More annual reports from FINEOS Corporation Holdings plc:
2023 ReportAnnual Report 2020
FINEOS Corporation Holdings plc
ARBN 633 278 430
ii
FINEOS Corporation Holdings plc
Contents
Chairman and CEO’s Report
Board of Directors
Directors’ Report
Remuneration and Nomination Committee Report
Directors’ Responsibilities Statement
Independent Auditor’s Report
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Company Statement of Financial Position
Consolidated Statement of Changes in Equity
Company Statement of Changes in Equity
Consolidated Statement of Cash Flows
Company Statement of Cash Flows
Notes to the Consolidated Financial Statements
Additional Security Holder Information
Company Information
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Annual Report 2020
1
Chairman and CEO’s Report
Dear Securityholder,
In our first year as an ASX listed company,
following an Initial Public Offering (IPO) on
16 August 2019, we are pleased to report on
a very successful and rewarding 12 months
for the Company to 30 June 2020 (FY20).
FY20 Results
FINEOS has continued to invest to grow our global client
portfolio, which includes several of the top life, accident
and health insurance carriers in North America and
the Asia Pacific region. We achieved record revenue
for the full year ended 30 June 2020 of €87.8 million,
representing a 39.8% increase on FY19, and a 18.6%
increase on our prospectus forecast of €74.0 million. Our
statutory EBITDA (defined as earnings before interest,
taxes, amortisation and depreciation) for FY20 was €13.3
million, up 64.2% from €8.1 million in FY19 and up on a
prospectus forecast of €2.4 million.
Our results were driven by a combination of new
client wins, existing client upgrades to the cloud and
increasing demand from clients to accelerate FINEOS
implementations to meet business and regulatory needs.
The closing cash balance for the year was €39.8 million,
primarily reflecting funds raised at the IPO and cashflow
generation in the second half of the year, partially offset
by the repayment of a €16.7 million loan and interest in
the first quarter of the year. The cash balance and debt
free position at 30 June 2020 provided a healthy balance
sheet to fund future growth initiatives for the Company.
To support the substantial growth in revenue, we
increased headcount to 875 at 30 June 2020, an increase
of 31.8% on the total of 664 at 30 June 2019.
in Research and
investment
We continued our
Development (R&D), supporting our mission to be the
global market leader in core systems for group and
individual life, accident and health insurance on our
single cloud technology platform. Total R&D spend for
FY20 was €28.4 million, up 24.6% from €22.8 million in
FY19. Of the total spend in FY20, €16.8 million (or 59.1%)
was capitalised, and €11.6 million was expensed.
These operational and financial results achieved were
testament to the dedicated work and focus of our
employees and leadership team throughout the year.
COVID-19
As we progressed into the third quarter of FY20, we
reacted quickly to the impact of the global pandemic
COVID-19 and established a taskforce to coordinate our
activities and communications to all of our stakeholders.
We prioritised the wellbeing of our people and ensured
that they could continue to meet the needs of our clients.
In line with best practice, our employees around the world
are working from home since the end of March 2020.
Utilisation rates within our FINEOS Product Consulting
teams remained consistently high, at over 90%, to
ensure our client projects are delivered on time and
to budget. We continued to hire for open roles and
remotely onboarded new people in line with business
demand. As part of our Corporate Public Responsibility,
FINEOS developed and made a US Federal Paid Leave
COVID-19 payments calculator freely available to the
market to support benefit calculations and entitlements
for COVID-19 payments at a Federal level. In addition,
the FINEOS Product Compliance team released several
information bulletins and published related blogs on
Federal and State COVID-19 regulatory changes as they
occurred. This helped demonstrate the FINEOS expertise
and growing market leadership position in the area of
paid and unpaid leaves and absence management.
COVID-19 continues to impact many of our clients and
the community more broadly. We will continue to be
guided by our purpose, of helping our clients care for
the people they serve through the delivery of superior
insurance technology, as we support them in these
challenging times. Our purpose will also continue to guide
the decisions we make to help ensure we deliver results
in a sustainable way for all FINEOS securityholders.
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FINEOS Corporation Holdings plc
“ Our results were driven by a combination of
new client wins, existing client upgrades to the
cloud and increasing demand from clients to
accelerate FINEOS implementations to meet
business and regulatory needs. ”
Board Appointment and Forthcoming
Retirement
begun and we look forward to reporting back to you on
progress throughout the year.
Since listing in August, one new Director joined the
Board. Mr David Hollander who is based in the US, was
appointed in October 2019. David has been a senior
leader within the global insurance, technology, and
professional services industries for over 35 years. He
was previously Global Insurance Leader for Ernst &
Young LLP.
After 10 years supporting and guiding FINEOS, both as
a Non-executive Director and Chairman, Mr Peter Le
Beau will not stand for re-election at our Annual General
Meeting later this year. Peter has brought great insight
to FINEOS leveraging his many years of experience,
particularly in the income protection and life assurance
sector in the U.K., Europe and United States. We thank
Peter for his contributions and wish him well for the
future.
To part fund the Limelight acquisition, an $85 million
institutional equity raise was undertaken on 11 August
2020, and a security purchase plan for retail securityholders
to raise up to $5 million is currently underway, to complete
in September 2020.
In spite of the significant global headwinds and
uncertainty caused by the COVID-19 pandemic, we at
FINEOS continue to be confident that we can continue
to achieve impressive revenue growth levels for this
financial year so we are targeting topline revenue growth
of 20% and subscription growth of 30%, before counting
the contribution Limelight will add.
On behalf of the Board, we would like to congratulate
and thank all FINEOS employees for their outstanding
efforts and contributions this year and look forward to
continuing an exciting new financial year in FY21.
Yours sincerely,
Anne O’Driscoll
Chairman
Michael Kelly
Founder and CEO
Outlook
Our current financial year has commenced with an exciting
development following our announcement in August 2020
of the acquisition of Limelight Health, a leading insurtech
Silicon Valley provider of cloud-based quoting, rating and
underwriting software to the life, accident and health
insurance carrier market in North America.
Limelight Health’s technology is highly complementary
to the FINEOS AdminSuite. The integration of the
Limelight new business product suite gives FINEOS
an end to end core product suite, from ‘quotations to
claims management’ to make the FINEOS Platform the
leading industry platform for US Employee Benefits. The
combination of the two companies sets forth an exciting
future for both organisations’ clients, our employees
and for you as securityholders as we look to add value,
grow market share and further develop and enhance
our full suite of core products to the market. In addition
to adding clients and market share for FINEOS in the
US we plan to take the Limelight product suite to our
international clients and new markets in the future in
line with our FINEOS growth strategy. Integration has
Annual Report 2020
3
Anne O’Driscoll
Chairman
Non-executive Director
Michael Kelly
Executive Director
Chief Executive Officer
Gilles Biscay
Non-executive Director
Based in Sydney, Anne joined the Board in 2019. Anne has over 35 years of business
experience across a broad spectrum of the insurance industry. Anne is currently on
the boards of ASX listed companies, Steadfast Group Limited and Infomedia Limited,
as well as non-listed companies, MDA National Pty Limited and Commonwealth
Insurance Limited. Anne chairs the audit committee for each of these boards.
Anne has held various other senior management roles within organisations such
as Insurance Australia Group Limited and NRMA Group, as well as being the CFO of
Genworth Australia between 2009 and 2012. She is also a former director of the NSW
Self-Insurance Corporation and Australasian Investor Relations Association Limited.
Anne qualified as a chartered accountant in Ireland with Haughey Boland (now Deloitte)
before joining Coopers & Lybrand (now PwC) in London. Anne moved to Sydney in
1988 and is a graduate of the Australian Institute of Company Directors and a Fellow
of the Australian and New Zealand Institute of Insurance and Finance, Chartered
Accountants Ireland and Chartered Accountants Australia and New Zealand.
Based in Dublin, Michael is the Chief Executive Officer and founder of FINEOS.
Michael has more than two decades of senior management experience in the
insurance industry.
Michael began his career with Paxus Corporation, an Australian insurance software
vendor entering the European market. Michael assisted in establishing Paxus’s LIFE400
product as the market leading policy administration system in continental Europe,
which was later acquired by CSC.
Michael is a previous winner of the EY Ireland Technology Entrepreneur of the Year,
and in 2015 was named as one of the top ten most influential executives in the Irish
international FinTech sector.
Michael attended Dublin City University where he graduated with a BSc in
Computer Science.
Based in Paris, Gilles joined the Board in 2019, having previously served on the Board
of Fineos Corporation Limited, the main operating entity of the FINEOS Group from
2014. Gilles spent most of his career at Accenture, where he worked in multiple areas
ranging from large system integration, post-merger implementations, case tools and
enterprise resource planning software development.
In 2005, Gilles was named as the managing director and global lead for Accenture
portfolio in insurance systems. Under his leadership, Accenture’s vertical software
activities grew significantly both organically and with new clients in countries such as
Japan and Turkey, and externally with acquisitions such as NaviSys and Duck Creek,
both insurance software providers.
Gilles is also a founding partner and president of FutureWork SAS, a strategy
consulting firm aimed at helping corporations manage digital transformations, and
a non-executive independent director and board member of EUDONET SAS, a cloud-
based CRM provider.
4
FINEOS Corporation Holdings plc
Board of Directors Dr Martin Fahy
Non-executive Director
David Hollander
Non-executive Director
Peter Le Beau, MBE
Non-executive Director
Based in Sydney, Martin joined the Board in 2019. Martin is currently the CEO of the
Association of Superannuation Funds of Australia (ASFA). Prior to this Martin was a
senior partner in the management consulting practice of KPMG, where he led the
firm’s Global Business Services and Business Process Outsourcing activities.
From 2007 to 2011, Martin was CEO at the Financial Services Institute of Australasia
(FINSIA) where he led the organisation’s transformation post the sale of its education
business. Prior to FINSIA, he led strategy and development for the Chartered Institute
of Management Accountants (CIMA) in Asia Pacific.
Martin holds a Ph.D. from University College Cork, is a former Senior Fulbright Scholar
and has extensive research and policy experience from his time as an academic in
Ireland, France and the United States. Martin is a member of Chartered Accountants
Australia and New Zealand.
Based in the US, David joined the Board on 14 October 2019. David has over 35 years of
experience in the insurance, technology and professional services industries.
David most recently served as Global Insurance Leader for Ernst & Young LLP (EY),
a professional services operation across 150 countries with US$31bn+ in revenues.
David currently sits on the Board of Directors at Westfield Insurance and Distinguished
Programs, both in the United States. Previously David served as the CEO of UNIRISX, a
SaaS-based policy administration insurtech solution based in the UK.
David began his career with Accenture (NYSE: ACN), where he served in a variety of
leadership and client service roles including CEO of Accenture’s Financial Services
Solutions Group. He led the creation of a 200-person global Insurance software
company within Accenture, driving more than US$1bn in consulting and outsourcing
pull through revenues, in addition to leading the acquisition and integration of a major
life and annuity software provider.
Based in Kent, Peter joined the Board in 2019, having previously served on the Board
of Fineos Corporation Limited, the main operating entity of the FINEOS Group from
2010. Peter has over 50 years’ experience in the insurance industry and is recognised
as one of Europe’s prominent consultants in the life and health insurance industry.
Peter is currently the Managing Director and founder of Le Beau Visage, a consulting
company specialising in product design, innovation and differentiation, and is
Chairman of ‘The-Net-Work’, a strategic discussion group comprising approximately
sixty senior executives from the insurance industry.
Prior to this Peter held a number of senior management roles at Swiss Re, including as
head of UK marketing between 1996 and 2001. Peter has served on the Boards of Red
Arc Assured, Exeter Family Friendly, Criterion and Permanent Insurance. In 2009 Peter
received an MBE (Most Excellent Order of the British Empire) for services to insurance
and charity.
Annual Report 2020
5
Based in Dublin, Tom joined FINEOS in 2003 as Chief Financial Officer and was
appointed to the Board in 2019. Tom has over 30 years of industry experience having
worked in financial management with a number of global corporations across the
IT, financial services, distribution, and manufacturing industries.
Prior to joining FINEOS, Tom spent seven years at Oracle where he held various
positions including as a Board Member and Finance Director of Oracle Ireland and
Finance Director for Oracle EMEA Ltd. Tom also gained expertise working across a
number of financial and accounting roles at MFS Communications Ltd, Unisys World
Trade Incorporated and Black & Decker Inc.
Tom is a Fellow of the Chartered Institute of Management Accountants and a Chartered
Global Management Accountant in Ireland.
Tom Wall
Executive Director
Chief Financial Officer
6
FINEOS Corporation Holdings plc
Board of Directors (continued) The Directors present herewith their report and audited consolidated financial statements for the year ended 30 June
2020. These financial statements reflect the performance of FINEOS Corporation Holdings plc and its subsidiaries
(‘the Group’) for the year ended 30 June 2020.
1.
Directors and Secretary
The Directors who served during the year are Anne O’Driscoll (appointed 25 July 2019), Michael Kelly, Gilles Biscay,
Martin Fahy (appointed 25 July 2019), David Hollander (appointed 15 October 2019), Peter Le Beau and Tom Wall.
Anne O’Driscoll served as Chairman of the Board for the year. Tom Wall and Vanessa Chidrawi (appointed 16 August
2019) served as Joint Company Secretary for the year.
Particulars of the Directors’ qualifications and experience as well as their directorships of other listed companies are
set out under Board of Directors on pages 4 to 6.
2.
Directors’ Meetings
The number of meetings of the Company’s Board of Directors (the ‘Board’) and of each Board Committee held during
the year ended 30 June 2020, and the number of meetings attended by each Director were as follows:
Board
Audit and Risk
Management Committee
Remuneration and
Nomination Committee
A
11
11
11
11
5
11
11
B
11
11
11
11
5
10
11
A
5
–
5
5
–
5
–
B
5
–
5
5
–
5
–
A
3
–
3
3
3
3
–
B
3
–
2
3
3
3
–
Anne O’Driscoll
Michael Kelly
Gilles Biscay
Martin Fahy
David Hollander (i)
Peter Le Beau
Tom Wall
A: Meetings eligible to attend
B: Meetings attended as a member
(i) Appointed October 2019
Particular details of the responsibilities of the members of the Board and the various Committees are set out in the
Corporate Governance Statement (see section 11 of the Directors’ Report).
3.
Audit Committee
The Audit and Risk Management Committee assists the Board in carrying out its accounting, auditing and financial
reporting responsibilities, including those outlined in Section 167 of the Companies Act 2014.
4.
Principal Activities and Review of the Development
and Performance of the Business During the Financial
Year
The principal activity of the Group is the development and sale of enterprise claims and policy management software
for the Life, Accident and Health Insurance Industry. On 16 August 2019 the Company listed on the Australian
Securities Exchange (‘ASX’) by means of issuing CHESS Depositary Interests.
Annual Report 2020
7
Directors’ Reportfor the year ended 30 June 2020 4.
Principal Activities and Review of the Development
and Performance of the Business During the Financial
Year (continued)
FINEOS Corporation Holdings plc (‘the Company’) and subsidiaries (collectively ‘FINEOS’, or ‘the Group’) remains an
innovator of enterprise claims and policy management software for the Life, Accident and Health Insurance Industry.
The Group continues to develop and sell its solutions to enable greater flexibility, efficiency and profitability within
business operations. FINEOS software solutions are typically integrated with existing back office administration
systems and other systems in operation within insurance organisations.
Business summary and key performance indicators
The key performance indicators of the financial results are as follows:
• an increase in revenue from €62.8 million for the year ended 30 June 2019 to €87.8 million for the year ended
30 June 2020 which is a 39.8% improvement;
• an increase of 37.9% in subscription revenues over the results for the year to 30 June 2019;
•
the revenue increase of €25 million reflects the growth in new business during a transition to a subscription-
based licence and billing model;
• employee retention rates continued at over 90%;
•
the profit before tax for the year ended 30 June 2020 is €0.7 million compared to a loss before tax of €1.7 million
for the year ended 30 June 2019; and
• basic loss per share of €0.11 cents for the year ended 30 June 2020 compared to a basic loss per share of
€0.81 cents for the year ended 30 June 2019.
Despite the challenging operating environment stemming from COVID-19, FINEOS has been able to deliver overall
revenue growth of 39.8% in FY20 when compared to FY19. This growth highlights the resilience of the FINEOS
platform.
The impact of COVID-19 on profit before tax for the year is reflected in the receipt of an Australian taxation office
cash flow boost in the amount of €33,457 (see Note 6 to the Consolidated Financial Statements) and a decrease in
travel, accommodation and events expense in the period of April to June 2020 due to travel restrictions.
FINEOS has continued its strategy of investment in research and development during the year ended 30 June 2020 in
the FINEOS AdminSuite product suite, which includes the development and launch of Absence Management, Policy
Administration and Billing to complement the existing FINEOS Claims solution. In addition, FINEOS also increased its
investment in the FINEOS Cloud platform.
The financial statements are presented in Euro which is the functional currency of the Group. Euro-based currency
volatility continued during fiscal year 2020 in relation to the US Dollar, British Pound, Australian Dollar, New Zealand
Dollar, Polish Zloty and Canadian Dollar, resulting in a foreign exchange gain of €0.77 million for the Group in the
year (2019: foreign exchange loss of €0.03 million). Foreign exchange continues to be a risk for FINEOS given the
export profile of the Group. This is closely managed with part of the risk being covered by the natural hedge of the
non-euro denominated staff costs and other overheads being paid in local currency.
Continued close management and control of the fixed cost base continues to be a key focus for the business. This is
important given the ongoing need for investment in sales, implementation and support services in the separate
geographies in which the Group operates.
FINEOS continues to align its organisational structure to reflect the specific business needs in the respective regions.
This is in line with the Group’s strategy of focusing on actively resourcing and training staff in line with business
demand in the respective locations.
The year ended 30 June 2020 reflects the continued focus on delivering value in the insurance market, primarily
within the Life, Accident and Health Claims sector in the USA, Canada, Australia and New Zealand.
The cash reserves closed at €39.8 million as at 30 June 2020 compared to €6.9 million as at 30 June 2019. This
increase includes the proceeds of shares issued on the Company’s listing on the Australian Stock Exchange (‘ASX’)
of €61.2 million, share issue costs of €5.8 million and repayment of borrowings inclusive of accrued interest in the
amount of €16.7 million.
8
FINEOS Corporation Holdings plc
Directors’ Report (continued)for the year ended 30 June 2020 4.
Principal Activities and Review of the Development
and Performance of the Business During the Financial
Year (continued)
The consolidated statement of comprehensive income for the year ended 30 June 2020 and the consolidated
statement of financial position at that date are set out on pages 26 and 27. The consolidated profit on ordinary
activities for the year, before tax, amounted to €0.7 million compared to a loss before tax of €1.7 million in 2019.
After deducting taxation of €0.9 million (2019: €0.1 million), a loss of €0.2 million has been debited to reserves (2019:
loss of €1.8 million debited to reserves).
Non-financial key performance indicators include employment and environmental matters. The Company and Group
will seek to minimise adverse impacts on the environment from its activities, whilst continuing to address health,
safety and economic issues. The Group adheres to best practice employee welfare and complies in all material
respects with health and safety requirements.
The Group’s growth strategy is to increase its market share by leveraging its comprehensive FINEOS Platform and the
strong reputation of the FINEOS Claims product. The Group plans to drive up-sell and cross-sell opportunities with
its existing clients and attract new clients in both existing and new geographic markets.
5.
Significant Changes in the State of Affairs
On 16 August 2019 the Company completed an initial public offering in Australia, raising AU$99,950,302. In
preparation for this the Company’s share capital was restructured. The Group repaid the bank loans per Note 20 to
the Consolidated Financial Statements and outstanding interest, in full, on 13 September 2019.
The Novel Coronavirus (‘COVID-19’) was declared a pandemic in March 2020 by the World Health Organisation
(‘WHO’). There continues to be considerable economic impact globally arising from the outbreak of COVID-19 and
government action to reduce the spread of the virus. The outbreak of COVID-19 and the subsequent quarantine
measures imposed by governments as well as the travel and trade restrictions imposed by countries have caused
disruption to businesses and economic activity.
COVID-19 has not substantially impacted the operations of the Group and its core operations. To date the group has
noted minimal impact in terms of the deferral of procurement decisions by customers impacting the rate of securing
new customers and cross-selling to existing customers or the re-phasing of payments by customers. At present, the
Group continues to operate effectively with business as usual.
The Group has no external debt and as at 30 June 2020 had €39.8 million of cash available to the Group. FINEOS has
also just completed an equity raising in August 2020 (see section 10 below).
Management believes the Group has sufficient cash to absorb the effects of COVID-19 even if the related restrictions
remain in force for an extended period of time.
The Directors do not consider that the impact is likely to compromise the ability of the Group to continue operating
for the foreseeable future.
6.
Dividends
During the year the Company made no interim dividend payments to Ordinary shareholders. The Directors do not
propose the payment of a final dividend for the year.
7.
Political Donations
There were no political donations made during the year ended 30 June 2020.
Annual Report 2020
9
8.
Future Developments in the Business
The future developments of the business are addressed in the Chairman and CEO’s report on pages 2 to 3.
9.
Principal Risks and Uncertainties Faced
In the opinion of the Directors, the main risks and uncertainties faced by the Group, along with the nature of their
potential impact, are as follows:
• global economic and political uncertainty and volatility continues in all marketplaces where FINEOS trades (see
section 5 above on COVID 19). This could potentially lead to delays and uncertainty on the allocated budgets
of existing and prospective customers. It may lead to extended procurement timelines, extended contract
negotiation timelines, and adds additional focus on return on investment and specific payback timelines on
these investments;
• FINEOS continues to face competition in its respective markets, and if FINEOS fails to compete successfully,
market share will decline;
• FINEOS subsidiaries and branches operate in currencies other than the Euro, and continued volatility in foreign
exchange rates relative to the Euro could adversely affect the Group’s reported earnings and cash flow;
• competitors’ products may replace existing FINEOS products and as a result, FINEOS may lose market share in
the markets for these products;
• major changes in technology could have an impact on FINEOS and its trading model unless it continues to invest
in research and development and remains competitive and current;
• FINEOS sells product and services in the USA, Canada, Australia, New Zealand, the UK and Europe, which
increases the complexity of local customer requirements, including addressing local compliance requirements in
the respective countries;
•
the loss of the chief executive officer or other key employees, or the limited availability of qualified personnel,
may disrupt operations or increase the cost structure; and
•
the loss of a significant customer could have a significant negative effect on revenues and profits.
The impact of the above is difficult or impossible to predict accurately and many of the risks and uncertainties faced
are beyond the Group’s control.
In the normal course of business, the Group is also exposed to price risk, credit risk, and liquidity risk, which are
discussed in more detail in Note 25 to the Consolidated Financial Statements.
10.
Events Subsequent to the Year End
On 14 August 2020, FINEOS acquired Limelight Health, Inc. (‘Limelight’), a leading US-based provider of end-to-end
quoting, rating and underwriting Software-as-a-Service (’SaaS’) that streamlines critical front office workflows for life,
accident and health insurance carriers, for total acquisition consideration of US$75 million, subject to customary
adjustments.
FINEOS undertook an equity raising on 11 August 2020 to provide funding towards the acquisition. FINEOS
successfully completed a fully underwritten institutional placement, raising approximately AU$85 million through the
issue of approximately 20 million new fully paid CHESS Depositary Interests over FCL shares (‘CDIs’). The placement
was undertaken at an offer price of AU$4.26 per new CDI. FINEOS is also undertaking a non-underwritten Security
Purchase Plan (‘SPP’) to raise up to AU$5 million, which will complete in September 2020.
10
FINEOS Corporation Holdings plc
Directors’ Report (continued)for the year ended 30 June 2020 11. Corporate Governance Statement
The corporate governance statement of FINEOS Corporation Holdings Plc, as approved by the Board, can be found
on the Company’s website at https://www.fineos.com/investors/corporate-governance/.
12.
Transactions with Directors
There were no contracts of any significance in relation to the business of the Group in which the Directors had any
interest, as defined by the Companies Act 2014, at any time during the year ended 30 June 2020.
13. Controlling Party
Michael Kelly is the ultimate controlling party of the FINEOS Group.
14. Directors’ and Secretary’s Interests
The Directors’ and Company Secretary’s interests in shares and share options as at 30 June 2020 are set out on
pages 17 and 18 in the Remuneration and Nomination Committee report.
15. Group Companies
Particulars of the companies within the Group required to be disclosed under Section 314(1) of the Companies
Act 2014 in respect of Group companies are detailed in Note 28 to the Consolidated Financial Statements.
16. Directors’ Compliance Statement
The Directors have considered the requirements of the Group to prepare a Directors’ Compliance Statement in
accordance with Section 225 of Companies Act 2014. It was noted that FINEOS Corporation Holdings plc, as a
single entity, does not meet the requirement threshold and accordingly no Statement of Compliance is presented.
However, certain individual subsidiaries do meet the thresholds required and Statements of Compliance relevant to
those entities will be disclosed in their respective financial statements in accordance with legislation.
17. Accounting Records
The Directors are responsible for ensuring that proper books and accounting records, as outlined in Sections
281 to 285 of the Companies Act 2014, are kept by the Company. To achieve this, the Directors have appointed a
professionally qualified financial director who reports to the Board and ensures that the requirements of Sections
281 to 285 of the Companies Act 2014 are complied with. These books and accounting records are maintained at the
Company’s registered office at FINEOS House, East Point Business Park, Dublin 3.
18.
Statement on Relevant Audit Information
In the case of all persons who are Directors at the time this report is approved in accordance with Section 332 of the
Companies Act 2014:
(a) So far as the Directors are aware, there is no relevant audit information of which the Company’s statutory
auditors are unaware; and
(b) The Directors have taken all steps that they ought to have taken as Directors to make themselves aware of
any relevant audit information, and to establish that the Company’s statutory auditors are aware of that
information.
Annual Report 2020
11
19. Auditors
Mazars Chartered Accountants and Statutory Audit Firm express their willingness to continue in office in accordance
with Section 383(2) of the Companies Act 2014.
20.
Takeover Provisions
FINEOS is not subject to chapters 6, 6A, 6B and 6C of the Companies Act 2014 dealing with the acquisition of its
shares (including substantial holdings and takeovers).
FINEOS has incorporated into its Articles shareholder protection provisions that are similar to the provisions of the
Australian Corporations Act 2001. These provisions seek to protect the interests of shareholders where a person
seeks to acquire a substantial interest in, or control of, FINEOS. The Articles prohibit a person from acquiring a
relevant interest in issued voting shares in FINEOS if any person’s voting power will increase from 20% or below
to more than 20%, or from a starting point that is above 20% and below 90%. Exceptions to the prohibition apply
(e.g. acquisitions with shareholder approval, 3% creep over six months and rights issues that satisfy prescribed
conditions). Compulsory acquisitions are permitted by persons who hold 90% or more of securities or voting rights
in a company.
21.
Restrictions on the Transfer of Securities under the
Companies Act
The Company is an Irish company formed under the laws of Ireland and therefore subject to the provisions of the
(Uncertificated Securities) Regulations, 1996 (S.I No 68 of 1996) (‘1996 Regulations’) and its Articles of Association
accordingly contains prohibitions on transfers. The provision of uncertificated securities is regulated by the 1996
Regulations, which is administered by the Office of the Director of Corporate Enforcement and the Companies
Registration Office. The Company must comply with the provisions of the 1996 Regulations. The Company may
therefore refuse to register transfers, pursuant to a direction from the Irish High Court, where the transfer is
prohibited under another enactment, where the Company has noted the transfer is to a deceased person, or where
the instruction requires a transfer of units to an entity which is not a legal person, a minor, or to be held jointly in
the names of more persons than permitted under the terms of issue of the security. Refer to Articles 36.2 and 36.3
of the Company’s Articles of Association.
On behalf of the Board
Michael Kelly
Director
Tom Wall
Director
25 August 2020
12
FINEOS Corporation Holdings plc
Directors’ Report (continued)for the year ended 30 June 2020
As chair of the Remuneration and Nomination Committee (the Committee), I am pleased to present the report for
the Committee for the year ended 30 June 2020.
The objective of this report is to provide shareholders with information to enable them to understand
the remuneration structures in place and how they relate to the Group’s financial performance. The report also
provides a summary of the Committee’s roles and responsibilities and how these were discharged in the year ended
30 June 2020.
Membership and Meetings of the Committee
The members of the Committee at any time during the year ended 30 June 2020 are set out in the table below,
together with the date of appointment of each member. All members of the Committee are independent
Non-executive Directors.
Committee Member
Ms Anne O’Driscoll
Mr Gilles Biscay
Dr Martin Fahy
Mr David Hollander
Mr Peter Le Beau
Position
Chair
Member
Member
Member
Member
Appointed
25 July 2019
25 June 2019
25 July 2019
15 October 2019
25 June 2019
Attendance details for the three meetings held during the year are outlined on page 7 in the Annual Report.
The Committee members’ biographies are set out on pages 4 to 6.
Role of the Remuneration and Nomination Committee
The purpose of the Committee is to assist the Board by reviewing and making recommendations to the Board in
relation to:
•
the Group’s remuneration policy, including as it applies to Directors, and the process by which any pool of
Directors’ fees approved by shareholders is allocated to Directors;
•
remuneration packages of Executive Directors, Non-executive Directors and senior executives,
• equity-based incentive plans and other employee benefit programs;
•
•
the Group’s pension/superannuation arrangements;
those aspects of the Group’s remuneration policies and packages, including equity-based incentives, which
should be subject to shareholder approval;
• succession plans of the Chief Executive Officer, Executive Directors and senior executives;
• Board succession issues and planning;
•
•
•
•
•
the appointment and re-election of Board and Committee members;
the induction of new Directors and continuing professional development programs for Directors;
the process for recruiting a new Director, including evaluating the balance of skills, knowledge, experience,
independence and diversity on the Board;
the process for the evaluation of the performance of the Board, its Board Committees and individual Directors;
and
the size and composition of the Board and strategies to address Board diversity and the Group’s performance
in respect of the Group’s Diversity Policy, including whether there is any gender or other inappropriate bias in
remuneration for Directors, senior executives or other employees.
The Committee charter can be found at https://www.fineos.com/investors/corporate-governance/.
Annual Report 2020
13
Remuneration and Nomination Committee Reportfor the year ended 30 June 2020 Remuneration Policy
The Group is committed to attracting and retaining the best people to work in the organisation, including Directors
and senior management. Appropriate remuneration designed to reward, retain and motivate people is a key element
in achieving that objective. Part of the Committee’s role is to assist the Board in implementing its Remuneration
Policy. A copy of the policy can be found at https://www.fineos.com/investors/corporate-governance/.
Executive Remuneration Framework
There are two Executive Directors: the Chief Executive, Mr Michael Kelly, and the Chief Financial Officer, Mr Tom Wall.
The elements of the remuneration package which may apply to Executive Directors are base salary, pension
contributions, other benefits and both short-term and long-term incentives.
The tables below summarise the framework which was applied during the year ended 30 June 2020. A similar structure
will apply during the year ended 30 June 2021. The relevant benefits are included in the Directors’ remuneration
table shown below.
Benefit
Nature of Benefit
Annual base salary
Salary levels are reviewed annually by reference to market comparisons and reflect
the individuals’ level of expertise and contribution to the organisation, in conjunction
with other benefits being provided. Salary increases are normally in line with the wider
workforce.
Pension contributions
Participation in a defined contribution scheme available to employees in the same
geography. Company contribution of 10% of base salary for the CFO.
The CEO does not utilise this benefit.
Other benefits
Benefits currently provided are healthcare cover, life insurance and permanent health
insurance cover. Premiums payable are included in remuneration.
14
FINEOS Corporation Holdings plc
Remuneration and Nomination Committee Report (continued)for the year ended 30 June 2020 Incentive
Basis of Incentive
Maximum Opportunity
Achieved for FY2020
Short-Term Incentives (Bonus
and Commissions paid
in
cash)
is entitled to
additional
an
bonus
cash
recognition of his
towards
The CEO
receive
annual
in
contribution
new client acquisitions.
CEO: Mr Kelly
leads a
number of key customer
relationships and, as such,
participates in the FINEOS
sales commission plan.
is entitled to
The CFO
receive an annual bonus
based on achievement
of agreed Company and
performance
individual
targets.
CFO: 15% of base salary if
all objectives achieved and
up to 25% where there is
over-achievement beyond
such agreed targets.
CEO: The amount disclosed
below does not reflect his
full entitlement for FY20.
The balance was provided
to other employees who
supported Mr Kelly on the
client acquisitions.
CFO: Bonus of 25% of
salary
Long-term incentives (Equity-
based remuneration)
to
long-term
incentive
A
established
plan was
the
on admission
ASX
(‘the 2019 Equity
Incentive Plan’). Awards
from this scheme may
form
be made
of
restricted
shares, restricted stock
units and performance
shares. See Note 19 to
the Consolidated Financial
Statements
for more
details.
options,
in the
N/A
No more than 5% of the
issued share capital of the
Company may be issued
or reserved under
the
2019 Equity Incentive Plan
at any time.
There were no awards
in FY20 to the Executive
Directors under the 2019
Equity
Plan
Incentive
during the year.
The terms and conditions
of any awards made
to Executive Directors
under the 2019 Equity
including
Incentive Plan,
those relating to targets,
vesting and/or exercise
(as the case may be),
will be determined by
the Remuneration and
Nomination
Committee
and to the extent required,
subject
to CDI holder
approval.
The Committee reviews the performance of the Executive Directors for the purposes of determining short-term
incentives and makes recommendations to the Board as to the pay-out level. The short-term incentives are payable
in cash following approval of the annual audited accounts.
Annual Report 2020
15
Non-executive Directors
The Board aims to recruit high-calibre Non-executive Directors, with broad commercial, international or other
relevant experience.
Non-executive Director remuneration is reviewed by the Board based on recommendations from the Committee.
The aggregate amount paid to all Non-executive Directors in any financial year for their services must not exceed
the amount fixed by FINEOS’ general meeting. This amount is currently fixed at AU$800,000 (€485,201i) per annum.
The current remuneration levels for Non-executive Directors were effective from August 2019 when FINEOS listed
on the ASX. As Chair of the Board, I am paid a fee of AU$160,000 (€97,040) per annum. David Hollander is paid a fee
of US$170,000 (€153,721) per annum for acting as Non-executive Director and invoices the Company separately for
the provision of consultancy services to the Board. The other Non-executive Directors, Gilles Biscay, Martin Fahy and
Peter Le Beau are paid fees of €52,167, AU$90,000 (€54,585) and €52,167 respectively. These Non-executive Director
fees include fees payable to each Non-executive Director for his/her role on the relevant Board committees.
The amounts set out above are exclusive of pension/superannuation contributions where required by law to be made
by FINEOS but such contributions are included in the remuneration set out in the Table of Directors’ Remuneration
for the year ended 30 June 2020 below.
Under their letters of appointment, the Non-executive Directors are not entitled to participate in any share, bonus,
retirement benefit or other scheme operated by the Company or any Group Company.
In addition, all reasonable and documented expenses incurred in the performance of the Non-executive Directors’
duties are reimbursed.
Service Contracts/Letters of Appointment
Details of service contracts for the Executive Directors are outlined below.
Name
Michael Kelly
Title
Date of Contract
Notice Period by
Company or Director
Chief Executive Officer
and Founder
12 December 2018
12 months
Tom Wall
Chief Financial Officer
25 June 2019
6 months
Each of the Non-executive Directors has received an appointment letter from FINEOS, confirming their respective
roles and responsibilities as directors, and FINEOS’ expectations of them as Non-executive Directors.
The appointment letter includes membership of any Board Committees, the fees to be paid and the time commitment
expected. The letter also covers matters such as confidentiality, data protection and securities dealing policy. In
addition, Non-executive Directors are expected to acquire a beneficial interest in CDIs equivalent to their annual fees
within 36 months of the Company’s IPO (occurred in August 2019).
Dates of appointment for the Non-executive Directors are set out below:
Name
Anne O’Driscoll
Gilles Biscay
Martin Fahy
David Hollander
Peter Le Beau
Date of Appointment
25 July 2019
25 June 2019
25 July 2019
15 October 2019
25 June 2019
i Throughout this Committee report, amounts denominated in Australian or US dollars are translated into Euro at a rate of AUD/EUR
1.6488 and USD/EUR 1.1059, being the average rates for the year to 30 June 2020.
16
FINEOS Corporation Holdings plc
Remuneration and Nomination Committee Report (continued)for the year ended 30 June 2020 Annual Report on Remuneration 2020
The following table sets out the total remuneration for Directors for the year ending 30 June 2020.
Salary/fees
€
Short-term
incentives
€
Post-
employment
benefits
€
Other
benefits
€
Shares
allotted(a)
€
Share
awards
gain on
exercise(b)
€
LTIP
€
Total
2020
€
Director
Executive Directors
Michael Kelly
380,592
120,000
–
3,125
Tom Wall
277,418
67,500
27,742
11,487
–
–
–
921,117
–
503,717
– 1,305,264
Non-executive Directors
Anne O’Driscoll
Gilles Biscay
Martin Fahy
93,590
52,167
52,644
David Hollander
115,908
Peter Le Beau
52,167
–
–
–
–
–
8,618
–
4,847
–
–
–
–
–
–
–
12,255
–
12,255
–
–
–
–
–
–
–
–
–
–
–
–
114,463
52,167
69,746
115,908
52,167
Total
1,024,486
187,500
41,207
14,612
24,510
921,117
– 2,213,432
(a) 8,000 CDIs were allotted to each of Anne O’Driscoll and Martin Fahy for their services in relation to pre-IPO work
(see Note 17 to the Consolidated Financial Statements for further detail).
(b) The market price of the CDIs at the date of exercise of Tom Wall’s share options during the year was AU$3.65.
200,000 options were exercised at €0.135 and 275,640 options were exercised at €0.249.
Directors’ Interests in Company Shares
Total CDIs
held at
1 July 2019(a)
Purchases/
Increase
in indirect
holdings
–
68,000
182,333,430
4,084,610
29,400
8,000
–
–
–
–
–
–
Anne O’Driscoll
Michael Kelly
Gilles Biscay
Martin Fahy
David Hollander
Peter Le Beau
Tom Wall
Acquired on
exercise of
options
Sales/
Reductions
Total
shares/
CDIs held
at 30 June
2020(b)
CDIs held
nominally
at 30 June
2020(c)
–
–
–
–
–
68,000
8,000
(20,000,000)
166,418,040
–
–
–
–
29,400
8,000
–
–
–
–
29,400
8,000
–
–
–
475,640
(475,640)
(a) The shares of the Company were restructured in July 2019 leading up to the Company’s IPO on the ASX in August
2019. As part of the IPO, all shares are held by Chess Depositary Nominees Pty Limited and beneficial interests
held through CDIs where one CDI is an interest in one share. The balances shown for 1 July 2019 are as if the
restructure in shares and transfer to the nominee had occurred on 30 June 2019. Details of the restructuring are
set out in Note 17 to the Consolidated Financial Statements.
(b) Total CDIs at 30 June 2020 represent CDIs held directly by the director and indirectly by relevant director’s related
parties inclusive of domestic partner, dependents and entities jointly controlled or significantly influenced by the
director. They also represent the relevant interest in the Company’s listed securities as notified by the Directors
to the ASX in accordance with the ASX Listing Rules
(c) Shares/CDIs held nominally are those CDIs registered in the name of the individual director.
Annual Report 2020
17
Directors’ Interests in Options
The only options on issue that are held by Directors are as follows:
Options held at
Options
30 June 2019(a) Options issued
exercised Options lapsed
Options held at
30 June 2020(b)
Tom Wall
2,775,640
–
475,640
–
2,300,000
(a) The options on issue at 30 June 2019 were restructured leading up to the Company’s IPO on the ASX in August 2019
to retain their proportionality and move to be options over CDIs when the Company’s shares were restructured
and listed. The balances shown for 1 July 2019 are as if the restructure of the shares had occurred on 30 June
2019.
These options over CDIs are now exercisable at €0.135 and expire on 3 February 2026.
See Note 19 to the Consolidated Financial Statements for further detail on the Company’s equity incentive schemes.
On behalf of the Committee
Anne O’Driscoll
Chair of the Remuneration and Nomination Committee
18
FINEOS Corporation Holdings plc
Remuneration and Nomination Committee Report (continued)for the year ended 30 June 2020
The Directors are responsible for preparing the Annual Report and the Group and Company financial statements in
accordance with applicable law and regulations.
Irish company law requires the Directors to prepare group and company financial statements for each financial year.
Under the law, the Directors have elected to prepare the Group and Company financial statements in accordance
with the Companies Act 2014 and IFRS. Under company law, the Directors must not approve the Group and Company
financial statements unless they are satisfied that they give a true and fair view of the assets, liabilities and financial
position of the Group and Company as at the financial year end date and of the profit or loss of the Group for the
financial year.
In preparing these financial statements, the Directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and accounting estimates that are reasonable and prudent;
• state whether the financial statements have been prepared in accordance with applicable accounting standards,
identify those standards, and note the effect and reasons for any material departure from those standards; and
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group
will continue in business.
The Directors are responsible for ensuring that the Company keeps or causes to be kept adequate accounting
records, which correctly explain and record the transactions of the Company, enable at any time the assets, liabilities,
financial position and profit or loss of the Group and parent Company to be determined with reasonable accuracy,
enable them to ensure that the parent Company and Group financial statements comply with the Companies Act
2014 and enable the financial statements to be audited. They are also responsible for safeguarding the assets of
the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance of the financial information included on the Company’s website.
Legislation in the Republic of Ireland governing the preparation and dissemination of financial statements may differ
from legislation in other jurisdictions.
On behalf of the Board
Michael Kelly
Director
Tom Wall
Director
25 August 2020
Annual Report 2020
19
Directors’ Responsibilities Statement Report on the audit of the financial statements
To the Members of Fineos Corporation Holdings Plc
Opinion
We have audited the financial statements of FINEOS Corporation Holdings Plc (‘the Company’) and Subsidiaries (‘the
Group’) for the year ended 30 June 2020, which comprise the Consolidated Statement of Comprehensive Income, the
Consolidated and Company Statement of Financial Position, the Consolidated and Company Statement of Changes in
Equity, the Consolidated and Company Statement of Cash Flows and the notes to the financial statements, including
the summary of significant accounting policies set out in Note 2. The financial reporting framework that has been
applied in their preparation is Irish Law and the International Financial Reporting Standards as adopted by the
European Union (‘IFRS’).
In our opinion the financial statements:
• give a true and fair view of the assets, liabilities and financial position of the Group and parent Company as at
30 June 2020 and of the Group’s loss for the year then ended;
• have been properly prepared in accordance with International Financial Reporting Standards as adopted by the
European Union; and
• have been properly prepared in accordance with the requirements of the Companies Act 2014.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (Ireland) (ISAs (Ireland)) and
applicable law. Our responsibilities under those standards are described in the Auditor’s responsibilities for the
audit of the financial statements section of our report. We are independent of the Company in accordance with
ethical requirements that are relevant to our audit of financial statements in Ireland, including the Ethical Standard
issued by the Irish Auditing and Accounting Supervisory Authority (IAASA), and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which ISAs (Ireland) require us to report
to you where:
•
•
the Directors’ use of the going concern basis of accounting in the preparation of the financial statements is not
appropriate; or
the Directors have not disclosed in the financial statements any identified material uncertainties that may cast
significant doubt about the Group’s ability to continue to adopt the going concern basis of accounting for a period
of at least 12 months from the date when the financial statements are authorised for issue.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the
financial statements and include the most significant assessed risks of material misstatement (whether or not due
to fraud) identified by us, including those which had the greatest effect on: the overall audit strategy; the allocation
of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the
context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.
20
FINEOS Corporation Holdings plc
Independent Auditor’s Report Key Audit Matter
How Our Audit Addressed the Key Audit Matter
Revenue
recognition
(€87.8 million for the year ended 30 June 2020;
2019: €62.8 million)
• The significance of revenue to understanding the
financial results for users of the financial statements.
• The extent of deferred revenue held by the Group
and the assessment of its systematic release in line
with relevant revenue recognition principles.
• The complexity involved in applying IFRS 15.
• The complexity associated with the varied nature
of bespoke contracts in forming new commercial
arrangements.
Capitalisation
expenditure
(€16.8 million capitalised in the year ended 30 June
2020; 2019: €13.9 million)
development
of
The Group capitalises costs incurred in the development
of its software. These costs are then amortised over
the estimated useful life of the software. The costs are
mainly comprised of payroll.
The Group’s process for calculating the value of
internally developed software involves judgement as it
includes estimating time which staff spend developing
software and determining the value attributable to
that time.
We performed a number of procedures including the
following:
• developed an understanding of and evaluated the
operating effectiveness of relevant key revenue
internal controls,
including deferred revenue
calculation and release controls;
• use of IT audit to perform data reconciliations;
• carried out detailed substantive testing;
• on a sample basis, recalculated the deferred portion
of customer agreements and compared this to the
amount deferred on the balance sheet;
• assessed associated
including
accounts receivable and deferred revenue for
unusual reconciling items;
reconciliations
• assessed the value of credit notes raised over the
year and for a select period post year end; and
• developed a risk-based approach to perform
journal entry testing on a sample basis to determine
the appropriateness of manual postings to revenue.
Our work on capitalised development costs focused on
the Group’s process for estimating the time spent by
staff on software development that can be capitalised
under IAS 38:
• assessing the nature of a sample of projects against
the requirements of IAS 38 to determine if they
were capital in nature;
• assessing the procedures applied by the Group to
review the rates applied to capitalise payroll costs;
• assessing the effectiveness of controls over the
payroll process;
• assessing capitalised costs with reference to actual
payroll information for a sample of employees; and
• assessing the adequacy of the disclosures related to
capitalised development costs in the consolidated
financial statements.
Annual Report 2020
21
Independent Auditor’s Report (continued) Key Audit Matter
How Our Audit Addressed the Key Audit Matter
Impairment consideration relating to capitalised
development expenditure (€50.1 million at 30 June
2020; 2019: €42.2 million)
Intangible assets make up €53.4 million of the Group’s
non-current assets (2019: €44.0 million). The most
significant of these intangibles is capitalised software
development costs of €50.1 million at 30 June 2020
(2019: €42.2 million).
We assessed the factors that the Group considered
regarding
impairment of capitalised development
costs and whether any indicators of impairment
existed. This included having regard to:
• significant changes in the extent or manner in which
the associated software is used;
• potential or actual redundancy or disposal of
developed software;
IAS 36: Impairment of Assets required that finite life
intangible assets be tested for impairment whenever
there is an indication that the intangible assets may
be impaired and this assessment requires judgement.
• amortisation periods applied by the Group to
develop software relative to its experience of
software lifecycle;
• significant changes in the market in which the assets
impairment
The assessment as to whether there are any indicators
of
including
consideration of both internal and external sources of
information.
judgement
requires
are used; and
• evaluating the Group’s assessment that the useful
lives of intangible assets are appropriate at year end.
Our application of materiality and an overview of the scope of our audit
The scope and focus of our audit was influenced by our assessment and application of materiality. We apply the
concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements on
our audit and on the consolidated financial statements.
We define financial statements materiality as the magnitude by which misstatements, including omissions, could
influence the economic decisions taken on the basis of the consolidated financial statements by reasonable users.
We also determine a level of performance materiality, which we use to determine the extent of testing needed to
reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements
exceeds materiality for the consolidated financial statements as a whole.
We determined materiality for the consolidated financial statements as a whole to be €1.3 million. This was
based on the key performance indicator, being 1.5% of the Group’s revenue. This benchmark is considered the
most appropriate because Revenue is a key benchmark used by management and shareholders in assessing the
performance of the business.
We determined materiality for the Company to be €0.2 million which is approximately 1% of the net assets of the
parent company, excluding intercompany balances.
Other information
The Directors are responsible for the other information. The other information comprises the information included in
the annual report other than the financial statements and our auditor’s report thereon. Our opinion on the financial
statements does not cover the other information and, except to the extent otherwise explicitly stated in our report,
we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and,
in doing so, consider whether the other information is materially inconsistent with the financial statements or our
knowledge obtained in the audit, or otherwise appears to be materially misstated. If we identify such material
inconsistencies or apparent material misstatements, we are required to determine whether there is a material
misstatement in the financial statements or a material misstatement of the other information. 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.
22
FINEOS Corporation Holdings plc
Independent Auditor’s Report (continued) We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2014
Based solely on the work undertaken in the course of the audit, we report that:
•
•
in our opinion, the information given in the Directors’ Report is consistent with the financial statements; and
in our opinion, the Directors’ Report has been prepared in accordance with the Companies Act 2014.
We have obtained all the information and explanations which we consider necessary for the purposes of our audit.
In our opinion the accounting records of the Company were sufficient to permit the financial statements to be readily
and properly audited and the financial statements are in agreement with the accounting records.
Matters on which we are required to report by exception
Based on the knowledge and understanding of the Group and its environment obtained in the course of the audit,
we have not identified any material misstatements in the Directors’ Report. The Companies Act 2014 requires us to
report to you if, in our opinion, the disclosures of Directors’ remuneration and transactions required by Sections 305
to 312 of the Act are not made.
We have nothing to report in this regard.
Respective Responsibilities
Responsibilities of directors for the financial statements
As explained more fully in the Directors’ responsibilities statement set out on page 19, the Directors are responsible
for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such
internal control as they determine is necessary to enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the financial statements, 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 management either intends to liquidate the Group or parent Company or to cease operations, or
has no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are 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
ISAs (Ireland) 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 these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the IAASA’s website
at: http://www.iaasa.ie/getmedia/b2389013-1cf6-458b-9b8f-a98202dc9c3a/Description of auditors responsibilities
for audit.pdf. This description forms part of our auditor’s report.
Annual Report 2020
23
Independent Auditor’s Report (continued) The purpose of our audit work and to whom we owe our responsibilities
Our report is made solely to the Group’s and parent Company’s members, as a body, in accordance with Section 391
of the Companies Act 2014. Our audit work has been undertaken so that we might state to the Group’s and parent
Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose.
To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Group and
the Group’s members, as a body, for our audit work, for this report, or for the opinions we have formed.
Lorcan Colclough
for and on behalf of Mazars
Chartered Accountants and Statutory Audit Firm
Harcourt Centre,
Block 3,
Harcourt Road,
Dublin 2
25 August 2020
24
FINEOS Corporation Holdings plc
Independent Auditor’s Report (continued) Annual Report 2020
25
Financial Statements and Notes Revenue
Cost of sales
Gross profit
Product development and delivery
Sales and marketing
General and administration
Amortisation
Depreciation
Initial public offering costs
Other income
Operating profit/(loss)
Finance income
Finance costs
Profit/(loss) on ordinary activities before taxation
Income tax
Loss for the financial year
Other comprehensive income for the year:
Foreign exchange differences on translation of operations of
foreign subsidiaries and branches
Total comprehensive loss for the year attributable to the
equity holders of the parent
Note
2020
€
2019
€
4
87,808,301
62,812,770
11
12
6
7
9
(29,348,198)
(18,808,676)
58,460,103
44,004,094
(29,913,935)
(24,000,915)
(4,182,559)
(3,950,360)
(11,635,389)
(7,886,577)
(9,954,905)
(7,115,224)
(1,892,089)
(1,357,376)
(688,563)
(1,068,273)
1,261,760
1,053,172
1,454,423
(321,459)
27,296
6,467
(766,480)
(1,358,629)
715,239
(1,673,621)
(942,422)
(96,036)
(227,183)
(1,769,657)
(53,193)
(4,270)
(280,376)
(1,773,927)
All results relate to continuing operations.
The notes on pages 35 to 73 are an integral part of these financial statements.
26
FINEOS Corporation Holdings plc
Consolidated Statement of Comprehensive Incomefor the year ended 30 June 2020 Consolidated Statement of Financial Position
as at 30 June 2020
ASSETS
Non-current assets
Intangible assets
Property, plant and equipment
Current assets
Trade and other receivables
Cash and cash equivalents
Total Assets
EQUITY AND LIABILITIES
Current liabilities
Trade and other payables
Non-current liabilities
Long-term liabilities
Provisions
Total liabilities
Capital and reserves
Called up share capital presented as equity
Share premium
Foreign exchange reserve
Other undenominated capital
Share option reserve
Reorganisation reserve
Retained earnings
Total equity
TOTAL EQUITY AND LIABILITIES
Note
30 June
2020
€
30 June
2019
€
11
12
14
15
16
16
9
17
17
18
18
18
18
18
53,356,909
44,027,266
7,234,637
7,295,724
60,591,546
51,322,990
23,936,154
16,037,285
39,831,380
6,903,010
63,767,534
22,940,295
124,359,080
74,263,285
28,482,204
23,646,628
12,206,975
27,813,499
488,045
193,870
41,177,224
51,653,997
272,030
224,402
59,903,254
-
(266,262)
(213,069)
1
1
2,664,088
1,762,026
11,123,985
11,123,985
9,484,760
9,711,943
83,181,856
22,609,288
124,359,080
74,263,285
The notes on pages 35 to 73 are an integral part of these financial statements.
On behalf of the Board
Michael Kelly
Director
Tom Wall
Director
25 August 2020
Annual Report 2020
27
Company Statement of Financial Position
as at 30 June 2020
ASSETS
Non-current assets
Financial assets
Current assets
Trade and other receivables
Cash and cash equivalents
TOTAL ASSETS
EQUITY AND LIABILITIES
Current liabilities
Total liabilities
Capital and reserves
Called up share capital presented as equity
Share premium
Other undenominated capital
Reorganisation reserve
Retained earnings
Total equity
TOTAL EQUITY AND LIABILITIES
Note
30 June
2020
€
30 June
2019
€
13
14
15
16
17
17
18
18
22,834,215
22,834,215
59,704,503
6,204
59,710,707
–
101
101
82,544,922
22,834,316
–
–
100
100
272,030
224,402
59,903,254
1
–
1
22,609,813
22,609,813
(240,176)
–
82,544,922
22,834,216
82,544,922
22,834,316
The notes on pages 35 to 73 are an integral part of these financial statements.
On behalf of the Board
Michael Kelly
Director
Tom Wall
Director
25 August 2020
28
FINEOS Corporation Holdings plc
Consolidated Statement of Changes In Equity
for the year ended 30 June 2020
Called up
share
capital
presented
as equity
€
Foreign
exchange
reserves
arising on
translation
€
Other
undenominated
capital
€
At 1 July 2018
224,402
(208,799)
Loss for the year
Other
comprehensive
income for the year
Total
comprehensive
income for the year
Share-based
payment charge
–
–
–
–
–
(4,270)
(4,270)
–
At 30 June 2019
224,402
(213,069)
1
–
–
–
–
1
Share
option
reserve
€
964,665
–
–
–
Reorganisation
reserve
€
Retained
earnings
€
Total
€
11,123,985
11,481,600
23,585,854
–
(1,769,657)
(1,769,657)
–
–
(4,270)
–
(1,769,657)
(1,773,927)
797,361
1,762,026
–
–
797,361
11,123,985
9,711,943
22,609,288
All amounts are attributable to the equity holders of the Group.
The notes on pages 35 to 73 are an integral part of these financial statements.
Annual Report 2020
29
Consolidated Statement of Changes In Equity (continued)
for the year ended 30 June 2020
Foreign
exchange
reserves
arising on
translation
€
Share
premium
€
Other
undenominated
capital
€
Share
option
reserve
€
Reorganisation
reserve
€
Retained
earnings
€
Total
€
(213,069)
1
1,762,026
11,123,985 9,711,943 22,609,288
Called
up share
capital
presented
as equity
€
224,402
–
–
–
–
–
–
–
–
(53,193)
(53,193)
–
–
–
47,628
58,531,261
–
1,371,993
–
–
At 30 June
2019
Loss for the
year
Other
comprehensive
income for the
year
Total
comprehensive
income for the
year
Issue of share
capital
Reserves
transfer from
share options
exercised
Share-based
payment
charge
At 30 June
2020
–
–
–
–
–
–
–
–
–
(1,371,993)
2,274,055
–
1
–
(227,183)
(227,183)
–
–
–
–
–
–
(53,193)
(227,183)
(280,376)
– 58,578,889
–
–
–
2,274,055
272,030
59,903,254
(266,262)
2,664,088
11,123,985 9,484,760 83,181,856
All amounts are attributable to the equity holders of the Group.
The notes on pages 35 to 73 are an integral part of these financial statements.
30
FINEOS Corporation Holdings plc
Company Statement of Changes In Equity
for the year ended 30 June 2020
Called up
share capital
presented as
equity
€
Other
undenominated
income
€
Reorganisation
reserve
€
At 12 December 2018
(date of incorporation)
Initial capitalisation of the Company
Result for the period
Other comprehensive income for
the period
Total comprehensive income for
the period
Issue of shares
Change in denomination of reserves
Reorganisation reserve on acquisition
of subsidiary companies
At 30 June 2019
–
1
–
–
–
224,402
(1)
–
224,402
–
–
–
–
–
–
1
–
1
All amounts are attributable to the equity holders of the parent Company.
The notes on pages 35 to 73 are an integral part of these financial statements.
Total
€
–
1
–
–
–
224,402
–
–
–
–
–
–
–
–
22,609,813
22,609,813
22,609,813
22,834,216
Annual Report 2020
31
Company Statement of Changes In Equity (continued)
for the year ended 30 June 2020
Share
premium
€
Other
undenominated
income
€
Called up
share
capital
presented
as equity
€
224,402
–
–
–
At 30 June 2019
Result for the year
Other comprehensive
income for the year
Total comprehensive
income for the year
–
–
–
–
Issue of shares
47,628
58,531,261
Arising on share options
exercised
–
1,371,993
At 30 June 2020
272,030
59,903,254
Reorganisation
reserve
€
Retained
earnings
€
Total
€
22,609,813
–
22,834,216
–
–
–
–
–
(240,176)
(240,176)
–
–
(240,176)
(240,176)
–
–
58,578,889
1,371,993
22,609,813
(240,176) 82,544,922
1
–
–
–
–
–
1
All amounts are attributable to the equity holders of the parent Company.
The notes on pages 35 to 73 are an integral part of these financial statements.
32
FINEOS Corporation Holdings plc
Consolidated Statement of Cash Flows
for the year ended 30 June 2020
Cash flows from operating activities
Group (loss) after tax
Adjusted for:
Income tax expense
Finance costs
Finance income
Other income
Depreciation
Amortisation
Lease expense
Movement in trade and other receivables
Movement in trade and other payables
Net tax paid
Research and development refund received
Effect of movement in exchange rates
Share-based payment expense
Initial public offering costs
Cost of shares allotted to Non-executive Directors
Net cash flows generated from operating activities
Cash flows from investing activities
Interest received
Grant income
Payment for property, plant and equipment
Payment for intangible assets
Net cash used in investing activities
Cash flows from financing activities
Interest paid
Repayment of bank loan
Proceeds from issue of shares
Transaction costs
Net cash generated from/(used in) financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Note
2020
€
2019
€
9
7
6
12
11
22
19
17
20
17
(227,183)
(1,769,657)
942,422
96,036
766,480
1,358,629
(27,296)
(6,467)
(1,261,760)
(1,053,172)
1,892,089
1,357,376
9,954,905
7,115,224
(2,088,032)
(1,610,017)
(10,173,710)
2,451,511
7,609,861
3,560,517
(522,881)
(726,129)
1,729,484
1,763,353
(34,280)
2,274,055
688,563
24,510
32,647
797,361
–
–
11,547,227
13,367,212
27,296
–
6,467
62,388
(1,304,183)
(861,575)
(17,495,207)
(15,269,513)
(18,772,094)
(16,062,233)
(1,674,896)
(495,351)
(15,000,000)
62,612,075
(5,783,942)
–
–
–
40,153,237
(495,351)
32,928,370
(3,190,372)
6,903,010
10,093,382
Cash and cash equivalents at the end of the year
15
39,831,380
6,903,010
Annual Report 2020
33
Company Statement of Cash Flows
for the year ended 30 June 2020
Cash flows from operating activities
Company (loss) after tax
Adjusted for:
Finance costs
Other non-cash items
Net cash flows used in operating activities
Cash flows from investing activities
Amounts advanced (to)/from Group companies
Net cash (used in)/generated from investing activities
Cash flows from financing activities
Interest paid
Issue of shares
Transaction costs
Note
17
17
17
Net cash generated from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year/period
Cash and cash equivalents at the end of the year/period
15
Period from
12 December 2018
(date of
incorporation) to
30 June 2019
€
–
–
–
–
100
100
–
1
–
1
101
–
101
2020
€
(240,176)
146
24,510
(215,520)
(58,332,610)
(58,332,610)
(146)
62,612,075
(4,057,696)
58,554,233
6,103
101
6,204
34
FINEOS Corporation Holdings plc
1.
General Information
FINEOS Corporation Holdings plc (‘the Company’) is a public limited company incorporated in the Republic of Ireland.
The registered office is FINEOS House, Eastpoint Business Park, Dublin 3.
The principal activity of the Company and its subsidiaries (‘the Group’) is that of enterprise claims and policy
management software for Life, Accident and Health insurers. Foreign operations are included in accordance with
the significant accounting policies set out in Note 2 to the Consolidated Financial Statements.
On 16 August 2019 the Company completed an initial public offering in Australia, resulting in the raising of
AU$99,950,302. In preparation for this the Company’s share capital was restructured as outlined in Note 17 to the
Consolidated Financial Statements. The Group repaid the bank loans per Note 20 to the Consolidated Financial
Statements and outstanding interest in full on 13 September 2019.
2.
a)
Summary of Significant Accounting Policies
Basis of financial statements
Incorporation of FINEOS Corporation Holdings Plc and restructure of the Group
FINEOS Corporation Holdings plc (‘FINEOS’) was incorporated on 12 December 2018. Prior to becoming the holding
Company of the FINEOS Group of companies on 24 June 2019 it did not undertake any trading activities. The FINEOS
Group contains FINEOS Corporation Limited (formerly FINEOS Corporation U.C.) (‘FINEOS Ireland’), which is the main
operating entity of the FINEOS Group and which, itself, holds various subsidiaries that together operate the business
for the Group. FINEOS Ireland is the entity that has historically prepared consolidated financial statements for the
FINEOS Group.
The Directors elected to account for the restructure as a capital re-organisation rather than a business combination
as in the Directors’ judgement, the continuation of the existing accounting values is consistent with the accounting
that would have occurred if the assets and liabilities had already been in a structure suitable to operate as a listed
entity and most appropriately reflects the substance of the internal restructure. As such, the consolidated financial
statements of FINEOS Corporation Holdings plc have been presented as a continuation of the pre-existing accounting
values of assets and liabilities in FINEOS Corporation Limited’s financial statements, and those of its intermediate
holding companies FINEOS Europe Limited and FINEOS International Limited. Therefore, although FINEOS was only
incorporated on 12 December 2018 the results, assets and liabilities of the entire Group are accounted for as if
these entities had been combined throughout the year ended 30 June 2019. The reorganisation reserve represents
the difference between the fair value of the shares issued to effect the reorganisation and the nominal value of the
shares acquired.
Compliance with IFRS, new standards and interpretation
The financial statements have been prepared in accordance with International Financial Reporting Standards (‘IFRS’)
and interpretations issued by the IFRS Interpretations Committee (‘IFRS IC’) applicable to companies reporting under
IFRS. The financial statements comply with IFRS as issued by the International Accounting Standards Board and as
adopted by the EU, and the Companies Act 2014.
There are no changes to IFRS which became effective for the Group during the financial year which resulted in
material changes to the financial statements.
Standards issued but not yet effective
A number of new standards are effective for annual periods beginning after 1 July 2020 and earlier application is
permitted; however, the Group has not early adopted the new or amended standards in preparing these consolidated
financial statements. The following amended standards and interpretations are not expected to have a significant
impact on the Group’s consolidated financial statements:
Reference to the Conceptual Framework (Amendments to IFRS 3)
On 14 May 2020, the IASB issued Reference to the Conceptual Framework (Amendments to IFRS 3) with amendments
to IFRS 3 ‘Business Combinations’ that
• update IFRS 3 so that it refers to the 2018 Conceptual Framework instead of the 1989 Framework;
Annual Report 2020
35
Notes to the Consolidated Financial Statements • add to IFRS 3 a requirement that, for transactions and other events within the scope of IAS 37 or IFRIC 21, an
acquirer applies IAS 37 or IFRIC 21 (instead of the Conceptual Framework) to identify the liabilities it has assumed
in a business combination; and
• add to IFRS 3 an explicit statement that an acquirer does not recognise contingent assets acquired in a business
combination.
The amendments are effective for annual reporting periods beginning on or after 1 January 2022.
Onerous Contracts – Cost of Fulfilling a Contract (Amendments to IAS 37)
On 14 May 2020, the IASB issued ‘Onerous Contracts — Cost of Fulfilling a Contract (Amendments to IAS 37)’ amending
the standard regarding costs a company should include as the cost of fulfilling a contract when assessing whether a
contract is onerous.
The changes specify that the ‘cost of fulfilling’ a contract comprises the ‘costs that relate directly to the contract’.
Costs that relate directly to a contract can either be incremental costs of fulfilling that contract (examples would be
direct labour, materials) or an allocation of other costs that relate directly to fulfilling contracts (an example would be
the allocation of the depreciation charge for an item of property, plant and equipment used in fulfilling the contract).
The amendments are effective for annual reporting periods beginning on or after 1 January 2022.
Property, Plant and Equipment - Proceeds before Intended Use (Amendments to IAS 16)
On 14 May 2020, the IASB issued ‘Property, Plant and Equipment - Proceeds before Intended Use (Amendments
to IAS 16)’ regarding proceeds from selling items produced while bringing an asset into the location and condition
necessary for it to be capable of operating in the manner intended by management.
It amends the standard to prohibit deducting from the cost of an item of property, plant and equipment any proceeds
from selling items produced while bringing that asset to the location and condition necessary for it to be capable
of operating in the manner intended by management. Instead, an entity recognises the proceeds from selling such
items, and the cost of producing those items, in profit or loss.
The amendments are effective for annual reporting periods beginning on or after 1 January 2022.
Classification of Liabilities as Current or Non-current (Amendments to IAS 1)
On 23 January 2020, the IASB issued ‘Classification of Liabilities as Current or Non-current (Amendments to IAS
1)’ providing a more general approach to the classification of liabilities under IAS 1 based on the contractual
arrangements in place at the reporting date.
The amendments in Classification of Liabilities as Current or Non-current (Amendments to IAS 1) affect only the
presentation of liabilities in the statement of financial position — not the amount or timing of recognition of any
asset, liability, income or expenses, or the information that entities disclose about those items.
They:
• clarify that the classification of liabilities as current or non-current should be based on rights that are in existence
at the end of the reporting period and align the wording in all affected paragraphs to refer to the “right” to defer
settlement by at least 12 months and make explicit that only rights in place “at the end of the reporting period”
should affect the classification of a liability;
• clarify that classification is unaffected by expectations about whether an entity will exercise its right to defer
settlement of a liability; and
• make clear that settlement refers to the transfer to the counterparty of cash, equity instruments, other assets or
services.
The amendments are effective for annual reporting periods beginning on or after 1 January 2023.
Historical cost, presentation currency and going concern
The consolidated financial statements have been prepared on the historical cost basis, except where described
otherwise in the policies below. The consolidated financial statements of the Group and the financial statements of
the Company are presented in Euro (‘€’) which is also the functional currency of the Group and Company.
36
FINEOS Corporation Holdings plc
Notes to the Consolidated Financial Statements (continued) Management has prepared projections and forecasts for the Group. These include consideration of revenue
growth, funding and finance facilities in place, and cash reserves held. On this basis, the Directors consider that it is
appropriate to prepare the consolidated financial statements on the going concern assumption.
Exemption from preparing Company statement of comprehensive income
In accordance with Section 304 of the Companies Act 2014 the Company is availing of the exemption from presenting
its individual statement of comprehensive income to the Annual General Meeting and from filing it with the Registrar
of Companies. The Company’s loss for the year to 30 June 2020 was €240,176 (period from 12 December 2018 (date
of incorporation) to 30 June 2019: €Nil).
b)
Basis of consolidation
The financial statements of the Group incorporate the financial statements of the Company (the parent) and entities
controlled by the Company (its subsidiaries) made up to 30 June each year.
Control is achieved when the Company:
• has the power over the subsidiary entity;
•
is exposed, or has rights, to variable returns from its involvement with the subsidiary entity; and
• has the ability to use its power to affect those returns.
The Group reassesses whether it controls the subsidiaries if facts and circumstance indicate that there are changes
to their control. When the Company has less than a majority of the voting rights of an investee, it considers that it
has power over the investee when the voting rights are sufficient to give it the practical ability to direct the relevant
activities of the investee unilaterally. The Company considers all relevant facts and circumstances in assessing
whether or not the Company’s voting rights in an investee are sufficient to give it power, including:
•
the size of the Company’s holding of voting rights relative to the size and dispersion of holdings of the other vote
holders;
• potential voting rights held by the Company, other vote holders or other parties;
•
rights arising from other contractual arrangements; and
• any additional facts and circumstances that indicate that the Company has, or does not have, the current ability
to direct the relevant activities at the time that decisions need to be made, including voting patterns at previous
shareholders’ meetings.
Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the
Company loses control of the subsidiary. Intra-Group assets and liabilities, equity, income, expenses and cash flows
relating to intra-Group transactions are eliminated on consolidation. Where necessary, the accounting policies of
subsidiaries have been changed to ensure consistency with the policies adopted by the Group.
When the Group loses control over a subsidiary, the profit or loss on disposal is calculated as the difference between
(i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the
previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any non-controlling
interests. Amounts previously recognised in other comprehensive income in relation to the subsidiary are accounted
for (i.e. reclassified to profit or loss or transferred directly to retained earnings) in the same manner as would be
required if the relevant assets or liabilities were disposed of.
The fair value of any investments retained in the former subsidiary at the date when control is lost is regarded as the
fair value on initial recognition for subsequent accounting or, when applicable, the cost on initial recognition of an
investment in an associate or jointly controlled entity.
c)
Revenue recognition
The Group recognises revenue from the following major sources:
•
initial product licence fees;
• annual subscriptions; and
•
rendering of services, including professional services and support contracts.
Revenue is measured based on the consideration to which the Group expects to be entitled in a contract with a
customer and excludes amounts collected on behalf of third parties. The Group recognises revenue when it transfers
control of a product or service to a customer.
Annual Report 2020
37
Initial product licence fees
Initial software licence revenue is recognised upon delivery of the software to the customer, provided that the Group
has no significant related obligations or collection uncertainties remaining.
Annual subscriptions
Annual subscriptions are recognised on a straight-line basis, for the right to continued access to the licenced
intellectual property (IP) and the support and maintenance services for the licences held, in accordance with the
master licence agreement in place. Annual subscriptions include all support, maintenance, software updates and
cloud services provided by FINEOS to customers.
Rendering of services, including professional services and support contracts
Revenue from rendering of services is recognised in the accounting period in which the services are rendered when
the outcome of the contract can be estimated reliably.
Professional services are provided primarily on a time and materials basis for which revenue is recognised in the
period that the services are provided.
For the services element of fixed price project engagements, revenue is recognised when the outcome of the
transaction can be estimated reliably by reference to the stage of completion of the transaction at the end of the
reporting period. The stage of completion is generally measured using output measures, primarily arrangement
milestones, where such milestones indicate progress to completion. When the outcome of the transaction involving
the rendering of services cannot be estimated reliably, an entity shall recognise revenue only to the extent of the
expenses recognised that are recoverable.
Income arising on support contracts and rental/subscription sales where the provision of the service has not been
completed at the year-end date is deferred and recognised as the service is provided.
When the consideration receivable in cash or cash equivalents is deferred, and the arrangement constitutes a
financing transaction, the fair value of the consideration is measured as the present value of all future receipts using
the effective rate of interest.
The Group’s policy for contract costs (associated with revenue contracts) is outlined in Note 2(l) to the Consolidated
Financial Statements.
d)
Leases
At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains,
a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for
consideration.
The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use
asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease
payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs
to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located,
less any lease incentives received.
The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to
the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The estimated useful
lives of right-of-use assets are determined on the same basis as those of property and equipment. In addition, the
right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of
the lease liability.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement
date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group’s
incremental borrowing rate. Generally, the Group uses its incremental borrowing rate as the discount rate.
Lease payments included in the measurement of the lease liability comprise:
•
fixed payments, including in-substance fixed payments;
• variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the
commencement date; and
• amounts expected to be payable under a residual value guarantee.
38
FINEOS Corporation Holdings plc
Notes to the Consolidated Financial Statements (continued) The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there
is a change in future lease payments arising from a change in an index or rate, if there is a change in the Group’s
estimate of the amount expected to be payable under a residual value guarantee.
When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the
right-of-use asset or is recorded in the statement of comprehensive income if the carrying amount of the right-of-use
asset has been reduced to zero.
The Group presents right-of-use assets that do not meet the definition of investment property in ‘property, plant and
equipment’, and lease liabilities in trade and other payables in the statement of financial position. Right-of-use asset
of office rentals is presented under ‘property, plant and equipment’, while right-of-use asset of licences is presented
under ‘intangible assets’. The movement of right-of-use of the assets of the Group is disclosed in Notes 11 and 12 to
the Consolidated Financial Statements.
Short-term leases and leases of low-value assets
The Group has elected not to recognise right-of-use assets and lease liabilities for short-term leases of offices and
licences that have a lease term of 12 months or less and leases of low-value assets. The Group recognises the lease
payments associated with these leases as an expense on a straight-line basis over the lease term.
Lease modifications
The Group as lessee accounts for a lease modification as a separate lease if both:
(a) the modification increases the scope of the lease by adding the right to use one or more underlying assets; and
(b) the consideration for the lease increases by an amount commensurate with the stand-alone price for the increase
in scope and any appropriate adjustments to that stand-alone price to reflect the circumstances of the particular
contract.
For a lease modification that is not accounted for as a separate lease, at the effective date of the lease modification
the Group as lessee:
(a) allocates the consideration in the modified contract;
(b) determines the lease term of the modified lease; and
(c) remeasures the lease liability by discounting the revised lease payments using a revised discount rate. The
revised discount rate is determined as the interest rate implicit in the lease for the remainder of the lease term,
if that rate can be readily determined; or the Group’s incremental borrowing rate at the effective date of the
modification, if the interest rate implicit in the lease cannot be readily determined.
For a lease modification that is not accounted for as a separate lease, the Group as lessee accounts for the
remeasurement of the lease liability by:
(a) decreasing the carrying amount of the right-of-use asset to reflect the partial or full termination of the lease for
lease modifications that decrease the scope of the lease. The Group recognises in profit or loss any gain or loss
relating to the partial or full termination of the lease; or
(b) making a corresponding adjustment to the right-of-use asset for all other lease modifications.
e)
Foreign currencies
Foreign currency transactions are translated into the individual entities’ respective functional currencies at
the exchange rates prevailing on the date of the transaction. At the end of each financial year, monetary items
denominated in foreign currencies are retranslated at the rates prevailing as of the end of the financial year.
Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates
prevailing on the date when the fair value was determined. Non-monetary items that are measured in terms of
historical cost in a foreign currency are not retranslated.
Exchange differences arising on the settlement of monetary items, and on retranslation of monetary items are
included in the statement of comprehensive income for the year. Exchange differences arising on the retranslation
of non-monetary items carried at fair value are included in the statement of comprehensive income for the year
except for differences arising on the retranslation of non-monetary items in respect of which gains, and losses are
recognised directly in equity. For such non-monetary items, any exchange component of that gain or loss is also
recognised directly in other comprehensive income.
Annual Report 2020
39
For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group’s foreign
operations (including comparatives) are expressed in Euro using exchange rates prevailing at the end of the financial
year. Income and expense items (including comparatives) are translated at the average exchange rates for the
period, unless exchange rates fluctuated significantly during that period, in which case the exchange rates at the
dates of the transactions are used. Exchange differences arising, if any, are classified as equity and transferred to the
Group’s translation reserve. Such translation differences are recognised in the statement of comprehensive income
in the period in which the foreign operation is disposed of.
On consolidation, exchange differences arising from the translation of the net investment in foreign entities (including
monetary items that, in substance, form part of the net investment in foreign entities), and of borrowings and
other currency instruments designated as hedges of such investments, are taken to the foreign currency translation
reserve.
Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and
liabilities of the foreign operation and translated accordingly.
f)
Employee benefits
The Group provides a range of benefits to employees, including annual bonus arrangements, paid holiday
arrangements and defined contribution pension plans.
Short-term benefits
Short-term benefits, including holiday pay and other similar non-monetary benefits, are recognised as an expense in
the period in which the service is received. A provision is made for the estimated liability for annual leave as a result
of services rendered by employees up to the end of the financial year.
Defined contribution pension plans
The Group operates a defined contribution plan for its employees. A defined contribution plan is a pension plan
under which the Group pays fixed contributions into a separate entity. Once the contributions have been paid the
Group has no further payment obligations.
The contributions are recognised as an expense when they are due. Amounts not paid are shown in accruals in
the statement of financial position. The assets of the plan are held separately from the Group in independently
administered funds.
Share-based payments
The Group issues equity-settled share-based payments to certain employees. Equity-settled share-based payments
are measured at fair value of the equity instruments (excluding the effect of non-market-based vesting conditions) at
the date of grant. Details regarding the determination of the fair value of equity-settled share-based transactions are
set out in Note 19 to the Consolidated Financial Statements. The cost of equity-settled transactions with employees is
recognised as an expense over the vesting period, which ends on the date on which the relevant employees become
fully entitled to the award. Fair value is determined by an external valuer using an appropriate pricing model. No
expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon
a market condition, which are treated as vesting irrespective of whether or not the market condition is satisfied,
provided that all other performance conditions are satisfied.
At each year end date before vesting, the cumulative expense is calculated, representing the extent to which the
vesting period has expired and management’s best estimate of the achievement or otherwise of non-market
conditions, the number of equity instruments that will ultimately vest, or in the case of an instrument subject to
a market condition, be treated as vesting as described above. The movement in the cumulative expense since the
previous year end date is recognised in the statement of comprehensive income, with a corresponding entry in
‘share option reserves’.
Where the terms of an equity-settled award are modified or a new award is designated as replacing a cancelled
or settled award, the cost based on the original award terms continues to be recognised over the original vesting
period. In addition, an expense is recognised over the remainder of the new vesting period for the incremental fair
value of any modification, based on the difference between the fair value of the original award and the fair value of
the modified award, both as measured on the date of the modification. No reduction is recognised if this difference
is negative.
40
FINEOS Corporation Holdings plc
Notes to the Consolidated Financial Statements (continued) g)
Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are
assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the
cost of those assets, until such time as the assets are substantially ready for their intended use or sale.
Investment income earned on the temporary investment of specific borrowings pending their expenditure on
qualifying assets is deducted from the borrowing costs eligible for capitalisation.
All other borrowing costs are recognised in the statement of comprehensive income in the period in which they are
incurred.
h)
Interest income
Interest income comprises income on cash held in interest-bearing bank deposits. Interest income is recognised as
it occurs in the statement of comprehensive income, using the effective interest rate method.
i)
Government grants
Government grants are not recognised until there is reasonable assurance that the Group will comply with the
conditions attaching to them and that the grants will be received.
Government grants are recognised in the statement of comprehensive income on a systematic basis over the periods
in which the Group recognises as expenses the related costs for which the grants are intended to compensate.
Specifically, government grants whose primary condition is that the Group should purchase, construct or otherwise
acquire non-current assets are recognised as deferred income in the consolidated statement of financial position
and transferred to the statement of comprehensive income on a systematic and rational basis over the useful lives
of the related assets.
Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose
of giving immediate financial support to the Group with no future related costs are recognised in the statement of
comprehensive income in the period in which they become receivable.
Government grants towards staff re-training costs are recognised as income over the periods necessary to match
them with the related costs and are deducted in reporting the related expense.
Government grants relating to the acquisition of property, plant and equipment or intangible assets are treated
as deferred income and released to the statement of comprehensive income over the expected useful lives of the
assets concerned.
j)
Income tax
The taxation expense for the period comprises current and deferred tax recognised in the reporting period. Tax is
recognised in the statement of comprehensive income, except to the extent that it relates to items recognised in
other comprehensive income or directly in equity. In this case tax is also recognised in other comprehensive income
or directly in equity respectively.
Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported
in the statement of comprehensive income because it excludes items of income or expense that are taxable or
deductible in other years and it further excludes items that are never taxable or deductible. The Group’s liability for
current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting
period.
A provision is recognised for those matters for which the tax determination is uncertain but it is considered probable
that there will be a future outflow of funds to a tax authority. The provisions are measured at the best estimate of
the amount expected to become payable. The assessment is based on the judgement of tax professionals within
the Group supported by previous experience in respect of such activities and in certain cases based on specialist
independent tax advice.
Annual Report 2020
41
Deferred tax
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets
and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit
and is accounted for using the liability method.
Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are
recognised to the extent that it is probable that taxable profits will be available against which deductible temporary
differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the
initial recognition of goodwill or from the initial recognition (other than in a business combination) of other assets
and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. In addition, a deferred
tax liability is not recognised if the temporary difference arises from the initial recognition of goodwill.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, except
where the Group is able to control the reversal of the temporary difference and it is probable that the temporary
difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary
differences associated with such investments and interests are only recognised to the extent that it is probable that
there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are
expected to reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is
no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled, or the
asset is realised, based on tax laws and rates that have been enacted or substantively enacted at the reporting date.
The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the
manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of
its assets and liabilities.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets
against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the
Group intends to settle its current tax assets and liabilities on a net basis.
k)
Research and development tax credit
Research and development tax credits are recognised as a gain, set against the related expenditure in the year
to which they relate. To the extent that the related expenditure is capitalised, the tax credit is deferred on the
statement of financial position.
l)
Intangible assets
Intangible assets acquired separately
Computer software
Computer software separately acquired, including computer software which is not an integral part of an item of
computer hardware, is stated at cost less any accumulated amortisation and any accumulated impairment losses.
Cost comprises purchase price and other directly attributable costs.
Computer software is recognised as an asset only if it meets the following criteria:
• an asset can be separately identified;
•
•
•
it is probable that the asset created will generate future economic benefits;
the development cost of the asset can be measured reliably;
it is probable that the expected future economic benefits that are attributable to the asset will flow to the entity;
and
•
the cost of the asset can be measured reliably.
Costs relating to the development of computer software for internal use are capitalised once the recognition criteria
outlined above are met.
Computer software is amortised on a straight-line basis over its useful economic life, which is considered to be
between three to five years. The amortisation expense is disclosed separately on the face of the consolidated
statement of comprehensive income.
42
FINEOS Corporation Holdings plc
Notes to the Consolidated Financial Statements (continued) Internally-generated intangible assets
Research and development expenditure
Expenditure on research activities is recognised as an expense in the period in which it is incurred. An
internally-generated intangible asset arising from development (or from the development phase of an internal
project) is recognised if, and only if, all of the following conditions have been demonstrated:
•
•
•
the technical feasibility of completing the intangible asset so that it will be available for use or sale;
the intention to complete the intangible asset and use or sell it;
the ability to use or sell the intangible asset;
• how the intangible asset will generate probable future economic benefits;
•
the availability of adequate technical, financial and other resources to complete the development and to use or
sell the intangible asset; and
•
the ability to measure reliably the expenditure attributable to the intangible asset during its development.
The amount initially recognised for internally-generated intangible assets is the sum of the expenditure incurred from
the date when the intangible asset first meets the recognition criteria listed above. Where no internally-generated
intangible asset can be recognised, development expenditure is recognised in the statement of comprehensive
income in the period in which it is incurred.
Borrowing costs, which meet the criteria as set out in Note 2(g) to the Consolidated Financial Statements above,
incurred in respect of an internally-generated intangible asset arising from development which meets each of the
aforementioned criteria is capitalised and classified as an intangible asset.
Development expenditure is amortised on a straight-line basis over its useful economic life, which commences when
the asset is brought into use, and is considered to be between five and ten years. The amortisation expense is
disclosed separately on the face of the consolidated statement of comprehensive income.
Contract costs
The incremental costs of obtaining a contract are recognised as an asset if the Group expects to recover those costs.
However, those incremental costs are limited to the costs that the Group would not have incurred if the contract had
not been successfully obtained.
Costs incurred to fulfil a contract are recognised as an asset if and only if all of the following criteria are met:
•
•
the costs relate directly to a contract (or a specific anticipated contract);
the costs generate or enhance resources of the entity that will be used in satisfying performance obligations in
the future; and
•
the costs are expected to be recovered.
These include costs such as direct labour, direct materials, and the allocation of overheads that relate directly to the
contract.
The asset recognised in respect of the costs to obtain or fulfil a contract is amortised on a systematic basis that is
consistent with the associated revenue contract’s pattern of transfer of the services to which the asset relates. The
amortisation expense is included within administrative expenses in the consolidated statement of comprehensive
income. The incremental costs of obtaining a contract are expensed if the associated amortisation period would be
12 months or less.
Subsequent to initial recognition, internally-generated intangible assets are reported at cost less accumulated
amortisation and accumulated impairment losses, on the same basis as intangible assets that are acquired separately.
Derecognition of intangible assets
An intangible asset is derecognised on disposal, or when no future economic benefits are expected from use or
disposal. Gains or losses arising from derecognition of an intangible asset, measured as the difference between
the net disposal proceeds and the carrying amount of the asset, are recognised in the statement of comprehensive
income when the asset is derecognised.
Annual Report 2020
43
m)
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses.
Cost includes the original purchase price, costs directly attributable to bringing the asset to its working condition for
its intended use, dismantling and restoration costs, and borrowing costs capitalised.
Depreciation
Depreciation is calculated using the straight-line method to write off the cost of property, plant and equipment over
their expected useful lives as follows:
Office equipment
Computer equipment
Fixtures and fittings
Right-of-use assets
33.33%
33.33%
20% – 33.33%
Lower of the useful life of the asset or the lease term
The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting
period, with the effect of any changes in estimate accounted for on a prospective basis.
Subsequent additions
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate,
only when it is probable that economic benefits associated with the item will flow to the Group and the cost can be
measured reliably.
The carrying amount of any replaced component is derecognised. Major components are treated as a separate
asset where they have significantly different patterns of consumption of economic benefits and are depreciated
separately over their useful lives.
Repairs, maintenance and minor inspection costs are expensed as incurred.
Derecognition
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits
are expected to arise from the continued use of the asset. The gain or loss arising on the disposal or retirement of
an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is
recognised in the statement of comprehensive income.
n)
Financial assets
Investments in subsidiary companies
Investments in subsidiary companies are reflected in the separate financial statements of the parent Company.
Investments in subsidiaries are stated at cost less accumulated impairment losses.
o)
Impairment of tangible and intangible assets
The Group reviews the carrying amounts of its tangible and intangible assets as at each reporting date to assess for
any indication of impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in
order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable
amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the
asset belongs.
Irrespective of whether there is any indication of impairment, the Group also tests its intangible assets with indefinite
useful lives and intangible assets not yet available for use for impairment annually by comparing their respective
carrying amounts with their corresponding recoverable amounts.
The recoverable amount of an asset or cash-generating unit is the higher of its fair value less costs to sell and its
value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a
pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to
the asset.
An impairment loss for the amount by which the asset’s carrying amount exceeds the recoverable amount is
recognised immediately in the statement of comprehensive income; unless the relevant asset is carried at a revalued
amount, in which case the impairment loss is first treated as a revaluation decrease.
44
FINEOS Corporation Holdings plc
Notes to the Consolidated Financial Statements (continued) Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased
to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the
carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-
generating unit) in prior years. A reversal of an impairment loss is recognised immediately in the statement of
comprehensive income, unless the relevant asset is carried at a revalued amount, in which case the reversal of the
impairment loss is treated as a revaluation increase.
p)
Financial instruments
Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions
of the instrument.
Effective interest method
The effective interest method is a method of calculating the amortised cost of a financial instrument and allocating
the interest income or expense over the relevant period. The effective interest rate is the rate that exactly discounts
estimated future cash receipts or payments (including all fees on points paid or received that form an integral part
of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the
financial instrument, or where appropriate, a shorter period, to the net carrying amount of the financial instrument.
Income and expense are recognised on an effective interest basis for debt instruments other than those financial
instruments at fair value through profit or loss.
Financial assets
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly
attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and
financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial
assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the
acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in
the statement of comprehensive income.
All financial assets are recognised on a trade date - the date on which the Group commits to purchase or sell the
asset. They are initially measured at fair value, plus transaction costs, except for those financial assets classified as
at fair value through profit or loss, which are initially measured at fair value.
Financial assets are classified into the following specified categories: financial assets at fair value through profit or
loss; held-to-maturity investments; loans and receivables; and available-for-sale financial assets. The classification
depends on the nature and purpose for which these financial assets were acquired and is determined at the time of
initial recognition.
Loans and receivables
The Group’s loans and receivables comprise trade and other receivables, amounts due from contract customers,
bank balances and fixed deposits.
Such loans and receivables are non-derivatives with fixed or determinable payments that are not quoted in an
active market. They are measured at amortised cost, using the effective interest method less impairment. Interest is
recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest
would be immaterial.
Impairment of financial assets
The Group recognises a loss allowance for expected credit losses on investments in debt instruments that are
measured at amortised cost or at fair value through other comprehensive income, lease receivables, trade receivables
and contract assets, as well as on financial guarantee contracts. The amount of expected credit losses is updated at
each reporting date to reflect changes in credit risk since initial recognition of the respective financial instrument.
The Group always recognises lifetime expected credit losses (‘ECL’) for trade receivables. The ECL on these financial
assets are estimated using a provision matrix based on the Group’s historical credit loss experience, adjusted for
factors that are specific to the receivables, general economic conditions and an assessment of both the current as well
as the forecast direction of conditions at the reporting date, including the time value of money where appropriate.
When there has not been a significant increase in credit risk since initial recognition, the Group measures the loss
allowance for that financial instrument at an amount equal to 12-month ECL which represents the portion of lifetime
Annual Report 2020
45
ECL that is expected to result from default events on a financial instrument that are possible within 12 months after
the reporting date; except for assets for which a simplified approach was used.
The Group assumes that the credit risk on a financial instrument has not increased significantly since initial recognition
if the financial instrument is determined to have low credit risk at the reporting date. A financial instrument is
determined to have low credit risk if:
(a) the financial instrument has a low risk of default;
(b) the debtor has a strong capacity to meet its contractual cash flow obligations in the near term; and
(c) adverse changes in economic and business conditions in the longer term may, but will not necessarily, reduce the
ability of the borrower to fulfil its contractual cash flow obligations.
The Group considers a financial asset to have low credit risk when the asset has an external credit rating of ‘investment
grade’ in accordance with the globally understood definition or if an external rating is not available, the asset has an
internal rating of ‘performing’. Performing means that the counterparty has a strong financial position and there are
no past due amounts.
Derecognition of financial assets
The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire,
or it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another
entity. If the Group neither transfers nor retains substantially all the risks and rewards of ownership of the financial
asset and continues to control the transferred asset, the Group recognises its retained interest in the asset and an
associated liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of
ownership of a transferred financial asset, the Group continues to recognise the financial asset and also recognises
a collateralised borrowing for the proceeds receivable.
Financial liabilities and equity
Classification of debt or equity
Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance
of the contractual arrangements and the definitions of a financial liability and an equity instrument.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all
of its liabilities. Equity instruments are recorded at the proceeds received, net of direct issue costs.
Ordinary share capital
Ordinary share capital is classified as equity. Incremental costs directly attributable to the issue of ordinary shares
and share options are recognised as a deduction from equity.
Financial liabilities
Financial liabilities are classified as either financial liabilities at fair value through profit or loss or other financial
liabilities.
Financial liabilities are classified as at fair value through profit or loss if the financial liability is either held for trading
or it is designated as such upon initial recognition.
Other financial liabilities
Trade and other payables
Trade and other payables are initially measured at fair value, net of transaction costs, and are subsequently measured
at amortised cost, where applicable, using the effective interest method, with interest expense recognised on an
effective yield basis.
46
FINEOS Corporation Holdings plc
Notes to the Consolidated Financial Statements (continued) Borrowings
Interest-bearing bank loans and overdrafts are initially measured at fair value, and are subsequently measured at
amortised cost, using the effective interest method. Any difference between the proceeds (net of transaction costs)
and the settlement or redemption of borrowings is recognised over the term of the borrowings.
Derecognition of financial liabilities
The Group derecognises financial liabilities when, and only when, the Group’s obligations are discharged, cancelled
or they expire.
Derivative financial instruments
In order to manage interest rate and foreign currency risks, the Group has from time to time entered into derivative
financial instruments (principally interest rate swaps, currency swaps and forward foreign exchange contracts).
Derivative financial instruments are recognised initially at fair value on the date on which a derivative contract is
entered into and are subsequently remeasured at fair value. The carrying value of derivatives is fair value based on
discounted future cash flows and adjusted for counterparty risk. Future floating rate cash flows are estimated based
on future interest rates (from observable yield curves at the end of the reporting period). Fixed and floating rate cash
flows are discounted at future interest rates and translated at period-end foreign exchange rates. At the statement
of financial position date, no derivative instruments were recognised on the statement of financial position.
q)
Provisions and contingencies
Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event,
it is probable that the Group will be required to settle that 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.
Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is
the present value of those cash flows (when the effect of the time value of money is material).
When some or all of the economic benefits required to settle a provision are expected to be recovered from a third
party, a receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the
amount of the receivable can be measured reliably.
Contingencies
Contingent liabilities, arising as a result of past events, are not recognised when (i) it is not probable that there will
be an outflow of resources or that the amount cannot be reliably measured at the reporting date or (ii) when the
existence will be confirmed by the occurrence or non-occurrence of uncertain future events not wholly within the
Group’s control. Contingent liabilities are disclosed in the financial statements unless the probability of an outflow
of resources is remote.
Contingent assets are not recognised. Contingent assets are disclosed in the financial statements when an inflow of
economic benefits is probable.
r)
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits and other short-term highly liquid
investments which are readily convertible to known amounts of cash and are subject to insignificant risk of changes
in value.
s)
Related party transactions
Related party transactions are disclosed in accordance with IAS 24 Related Party Disclosures and the Companies Act
2014.
Annual Report 2020
47
3.
Significant Accounting Judgements, Estimates and
Assumptions
In preparing these financial statements, the Group and Company make judgements, estimates and assumptions
concerning the future that impact the application of policies and reported amounts of assets, liabilities, income and
expenses.
The resulting accounting estimates calculated using these judgements and assumptions are based on historical
experience and expectations of future events and may not equal the actual results. Estimates and underlying
assumptions are reviewed on an ongoing basis, and revisions to estimates are recognised prospectively.
The judgements and key sources of assumptions and estimation uncertainty that have a significant effect on the
amounts recognised in the financial statements are discussed below.
Critical judgements made in applying the Group’s and Company’s accounting policies
Information about judgements made in applying accounting policies that have the most significant effects on the
amounts recognised in these financial statements are set out below:
Group:
(a) Development expenditure
The Group capitalises a proportion of costs related to software development in accordance with its accounting
policy. The Group regularly reviews the carrying value of capitalised development costs, which are amortised over
five to ten years, to ensure they are not impaired and the amortisation period is appropriate. Management makes
judgements about the technical feasibility and economic benefit of completed products, as well as the period of time
over which the economic benefit will cease.
(b) Useful life of intangible assets
Intangible assets are amortised over their useful lives. The estimated useful life reflects management’s estimate of
the period that the Group intends to derive future economic benefits from the use of intangible assets. Changes in
the economic usage and developments could affect the economic useful life of the intangible fixed asset which could
then consequently impact future amortisation charges. The carrying amount of the intangible assets of the Group as
at 30 June 2020 was €53,356,909 (2019: €44,027,266) (Note 11 to the Consolidated Financial Statements).
(c) Revenue recognition
The Group recognises revenue in line with IFRS 15 Revenue recognition. Management applies judgement in determining
the nature, variable considerations, and timing of satisfaction of promises in the context of the contract that meet the
basis of revenue recognition criteria. Significant judgements include identifying performance obligations, identifying
distinct intellectual property licences, and determining the timing of satisfaction and approach in recognising the
revenue of those identified performance obligations; whether a point in time or a passage of time approach is to be
adopted. See applied revenue recognition criteria for each revenue streams within Note 2 (c) to the Consolidated
Financial Statements for details on the Group’s revenue recognition policies adopted. The amount of the Group’s
revenue recognised as at 30 June 2020 was €87,808,301 (2019: €62,812,770) (Note 4 to the Consolidated Financial
Statements).
Company:
(a) Impairment of investment in subsidiaries
Investments in subsidiary companies are reflected in the separate financial statements of the parent Company at
cost less accumulated impairment losses. At the end of each financial year, an assessment is made on whether
there are indicators that the Company’s investments are impaired. The Company’s assessment is based on the
performance of the underlying subsidiary companies and no impairment has been recognised in the year under
review. The carrying amount of investments in subsidiaries in the Company statement of financial position at 30 June
2020 was €22,834,215 (2019: €22,834,215).
48
FINEOS Corporation Holdings plc
Notes to the Consolidated Financial Statements (continued) 4.
Revenue
Amount of revenue by class of activity:
Professional services
Annual subscriptions
Initial product licence fees
Amount of revenue by market:
North America
APAC
EMEA
Segment information
2020
€
2019
€
58,303,497
39,524,122
27,012,410
19,588,954
2,492,394
3,699,694
87,808,301
62,812,770
51,806,318
28,248,723
30,657,403
28,368,929
5,344,580
6,195,118
87,808,301
62,812,770
The Group manages its operations as a single business operation and there are no parts of the Group that qualify
as operating segments. The Board assesses the financial performance of the Group on an integrated basis only and
accordingly, the Group is managed on the basis of a single segment.
Major customers
Three individual external customers each account for over 10% of the Group’s revenue, as follows:
Client 1
Percentage of total revenue
Client 2
Percentage of total revenue
Client 3
Percentage of total revenue
Initial product licence fees
2020
€
2019
€
16,494,211
15,344,891
18.8%
24.4%
12,040,943
2,652,886
13.7%
4.2%
12,034,533
11,095,136
13.7%
17.7%
Initial software licence is considered a distinct performance obligation to the customer. Revenue is recognised when
control is transferred to the customer which is upon delivery of the licenced intellectual property (IP) at a point in
time, provided that the Group has no significant related obligations remaining which would significantly enhance or
modify the licenced IP or any collection uncertainties over the term of the contract.
Licences with related obligations which significantly enhance or modify the IP are considered a single performance
obligation. The performance obligation is satisfied over time as the client avails of consistent access to the services
enhancing and customising the licenced IP. The satisfaction of the performance obligation is reliably measured
primarily on a percentage-of-completion basis. Revenue is recognised over the passage of time using the output
method based on pre-agreed milestones between the parties in accordance with the master licence agreement in
place. Income arising on customised solutions where the provision of the service has not been completed at the
year-end date is deferred and recognised as the service is provided.
Annual Report 2020
49
Annual subscriptions
Annual subscriptions include all support, maintenance, software updates and cloud services provided by FINEOS to
customers.
Annual support and maintenance is considered a distinct performance obligation. The performance obligation is
satisfied over time and the annual licence fees are recognised using the output method on a straight-line basis which
reflects time lapsed, for the right to continued support and maintenance for licences held, in accordance with the
master licence agreement in place.
Income arising on support and maintenance where the provision of the service has not been completed at the year-
end date is deferred creating a contract liability which is subsequently recognised as the service is provided.
Cloud services are made available to the customer through the Group’s preferred Virtual Private Cloud (VPC) provider.
In accordance with the master agreement, the subscription includes the provision of the licence along with annual
support and maintenance services. The promises are considered a single performance obligation which is satisfied
over time and the subscription fees, including the third-party fees, are recognised using the output method on a
straight-line basis which reflects time lapsed, for the continued right to access the licenced IP and to benefit from the
support and maintenance services.
Income arising on Cloud subscription where the provision of the service has not been completed at the year-end
date is deferred creating a contract liability which is subsequently recognised as the service is provided.
Rendering of services, including professional services
Rendering of services are distinct performance obligations for which revenue is recognised in the accounting period
in which the services are rendered when the outcome of the contract can be estimated reliably.
The performance obligations are satisfied over time and the satisfaction of the promises is measured using the input
method, primarily on a time and materials basis for which revenue is recognised in the period that the services are
provided.
For the services element of fixed price project engagements, the performance obligations are satisfied over time and
the satisfaction of the promises are reliably measured primarily on a percentage-of-completion basis over the term
of the contract. Revenue is recognised using the output method based on pre-agreed milestones indicating progress
to completion.
Income arising on rendering of services where the provision of the service has not been completed at the year-end
date is deferred creating a contract liability which is subsequently recognised as the service is provided.
Contract assets and contract liabilities
Contract assets
Contract assets are disclosed separately as unbilled receivables in Trade and other receivables amounting to
€639,097 (2019: €1,405,217) (Note 14 to the Consolidated Financial Statements).
Contract liabilities
Contract liabilities are disclosed separately as deferred revenue in Trade and other payables amounting to
€14,201,684 (2019: €10,397,118) (Note 16 to the Consolidated Financial Statements). The Group is availing of the
practical expedient which exempts the disclosure of unsatisfied performance obligations to date since both of the
following criteria are met:
•
•
the performance obligations are part of contracts which have an original expected duration of one year or less;
and
the Group recognises revenue from the satisfaction of the performance obligations which have been completed
to date and to which the Group has a right to invoice.
50
FINEOS Corporation Holdings plc
Notes to the Consolidated Financial Statements (continued) 5.
Employees
The average monthly number of persons employed by the Group (including Directors) during the year was as follows:
Product development and delivery
Sales and marketing
Administration
The staff costs comprise:
Wages and salaries
Social welfare costs
Pension costs
Share-based payments
Directors’ remuneration
Directors’ remuneration in respect of qualifying
services in respect of FINEOS Corporation Limited:
Emoluments
Pension/superannuation
Shares allotted
Gain on exercise of options
2020
Number
2019
Number
711
20
46
777
2020
€
577
13
41
631
2019
€
54,024,075
44,168,771
4,753,053
2,839,647
2,274,055
3,568,332
2,285,974
797,361
63,890,830
50,820,438
2020
€
2019
€
1,226,598
1,082,069
41,207
24,510
921,117
27,342
-
-
2,213,432
1,109,411
The number of Directors to whom retirement benefits are accruing under defined contribution scheme pension/
superannuation costs noted above is three (2019: one).
Other than as shown above any further disclosures in respect of section 305 and 306 of the Companies Act 2014 are
€Nil for the financial year presented.
Staff costs as qualifying development expenditure
The qualifying development expenditure generating an asset as shown in Note 11 to the Consolidated Financial
Statements consists of qualifying staff costs incurred in relation to the development of the Group’s projects. During
the current year, qualifying staff costs amounted to €16,787,883 (2019: €13,925,681).
Annual Report 2020
51
6.
Other Income
Research and development tax credit
Australian taxation office cash flow boost
Grant income
2020
€
2019
€
1,228,303
990,784
33,457
–
–
62,388
1,261,760
1,053,172
The Company has previously availed of research and development tax credits pursuant to Section 33, Finance
Act 2004.
7.
Finance Costs
Bank charges and interest
Lease interest
2020
€
258,563
507,917
2019
€
1,095,351
263,278
766,480
1,358,629
8.
Profit/(Loss) on Ordinary Activities Before Taxation
The profit/(loss) on ordinary activities before taxation is stated
after charging/(crediting):
Auditor’s remuneration – Audit of Group companies
– Other assurance services
– Tax advisory services
– Other non-audit services
Amortisation (Note 11)
Depreciation (Note 12)
Research and development expense
Research and development tax credit (Note 6)
Foreign exchange (gain)/loss
2020
€
2019
€
111,000
10,000
46,000
–
9,954,905
1,892,089
11,639,095
95,000
151,000
119,000
7,000
7,115,224
1,357,376
8,919,930
(1,228,303)
(990,784)
(770,281)
34,387
The other assurance services and tax advisory services fees for the current and prior year very substantially relate to
advisory work in connection with the IPO.
52
FINEOS Corporation Holdings plc
Notes to the Consolidated Financial Statements (continued) 9.
(a)
Tax on Profit/(Loss) on Ordinary Activities
Tax on profit/(loss) on ordinary activities
The tax charge is made up as follows:
Current tax:
Overseas taxation
Foreign withholding tax
Adjustments in respect of previous years
Total current tax
Deferred tax:
2020
€
2019
€
832,700
–
2,482
509,640
66,070
–
835,182
575,710
Origination and reversal of timing differences
107,240
(479,674)
Tax on profit/(loss) on ordinary activities
942,422
96,036
Overseas taxation has been provided on the results of overseas subsidiary companies at the appropriate overseas
rates of tax.
(b)
Factors affecting the tax charge for the year
The current tax charge for the year differs from the amount computed by applying the standard rate of corporation
tax in the Republic of Ireland to the profit/(loss) on ordinary activities before taxation. The sources and tax effects of
the differences are explained below:
Profit/(loss) on ordinary activities before tax
Profit/(loss) on ordinary activities multiplied by the standard rate of tax
of 12.5%
Depreciation greater than capital allowances
Short-term timing differences
Non-deductible expenses/non-taxable income
Higher tax charge on passive income
Higher rates of tax on foreign income
Research and development tax credits claimed
Foreign withholding tax
Adjustments in respect of previous years
Losses (utilised)/carried forward
Deferred tax
Total tax charge
2020
€
2019
€
715,239
(1,673,621)
89,405
100,983
53,997
402,764
1,286
361,590
(66,720)
–
2,482
(110,605)
107,240
(209,203)
56,559
(1,652)
256,018
57
279,450
(157,791)
66,070
–
286,202
(479,674)
942,422
96,036
Annual Report 2020
53
(c)
Deferred tax asset/(liability)
Group
At beginning of year
(Charged)/released to the statement
of comprehensive income (Note 9(a))
Foreign exchange
At end of year
The deferred tax asset/(liability) is analysed as follows:
Timing differences between depreciation
and capital allowances
Timing differences on holiday leave
Timing differences between losses
forward and capitalised development costs
Other timing differences
At end of year
Being:
Deferred tax asset
Provision for deferred tax
Deferred tax asset
2020
€
2019
€
117,698
(359,593)
(107,240)
5
479,674
(2,383)
10,463
117,698
134,979
401,012
138,076
251,284
(636,048)
110,520
(401,183)
129,521
10,463
117,698
498,508
(488,045)
311,568
(193,870)
10,463
117,698
54
FINEOS Corporation Holdings plc
Notes to the Consolidated Financial Statements (continued) 10.
Earnings Per Share
2020
€
2019
€
Basic earnings per share
(Loss) attributed to ordinary shareholders
(280,376)
(1,773,927)
Weighted average number of ordinary shares outstanding
261,429,432
219,990,350
Basic (loss) per share (cent)
(0.11)
(0.81)
Basic (loss) per share is calculated by dividing the loss for the year after taxation attributable to ordinary shareholders
by the weighted average number of ordinary shares in issue during the year.
Diluted earnings per share
(Loss) attributed to ordinary shareholders
(280,376)
(1,773,927)
Weighted average number of ordinary shares outstanding
261,429,432
219,990,350
Diluted (loss) per share (cent)
(0.11)
(0.81)
The calculation of diluted earnings per share has been based on the loss attributable to ordinary shareholders and
weighted-average number of ordinary shares outstanding after adjustments for the effects of all dilutive ordinary
shares. Potential ordinary shares are treated as dilutive when, and only when, their conversion to ordinary shares
would decrease EPS or increase the loss per share from continuing operations.
The calculation of basic and diluted earnings per share for the comparative period presented has been adjusted
retrospectively to reflect the resolution passed to subdivide all issued and unissued ordinary shares of €0.01 each in
the capital of the Company by 10 (see Note 17 to the Consolidated Financial Statements).
Annual Report 2020
55
11.
Intangible Assets
Group 2020
Cost
At 30 June 2019
Additions
Right of
use assets
Development
expenditure
€
€
Contract
costs
€
Computer
software
€
Total
€
2,743,877
64,912,209
1,660,417
341,736
69,658,239
1,789,341
16,787,883
707,324
–
19,284,548
At 30 June 2020
4,533,218
81,700,092
2,367,741
341,736
88,942,787
Amortisation
At 30 June 2019
2,371,132
22,744,835
Charged in the year
679,987
8,822,419
271,833
384,025
243,173
25,630,973
68,474
9,954,905
At 30 June 2020
3,051,119
31,567,254
655,858
311,647
35,585,878
Net book amounts
At 30 June 2020
1,482,099
50,132,838
1,711,883
30,089
53,356,909
At 30 June 2019
372,745
42,167,374
1,388,584
98,563
44,027,266
Group 2019
Cost
At 30 June 2018
Additions
Right of
use assets
€
Development
expenditure
€
Contract
costs
€
Computer
software
€
Total
€
2,743,877
50,986,528
316,585
341,736
54,388,726
–
13,925,681
1,343,832
–
15,269,513
At 30 June 2019
2,743,877
64,912,209
1,660,417
341,736
69,658,239
Amortisation
At 30 June 2018
1,688,038
16,603,105
Charged in the year
683,094
6,141,730
49,884
221,949
174,722
18,515,749
68,451
7,115,224
At 30 June 2019
2,371,132
22,744,835
271,833
243,173
25,630,973
Net book amounts
At 30 June 2019
372,745
42,167,374
1,388,584
98,563
44,027,266
At 30 June 2018
1,055,839
34,383,423
266,701
167,014
35,872,977
56
FINEOS Corporation Holdings plc
Notes to the Consolidated Financial Statements (continued) Development expenditure
In total, research and development costs for the Group amounted to €28,426,978 (2019: €22,845,611) in the
reporting period, out of which €16,787,883 (2019: €13,925,681) qualifies for capitalisation under IAS 38 ‘Intangible
assets’. Qualifying development expenditure is amortised on a straight-line basis over its useful economic life, which
is considered to be between five and ten years. The amortisation expense amounts to €8,717,419 in 2020 (2019:
€6,036,730).
No borrowing costs were capitalised within Group development expenditure additions during the year (2019: €Nil).
The amortisation expense relating to previously capitalised borrowing costs is €105,000 (2019: €105,000).
12.
Property, Plant and Equipment
Group 2020
Cost
At 30 June 2019
Additions
Translation adjustment
Right of
use assets
€
Office
equipment
€
Computer
equipment
€
Fixtures and
fittings
€
Total
€
8,894,069
545,734
(36,362)
685,451
108,860
(3,638)
2,996,543
1,003,537
1,701,812
14,277,875
191,786
1,849,917
(13,355)
(3,718)
(57,073)
At 30 June 2020
9,403,441
790,673
3,986,725
1,889,880
16,070,719
Depreciation
At 30 June 2019
Charged in the year
Translation adjustment
2,613,940
1,177,699
(21,136)
623,448
2,120,443
1,624,320
42,374
(8,894)
622,453
(2,812)
49,563
(5,316)
6,982,151
1,892,089
(38,158)
At 30 June 2020
3,770,503
656,928
2,740,084
1,668,567
8,836,082
Net book amounts
At 30 June 2020
5,632,938
133,745
1,246,641
221,313
7,234,637
At 30 June 2019
6,280,129
62,003
876,100
77,492
7,295,724
Annual Report 2020
57
Right of
use assets
€
Office
equipment
€
Computer
equipment
€
Fixtures and
fittings
€
Total
€
Group 2019
Cost
At 30 June 2018
Additions
Lease modification
Disposals/retirements
4,818,466
190,016
3,916,847
-
726,557
28,879
-
-
1,871,394
2,720,325
10,136,742
832,091
-
-
605
-
(719,253)
(299,865)
1,051,591
3,916,847
(719,253)
(108,052)
Translation adjustment
(31,260)
(69,985)
293,058
At 30 June 2019
8,894,069
685,451
2,996,543
1,701,812
14,277,875
Depreciation
At 30 June 2018
Charged in the year
Disposals/retirements
1,908,471
709,255
-
638,158
42,213
-
Translation adjustment
(3,786)
(56,923)
285,533
1,394,273
2,474,261
440,637
-
165,271
(719,253)
(295,959)
6,415,163
1,357,376
(719,253)
(71,135)
At 30 June 2019
2,613,940
623,448
2,120,443
1,624,320
6,982,151
Net book amounts
At 30 June 2019
6,280,129
62,003
876,100
77,492
7,295,724
At 30 June 2018
2,909,995
88,399
477,121
246,064
3,721,579
13.
Financial Assets
Company
Shares in Group undertakings – unlisted, at cost:
At beginning of period
Additions during period
At end of period
2020
€
2019
€
22,834,215
–
–
22,834,215
22,834,215
22,834,215
Details of subsidiary undertakings are included in Note 28 to the Consolidated Financial Statements.
58
FINEOS Corporation Holdings plc
Notes to the Consolidated Financial Statements (continued) 14.
Trade and Other Receivables
Group
Trade receivables
Unbilled receivables
Other receivables
Prepayments
Research and development tax credits
Value added tax recoverable
Corporation tax recoverable
Deferred tax asset (Note 9)
Company
Amounts owed by subsidiary undertakings
Trade and other receivables
2020
€
2019
€
17,566,095
639,097
210,380
1,481,820
2,289,342
1,130,024
120,888
498,508
7,400,917
1,405,217
192,830
2,344,511
3,771,908
439,399
170,935
311,568
23,936,154
16,037,285
2020
€
59,704,503
2019
€
–
The carrying amounts of trade receivables and other receivables approximate their fair value largely due to the short-
term maturities and nature of these instruments. All trade receivables are due within the Group’s and Company’s
normal terms, which are 30 days. Trade receivables are shown net of a provision for expected credit losses.
Unbilled receivables
The terms of the accrued income are based on underlying invoices.
Taxes and tax credits
Taxes and social welfare costs are subject to the terms of the relevant legislation.
15. Cash and Cash Equivalents
Group
Cash and cash equivalents
Company
Cash and cash equivalents
There are no restrictions on the cash held.
2020
€
2019
€
39,831,380
6,903,010
2020
€
2019
€
6,204
101
Annual Report 2020
59
16.
Trade and Other Payables
Current
Group
Trade payables
Corporation tax
Value added tax
PAYE and PRSI
Accruals
Deferred revenue
Research and development tax credit
Lease liabilities (Note 22)
Company
Amounts due to subsidiary undertakings
Non-current
Group
Long-term loan (Note 20)
Lease liability (Note 22)
Research and development tax credit
Trade and other payables
2020
€
2019
€
2,504,346
1,868,820
407,864
77,396
145,605
57,420
2,347,389
1,119,744
6,136,009
7,630,504
14,201,684
10,397,118
1,282,910
1,344,922
1,524,606
1,082,495
28,482,204
23,646,628
2020
€
–
2020
€
2019
€
100
2019
€
-
15,000,000
6,251,540
5,938,691
5,955,435
6,874,808
12,206,975
27,813,499
The carrying amounts of trade and other payables approximate their fair value largely due to the short-term
maturities and nature of these instruments. The repayment terms of trade payables vary between on demand and
30 days. No interest is payable on trade payables.
Reservation of title
Certain trade payables purport to claim a reservation of title clause for goods supplied. Since the extent to which
these payables are secured at any time depends on a number of conditions, the validity of some of which is not
readily determinable, it is not possible to indicate how much of the above was effectively secured.
Amount due to Group companies
The amounts due to Group and related companies are unsecured, interest free and are repayable on demand.
Accruals
The terms of the accruals are based on underlying invoices.
Taxes and social welfare costs
Taxes and social welfare costs are subject to the terms of the relevant legislation. Interest accrues on late payments.
No interest was due at the financial year end date.
Deferred revenue
Income arising on support contracts and rental subscription sales where the provision of the service has not been
completed at the year-end date is deferred and recognised as the service is provided.
60
FINEOS Corporation Holdings plc
Notes to the Consolidated Financial Statements (continued) 17. Called up Share Capital
Nominal
value
Ordinary
shares
€
Preferred
A shares
€
B Ordinary
Redeemable
shares
€
C Ordinary
Redeemable
shares
€
Total
€
Authorised share capital
(Group and Company)
At 30 June 2019
At 30 June 2020
€0.01
per share
€0.001
per share
4,312,175
79,782
24,629
83,414
4,500,000
4,500,000
–
–
–
4,500,000
The movement in the number of authorised shares during the financial year was as follows:
Ordinary
shares
Preferred
A shares
B Ordinary
Redeemable
shares
C Ordinary
Redeemable
shares
Total
number of
authorised
shares
At 30 June 2019
431,217,456
7,978,180
2,462,944
8,341,420
450,000,000
Resolution to subdivide
shares by 10
3,880,957,104
71,803,620
22,166,496
75,072,780 4,050,000,000
4,312,174,560
79,781,800
24,629,440
83,414,200 4,500,000,000
Conversion to Ordinary shares
187,825,440
(79,781,800)
(24,629,440)
(83,414,200)
–
At 30 June 2020
4,500,000,000
–
–
– 4,500,000,000
Nominal
value
Ordinary
shares
€
Preferred
A shares
€
B Ordinary
Redeemable
shares
€
C Ordinary
Redeemable
shares
€
Total
€
Issued share capital
presented as equity
At 30 June 2019
At 30 June 2020
€0.01
per share
€0.001
per share
152,971
4,411
365
66,655
224,402
272,030
–
–
–
272,030
Annual Report 2020
61
The movement in the number of issued shares during the financial year was as follows:
Ordinary
shares
Preferred
A shares
B Ordinary
Redeemable
shares
C Ordinary
Redeemable
shares
Total
number of
issued
shares
At 30 June 2019
15,297,109
441,124
36,440
6,665,486
22,440,159
Resolution to subdivide
shares by 10
137,673,981
3,970,116
327,960
59,989,374
201,961,431
152,971,090
4,411,240
364,400
66,654,860
224,401,590
Conversion to Ordinary shares
71,430,500
(4,411,240)
(364,400)
(66,654,860)
–
Share capital issued
At 30 June 2020
Ordinary share capital
47,628,261
272,029,851
–
–
–
–
–
–
47,628,261
272,029,851
A resolution was passed on 9 July 2019 to subdivide all issued and unissued ordinary shares of €0.01 each in the
capital of the Company by 10 so that the nominal value of each share in the Company shall be €0.001 rather than
€0.01 and to re-designate all the issued and unissued ‘A Ordinary Shares’ as ‘Ordinary Shares’ but with no change to
the rights attached to the shares.
On 15 August 2019, in preparation for the Company’s admission to the official list of the Australian Stock Exchange
(‘ASX’) and its initial public offering, the Company issued and allotted 39,980,121 new ordinary shares at a price of
AU$2.50 per Ordinary Share. In addition, the Preferred A Shares, B Ordinary Redeemable Shares and C Ordinary
Redeemable Shares were converted into Ordinary Shares.
Details of share options granted under the Company’s share option schemes and the terms attaching thereto are
provided in Note 19 to the Consolidated Financial Statements. Under these schemes, options over a total of 7,648,140
new ordinary shares of €0.001 per share were exercised during the financial year (2019: Nil) at a weighted average
exercise price of €0.18 per share.
At 30 June 2019
Premium arising on shares issued
Transaction costs accounted for as a deduction from equity
Transfer from share option reserve
At 30 June 2020
Reconciliation of shares issued to proceeds
Shares issued at nominal amount
Premium arising on shares issued
Total value of shares issued
Shares allotted to Non-executive Directors
Proceeds from issue of shares
Share premium
€
–
62,588,957
(4,057,696)
58,531,261
1,371,993
59,903,254
2020
€
47,628
62,588,957
62,636,585
(24,510)
62,612,075
8,000 Ordinary shares were allotted to each of Anne O’Driscoll and Martin Fahy for their services in relation to
pre-IPO work.
62
FINEOS Corporation Holdings plc
Notes to the Consolidated Financial Statements (continued) 18.
Reserves
Foreign exchange reserve
The foreign exchange reserve represents gains/losses arising on retranslating the net assets of overseas operations
into Euro.
Retained earnings
The retained earnings represent cumulative gains and losses recognised, net of transfers to/from other reserves and
dividends paid.
Other undenominated capital
This reserve records the nominal value of shares repurchased by the Company.
Share option reserve
The share option reserve represents the movement in share-based payments. The movement in the cumulative
expense since the previous year end date is recognised in the statement of comprehensive income, with a
corresponding entry in ‘share option reserve’.
Re-organisation reserve
FINEOS Corporation Holdings plc (‘FINEOS’) was incorporated on 12 December 2018 and the Directors elected at that
date to account for the restructure of the Group as a capital re-organisation rather than a business combination.
The reorganisation reserve represents the difference between the fair value of the shares issued to effect the
reorganisation and the nominal value of the shares acquired. See Note 2(a) to the Consolidated Financial Statements
for further detail.
19.
Share-Based Payment Expense
The total share-based payment expense for the Group’s equity incentive schemes charged to general and
administration costs in the consolidated statement of comprehensive income is as follows:
Share-based payment expense
Details of the schemes operated by the Group are set out below.
2019 Equity Incentive Plan
2020
€
2019
€
2,274,055
797,361
A new Equity Incentive Plan (the ‘2019 Equity Incentive Plan’) was adopted by the Board on 24 June 2019 and approved
by the shareholders of the Company on 9 July 2019. It became effective on Listing. The 2019 Equity Incentive Plan,
administered by the Remuneration and Nomination Committee, allows for the grant of the following awards to
employees: options, restricted share awards, RSU awards and performance awards. Total awards under the 2019
Equity Incentive Plan are subject to a limit of 5% of the ordinary issued share capital of the Company at any time. The
exercise of awards may be conditional upon the satisfaction of performance factors during a performance period as
determined by the Remuneration and Nomination Committee and set out in each award agreement.
In December 2019, the Remuneration and Nomination Committee approved the award of 4,475,000 share options
under the 2019 Equity Incentive Plan to all eligible employees of the Group at the date of grant. The options have an
exercise price of AU$2.5038 (€1.55 using a spot AUD/EUR FX rate of 1.6177), are subject to a three-year service period
(no further performance criteria) and will expire seven years after the date of grant. An expense of €386,370 was
recognised during the financial year relating to the current year award of options under the 2019 Equity Incentive
Plan.
Annual Report 2020
63
2012 Share Option Plan, 2015 Share Option Plan and 2019 Share Option and Retention Plan
Prior to listing, FINEOS International Limited, the previous ultimate parent undertaking of the Group, operated a
2012 Share Option Plan and a 2015 Share Option Plan. The options awarded were subject to a three-year service
period and the occurrence of a ‘triggering event’, being the acquisition by any person, or group of persons acting in
concert (excluding any persons connected or related to the existing shareholders), of control of the Company as a
result of purchasing and/or subscribing for shares under a trade sale or IPO.
In February 2019, the Group modified the terms and conditions of the share options granted under its 2015 Share
Option Plan and granted new options under a 2019 Share Option and Retention Plan. The options granted under the
2019 Share Option and Retention Plan were issued as replacements for options granted under the Company’s 2012
Share Option Plan, which lapsed on 1 February 2019 without having vested.
On 24 June 2019, as part of the restructure, all options were exchanged for options in the new parent Company,
FINEOS Corporation Holdings Limited, on a one-for-one basis. The awards were to vest six months after listing.
These 2015 and 2019 share option plans have now closed, and no further awards were issued under these plans
during the year. An expense of €1,887,685 was recognised during the financial year (2019: €797,361) relating to the
prior year modification of options under the 2015 Share Option Plan and the grant of options under the 2019 Share
Option Plan.
Details of movement and options outstanding under the Group’s Equity Incentive Plans
The following table illustrates the number and weighted average exercise prices (WAEP) of, and movements in, share
options granted under the schemes to Group employees during the year. During the year ended 30 June 2020, the
Company issued 7,648,140 shares of €0.001 per share on foot of the vesting of share option awards granted under
the terms of the 2012 and 2015 Share Options Plans (see Note 17 to the Consolidated Financial Statements). The
weighted average exercise price at the date of exercise for options exercised during the year was €0.18.
Outstanding as at 1 July at €0.01 per share
Resolution to subdivide shares by 10
Options granted during year
Options exercised during year
Options forfeited during year
Options expired during year
2,044,064
18,396,576
20,440,640
4,475,000
(7,648,140)
(50,000)
–
2020
No.
2020
WAEP
2019
No.
1.83
2,064,839
2019
WAEP
1.85
–
1.85
–
–
–
–
2,064,839
–
–
–
–
0.18
1.55
0.18
1.55
–
(20,775)
2.12
Outstanding at 30 June at €0.001 per share
17,217,500
0.53
2,044,064
1.83
Exercisable at 30 June
12,792,500
0.18
–
–
If the subdivision of shares by 10 had occurred in the prior year, the weighted average exercise price at the prior year
end would have been €0.18.
For the share options not yet exercisable as at 30 June 2020 the weighted average remaining contractual life is 2.5
years (30 June 2019: 1 year). The fair value of equity-settled share options granted is estimated as at the date of grant
using a Black-Scholes model, taking into account the terms and conditions upon which the options were granted.
The Black-Scholes model is internationally recognised as being appropriate to value employee share schemes. The
Company has used expected share price volatilities of comparable listed companies.
The following table lists the inputs to the model used for the year ended 30 June 2020:
64
FINEOS Corporation Holdings plc
Notes to the Consolidated Financial Statements (continued) Dividend yield
Expected volatility
Risk free interest rate
Average expected life remaining in years
20. Bank Loans
Group
Due after one year
2020
%
0
42.13
0.80
5
2019
%
0
16.50
0.93
7
2020
€
2019
€
–
15,000,000
Following completion of its initial public offering in Australia, the Group repaid the bank loan and outstanding
interest in full on 13 September 2019.
21. Commitments and Contingencies
(a)
Capital commitments
At the year end the Group had no capital commitments.
(b)
Contingent liabilities
At the year end the Group had no contingent liabilities.
(c)
Lease commitments
The Group has total future minimum lease payments under non-cancellable lease commitments as follows:
At 30 June 2020
Due within one year
Due within two to five years
Due after five years
At 30 June 2019
Due within one year
Due within two to five years
Due after five years
Land and
buildings
€
1,313,744
3,791,472
3,118,624
Software
licences
€
655,291
883,460
Total
€
1,969,035
4,674,932
–
3,118,624
8,223,840
1,538,751
9,762,591
Land and
buildings
€
1,112,257
3,960,640
3,898,280
8,971,177
Software
licences
€
Total
€
414,333
1,526,590
–
–
3,960,640
3,898,280
414,333
9,385,510
Annual Report 2020
65
22.
Lease Liabilities
Group
Current lease liabilities
Non-current lease liabilities
Total lease liabilities
The Group’s total lease liability over the years are as follows:
Opening liability
Additions for the year
Interest for the year
Lease expense for the year
Closing lease liability
2020
€
2019
€
1,524,606
1,082,495
6,251,540
5,938,691
7,776,146
7,021,186
2020
€
2019
€
(7,021,186)
(4,261,063)
(2,355,075)
(4,106,863)
(507,917)
(263,277)
2,088,032
1,610,017
(7,776,146)
(7,021,186)
Short-term lease expenses in the statement of comprehensive income
–
–
The Group’s leases include rental of office spaces for business use and right-of-use licences. All leases are on a fixed
repayment basis and no arrangements have been entered into for contingent rental repayments. The lease terms
range from two to 15 years depending on the term set in the contract. The effective interest rate charged during the
financial year ranged from 3.2% to 7% (2019: 7%) per annum. The lower rate of 3.2% reflects the Group’s overdraft
facility rate and the higher rate of 7% reflects the borrowing rate on the loan drawn by the Group in 2017 and repaid
in September 2019.
The right-of-use asset of licences is classified as ‘intangible assets’, while the right-of-use asset of office rentals is
classified as ‘property, plant and equipment’. The movement in the carrying amount of the right-of-use assets of the
Group at the start and end of each reporting period is disclosed in Notes 11 and 12 to the Consolidated Financial
Statements.
23. Controlling Party
Michael Kelly is the ultimate controlling party of the FINEOS Group.
24.
Pension Commitments
The Group operates a defined contribution pension scheme. Pension benefits are funded over the employee’s period
of service by way of contributions to an insured fund. The Group’s contributions are charged to the statement of
comprehensive income in the year to which they relate and amounted to €2,839,647 (2019: €2,285,974). An amount
of €368,211 was payable at the year end (2019: €300,847).
66
FINEOS Corporation Holdings plc
Notes to the Consolidated Financial Statements (continued) 25.
(i)
Financial Instruments
Liquidity risk
Liquidity risk refers to the risk that the Group encounters difficulties in meeting its short-term obligations. Liquidity
risk is managed by matching the payment and receipt cycle. The following table details the Group’s remaining
contractual maturity for its liabilities. The table has been drawn up based on contractual undiscounted cash flows of
financial instruments based on the earlier of the contractual date or when the Group is expected to receive or (pay).
The table includes both interest and principal cash flows.
30 June 2020
Group
Financial liabilities
Finance lease
Total
€
Within
1 year
€
Between
1 – 5 years
€
Over
5 years
€
25,674,688
25,674,688
–
–
7,776,146
1,524,606
3,551,873
2,699,667
Research and development tax credit
7,238,345
1,282,910
3,675,490
2,279,945
Bank loan
30 June 2019
Group
Financial liabilities
Finance lease
–
–
–
–
40,689,179
28,482,204
7,227,363
4,979,612
Total
€
Within
1 year
€
Between
1 – 5 years
€
Over
5 years
€
21,219,211
21,219,211
–
–
7,021,186
1,082,495
3,239,027
2,699,664
Research and development tax credit
8,219,730
1,344,922
4,240,214
2,634,594
Bank loan
Fair values
15,000,000
–
15,000,000
–
51,460,127
23,646,628
22,479,241
5,334,258
The fair value of a financial instrument is 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.
Financial instruments whose carrying amounts approximate fair value
Management has determined that the carrying amounts of cash and bank balances, trade and other receivables and
trade and other payables reasonably approximate their fair values because these are mostly short-term in nature.
The fair values of other classes of financial assets and liabilities are disclosed in their respective notes to these
financial statements.
Annual Report 2020
67
The analysis of the carrying amounts of the financial instruments of the Group required under IFRS 9 Financial
Instruments is as set out below:
Financial assets that are debt instruments measured at amortised cost
Trade receivables
Cash and cash equivalents
Financial liabilities at amortised cost
Trade payables
Long-term loan
Lease liabilities
Group
2020
€
Group
2019
€
17,566,095
7,400,917
39,831,380
6,903,010
2,504,346
1,868,820
–
15,000,000
7,776,146
7,021,186
The main risks arising from the Group’s financial instruments are credit risk, market risk, foreign currency risk,
interest rate risk and liquidity risk. The Board reviews and agrees policies for managing each of these risks and they
are summarised below:
(ii)
Credit risk
Credit risk is the potential financial loss resulting from the failure of a customer or counterparty to settle its financial
and contractual obligations to the Group, as and when they fall due.
The Group’s exposure to credit risk is mainly influenced by the individual characteristics of each customer. The Group
has established credit limits for each customer under which these customers are analysed for credit-worthiness
before the Group’s standard payment and delivery terms are offered. Most of the customers have been with the
Group for many years and losses have occurred infrequently. In most cases, the Group does not require collateral in
respect of trade and other receivables. The Group monitors their balances regularly.
Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. The Group
always recognises lifetime expected credit losses (‘ECL’) for trade receivables. The ECL on these financial assets are
estimated using a provision matrix as shown below, based on the Group’s historical credit loss experience, adjusted
for factors that are specific to the receivables, general economic conditions and an assessment of both the current as
well as the forecast direction of conditions at the reporting date, including time value of money where appropriate.
Expected credit losses analysis:
At 30 June 2020
Current
1 month
2 months
3 months 4+ months
Balance
Trade receivables as at 30 June
2020
Expected credit losses %
Loss allowance
9,296,686
5,867,591
1,315,239
1,139,313
19,316
17,638,145
0%
–
0%
–
1%
5%
13,152
56,966
10%
1,932
72,050
At 30 June 2019
Current
1 month
2 months
3 months 4+ months
Balance
Trade receivables as at 30 June
2019
Expected credit losses %
Loss allowance
5,995,120
1,161,378
231,575
(80,573)
101,893
7,409,393
0%
–
0%
–
1%
5%
10%
2,316
(4,029)
10,189
8,476
FINEOS has not noted a significant impact on it’s customer base due to COVID-19. The increase in the provisioning
for expected future credit losses is primarily driven by the increase in revenue.
68
FINEOS Corporation Holdings plc
Notes to the Consolidated Financial Statements (continued) (iii)
Market risk
Market risk is the risk that changes in market prices, such as interest rates and foreign exchange rates, will affect the
Group’s income. The objective of market risk management is to manage and control market risk exposures within
acceptable parameters, while optimising the return on risk.
(a)
Foreign currency risk
The Group’s foreign currency risk arises from sales and purchases denominated in foreign currencies, primarily the
United States dollar, Australian dollar and New Zealand dollar. During the year, the Group used foreign currency
forward exchange contracts to hedge its exposure; however at the year end the Group had no outstanding contracts
in place.
Sensitivity analysis
At 30 June 2020, if the foreign currencies strengthen or weaken 5% against the functional currencies, with all variables
held constant, the maximum adjustment to the pre-tax profit/loss of the Group, respectively, for the financial years
presented would have been as set out below:
NZ $
AU $
US $
CAN $
GBP £
PLN
2020
€
407,543
152,402
1,214,584
246,329
92,008
2019
€
423,850
139,642
594,836
169,310
116,375
(84,264)
(72,670)
2,028,602
1,371,343
5% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and
represents management’s assessment of the possible changes in foreign exchange rate.
(b)
Interest rate risk
There are no variable rate instruments on the balance sheet. The fixed interest rate long-term debt in place at 30
June 2019 has been repaid (see Note 20 to the Consolidated Financial Statements). The Group does not account for
any fixed rate financial liabilities at FVTPL, therefore a change in interest rates at the reporting date would not affect
profit or loss.
Fixed rate instruments – nominal amount
Financial liabilities
2020
€
2019
€
–
15,000,000
Annual Report 2020
69
26.
Related Party Transactions
A Group subsidiary, FINEOS Corporation Limited (Ireland), is party to a lease arrangement with Jacquel Properties
Limited, a company controlled by Michael Kelly. Its term extends until 13 June 2029 with no express options for
renewal in favour of either party. The lease provides for a rent review on 13 June 2024 at market rates. Rent payable
by FINEOS is currently €779,656 per annum (excluding taxes). The rental expense for the year was €779,656 (2019:
€418,720). The total rent due to Jacquel Properties Limited at 30 June 2020 was €Nil (2019: €Nil).
Consulting fees invoiced by Non-executive Directors during the year amounted to €9,862 (2019: €55,000).
In common with other companies, which are members of a group of companies, the financial statements reflect the
effect of such membership.
Key management personnel
All Directors of the FINEOS Group are considered key management personnel. The current Directors are set out on
page 7 of the Annual Report. Total remuneration in respect of these individuals is split as follows:
Wages and salaries
Employer’s PRSI
Pension
Shares allotted to Directors
Share awards gain on exercise
2020
€
2019
€
1,226,598
1,082,069
44,375
41,207
24,510
921,117
32,710
27,342
-
-
2,257,807
1,142,121
During the financial year ended 30 June 2020, there were no material changes to, or material transactions between,
the Company and its key management personnel or members of their close family, other than in respect of
remuneration.
27. Capital Management Policies and Objectives
Capital management
The Group’s and Company’s objectives when managing capital are to safeguard the Group’s and Company’s ability
to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and
to maintain an optimal capital structure to reduce the cost of capital. The capital structure of the Group consists of
debts, which includes the borrowings and equity attributable to owners of the Company, comprising issued capital
and reserves.
There were no changes in the Group’s and Company’s approach to capital management during the year. The Group
and Company monitor capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total
equity. Net debt is calculated as total borrowings (including bank borrowings and excluding trade and other payables,
provisions for income tax and deferred tax liabilities as shown in the statement of financial position) less cash.
Given that all of the Group’s external borrowings were repaid during the year, the gearing ratio is not relevant for the
current year and has been reflected as nil.
70
FINEOS Corporation Holdings plc
Notes to the Consolidated Financial Statements (continued) The gearing ratio of the Group at 30 June 2020 was as follows:
Total borrowings
Less: cash and cash equivalents
Net (funds)/debt
Total equity
Total capital
Gearing ratio
Group
2020
€
Group
2019
€
–
15,000,000
(39,831,380)
(6,903,010)
(39,831,380)
8,096,990
83,181,856
22,609,288
83,181,856
30,706,278
Nil
35.81%
28.
Subsidiary Undertakings
The Company has the following subsidiary undertakings. All subsidiaries are wholly owned unless otherwise
indicated:
Subsidiary Undertaking
FINEOS International Ltd
FINEOS Europe Unlimited
Country of
Incorporation
Jersey
Jersey
Principal Activity
Holding Company
Holding Company
FINEOS Corporation Limited
(previously FINEOS Corporation U.C.)
Republic of Ireland
Innovator of enterprise claims management
and policy administration software
FINEOS UK Limited (previously FINEOS
Corporation Limited)
United Kingdom
Provision of professional services to its parent
undertaking
FINEOS Corporation
United States of
America
FINEOS Australia Pty Limited
Australia
FINEOS New Zealand Limited
New Zealand
FINEOS Polska S.p Z.o.o
FINEOS Canada Limited
Poland
Canada
FINEOS Hong Kong Limited
Hong Kong
Ellaville Invest SL
Spain
Provision of professional services and
sales and marketing services to its parent
undertaking
Provision of professional services and
sales and marketing services to its parent
undertaking
Provision of professional services to its parent
undertaking
Provision of product engineering services to
its parent undertaking
Provision of professional services to its parent
undertaking
Provision of sales and marketing services to
its parent undertaking
Provision of product engineering services to
its parent undertaking
Annual Report 2020
71
Details of registered offices are listed below:
Incorporated in Jersey
FINEOS International Ltd
FINEOS Europe Unlimited
Incorporated in Ireland
FINEOS Corporation Limited
(previously FINEOS Corporation U.C.)
Registered Address
2nd Floor, The Le Gallais Building,
54 Bath Street, St. Helier,
Jersey JE1 1FW
Registered Address
FINEOS House,
East Point Business Park,
Dublin 3, D03 FT97
Incorporated in United Kingdom
Registered Address
FINEOS UK Limited
(previously FINEOS Corporation Limited)
5 Clapham Chase, Bedford,
Bedfordshire, MK41 6FA, UK
(previously 5 Amberly Gardens, Bedford, Bedfordshire)
Incorporated in United States of America
Registered Address
60 State Street, Suite 700,
Boston, MA 02109
United States of America
Registered Address
Level 8, 224–228 Queen Street, Melbourne,
VIC 3000, Australia
Registered Address
Offices of DLA Phillips Fox,
Level 22, DLA Phillips Fox Tower, 209
Queen Street, Auckland 1010, New Zealand
Registered Address
2 Szymanowskiego Street,
80-280 Gdansk, Poland
Registered Address
900-1959 Upper Water Street,
Halifax, NS, Canada B3J 3N2
Registered Address
16th floor, Wing On Centre,
111 Connaught Road Central,
Hong Kong
Registered Address
Calle Principe de Vergara 112,
28002 Madrid, Spain
FINEOS Corporation
Incorporated in Australia
FINEOS Australia Pty Limited
Incorporated in New Zealand
FINEOS New Zealand Limited
Incorporated in Poland
FINEOS Polska S.p Z.o.o
Incorporated in Canada
FINEOS Canada Limited
Incorporated in Hong Kong
FINEOS Hong Kong Limited
Incorporated in Spain
Ellaville Invest SL
72
FINEOS Corporation Holdings plc
Notes to the Consolidated Financial Statements (continued) 29.
Events Subsequent to the Year End
On 14 August 2020, FINEOS acquired Limelight Health, Inc. (‘Limelight’), a leading US-based provider of end-to-end
quoting, rating and underwriting Software-as-a-Service (’SaaS’) that streamlines critical front office workflows for life,
accident and health insurance carriers, for total acquisition consideration of US$75 million, subject to customary
adjustments.
FINEOS undertook an equity raising on 11 August 2020 to provide funding towards the acquisition. FINEOS
successfully completed a fully underwritten institutional placement, raising approximately AU$85 million through the
issue of approximately 20 million new fully paid CHESS Depositary Interests over FCL shares (‘CDIs’). The placement
was undertaken at an offer price of AU$4.26 per new CDI. FINEOS is also undertaking a non-underwritten Security
Purchase Plan (‘SPP’) to raise up to AU$5 million, which will complete in September 2020.
30.
Prior Year Comparatives
Costs have been reclassified in the comparative year ended 30 June 2019 to ensure comparability.
The reclassifications have had no impact on operating profit or loss on ordinary activities before tax in the comparative
year.
Cost of sales for the year ended 30 June 2019 has reduced by €2,283,265 arising from the reclassification.
31. Approval of Consolidated Financial Statements
The consolidated financial statements and Company statement of financial position in respect of the year ended
30 June 2020 were approved and authorised for issue by the Directors on 25 August 2020.
Annual Report 2020
73
Information required by ASX Listing Rules and not disclosed elsewhere in this document is set out below.
Information is correct as at 21 August 2020, unless otherwise indicated.
(1)
(2)
There are 272,029,851 CHESS Depositary Interests (CDIs) on issue.
The number of securities held by substantial shareholders are set out below:
JACQUEL INVESTMENTS LIMITED
(3)
FINEOS has issued the following securities:
(a)
(b)
291,982,903 CDIs held by 1,642 CDI holders; and
17,373,500 unquoted options held by 595 option holders.
(4)
Voting Rights:
Balance as at
21-08-2020
162,333,430
%
55.6%
Since Chess Deposit Nominees Pty Limited (CDN) is the legal holder of applicable shares but the holders of CDIs are
not themselves the legal holders of their applicable shares, the holders of CDIs do not have any directly enforceable
right to vote under the FINEOS constitution.
In order to vote at general meetings, CDI holders have the following options:
a)
b)
c)
instructing CDN, as the legal owner of the underlying shares, to vote the shares underlying their
CDIs in a particular manner;
informing FINEOS that they wish to nominate themselves or another person to be appointed as
CDN’s proxy with respect to the shares underlying their CDIs for the purposes of attending and
voting at the general meeting; or
converting their CDIs into a holding of shares and voting these at the meeting (however, if thereafter
the former CDI holder wishes to sell their investment on ASX it would be necessary to convert the
shares back to CDIs).
Option holders are not afforded any voting rights by the options held by them.
(5)
Distribution of Security Holders
Distribution spread of Security Holdings as at 21-08-2020
Holding Ranges
1-1,000
1,001-5,000
5,001-10,000
10,001-100,000
100,001-9,999,999,999
Totals
Holders
Total Units
775
530
152
153
32
370,710
1,375,433
1,155,510
3,902,882
285,178,368
1,642
291,982,903
%
0.13
0.47
0.39
1.34
97.67
100.00
(6)
Unmarketable Parcels of Shares
Unmarketable Parcels (UMP) as at 21-08-20 (based on a share price of $5.43)
Total Securities/Issued Capital
UMP Securities
UMP Holders
UMP Percent
291,982,903
434
32
0.00015
74
FINEOS Corporation Holdings plc
Additional Security Holder Information
Additional Security Holder Information (continued)
(7)
Top 20 Security Holders
JACQUEL INVESTMENTS LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
CITICORP NOMINEES PTY LIMITED
NATIONAL NOMINEES LIMITED
CARMEN INVESTMENTS LIMITED
BNP PARIBAS NOMINEES PTY LTD
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