective date of 1 September 2021 and a maximum
enterprise value of $13 million. The purchase consideration is expected to be settled by $11.7 million upfront cash
payment, plus $1.3 million in the Company's shares. The acquisition will be partly funded through an increase to the
existing bank debt facility.
CLASS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
30 JUNE 2021
Note 36. Other accounting policies (continued)
96
F I N A N C I A L R E P O R T 2 0 2 1
As part of the transaction, the Topdocs platform and customer base will be acquired and is expected to deliver
an estimated revenue contribution of $3 million in FY22.
Apart from the dividend declared as disclosed in note 23, no other matter or circumstance has arisen since
30 June 2021 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.
CLASS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
30 JUNE 2021
Note 37. Events after the reporting period (continued)
97
C L A S S 2 0 2 1 A N N U A L R E P O R T
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 2021 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 of the Board
17 August 2021
Sydney
CLASS LIMITED
DIRECTORS’ DECLARATION
30 JUNE 2021
98
F I N A N C I A L R E P O R T 2 0 2 1
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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
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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.
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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 2021, 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 2021 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 (including Independence Standards) (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.
CLASS LIMITED
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF CLASS LIMITED
99
C L A S S 2 0 2 1 A N N U A L R E P O R T
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 software
development costs – Note 14 Intangibles
Capitalised software development costs had a net carrying
value of $19,123,000 at 30 June 2021.
During the year the Group capitalised $11,100,000 of
software development costs. Once placed into service,
these intangible assets are being amortised over a 3-10
year period.
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.
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.
Our procedures included, amongst others:
Assessing the Group’s accounting policy in respect of
product development costs for adherence to AASB 138;
Evaluating management’s assessment of each project for
compliance with the recognition criteria set out in 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
Assessing the adequacy of related disclosures in the
financial statements.
Acquisition accounting – Note 32 Business
combinations
On 20 August 2020 the Group acquired all the shares in
Assuriti Pty Ltd (‘Smartcorp’) and controlled entities. The
purchase consideration of $4,846,000 was settled by
$2,905,000 upfront cash payment and $1,941,000 in the
Company's shares.
On 1 March 2021 the Group acquired the assets and certain
liabilities of the Reckon Docs business. The purchase
consideration was settled by $12,473,000 upfront cash
payment.
When an acquisition meets the definition of a business
combination, AASB 3: Business Combinations requires
management to exercise judgement to determine the fair
value of the purchase consideration, the fair value of acquired
assets and liabilities, and the allocation of purchase
consideration to separately identifiable intangible assets and
goodwill.
Business combinations are a key audit matter due to the size
of the acquisitions and their materiality to the Group, the level
of judgement required in evaluating the Group’s purchase
price allocation including the assessment of identifiable
intangible assets arising on acquisitions. The Group has
engaged an expert to assist them in determining the
appropriate asset values.
Our procedures included, amongst others:
Considering the legal documents, the purchase price
allocation reports, and management’s position paper on
the acquisitions to obtain an understanding of the
transactions;
Assessing whether the acquisitions met the definition of a
business in accordance with AASB 3;
Assessing management’s determination of the fair value of
both the purchase consideration, and the fair value of
assets and liabilities acquired;
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 our 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;
CLASS LIMITED
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF CLASS LIMITED
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Key audit matter
How our audit addressed the key audit matter
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 the mathematical accuracy of the cash flow
models;
Considering any tax implications related to the purchase
accounting in consultation with our tax experts;
Assessing the amount and accounting treatment of
acquisition costs by testing a sample of items to supporting
documentation;
Testing the Group’s accounting for the transactions
including checking the mathematical accuracy of the
calculations and associated journal entries; and
Assessing the adequacy of related disclosures in the
financial statements.
Recoverable amount of intangible assets – Note 14
Intangibles
As at 30 June 2021, the Group’s intangible assets of
$58,899,000 consist of goodwill, trademarks and domain
names, software development, contractual rights and
customer relationships.
AASB 136: Impairment of Assets requires that intangible
assets with indefinite useful life and intangible assets not yet
available for use must be tested for impairment annually.
AASB 136 also requires that goodwill acquired in a business
combination be allocated to each of the Group’s cash-
generating units (CGU). Each CGU to which goodwill has
been allocated must be tested for impairment annually.
Management has allocated the goodwill and indefinite useful
life intangible assets to the Documents and Corporate
Compliance CGU and therefore management has tested this
CGU for impairment by comparing its carrying amounts with
its recoverable amount. The recoverable amount was
determined using a value-in-use model.
We have determined this is a key audit matter due to the
judgements and estimates required in determining the
appropriate CGUs and calculating the recoverable amount.
Our procedures included, amongst others:
Enquiring with management to obtain and document an
understanding of their processes and controls related to
the assessment of impairment, including identification of
CGUs and the calculation of the recoverable amount for
the Documents and Corporate Compliance CGU;
Obtaining management’s value in use calculation to:
Test the mathematical accuracy;
Evaluate management’s ability to perform accurate
estimates by comparing historical forecasting to actual
results;
Test forecast cash inflows and outflows to be derived
by the CGU’s assets; and
Agree discount rates applied to forecast future cash
flows;
Evaluating the value in use model against the
requirements of AASB 136, including consultation with our
valuations experts;
Performing sensitivity analysis on the significant inputs and
assumptions made by management in preparing the
calculation; and
Assessing the adequacy of financial report disclosures.
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 2021, 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.
CLASS LIMITED
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF CLASS LIMITED
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C L A S S 2 0 2 1 A N N U A L R E P O R T
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: https://www.auasb.gov.au/admin/file/content102/c3/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 22 to 41 of the Directors’ report for the year ended 30 June
2021.
In our opinion, the Remuneration Report of Class Limited, for the year ended 30 June 2021 complies with section 300A
of the Corporations Act 2001.
Responsibilities
The Directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance
with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report,
based on our audit conducted in accordance with Australian Auditing Standards.
Grant Thornton Audit Pty Ltd
Chartered Accountants
C F Farley
Partner – Audit & Assurance
Sydney, 17 August 2021
CLASS LIMITED
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF CLASS LIMITED
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F I N A N C I A L R E P O R T 2 0 2 1
Shareholder
information
The shareholder information set out below was applicable as at 31 July 2021.
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
70
3
6
10,001 to 100,000
572
22
0
5,001 to 10,000
559
9
–
1,001 to 5,000
1,457
1
–
1 to 1,000
1,257
–
–
TOTAL
3,915
35
6
Holding less than a marketable parcel
469
–
–
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C L A S S 2 0 2 1 A N N U A L R E P O R T
Shareholder
information (cont)
Equity security holders
The names of the twenty largest security holders of quoted equity securities are listed below:
Rank
Name
Number of ordinary shares
% IC
1
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
17,252,361
13.94%
2
CITICORP NOMINEES PTY LIMITED
16,464,927
13.30%
3
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
9,121,358
7.37%
4
TRONCELL PTY LTD
8,870,944
7.17%
5
NATIONAL NOMINEES LIMITED
8,656,736
6.99%
6
TRONCELL PTY LTD
5,458,000
4.41%
7
ARMELEK PTY LTD
3,000,155
2.42%
8
STORY OF PRINCIPAL PTY LIMITED
2,650,102
2.14%
9
BNP PARIBAS NOMINEES PTY LTD
2,329,665
1.88%
10
BAY 88 PTY LTD
1,800,000
1.45%
11
BNP PARIBAS NOMS PTY LTD
1,774,889
1.43%
12
MR PETER DORIAN KIBBLE + MRS LORRAINE LESTER
1,501,652
1.21%
12
MR RODERICK KIBBLE + MRS MICHELLE KIBBLE
1,501,652
1.21%
13
FNNI PTY LIMITED
1,477,942
1.19%
14
TANOODLE PTY LTD
1,000,427
.81%
15
MR RAJARSHI MANU RAY
1,000,000
.81%
16
THE DAY ASPHALT STOOD UP PTY LIMITED
968,307
.78%
17
SANDHURST TRUSTEES LTD
906,092
.73%
18
MR KEVIN BUNGARD + MRS STEPHANIE ANNE BUNGARD
857,117
.69%
19
MR KEVIN BUNGARD
831,604
.67%
20
FYLPANE PTY LTD
750,000
.61%
Investors
TOTAL IN THIS REPORT:
88,173,930
21
71.25%
TOTAL OTHER INVESTORS:
35,584,904
3,898
28.75%
GRAND TOTAL:
123,758,834
3,919
100.00%
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F I N A N C I A L R E P O R T 2 0 2 1
Shareholder
information (cont)
Unquoted equity securities
Number on issue
Number of holders
Options over ordinary shares
844,663
20
Performance Rights over ordinary shares
1,826,738
6
Substantial holders
Perennial Value Management Ltd advised that as of 9 July 2021, it and its associates had an interest in 10,019,720
shares, which represented 8.10 % of Class’ issued capital at that time.
Microequities Asset Management Ltd advised that as of 26 April 2021, it and its associates had an interest in
8,660,591 shares, which represented 7 % of Class’ issued capital at that time.
Spheria Asset Management Limited advised that as of 23 October 2020, it had an interest in 20,913,106 shares,
which represented 16.9 % of Class’ issued capital at that time.
Pinnacle Investment Management Group Limited (and its subsidiaries) advised that as of 30 July 2020, it and its
associates had an interest in 7,737,515 shares, which represented 6.3 % 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
Number of shares
Ordinary shares
18 December 2021 or the day after the date which the shareholder ceases to be an employee
29,256
Ordinary shares
18 December 2022 or the day after the date which the shareholder ceases to be an employee
29,610
Ordinary shares
31 January 2022
6,096,778
Ordinary shares
18 December 2023 or the day after the date which the shareholder ceases to be an employee
53,212
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C L A S S 2 0 2 1 A N N U A L R E P O R T
Corporate
directory
Directors
Matthew Quinn – Chairman
Andrew Russell
Kathryn Giudes (Foster)
Nicolette Rubinsztein
Robert Bazzani
Company secretary
Jasmin Chew (interim appointment)
Registered office
and Principal place of business
Level 20, 580 George Street
Sydney, NSW 2000
Telephone 1300 851 057
Share register
Link Market Services Limited
Level 12, 680 George Street
Sydney, NSW 2000
Telephone 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
Telephone (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
(Fourth 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/
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Class Ltd ACN 116 802 058
Address
Level 20, 580 George Street
Sydney NSW 2000
Phone
1300 851 058
Email
media@class.com.au