F R E E L A N C E R L I M I T E D A C N 1 4 1 9 5 9 0 4 2
ANNUAL REPORT
2018
Index
PAGE
CONTENTS
01
37
41
52
53
54
55
56
57
89
90
95
97
Chairman’s Letter
Directors’ Report
Review of Operations
Auditor’s Independence Declaration
Consolidated Statement of Profit or Loss and
Other Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Financial Statements
Directors’ Declaration
Independent Auditor’s Report
Additional ASX Information
Corporate Directory
CHAIRMAN’S LETTER
Chairman’s
Letter
1 FREELANCER LIMITED ANNUAL REPORT 2018
CHAIRMAN’S LETTER
Arrow brings to the partnership a large volume of high quality,
high value projects from well-funded companies with a real
demand for innovation and talent. The projects will span across
many industry verticals including aerospace & defence, cloud,
lighting, sustainability, IoT, mobility, power management, data
centers, transport and security.
Arrow is the first commercial customer to be publicly announced
from Freelancer Enterprise Solutions. I encourage you to visit
http://freelancer.arrow.com to see what we have built.
Escrow
Escrow.com is truly in growth mode with GPV up 33.3% in the
year to $570.6 million. As I mentioned before, excluding China,
we beat the previous all-time high by a little over 20%. During the
year we launched quite a number of product offerings including
Escrow Pay, the simplest way to add escrow payments to any
website, mobile app, online store, classified site or marketplace.
We also launched Escrow Offer, which empowers buyers and
sellers to negotiate a price for domain names, cars, boats,
aircraft or any high-value item online.
Our integration partners are across a wide range of industries
including automotive, aircraft, domain name, IPv4 address,
heavy equipment, intellectual property, diamond and import/
export marketplaces. We are rapidly building out our sales and
account management capabilities. In the year we also launched
in Australian Dollars and Pounds Sterling.
Thanks to the tremendous effort of our global compliance team,
we now have 45 money transmitter or escrow licenses granted
or in-application across the United States of America as well as
Dear Shareholders,
The year 2018 was an inflection point for the Freelancer Limited
group with revenue of $51.9 million (up 3.2% on pcp), and
Gross Payment Volume (GPV) of $740.6 million (up 26% on
pcp). Breaking down GPV by segment, Freelancer hit an all-time
record of $170.1 million (up 6.7% on pcp), and Escrow achieved
GPV of $570.6 million (up 33.3% on pcp). For the year, Escrow
GPV ex-China hit an all-time record, beating the previous high
by 20.2%. For the period, Operating cash flow and Operating
NPAT were nearing break-even at $(0.7) million and $(0.9) million
respectively. As at 31 December 2018, the Company had $33.2
million in cash and cash equivalents (up 4% on pcp).
A detailed analysis of the activities of the group are provided in
the Review of Operations in the Directors’ Report.
Freelancer
In FY18 we added 4.7 million registered users and 2.1 million
an Australian Financial Services Licence.
jobs were posted on Freelancer.com. Project fees, the main
revenue line of the business, continued to hit all-time highs
Freightlancer
throughout the year.
2018 was the first full year of Freelancer Enterprise and I am
particularly excited about the opportunities working with some
of the largest organisations on the planet. Our pipeline includes
Fortune 500 customers in the areas of aerospace, electronics,
telecommunications, technology, pharmaceuticals, professional
services and consumer goods. We also have government
customers including NASA and the US Department of Energy.
We launched a smaller, but no less exciting business towards
the end of FY18. Freightlancer is a global enterprise freight
marketplace. It services primarily mining, construction and
infrastructure markets, typically saving around 30% on freight
through access to competitive bids from over 8,000 transport
operators. Stay tuned for more exciting things from this
business.
Summary
Our customer pipeline also spans North America, Europe, Asia-
The year 2019 is shaping up to be a defining year for the Group.
Pacific and Latin America.
I am also excited to be able to start talking about some of
these customers in greater detail as they move into production.
Just a few days ago, Freelancer and Arrow Electronics
The team is busy with our heads down focused on execution.
The Board and myself wish to thank our staff, shareholders and
32+ million users across the group for their support.
(NYSE:ARW) jointly announced the launch of ArrowPlus powered
Regards,
by Freelancer, the world’s largest electronics and electrical
engineering services marketplace, which will revolutionise the
way that hardware products get designed and manufactured.
Arrow Electronics is a global leader in electronics and cloud
services, with 2018 sales of $30 billion and ranked 113th in the
Fortune 500 of 2018. The partnership with Freelancer allows
Arrow to transform their services business so they can provide
electronic and electrical engineering design for over 200,000
leading technology manufacturers and service providers from all
over the world.
Matt Barrie
Chairman
15 March 2019
FREELANCER LIMITED ANNUAL REPORT 2018 2
MARKETPLACE STATISTICS
32m
TOTAL REGISTERED USERS
FY00
FY01
FY02
FY03
FY04
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18
3 FREELANCER LIMITED ANNUAL REPORT 2018
34
32
30
28
26
24
22
20
18
16
14
12
10
8
6
4
2
0
15.1m
TOTAL JOBS POSTED
MARKETPLACE STATISTICS
16
15
14
13
12
11
10
9
8
7
6
5
4
3
2
1
0
FY00
FY01
FY02
FY03
FY04
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FREELANCER LIMITED ANNUAL REPORT 2018 4
ABOUT FREELANCER
Freelancer.com
is the world’s
largest
freelancing
marketplace
With over 32 million registered users Freelancer is
the world’s largest freelancing and crowdsourcing
marketplace by total number of users and jobs posted.
We’re changing lives in the developing world by providing
opportunity and income.
Five billion people on the planet live on $10 a day or less.
On Freelancer they can earn $10 an hour or more, as they
develop their skills, education and reputation.
5 FREELANCER LIMITED ANNUAL REPORT 2018
ABOUT FREELANCER
FREELANCER LIMITED ANNUAL REPORT 2018 6
MARKETPLACE STATISTICS
We are changing lives
in the developing world
by providing opportunity
and income
“I had a tough time putting my products online. Thankfully a friend
recommended I try hiring someone from Freelancer.com. I’m so glad I
did because the person I hired turned out to be awesome! Sakshi fixed
the website and even helped in tasks that weren’t part of our deal, free of
charge. Her team’s communication and responsiveness were excellent, and
most importantly, they understood my instructions perfectly. I am so happy
to have found Freelancer and more importantly, Sakshi.”
Rynette Tan
Mompreneur - 13thirteen’s Founder
Singapore
7 FREELANCER LIMITED ANNUAL REPORT 2018
MARKETPLACE STATISTICS
FREELANCER LIMITED ANNUAL REPORT 2018 8
MARKETPLACE STATISTICS
9 FREELANCER LIMITED ANNUAL REPORT 2018
MARKETPLACE STATISTICS
We continue
defining the future
of online work
“A year and a half ago, I left full-time employment behind, moved from
Melbourne to Sydney and begun creating lots and lots of artwork full-time
for myself. In hopes of growing my business, even more, I had a website
built on Freelancer.com. To crowdsource the website development in
a competitive market made sense, where I could look to work with a
professional at an affordable rate. I was really pleased and would happily
recommend Gaurav to others! I’m getting him to do another side project
because I’m extremely confident in his abilities!”
Camille Reed
Freelance Textile Designer
Sydney, Australia
FREELANCER LIMITED ANNUAL REPORT 2018 10
MARKETPLACE STATISTICS
We help small
businesses, startups
and entrepreneurs turn
that spark of an idea
into reality
“This was my first experience as an entrepreneur. I had to hit the ground
running, so finding the perfect person was critical. With Freelancer.com, I
had an open door to millions of professionals around the world. Being given
the chance to screen people for the project quickly paid its dividends. For
those entrepreneurs unfamiliar with certain fields needed in a project, look
no further.”
Joan Maria Muntane
Entrepreneur - SportMap’s Founder
Barcelona, Spain
11 FREELANCER LIMITED ANNUAL REPORT 2018
MARKETPLACE STATISTICS
FREELANCER LIMITED ANNUAL REPORT 2018 12
MARKETPLACE STATISTICS
Marketplace
Statistics
Freelancer is a game-changer for entrepreneurs, small
businesses, and large organisations. We provide easy
access to talented freelancers from all around the world,
who offer a wide range of services at competitive prices.
$205
AVERAGE COMPLETED
PROJECT SIZE IN USD
78%
OF JOBS RECEIVE A BID
WITHIN 60 SECONDS
556k
MESSAGES SENT
PER DAY
32m
TOTAL REGISTERED
USERS
15.1m
TOTAL JOBS POSTED
$4.5b
$4,500,000,000+ USD
IN JOBS POSTED
13 FREELANCER LIMITED ANNUAL REPORT 2018
MARKETPLACE STATISTICS
FREELANCER CONTESTS
Get the perfect design by
crowdsourcing your ideas
By posting a Freelancer contest, anyone can crowdsource a job. Watch as
millions of freelancers compete to outclass each other in quality of work,
as they compete for your prize. The larger the prize, the better the entries,
and the freelancers will dynamically adapt their style to suit your feedback.
At the end, an IP handover process with the winners ensures you own each
entry you pay for.
NASA has been utilizing the contests platform since 2015, and in 2018
we launched the Astrobee Challenge Series together. We crowdsourced
solutions for 16 engineering and design challenges with a US$25,000 prize
pool.
In 2018 we continued to build on the core contest experience, including
functionality allowing contest holders to make an offer and negotiate
prices for extra contest entries after awarding the main prize. Additionally,
we overhauled the contest pages to be significantly more mobile-friendly,
ensuring you can post a contest anytime, anywhere.
116
AVERAGE ENTRIES
PER CONTEST
65%
OF CONTESTS
RECEIVE ENTRIES
WITHIN 1 HOUR
FREELANCER LIMITED ANNUAL REPORT 2018 14
MARKETPLACE STATISTICS
FREELANCER ENTERPRISE
Bringing the latent employment
demand from enterprises, to the
largest pool of talent in the world
At Freelancer, our vision is to transform the concept of work. We built a platform
that provides equal opportunities to any freelancer in the world. As a result, we have
gathered the largest global talent pool, with unparalleled liquidity that is unmatched
anywhere else.
The world’s most innovative companies understand this presents an opportunity
to tap into a workforce with minimal friction, which is why over 70% of Fortune 500
companies already use Freelancer in their operations. The skill demand from these
global giants continue to grow at an accelerating pace.
Freelancer Enterprise provides a solution that is fully embeddable into the
organisation’s workflow. These companies can now use Freelancer to supplement their
workforce and access specialised skills on demand, bypassing obstacles present in
traditional hiring and procurement processes.
Organisations such as NASA and U.S. Department of Energy have used Freelancer to
find the right talent and achieve their desired outcomes in days, not months; and at a
mere fraction of the cost.
15 FREELANCER LIMITED ANNUAL REPORT 2018
70%+
FORTUNE 500
COMPANIES
CURRENTLY USE
FREELANCER
50%
U.S. WORKFORCE
ESTIMATED TO BE
FREELANCERS BY
2020 (FORBES)
FREELANCER ENTERPRISE
Introducing ArrowPlus powered
by Freelancer
Freelancer has partnered with Arrow Electronics (NYSE:ARW), the leading global
distributor of electronic components and engineering services. Freelancer’s platform
will power Arrow’s services business, and Arrow will bring high quality engineering
projects to Freelancer.
The new platform ArrowPlus powered by Freelancer is designed to solve sophisticated
technology problems spanning consumer electronics, transportation, healthcare,
industrial, Internet of Things (IoT), telecommunications, biomedical, cloud security,
firmware, hardware, and connected products in every industry.
Our vision is to connect the huge demand for services from Fortune 500 companies
with the largest reliable, highly skilled, global workforce in the world - Freelancer.com.
Visit https://freelancer.arrow.com to see what we have built for Arrow. This is only the
first of many enterprise partnerships to come.
MARKETPLACE STATISTICS
#113
ARROW FORTUNE
500 RANKING 2018
$29.7b+
ARROW TOTAL
SALES 2018
200k
TECHNOLOGY
MANUFACTURERS &
SERVICE PRODIVERS
AND
FREELANCER LIMITED ANNUAL REPORT 2018 16
MARKETPLACE STATISTICS
FREELANCER MOBILE
The world’s largest freelancing
site in your pocket
According to Mary Meeker’s 2018 Internet Trends presentation, mobile is the main
powerhouse behind global ecommerce with this category having the highest growth
rate in mobile channels. Freelancer is one of the world’s largest ecommerce platforms
for services, and we recognise the importance of mobile by giving our users the choice
to use our platform on iOS, Android, or mobile web.
In 2018 we saw continued healthy growth of our mobile channel with funded projects
up 36% YoY from 2017, which aligns with an increasingly on-the-go gig economy.
We maintained our first-grade mobile experience by building additional features for
messaging, contests, and local jobs. We also improved the overall design and increased
technical resilience. We then continued to impress by winning the People’s Voice Award
for Mobile Sites & Apps: Professional Services at the 22nd Annual Web Awards 2018.
17 FREELANCER LIMITED ANNUAL REPORT 2018
1.1m
DOWNLOADS OF IOS
AND ANDROID APPS
88%
OF GOOD PROJECTS
TOUCH MOBILE
CHANNELS
4.2
RATING OF IOS &
ANDROID APPS IN
DEC 2018
MARKETPLACE STATISTICS
FREELANCER MEMBERSHIPS
Making it easier for freelancers
to earn more money
Introducing Freelancer Insights – an analytics tool for freelancers to enable
them to win more work. As an added benefit for higher tier membership
plans, we provide additional data that gives freelancers the insights they
need to stay ahead of the competition.
We switched the one-month trial membership to the lower Plus plan
to increase retention in memberships. Membership fees from Plus
membership plans have increased by 120% since January 2018. Overall, the
total count of users on active, paid membership plans (excluding trials) has
increased by 40% since January 2018.
120%
EARNINGS
GROWTH FOR PLUS
MEMBERSHIPS
40%
GROWTH IN USERS ON
ACTIVE MEMBERSHIP
PLANS
FREELANCER LIMITED ANNUAL REPORT 2018 18
MARKETPLACE STATISTICS
RECRUITER
Leave the work of finding the
perfect freelancer to an expert.
Recruiter is Freelancer.com’s flagship managed service, with a mission to
match any project with the perfect freelancer for the job. Augmenting our
standard matchmaking algorithm, our Recruiter team gathers the project
requirements, budget, timeframe and more, and uses these to handpick a
freelancer for the employer, from our exclusive pool of pre-curated Preferred
Freelancers.
In 2018, Recruiter projects grew 28%, leading to a significant 55% increase
in Gross Marketplace Volume delivered via Recruiter. This significant growth
continues to attract the top talent of the site to our Preferred Freelancer
Program, our elite group of hand selected, pre-curated freelancers who are
drawn from the top 1% of the freelancers with a given skillset.
28%
GROWTH IN
RECRUITER PROJECT
PROJECTS
55%
INCREASE IN GROSS
MARKETPLACE
VOLUME
19 FREELANCER LIMITED ANNUAL REPORT 2018
MARKETPLACE STATISTICS
FREIGHTLANCER
Ship anything, anywhere with
Freightlancer.com
Freightlancer.com is a marketplace that connects customers to thousands
of transport companies, shipping lines and customs brokers worldwide,
whist also doubling as a management system to track freight consignments
moving from A to B. With an average saving of 30% on annual freight
costs. We now have thousands of users switching to Freightlancer.com
and joining a smarter, safer and more transparent system for their global
logistics needs.
30%
AVERAGE SAVING
ON ANNUAL FREIGHT
COSTS
30
MINUTES AVERAGE
TIME TO FIRST QUOTE
6500+
TRANSPORT
OPERATORS
FREELANCER LIMITED ANNUAL REPORT 2018 20
MARKETPLACE STATISTICS
ESCROW.COM
Secure online payment
processing from the world’s
largest online escrow service
since 1999.
Escrow.com introduced Escrow Pay - the simplest way to add escrow
payments to any website, mobile app, online store, classified site or
marketplace with a single API call.
Additionally, Escrow Offer was released which empowers buyers and sellers
to negotiate a price for domain names, cars, boats, aircraft or any high-value
item online.
Escrow.com also added Australian Dollars to the list of supported
currencies which includes United States Dollars (USD) and Euros (EUR), and
subsequently launched in Australia. GBP currency support was also added
by the date of this report. Escrow extended its regulatory footprint with new
money transmission and escrow licenses which brings the total licensed
coverage of U.S. states to 45.
21 FREELANCER LIMITED ANNUAL REPORT 2018
1.2m
REGISTERED USERS
$4b+
USD IN PAID
TRANSACTIONS
5
SPOKEN LANGUAGES
BY OUR SUPPORT
TEAM
MARKETPLACE STATISTICS
MARKETPLACE STATISTICS
FREELANCER LIMITED ANNUAL REPORT 2018 22
MARKETPLACE STATISTICS
Steve Rader
Deputy Manager of Excellence for
Collaborative Innovation @ NASA
STARTCON
Australia’s largest startup &
growth conference. Sold out
nine years in a row.
StartCon (a Freelancer Limited company) hosts Australia’s largest startup
and growth conference, which is now in its tenth year. The conference held
in Q4 of 2018 saw over 4,000 attendees, 160 exhibitors and 65 International
and Domestic speakers attend. StartCon also launched Asia Pacific’s largest
startup pitch competition, the StartCon Pitch for $1 Million contest series,
in which over 600 startups pitched in front of over 400 investors in 14 cities
around the Asia Pacific region.
23 FREELANCER LIMITED ANNUAL REPORT 2018
4k
ATTENDEES
160
EXHIBITORS
600
PITCHING STARTUPS
WARRIORFORUM.COMMARKETPLACE STATISTICS FREELANCER LIMITED ANNUAL REPORT 2018 24The world’s #1 Internet marketing community & marketplace since 1997.Warrior Forum continues its expansion as the world’s top internet marketing forum. As a fountain of up to date content, Warrior Forum is the number one place that marketers and startups learn from experienced internet marketers. In 2018 we partnered with Dan Lok, best selling-author of F.U. Money to deliver one of the best sales courses available to our users.10.4m1.02m1.41mREGISTERED USERSPOSTSDISCUSSIONS This
architectural
design cost
$4,705
Real project completed at
freelancer.com. Have an idea? Post your
project today and get free quotes!
This
dashboard
design cost
$348
Real project completed at
freelancer.com. Have an idea? Post your
project today and get free quotes!
This logo
design cost
$20
Real project completed at
freelancer.com. Have an idea? Post your
project today and get free quotes!
This label
design cost
€50
Real project completed at
freelancer.com. Have an idea? Post your
project today and get free quotes!
2018 AWARDS
2018
Awards
In term of awards and recognition, Freelancer.com won
a total of 14 awards in 2018 including 2 Webby Awards,
6 Stevie International Business Awards, 5 APAC Stevie
Awards, and one in the 2018 Premier’s NSW Export
Awards. In this year, Escrow.com also won a total of
2 awards - all were in the 2018 Stevie International
Business Awards.
Premier’s NSW Export Awards 2018
The Webby Awards
The Premier’s NSW Export Awards is an annual program
The 22nd annual Webby Awards were held at Cipriani Wall
which aims to recognise excellence in the export of goods
Street in New York City, the United States, on May 14, 2018,
and services by NSW business. The Awards acknowledge the
which was hosted by comedian and writer Amber Ruffin. The
important contribution of businesses to the economy through
Webby Awards have been dubbed the “internet’s highest honor”
job creation and increased prosperity for the community and for
and, in 2018, received over 13,000 entries from 70 countries,
the state. Freelancer won the award for the category of Digital
Technologies.
with 10% receiving nominations. Freelancer.com won People’s
Voice Award in the 22nd Webby Awards for the category of
Mobile Sites & Apps: Professional Services, as well as an Official
Honoree in the Employment Category.
33 FREELANCER LIMITED ANNUAL REPORT 2018
2018 AWARDS
Stevie Awards
Stevie International Business Awards (IBA): For
Escrow.com, we won Gold Award for Company of the
Year - Financial Services - Small, and Bronze Award for
the Financial Services Company Category. Meanwhile,
for Freelancer.com, we won 2 Gold Awards for Business
Services Category, and the Executive of the Year -
Business or Professional Services (Matt Barrie, the
CEO); as well as 2 Silver Awards for Most Innovative
Company of the Year - Up to 2,500 Employees, and
Communications Department of the Year. Freelancer.
com also won 2 Bronze Awards for Most Innovative
Tech Company of the Year - Up to 2,500 Employees; and
Communications, Investor Relations or PR Executive of
the Year (Sebastián Siseles, Director of International).
Stevie Awards
The Stevie Awards are the world’s premier business
awards, which were created in 2002 to honor and
generate public recognition of the achievements and
positive contributions of organizations and working
professionals worldwide. There are seven Stevie Awards
programs, each with its own focus, list of categories, and
schedule; such as the International Business Awards
that are open to all organizations worldwide, and include
categories to honor accomplishments in all aspects of
Asia Pacific Stevies: We won 2 Gold Awards for
work life; and the Asia-Pacific Stevie Awards that are
Innovation in Shopping or E-commerce Websites,
open to all organizations in the 29 nations of the Asia-
and Innovative Management in Technology
Pacific region. In 2018, Freelancer.com won a total of 11
Industries; as well as 3 Silver Awards for Excellence
Stevie Awards, including 6 Stevie International Business
in Innovation in Technology Industries, Most
Awards (IBA) and 5 Asia Pacific Stevies. Escrow took out
Innovative Communications Team of the Year,
2 Stevie International Business Awards in total: 1 gold
and Innovation in Technology Development.
and 1 bronze.
FREELANCER LIMITED ANNUAL REPORT 2018 34
OUR ONLINE ECONOMY
Our Online
Economy
This map illustrates the Freelancer
online economy. The pink lines indicate
where projects are being posted by
employers, and the blue lines indicate
where the projects are being performed
by freelancers. Thicker lines indicate
a higher dollar volume of work. White
dots indicate the location of Freelancer’s
users. Edges are sampled data from
awarded projects in 2018.
35 FREELANCER LIMITED ANNUAL REPORT 2018
OUR ONLINE ECONOMY
FREELANCER LIMITED ANNUAL REPORT 2018 36
DIRECTORS’ REPORT
Directors’
Report
Your Directors submit the financial report of Freelancer
Limited (the Company) for the year ended 31 December 2018.
In order to comply with the provisions of the Corporations Act
2001, the Directors report as follows.
The names and particulars of the directors of the Company
during or since the end of the financial year (Directors) are:
37 FREELANCER LIMITED ANNUAL REPORT 2018
DIRECTORS’ REPORT
Matt
Barrie
Executive Chairman
(appointed 10 April 2010)
BE (Hons I) BSc (Hons I)
GDipAppFin MAppFin MSEE
(Stanford) GAICD SEP FIEAust
Founder and Executive Chairman of the
from Macquarie University, Masters in
Company.
Serial entrepreneur with extensive
experience and knowledge in the
technology sector. Previously co-founded
and was CEO of Sensory Networks Inc.,
a vendor of high performance network
security processors, which was acquired
by Intel Corporation Inc. in 2013.
BE (Hons I) BSc (Hons I) GDipAppFin
MAppFin MSEE (Stanford) GAICD SEP
FIEAust
Formerly Adjunct Associate Professor
at the Department of Electrical and
Information Engineering at the University
of Sydney. Co-author of over 20 US patent
applications.
Qualifications include first class honours
degrees in Electrical Engineering and
Computer Science from the University
of Sydney, Masters in Applied Finance
Electrical Engineering from Stanford,
California, Graduate of the Stanford
Executive Program at the Graduate
School of Business, Fellow of the Institute
of Engineers Australia and Councillor of
the Electrical and Information Engineering
Foundation at the University of Sydney.
Relevant interest in 199,188,627 fully
paid ordinary shares, including a relevant
interest in 5,771,696 fully paid ordinary
shares by virtue of having a voting power
of over 20% in the Company, which has
a relevant interest as a result of trading
restrictions over shares issued under the
Employee Share Plan.
Beneficial interest in 193,416,931 fully
paid ordinary shares (representing 42.49%
of issued capital).
Member of the Nomination and
Remuneration Committee and Audit
Committee.
FREELANCER LIMITED ANNUAL REPORT 2018 38
DIRECTORS’ REPORT
Darren
Williams
Non-Executive Director from 1
November 2015.
Executive Director until 31
October 2015 (appointed 10
April 2010)
BSc (Hons I) PhD (Computer
Science)
Non-Executive Director of Company.
relating to security technology, software
Was the Chief Technology Officer and
and networking.
Executive Director of the Company until
31 October 2015.
Qualifications include first class honours
degree in Computer Science and a Ph.D.
Extensive experience in computer
in Computer Science specialising in
security, protocols, networking and
computer networking from the University
software. Previously co-founded and
was CTO (and subsequently CEO) of
Sensory Networks Inc., a vendor of high
performance network security processors,
which was acquired by Intel Corporation
Inc. in 2013.
of Sydney.
Beneficial and relevant interest in
10,627,165 fully paid ordinary shares
(representing 2.33% of issued capital).
Member of the Nomination and
Remuneration Committee and Audit
BSc (Hons I) PhD (Computer Science)
Committee.
Previously lectured Computer Science
at the University of Sydney. Author of
numerous articles, patents and papers
39 FREELANCER LIMITED ANNUAL REPORT 2018
DIRECTORS’ REPORT
Simon
Clausen
Non-Executive Director
(appointed 10 April 2010)
Founding investor and Non-Executive
paid ordinary shares, including a relevant
Director of the Company.
interest in 5,771,696 fully paid ordinary
Extensive experience in operating and
investing in high growth technology
businesses in both Australia and the
United States. Previously founded and
was CEO of WinGuides, which later
became PC Tools and was acquired by
Symantec Corporation in October 2008.
shares by virtue of having a voting power
of over 20% in the Company, which has
a relevant interest as a result of trading
restrictions over shares issued under the
Employee Share Plan.
Beneficial interest in 160,000,000 fully
paid ordinary shares (representing 35.15%
Currently the sole director of Startive
of issued capital).
Ventures, a specialised technology
Member of the Nomination and
venture fund that actively maintains
Remuneration Committee and Audit
investments in a number of companies
Committee.
globally. Other directorships include
LatAm Autos Limited since 2014.
Relevant interest in 165,771,696 fully
FREELANCER LIMITED ANNUAL REPORT 2018 40
DIRECTORS’ REPORT
Company Secretary
Mr Neil Katz held the position of Company Secretary during and at the end of the financial year (appointed 9 March 2012). He has
been with the Group since 2009 and is also the Chief Financial Officer.
Principal activities
The principal activity of the consolidated entity (the Group) during the financial year was the provision of an online outsourcing
marketplace and escrow payment services.
There were no other significant changes in the nature of the principal activities during the financial year.
Review of operations
The Group’s loss attributable to equity holders of the Company, after providing for income tax, was nearing breakeven at $1,484,000
(2017 loss: $4,773,000).
Key Performance Highlights
Year ended 31 December
Financial metrics:
Gross Payment Volume1
Net Revenue2
Gross Profit
Gross margin (%)
Operating EBITDA3
Operating EBIT3
Operating NPAT3
Operating Cash Flow
Operational metrics:
New Jobs4 (millions)
Total Jobs Posted (millions)
New Registered Users (excluding Escrow, millions)
Total Registered Users5 (millions)
FY18
$m
741
51.9
44.2
85.2%
(0.7)
(1.2)
(0.9)
(0.9)
2.1
15.1
4.7
32.5
FY17
$m
588
50.3
44.1
87.5%
(3.7)
(4.4)
(3.8)
(0.6)
2.4
13.0
4.4
27.7
% Change
+26%
+3%
nm
-2.6%
nm
nm
nm
nm
-13%
+16%
+7%
+17%
Notes:
1.
2.
3.
4.
5.
Gross Payment Volume (GPV) is calculated as the total payments to Freelancer and Escrow users for products and services transacted through the Freelancer and Escrow
websites plus total Freelancer and Escrow revenue. GPV is an unaudited metric. Marketplace segment FY18 GPV A$170.1 million (up 6.7% on prior corresponding period),
Payments segment GPV A$570.6 million (up 33% on prior corresponding period).
Net Revenue excluding Escrow.com for FY18 was $44.7m (up 2% on prior corresponding period).
Excludes non-cash share based payments expense of $559k in FY18 and $986k in FY17.
Total Projects and Contests Posted was redefined in January 2016 to Total Jobs Posted (filtered). Jobs Posted (Filtered) is defined as the sum of Total Posted Projects and
Total Posted Contests, filtered for spam, advertising, test projects, unawardable or otherwise projects that are deemed bad and unable to be fulfilled.
User and project/contest data includes all users and projects/contests from acquired marketplaces. Prior to May 2009, all data is from acquired marketplaces. Includes Escrow.
com unique users.
6.
Gross margin % calculation in FY17 excludes $0.3m of proceeds from working capital adjustment on acquisition of Escrow.com, which is included in Net Revenue
Freelancer.com
The Company’s revenue is primarily generated from new and existing users posting and fulfilling projects and contests in the
Freelancer.com marketplace.
In FY18, Freelancer.com ended the year with 31.4 million users, adding 4.7 million users. The number of jobs posted (filtered) totalled
15.1 million at 31 December 2018, adding 2.1 million for the year.
In the year, Freelancer Gross Payment Volume hit an all-time record of $170.1 million, up 6.7% on the previous corresponding period.
The rate of growth of Gross Marketplace Value (earnings by freelancers) likewise improved in FY18 on FY17, but we still have some
way to go to return to previous year’s growth rates. We have been working to improve this throughout the year and have been getting
41 FREELANCER LIMITED ANNUAL REPORT 2018
Total Jobs Posted (Filtered)
Total Registered Users
DIRECTORS’ REPORT
15,000,000
10,000,000
5,000,000
0
35,000,000
30,000,000
25,000,000
20,000,000
15,000,000
10,000,000
5,000,000
0
FY00
FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10
FY11 FY12 FY13 FY14 FY15 FY16 FY17
FY18
FY00
FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10
FY11 FY12 FY13 FY14 FY15 FY16 FY17
FY18
FIGURE 1: JOBS (FILTERED) BY YEAR TOTAL AND TOTAL REGISTERED USERS ON FREELANCER.COM
results as can be seen in the year over year improvement in GMV.
Our GMV has been growing at much faster rates year on year in certain segments including mobile (up 27%), hourly (up 30%) and
managed services (up 55%).
To spur GMV growth on desktop, in the second half of the year a major development program involving most of the engineering
teams commenced to deploy a new front-end technical stack. The goal of this work is to improve the user experience, product
velocity and site speed. This is a substantial amount of work and
has continued into 1Q19 with pages in the new stack starting to
be shipped to the live website. This effort pays off a large amount
of technical debt that has accrued over the years and will bring the
front-end architecture to the state of the art, which should improve
the user experience and retention.
Paid, active project fees continue to hit all-time highs. Project fees
are the dominant revenue line of the Freelancer.com business.
Our quality, retention and customer focused improvements have
been paying off with our Trustpilot Score lifting to 9.0 (Excellent) in
the fourth quarter.
We are particularly excited about Freelancer Enterprise in the first
full operating year of the division. In the year we have built the
pipeline to over 50 high quality Fortune 500 size organisations. This
pipeline spans the professional services, electronics, aerospace,
0.95
Total
0.90
0.85
0.80
0.75
0.70
Jan 15
Jan 16
Jan 17
Jan 18
Jan 19
FIGURE 2: FREELANCER EARNINGS / GMV (USD EQUIVALENT)
pharmaceuticals, consumer products, FMCG, technology, e-commerce, and government sectors.
We continue to close Master Services Agreements, and while most of the agreements have no minimum volume commitments, there
are attractive forecasts being provided by customers looking to cut a substantial amount from their full time labour budgets.
In the year, we closed a channel partnership with ManpowerGroup Solutions’ Managed Service Provider TAPFIN, which is the largest
global temporary/contract managed service provider according to Staffing Industry Analysts (SIA). Through this partnership we
have closed a global Master Services Agreement with one of the world’s largest consumer goods companies. We are in discussions
GMV (USD) for hourly projects
GMV (USD) for recruiter projects
GMV (USD) for project posted on mobile devices
Total
Total
Total
Jan 15
Jan 16
Jan 17
Jan 18
Jan 19
Jan 15
Jan 16
Jan 17
Jan 18
Jan 19
Jan 15
Jan 16
Jan 17
Jan 18
Jan 19
FIGURE 3: GMV FOR HOURLY, MANAGED SERVICE AND MOBILE PROJECTS ON FREELANCER.COM
FREELANCER LIMITED ANNUAL REPORT 2018 42
DIRECTORS’ REPORT
with several other globally staffing firms about similar channel
partnerships.
On October 16, 2018, Freelancer announced that it had partnered
with the US Department of Energy to help crowdsource new
solutions to increase manufacturing energy productivity in the
U.S. The Department is working to develop next generation
manufacturing technologies that will keep jobs in America, ensure
products are made in the U.S.A., and strengthen America’s industrial
base.
The partnership saw the Department of Energy launch its
Manufacturing Innovator Challenge on the Freelancer.com
marketplace, giving talented individuals across the United States
the chance to pitch innovative designs for industrial 3D printing,
bioenergy, buildings, fuel cells and vehicle technologies. Examples
of these projects include:
•
•
•
•
•
•
•
Design concepts for additive manufacturing for disaster
response
Design concepts for large-scale 3D printing
A biobased additive manufacturing prize
A low-cost portable refrigerant leak detector for residential use
A solid state lighting manufacturing concept
Readily manufactured reversible fuel cell kits
A lightweight turbocharger turbine wheel
More information is available at http://freelancer.com/doe.
In August we also jointly published a paper with the United States
National Aeronautics and Space Administration’s Centre of
Excellence for Collaborative Innovation entitled “Surprising results
from large crowds using Micro-Purchase Challenges- using contests
on freelancing communities to source innovative, impactful and
cost-effective solutions” which is available for download at the
$60,000
$50,000
$40,000
$30,000
Laboratory for Innovation Science at Harvard . In this paper, NASA
$20,000
CoECI saw “quality and fast work with extraordinary cost savings
(80-99%)” with 97% of the work being completed by freelancers
$10,000
being able to be implemented across a wide range of federal space
0
programs.
Jan 2016
Jul 2016
Jan 2017
Jul 2017
Jan 2018
Jul 2018
Jan 2019
FIGURE 4: PAID, ACTIVE PROJECT FEES (USD EQUIV.).
NOTE Y-AXIS ORIGIN IS NOT ZERO.
Freelancer
Reviews 3,768 • Excellent
SOURCE: TRUSTPILOT
FIGURE 5: TRUSTPILOT SCORE FOR FREELANCER.COM
AveragContest Cost (Actual)
Average In-House Cost (Estimated)
$55,500
$1,675
Technical
$4,477
$317
Non-Technical
Type of Work
In 1Q19 we will be jointly announcing with a customer a major
FIGURE 6: COST SAVINGS BY NASA USING FREELANCER VERSUS IN-HOUSE FROM
initiative through Freelancer Enterprise.
WHITEPAPER (SOURCE: NASA COECI & FREELANCER.COM)
Escrow.com
In FY18, Escrow.com continued strong growth, with Gross Payment
Volume for the full year at US$426 million (up 30% on pcp), or
AU$570.6 million (up 33.3% on pcp). Ex-China, the GPV was an all-
time record, beating the previous high by 20.2%.
In the year, Escrow.com released Escrow Pay- the simplest way
to add escrow payments to a website, mobile app, online store,
classified site or marketplace. Escrow Pay is a streamlined checkout
payment system for buying and selling cars, boats, airplanes,
domains and anything of value, in one line of code.
Another major release in the year was Escrow Offer, which allows
sellers to negotiate the price for cars, boats, aircraft, domain names
jewellery, fine art and more through a Pay Now button. It is the
43 FREELANCER LIMITED ANNUAL REPORT 2018
FIGURE 8: ESCROW.COM LAUNCHED IN AUSTRALIA
DIRECTORS’ REPORT
ROW
CHINA
$150,000,000
$100,000,000
$50,000,000
$0
2
Q
0
0
0
2
4
Q
0
0
0
2
2
Q
1
0
0
2
4
Q
1
0
0
2
2
Q
2
0
0
2
4
Q
2
0
0
2
2
Q
3
0
0
2
4
Q
3
0
0
2
2
Q
4
0
0
2
4
Q
4
0
0
2
2
Q
5
0
0
2
4
Q
5
0
0
2
2
Q
6
0
0
2
4
Q
6
0
0
2
2
Q
7
0
0
2
4
Q
7
0
0
2
2
Q
8
0
0
2
4
Q
8
0
0
2
2
Q
9
0
0
2
4
Q
9
0
0
2
2
Q
0
1
0
2
4
Q
0
1
0
2
2
Q
1
1
0
2
4
Q
1
1
0
2
2
Q
2
1
0
2
4
Q
2
1
0
2
2
Q
3
1
0
2
4
Q
3
1
0
2
2
Q
4
1
0
2
4
Q
4
1
0
2
2
Q
5
1
0
2
4
Q
5
1
0
2
2
Q
6
1
0
2
4
Q
6
1
0
2
2
Q
7
1
0
2
4
Q
7
1
0
2
2
Q
8
1
0
2
4
Q
8
1
0
2
FIGURE 7: TOTAL GROSS PAYMENT VOLUME CONTRIBUTION (US$) FOR ESCROW.COM
easiest way to introduce the power of price negotiation into online platforms. With Escrow Offer, online sellers can review offers, and
either accept, reject or counter them. Negotiations proceed until a deal is reached and the secure escrow process begins.
In FY18 we obtained our AFSL and added Australian Dollars to the list of supported currencies which includes United States Dollars
and Euros, and subsequently launched in Australia.
Other major releases include significant improvement in the internal fraud engine and new identity verification processes which
increased the number of users who submit Know Your Customer (KYC) documents by 10%. We also translated most of the logged
out pages into Chinese and provided new plugins for using Escrow Platform API.
We extended our regulatory footprint with money transmission licenses being granted in Minnesota, New Jersey and Virginia and
an escrow license in Utah by the date of this announcement in February 2019. We also received confirmation that licensing is not
required from Tennessee. This brings our total licensed coverage of U.S. States to 45, with 33 money transmission licenses, 8 escrow
licenses (not all states have these available) and 4 states not requiring licensing. We have four license applications currently under
review and applications in five U.S. territories to be lodged. We expect one of these applications to be granted imminently. We also
need to re-submit our applications in Hawaii and Nevada, and this will complete our US licensing program. Our compliance team
headed by Greg Robinson must be commended for their remarkable effort to get us to this point. There are only a small number of
businesses that have managed to achieve a full U.S. licensed footprint in the payments space, and we are not too far away from
achieving this.
FREELANCER LIMITED ANNUAL REPORT 2018 44
DIRECTORS’ REPORT
Review of Financial Performance
The Company achieved Net Revenue of $51.9 million in FY18 (up 3% on the previous corresponding period), and an all-time record
Gross Payment Volume of $740.6 million (up 26% on the previous corresponding period). Revenue excluding Escrow.com amounts to
$44.7 million (up 2% on the previous corresponding period), GPV excluding Escrow.com was an all-time record at $170.1 million (up
7% on the previous corresponding period).
60
40
20
0
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18
Revenue (A$m)
4.7
6.5
10.6
18.8
26.1
38.6
52.7
50.3
Growth pcp
-
37%
64%
77%
39%
48%
37%
(5%)
Gross margin
83%
87%
87%
88%
87%
86%
86%
88%
51.9
3.2%
85%
FIGURE 9: NET REVENUE BY YEAR FOR THE FREELANCER GROUP
100%
75%
50%
25%
0%
Freelancer.com
Escrow.com
400
300
200
100
0
570.6
506.2
438.1
91.3
138
160
159.4
170.1
103.7
84.4
28
35.6
50.8
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18
GPV (A$m)
Growth pcp
28
-
35.6
50.8
84.4
103.7
229.3
666.2
587.6
740.7
27%
43%
66%
23%
120%
290%
-12%
-26%
FIGURE 10: GROSS PAYMENT VOLUME (GPV) FOR
THE FREELANCER GROUP BY YEAR
Notes:
1.
2.
3.
Gross Payment Volume (GPV) is calculated as the total payments to Freelancer or Escrow users for products and services transacted through the Freelancer or Escrow
websites plus Net Revenue. Based on Freelancer’s unaudited management accounts which have not been subject to an auditor’s review.
Take rate for the Marketplace segment is 3% employer commission and 10% freelancer commission, which has not changed since 2010.
Core Freelancer FY18 GPV of A$170.1m. Escrow FY18 GPV of US$426m, average AUD/USD FX of 0.7466= A$570.6m
The Company’s gross margin of 85.2% in FY18 decreased by 2.3% compared to the previous corresponding period (FY17: 87.5%),but
remains within a consistent range since 2011. The Company’s cost of sales predominantly consists of transaction costs that
are incurred from the various gateways relied upon to process user payments, as well as various provisions taken for credit card
chargebacks and fraud risks. The cost of sales in the Escrow.com business is higher than in the core Freelancer marketplace
business. The gross margin was slightly lower in FY18 due to an increased revenue share from the Escrow.com business, lower
margins in enterprise sales (which includes revenue from consulting) and normalisation of provisions in FY18 (one-off reductions in
4Q17 resulting in higher than normal gross margins in FY17).
NPAT and EBITDA
The Company reported an operating net loss after tax of ($0.9) million (FY17 Operating NPAT: ($3.8) million) and Operating EBITDA of
($0.7) million (FY17 Operating EBITDA: ($3.7) million).
The achievement of a near breakeven operating EBITDA has been due to tight cost control and continued operating efficiencies.
Employee, administrative, marketing and occupancy expenses were all down due to tight cost control, which will provide operating
leverage with rising revenue.
Operating expenses were 5.5% lower than the prior corresponding period. Payroll costs, which represent 45% of operating costs were
lower by 7%. As at 31 December 2018, the company had 458 FTE staff (down 3% on FY17).
Reported Net Loss After Tax of $1.5 million in FY18 included a tax benefit of $0.3 million (FY17 NPAT: ($4.8) million).
Cash Flow and Balance Sheet Strength
The Company posted a negative operating cash flow of ($0.9) million in FY18 (FY17: ($0.6) million). Operating cash flow was
adversely impacted by increased trade receivables of $0.6 million from our enterprise customers.
Trade and other receivables include receivables from various payment gateways in relation to partially completed transactions.
Receivables increased in FY18 due to enterprise customers.
As at 31 December 2018, the Company held cash and equivalents of $33.2 million and no net debt.
45 FREELANCER LIMITED ANNUAL REPORT 2018
DIRECTORS’ REPORT
Dividends paid or recommended
There have been no dividends paid or provided for the financial year ended 31 December 2018 (2017: nil).
The Company has established a Dividend Reinvestment Plan (DRP). The full terms and conditions of the DRP are available on the
Company’s website, www.freelancer.com.
Significant changes in state of affairs
There have been no significant changes in the state of affairs for the current financial year.
Subsequent Events
As at the date of this report, the Directors are not aware of any circumstance that has arisen since 31 December 2018 that has
significantly affected, or may significantly affect the Group’s operations in future financial years, the results of those operations in future
financial years, or the Group’s state of affairs in future financial years.
Future developments
In future financial years, the Group expects to further its growth through expansions to other territories organically and by acquisition,
and forming strategic alliances and partnerships.
Environmental regulations
The operations of the Group do not involve any activities that have a marked influence on the environment. As such, the Directors are
not aware of any material issues affecting the Group or its compliance with the relevant environment agencies or regulatory authorities.
Insurance and indemnification of Directors and Officers
During the financial year, the Group paid premiums based on normal commercial terms and conditions to insure all directors, officers
and employees of the Group against the costs and expenses in defending claims brought against the individual while performing
services for the Group. The premium paid has not been disclosed as it is subject to the confidentiality provisions of the insurance policy.
The Company has in place Deeds of Indemnity, Insurance and Access with each of its current Directors and such other officers that the
Directors determine are entitled to receive the benefit of an indemnity.
Rounding off of amounts
The Company is an entity to which ASIC Corporations Instrument 2016/191 applies. Accordingly amounts in the financial report have
been rounded off to the nearest thousand dollars, unless otherwise stated.
Meetings of Directors
During the financial year five meetings of Directors were held. Other matters arising during the year were resolved by circular
resolutions.
The following persons acted as Directors of the Company during the financial year, with attendances to meetings of Directors as
follows:
Director meetings
Audit Committee meetings
Nomination and
Remuneration meetings
Eligible to attend
Attended
Eligible to attend
Attended
Eligible to attend
Attended
R.M. Barrie
S.A. Clausen
D.N.J. Williams
5
5
5
5
5
5
2
2
2
2
2
2
1
1
1
1
1
1
Non-audit services
Details of amounts paid or payable to the auditor for non-audit services provided during the year by the auditor and its related parties
amounted to $37,000 (2017: $21,000).
The Directors are satisfied that the provision of non-audit services in the form of tax compliance services during the year by the
auditor (or another person or firm on the auditors’ behalf) is compatible with the general standard of independence for auditors
imposed by the Corporations Act.
FREELANCER LIMITED ANNUAL REPORT 2018 46
DIRECTORS’ REPORT
The Directors are of the opinion that the services as disclosed in Note 20 to the financial statements do not compromise the external
auditor’s independence, based on advice received from the Audit Committee, for the following reasons:
• all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity of the
auditor; and
• none of the services undermine the general principles relating to auditor independence as set out in Code of Conduct APES
110 Code of Ethics for Professional Accountants issued by the Accounting Professional & Ethical Standards Board, including
reviewing or auditing the auditors own work, acting in a management or decision making capacity for the Company, acting as
advocate for the Company or jointly sharing economic risks and rewards.
Officers of the Company who are former audit partners of the auditor
There are no officers of the Company who are former audit partners of Hall Chadwick.
Auditor’s independence declaration
The auditor’s independence declaration is included on page 50 and forms part of the Directors’ Report for the year ended 31
December 2018.
Shares issued under Employee Share Plan (ESP)
No ESP shares have been granted to Directors during the financial year. No ESP shares have been granted to Directors since the end
of the financial year.
Proceedings on behalf of Company
No proceedings have been brought or intervened in on behalf of the Company, nor have any applications for leave to do so been
made in respect of the Company, under section 237 of the Corporations Act 2001.
47 FREELANCER LIMITED ANNUAL REPORT 2018
Remuneration Report
This audited Remuneration Report for the Group which forms part of the Directors’ Report for the financial year ended 31 December
2018, details the nature and amount of remuneration for each Director and the Executives.
DIRECTORS’ REPORT
Key management personnel (KMP) comprise:
•
•
•
•
R.M. Barrie – Executive Chairman
S.A. Clausen – Non-Executive Director
D.N.J. Williams – Non-Executive Director
N.L. Katz – Chief Financial Officer and Company Secretary
Remuneration policy
The performance of the Group depends upon the quality of its directors and executives. The Group recognises the need to attract,
motivate and retain highly skilled directors and executives.
The Board of Directors, through its Nomination and Remuneration Committee, accepts responsibility for determining and reviewing
remuneration arrangements for the Directors and Executives. The Nomination and Remuneration Committee assesses the
appropriateness of the nature and amount of remuneration of Directors and Executives on a periodic basis by reference to relevant
employment market conditions, giving due consideration to the overall profitability and financial resources of the Group, with the
objective of ensuring maximum stakeholder benefit from the retention of a high-quality Board and executive team.
Non-Executive Director remuneration
Fees and payments to Non-Executive Directors reflect the demands which are made of the Directors in fulfilling their responsibilities.
Non-Executive Director fees are reviewed annually by the Board. The Constitution of the Company provides that the Non-Executive
Directors of the Company are entitled to such remuneration, as determined by the Board, which must not exceed in aggregate the
maximum amount determined by the Company in general meeting. The most recent determination was at a General Meeting held
on 9 October 2013 where the shareholders approved an aggregate remuneration of $300,000. Annual Non-Executive Directors’ fees
currently agreed to be paid by the Company are $25,000 to S.A. Clausen and D.N.J. Williams inclusive of superannuation.
Executive and Executive Director remuneration
Fixed remuneration consists of base remuneration (which is calculated on a total cost basis and includes any fringe benefits tax
charges related to employee benefits, including motor vehicles), as well as employer contributions to superannuation funds.
Executive and Executive Director remuneration levels are reviewed annually by the Nomination and Remuneration Committee
through a process that considers the overall performance of the Group. The Executive Directors are not paid any director fees in
addition to their fixed remuneration as Executives.
Performance based remuneration
Performance based remuneration is at the discretion of the Nomination and Remuneration Committee. These can take the form of
cash bonuses or invitations to participate in the Company’s Employee Share Plan (ESP).
FREELANCER LIMITED ANNUAL REPORT 2018 48
DIRECTORS’ REPORT
Remuneration of Directors and Executives
Remuneration shown below relates to the period in which the Director or Executive was a member of key management personnel.
Amounts below have either been paid out or accrued in the period.
Non-Executive Directors
S.A. Clausen
2018
2017
D.N.J. Williams
2018
2017
Executive Directors
R.M. Barrie
2018
2017
Other KMP
N.L. Katz
2018
2017
Total
2018
2017
Short-term benefits
Post-employ-
ment benefits
Share based
payments
Directors’
fees
Cash salary
and fees
Other
Superannuation
Shares
$
-
-
-
-
$
-
-
-
-
$
-
-
2,174
2,174
$
-
-
-
16,706
Total
$
25,000
25,000
25,058
41,764
569,096
569,096
9,257
22,209
25, 904
25,904
-
13,365
604,257
630,574
310,200
310,200
6,324
6,324
47,884
45,884
879,296
879,296
28,581
28,533
34,800
34,800
62,878
64,878
110,820
111,706
462,144
463,030
110,820
141,777
1,116,456
1,160,368
$
25,000
25,000
22,884
22,884
-
-
-
-
The remuneration of key management personnel in the years ended 31 December 2018 and 2017 were 100% fixed, and there is no
link between remuneration and the market price of the Company’s shares.
ESP shares
Details of ESP shares in the Company held directly, indirectly or beneficially, by KMP, including their related parties, is as follows:
Balance at the
start of the year
Granted /
issued
Released from
restrictions
Forfeited /
cancelled
Balance at
the end of
the year
Balance of
unvested ESP
shares
Balance of
vested ESP
shares
2018
Directors
R.M. Barrie
D.N.J. Williams
Other KMP
N.L. Katz
Total
2017
Directors
R.M. Barrie
D.N.J. Williams
Other KMP
N.L. Katz
Total
-
-
885,539
885,539
400,000
500,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
885,539
885,539
412,355
412,355
473,184
473,184
(400,000)
(500,000)
-
-
-
-
-
-
1,000,000
1,900,000
245,000
245,000
(114,461)
(245,000)
(144,461)
(1,145,000)
885,539
885,539
251,800
251,800
633,739
633,739
49 FREELANCER LIMITED ANNUAL REPORT 2018
Ordinary share capital
Details of ordinary shares in the Company held directly, indirectly or beneficially, by KMP, including their related parties, is as follows:
Balance at the start
of the year
Received as part
of remuneration Purchase of shares
Sale of shares
Balance at the end of
the year
DIRECTORS’ REPORT
2018
Directors
R.M. Barrie1
S.A. Clausen
D.N.J. Williams2
Other KMP
N.L. Katz3
Total
2017
Directors
R.M. Barrie1
S.A. Clausen
D.N.J. Williams2
Other KMP
N.L. Katz3
Total
194,075,686
159,717,351
10,758,165
150,000
364,701,202
192,842,959
156,666,463
10,758,165
290,000
360,557,587
-
-
-
-
-
-
-
-
620,745
282,649
-
-
903,394
1,232,727
3,050,888
-
-
-
-
-
-
-
-
194,696,431
160,000,000
10,758,165
150,000
365,604,596
194,075,686
159,717,351
10,758,165
114,461
4,398,076
(254,461)
(254,461)
150,000
364,701,202
1. 1,279,500 shares as at 31 December 2018 (2017: 1,279,500) are held directly or indirectly by related parties.
2. 131,000 shares as at 31 December 2018 (2017: 131,000) are held directly or indirectly by related parties.
3. 40,000 shares as at 31 December 2018 (2017: 40,000) are held directly or indirectly by related parties.
Loans to directors and key management personnel
The following loan balances are outstanding at the reporting date in relation to remuneration arrangements with Executive Directors
and KMP in respect of shares issued under the Employee Share Plan (ESP).
As the ESP is considered in substance a share option, the ESP shares issued and corresponding loan receivable are not recognised
by the Group in its financial statements. The ESP shares will not be considered issued to participants until the corresponding loan
has been repaid, at which time there will be an increase in the issued capital and increase in cash. Further information relating to the
ESP is set out in Note 23 of the financial statements.
Directors:
R.M. Barrie
S.A. Clausen
D.N.J. Williams
Other KMP:
N.L. Katz
Total loans to Directors and KMP
2018
$000
-
-
-
960
960
2017
$000
-
-
-
960
960
FREELANCER LIMITED ANNUAL REPORT 2018 50
DIRECTORS’ REPORT
Executive service agreements
The employment terms and conditions of Group Executives and KMP are formalised in service agreements.
Position
Key terms of service agreements
Chief Executive
Officer
• Term: unspecified.
• Base remuneration: Reviewed annually by the Nomination and Remuneration Committee.
• Bonus entitlements: Determined annually by the Nomination and Remuneration Committee (capped at
50% of the base remuneration).
• Termination notice period: 6 months’ notice or alternatively in Freelancer’s case, payment in lieu of
notice.
• Restraint of trade period: 12 months.
Other Executives
Other Executives are employed under individual executive services agreements. These establish, amongst
other things:
•
•
•
total compensation;
eligibility to participate in the ESP;
variable notice and termination provisions of up to 3 months, or by the Group without notice in the event
of serious misconduct; and
•
restraint and confidentiality provisions.
Other transactions with KMP or their related parties
There were no other transactions conducted between the Group and KMP or their related parties, other than those disclosed above
relating to equity, compensation and loans, that were conducted other than in accordance with normal employee, customer or
supplier relationships on terms no more favourable than those reasonably expected under arm’s length dealings with unrelated
persons, apart from related party transactions disclosed in Note 24 of the financial statements.
This concludes the Remuneration Report.
The Directors’ Report, incorporating the Remuneration Report, is signed in accordance with a resolution of the directors made
pursuant to s298(2) of the Corporations Act 2001.
On behalf of the Directors
Matt Barrie
Chairman
18 February 2019
51 FREELANCER LIMITED ANNUAL REPORT 2018
Auditor’s Independence Declaration
AUDITOR’S INDEPENDENCE DECLARATION
FREELANCER LIMITED
ABN 66 141 959 042
AND CONTROLLED ENTITIES
AUDITOR’S INDEPENDENCE DECLARATION
UNDER SECTION 307C OF THE CORPORATIONS ACT 2001 TO THE DIRECTORS
OF FREELANCER LIMITED
I declare that, to the best of my knowledge and belief, during the year ended 31
December 2018 there have been no contraventions of:
(i)
the auditor independence requirements as set out in the Corporations Act 2001
in relation to the audit; and
(ii)
any applicable code of professional conduct in relation to the audit.
Hall Chadwick
Level 40, 2 Park Street
Sydney NSW 2000
SANDEEP KUMAR
Partner
Date: 18 February 2019
SYDNEY · PENRITH · MELBOURNE · BRISBANE · PERTH · DARWIN
Liability limited by a scheme approved under Professional Standards Legislation
www.hallchadwick.com.au
FREELANCER LIMITED ANNUAL REPORT 2018 52
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statement of Profit or Loss
and Other Comprehensive Income
For the year ended 31 December 2018
Revenue
Cost of sales
Gross profit
Employee expenses
Administrative expenses
Marketing related expenses
Occupancy expenses
Foreign exchange losses
Depreciation and amortisation expenses
Share based payments expense
Finance costs
Loss before income tax
Income tax benefit
Loss after tax
Other comprehensive income
Items that may be reclassified to profit or loss:
Exchange differences on translation of foreign operations
Total compresensive loss for the year
Loss is attributable to:
Owners of Freelancer Limited
Non-controlling interests
Total comprehensive income for the year is attributable to:
Owners of Freelancer Limited
Non-controlling interests
Earnings per share
Basic earnings per share
Diluted earnings per share
Note
5
6
6
6
6
23
6
7
18
30
30
2018
$000
51,851
(7,651)
44,200
(20,217)
(11,678)
(8,922)
(2,702)
(1,353)
(530)
(558)
(33)
(1,793)
309
(1,484)
1
(1,483)
(1,484)
-
(1,484)
(1,483)
-
(1,483)
Cents
(0.33)
(0.33)
2017
$000
50,270
(6,220)
44,050
(22,028)
(12,387)
(9,767)
(2,776)
(816)
(701)
(986)
(15)
(5,426)
653
(4,773)
22
(4,751)
(4,773)
-
(4,773)
(4,751)
-
(4,751)
Cents
(1.06)
(1.04)
The above statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes.
53 FREELANCER LIMITED ANNUAL REPORT 2018
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statement of Financial Position
As at 31 December 2018
Note
2018
$000
2017
$000
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Current tax assets
Other assets
Total current assets
Non-current assets
Trade and other receivables
Plant and equipment
Intangible assets
Other assets
Deferred tax assets
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Borrowings
Current tax liabilities
Provisions
Contract liabilities
Total current liabilities
Non-current liabilities
Deferred tax liabilities
Provisions
Contract liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Accumulated losses
Non-controlling interests
Total equity
8
9
7
10
9
11
12
10
7
13
14
7
15
16
7
15
16
17
18
33,211
3,474
-
972
37,657
1,103
557
26,429
696
4,674
33,459
71,116
35,898
121
71
1,918
620
38,628
246
639
528
1,413
40,041
31,075
38,106
4,000
(11,051)
20
31,075
31,908
3,058
105
869
35,940
871
913
26,442
521
4,003
32,750
68,690
32,956
-
61
2,020
911
35,948
5
509
305
819
36,767
31,923
38,049
3,441
(9,567)
-
31,923
The above statement of financial position should be read in conjunction with the accompanying notes.
FREELANCER LIMITED ANNUAL REPORT 2018 54
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statement of Changes in Equity
For the year ended 31 December 2018
Attributable to owners of Freelancer Limited
Contributed
Equity
$000
Share Based
Payments
$000
Note
Foreign
currency
translation
reserve
$000
(Accumulated
losses)
$000
Non-
controlling
interests
$000
Balance at 1 January 2017
37,750
2,838
(405)
(4,794)
Loss for the year
Exchange differences on
translation of foreign operations
18
Total comprehensive loss for the year
-
-
-
Transactions with owners in their capacity as owners:
Contributions of equity arising
from repayment of ESP loans
Share based payments
Balance at 31 December 2017
17
23
299
-
38,049
-
-
-
-
986
3,824
-
22
22
-
-
(4,773)
-
(4,773)
-
-
(383)
(9,567)
-
-
-
-
-
-
-
-
Attributable to owners of Freelancer Limited
Contributed
Equity
$000
Share Based
Payments
$000
Note
Foreign
currency
translation
reserve
$000
(Accumulated
losses)
$000
Non-
controlling
interests
$000
Balance at 1 January 2018
38,049
3,824
(383)
(9,567)
Loss for the year
Exchange differences on
translation of foreign operations
18
Total comprehensive loss for the year
Transactions with owners in their capacity as owners:
Contributions of equity arising
from repayment of ESP loans
Share capital contributed by
non-controlling interests
Share based payments
17
-
23
-
-
-
57
-
-
Balance at 31 December 2018
38,106
-
-
-
-
-
558
4,382
-
1
1
-
-
-
(1,484)
-
(1,484)
-
-
-
(382)
(11,051)
-
-
-
-
-
20
-
20
The above statement of changes in equity should be read in conjunction with the accompanying notes.
Total Equity
$000
35,389
(4,773)
22
(4,751)
299
986
31,923
Total Equity
$000
31,923
(1,484)
1
(1,483)
57
20
558
31,075
55 FREELANCER LIMITED ANNUAL REPORT 2018
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statement of Cash Flows
For the year ended 31 December 2018
Note
Cash flows from operating activities
Receipts from customers (inclusive of GST)
Payments to suppliers and employees (inclusive of GST)
Interest received
Income taxes refunded / (paid)
Net cash (outflow) from operating activities
29
Cash flows from investing activities
Payments for plant and equipment
Payments for intangible assets
Proceeds from disposal of plant and equiptment
Proceeds from goodwill adjustment on acquistion of Nubelo
Proceeds from working capital adjustment on acquisition of Escrow.com
5
Net cash (outflow) from investing activities
Cash flows from financing activities
Contributions of equity arising from repayment of ESP loans
Proceeds from brorrowings
Increase in security to gateway providers
Net cash (outflow) / inflow from financing activities
Net (decrease) / increase in cash and cash equivalents
Cash and cash equivalents at beginning of the financial year
Effects of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at end of year
17
14
8
2018
$000
51,296
(52,317)
22
20
(979)
(83)
(52)
23
86
-
(26)
57
121
-
178
(827)
31,908
2,130
33,211
2017
$000
50,658
(51,244)
46
(28)
(568)
(303)
(740)
-
-
326
(717)
299
-
(673)
(374)
(1,659)
34,779
(1,212)
31,908
The above statement of cash flows should be read in conjunction with the accompanying notes.
Notes to the financial statements
FREELANCER LIMITED ANNUAL REPORT 2018 56
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Contents of the notes to the
consolidated financial statements
NOTE
CONTENTS
PAGE
1.
2.
3.
4.
5.
6.
7.
8.
9.
Reporting entity.................................................................................................................................................
58
Basis of preparation.........................................................................................................................................
58
Financial risk management.............................................................................................................................
59
Operating segments.........................................................................................................................................
62
Revenue..............................................................................................................................................................
64
Expenses............................................................................................................................................................
65
Income tax.........................................................................................................................................................
65
Cash and cash equivalents.............................................................................................................................
68
Trade and other receivables............................................................................................................................
68
10.
Other assets......................................................................................................................................................
69
11.
Plant and equipment........................................................................................................................................
69
12.
Intangible assets..............................................................................................................................................
70
13.
Trade and other payables................................................................................................................................
72
14.
Borrowings........................................................................................................................................................
72
15.
Provisions...........................................................................................................................................................
72
16.
Contract Liabilities...........................................................................................................................................
73
17.
Contributed equity............................................................................................................................................
74
18.
Equity – reserves..............................................................................................................................................
75
19.
Key management personnel disclosures.....................................................................................................
75
20.
Remuneration of auditors................................................................................................................................
76
21.
Contingent liabilities........................................................................................................................................
76
22.
Commitments for expenditure........................................................................................................................
76
23.
Share based payments....................................................................................................................................
77
24.
Related party transactions..............................................................................................................................
80
25.
Parent entity information................................................................................................................................
81
26.
Business Combinations...................................................................................................................................
82
27.
Interests in controlled entities........................................................................................................................
83
28.
Events occurring after the reporting date...................................................................................................
83
29.
Reconciliation of loss after tax to net cash flow from operating activities..........................................
84
30.
Earnings per share (EPS)................................................................................................................................
84
31.
Other significant accounting policies...........................................................................................................
85
57 FREELANCER LIMITED ANNUAL REPORT 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. Reporting entity
Freelancer Limited (the Company) is a company domiciled in Australia. The address of the Company’s registered office is Level
20, 680 George Street, Sydney, NSW, 2000. The consolidated financial statements of the Company as at and for the year ended 31
December 2018 comprise the Company and its subsidiaries (together referred to as the Group and individually as Group entities). The
Group is a for-profit entity and primarily is involved in operating an online marketplace for services and providing escrow payment
services. The separate financial statements of the parent entity, Freelancer Limited, have not been presented within this financial
report as permitted by the Corporations Act 2001.
The consolidated financial statements were authorised for issue by the Board on 18 February 2019.
2. Basis of preparation
These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and
Interpretations issued by the Australian Accounting Standards Board and the Corporations Act 2001.
The Directors believe that there are reasonable grounds that the company is able to pay its debts as and when they fall due. The
Group has a significant cash balance at year end and has projected a profitable financial year for the period ending 31 December
2019 based on increased revenue and a planned reduction in expenses.
(a) Compliance with International Financial Reporting Standards
The consolidated financial statements of the Group comply with International Financial Reporting Standards (IFRS) as issued by the
International Accounting Standards Board (IASB).
(b) Historical cost convention
The consolidated financial statements have been prepared on the historical cost basis unless otherwise stated in the notes. Except
for the cash flow information, the financial statements have been prepared on an accrual basis, modified, where applicable, by the
measurement at fair value of selected non-current assets, financial assets and financial liabilities.
(c) Functional and presentation currency
These consolidated financial statements are presented in Australian dollars, which is the Company’s functional currency.
(d) Critical accounting estimates
The preparation of financial statements requires the use of certain critical accounting estimates. It also requires management to
exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement
or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 31(h).
(e) Significant accounting policies
The principal accounting policies adopted in the presentation of these consolidated financial statements are set out in the relevant
notes. The policies have been consistently applied to all the years presented, unless otherwise stated.
(f) Rounding of amounts
The Company has applied the relief available to it under ASIC Corporations Instrument 2016/191. Accordingly, amounts in the
financial statements and Directors’ Report have been rounded off to the nearest $1,000.
(g) New Accounting Standards
i. AASB15 Revenue from Contracts with Customers
The Group has adopted AASB 15 Revenue from Contracts with Customers with an initial application date of 1 January 2018. The
Group has applied AASB 15 retrospectively with the cumulative effect of initially applying the standard recognised in opening retained
earnings. The cumulative effect of initially applying the standard was nil, so no adjustments were required to net profit or opening
retained earnings on transition as the timing of revenue recognition has not changed for the Group’s contracts that were in progress
at 1 January 2018.
ii. AASB9 Financial Instruments
The Group has adopted AASB 9 Financial Instruments with an initial application date of 1 January 2018. The Group has applied AASB
9 retrospectively and the cumulative effect of initially application on the group’s financial instruments was nil, so no adjustments
were required on transition.
(h) Materiality
These consolidated financial statements have included information that is deemed to be material and relevant to the understanding
FREELANCER LIMITED ANNUAL REPORT 2018 58
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
of the financial statements. Disclosure may be considered material and relevant if the dollar amount is significant due to size or
nature, or the information is important to understand the:
• Group’s current year results;
•
impact of significant changes in the Group’s business; or
• aspects of the Group’s operations that are important to future performance.
3. Financial risk management
Financial risk management policies
The Group’s activities expose it to a variety of financial risks: market risk (including currency risk), credit risk and liquidity risk. The
Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse
effects on the financial performance of the Group. The Group uses different methods to measure different types of risk to which it is
exposed. These methods include sensitivity analysis in the case of interest rate and other price risks and ageing analysis for credit risk.
Risk management is carried out by senior finance executives (Finance) under policies approved by the Board of Directors (Board).
These policies include identification and analysis of the risk exposure of the Group and appropriate procedures, controls and risk limits.
Finance identifies, evaluates and hedges financial risks within the Group’s operating units.
The Group holds the following financial instruments:
Financial Assets
Cash and cash equivalents
Trade and other receivables
Total financial assets
Financial Liabilities
Trade and other payables
Total financial liabilities
Note
8
9
13
2018
$000
33,211
4,577
37,788
36,019
36,019
2017
$000
31,908
3,929
35,837
32,956
32,956
The carrying value of the assets and liabilities disclosed in the table above closely approximates or equals their fair value. The
carrying amounts of trade receivables and trade and other payables are assumed to approximate their fair values due to their short
term nature.
Initial recognition and measurement
Financial assets and financial liabilities are recognised when the entity becomes a party to the contractual provisions of the
instrument. For financial assets, this is equivalent to the date that the Group commits itself to either purchase or sell the asset (i.e.
trade date accounting is adopted).
Financial instruments are initially measured at fair value plus transaction costs, except where the instrument is classified “at fair
value through profit or loss”, in which case transaction costs are expensed to profit or loss immediately.
Classification and subsequent measurement
Financial instruments are subsequently measured at fair value, amortised cost using the effective interest method, or cost. Where
available, quoted prices in an active market are used to determine fair value. In other circumstances, valuation techniques are
adopted.
Amortised cost is calculated as the amount at which the financial asset or financial liability is measured at initial recognition less
principal repayments and any reduction for impairment, and adjusted for any cumulative amortisation of the difference between that
initial amount and the maturity amount calculated using the effective interest method.
The effective interest method is used to allocate interest income or interest expense over the relevant period and is equivalent to the
rate that exactly discounts estimated future cash payments or receipts (including fees, transaction costs and other premiums or
discounts) through the expected life (or when this cannot be reliably predicted, the contractual term) of the financial instrument to
the net carrying amount of the financial asset or financial liability.
Revisions to expected future net cash flows will necessitate an adjustment to the carrying amount with a consequential recognition
of an income or expense item in profit or loss.
Fair value is determined based on current bid prices for all quoted investments. Valuation techniques are applied to determine the
59 FREELANCER LIMITED ANNUAL REPORT 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
fair value for all unlisted securities, including recent arm’s length transactions, reference to similar instruments and option pricing
models.
The Group does not designate any interests in subsidiaries, associates or joint venture entities as being subject to the requirements
of Accounting Standards specifically applicable to financial instruments.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active
market and are subsequently measured at amortised cost. Gains or losses are recognised in profit or loss through the amortisation
process and when the financial asset is derecognised.
Held-to-maturity investments
Held-to-maturity investments are non-derivative financial assets that have fixed maturities and fixed or determinable payments, and
it is the Company’s intention to hold these investments to maturity. They are subsequently measured at amortised cost. Gains or
losses are recognised in profit or loss through the amortisation process and when the financial asset is derecognised.
Financial liabilities
Non-derivative financial liabilities other than financial guarantees are subsequently measured at amortised cost. Gains or losses are
recognised in profit or loss through the amortisation process and when the financial liability is derecognised.
Impairment
At the end of each reporting period, the Group assesses whether there is objective evidence that a financial asset has been impaired.
A financial asset (or a group of financial assets) is deemed to be impaired if, and only if, there is objective evidence of impairment
as a result of one or more events (a “loss event”) having occurred, which has an impact on the estimated future cash flows of the
financial asset(s).
When the terms of financial assets that would otherwise have been past due or impaired have been renegotiated, the Company
recognises the impairment for such financial assets by taking into account the original terms as if the terms have not been
renegotiated so that the loss events that have occurred are duly considered.
(a) Market risk
Foreign currency risk
The Group operates internationally and is exposed to foreign exchange risk arising from various currencies.
Foreign exchange risk arises when future commercial transactions and recognised assets and liabilities are denominated in a
currency that is not the entity’s functional currency. The risk is measured using sensitivity analysis and cash flow forecasting.
The Group has not entered into forward foreign exchange contracts to protect against exchange rate movements. The Directors
are of the view that the cost of hedging the Group’s short term foreign exchange exposure outweighs the risk of adverse currency
movements.
The Group’s exposure to foreign currency exchange risk at the reporting date, expressed in each currency, was as follows:
AUD
USD
NZD
GBP
HKD
SGD
PHP
EUR
CAD
INR
Other
USD
000’s
NZD
000’s
HKD
000’s
SGD
000’s
PHP
000’s
EUR
000’s
CAD
000’s
INR
000’s
AUD
000’s
AUD
000’s
2,619
1,075
656
16,501
1,381
164
GBP
000’s
1,073
184
8
(5)
116
23
-
-
767
224
-
-
275
21,168
1,292
72
-
(5)
968
262
21,959
(1,994)
-
-
750
139
4
-
51,287
16,436
93
(633)
Payables
(697)
(1,681)
User obligations
(2,097)
(15,704)
(160)
(1,005)
(896)
(314)
(3,078)
(2,176)
(779)
(40,310)
Net exposure
1,556
661
(21)
255
95
28
39,023
(622)
114
26,873
AUD
USD
NZD
GBP
HKD
SGD
PHP
EUR
CAD
INR
Other
AUD
000’s
USD
000’s
NZD
000’s
GBP
000’s
HKD
000’s
SGD
000’s
PHP
000’s
CAD
000’s
INR
000’s
AUD
000’s
EUR
000’s
2,139
273
-
-
332
121
-
2
41,118
17,010
6,079
(10,057)
865
129
5
(7)
54,153
12,686
197
(250)
4,861
13,257
413
529
1,491
135
(910)
(2,151)
208
29
-
-
1,632
1,011
171
1
(20)
(919)
865
660
-
-
(832)
839
User obligations
(2,113)
(15,350)
(160)
Net exposure
2,780
(2,618)
77
(289)
(2,878)
(1,840)
(711)
(36,568)
166
51,272
572
281
30,218
2018
Currency exposure:
Denominated in:
Cash
Trade receivables
Other financial assets
2017
Currency exposure:
Denominated in:
Cash
Trade receivables
Other financial assets
Payables
161
356
-
(28)
(540)
(51)
220
338
-
(34)
(638)
(114)
FREELANCER LIMITED ANNUAL REPORT 2018 60
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The Group had net assets of $2,084,000 denominated in foreign currencies as at 31 December 2018 (comprising assets of
$35,160,000 less liabilities of $33,076,000). The Group had net assets of $453,000 denominated in foreign currencies as at 31
December 2017 (comprising assets of $30,964,000 less liabilities of $30,511,000).
The analysis below reflects management’s view of possible movements in relevant foreign currencies against the Australian dollar
in the short term subsequent to 31 December 2018. The table summarises the range of possible outcomes that would affect the
Group’s net profit and equity as a result of foreign currency movements on year end foreign denominated assets and liabilities.
The impact of potential movements in exchange rates on the profit or loss is as follows:
(Range +5% to -5%)
(Range +5% to -5%)
(Range +5% to -5%)
(Range +5% to -5%)
(Range +5% to -5%)
(Range +5% to -5%)
(Range +5% to -5%)
(Range +5% to -5%)
(Range +5% to -5%)
2018 $000
2017 $000
High
(45)
1
(22)
(1)
(1)
(50)
48
(6)
(26)
(102)
Low
49
(1)
24
1
2
56
(53)
6
29
113
High
160
(3)
(71)
(7)
(8)
(63)
(42)
(14)
(29)
(77)
Low
(177)
4
79
7
8
69
46
15
32
83
AUD to USD
AUD to NZD
AUD to GBP
AUD to HKD
AUD to SGD
AUD to PHP
AUD to EUR
AUD to CAD
AUD to INR
Net movement
Price risk
The Group is not exposed to significant equities price risk.
Interest rate risk
The Group is not exposed to any significant interest rate risk.
Cash balances
As at 31 December 2018 the Group had $33,211,000 (2017: $31,908,000) held in bank accounts and online wallets. The Group’s cash
balances are predominantly held in interest bearing bank accounts. Funds that are excess to short term liquidity requirements are
generally invested in short term deposits.
(b) Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. The
maximum exposure to credit risk at the reporting date to recognised financial assets is the carrying amount, net of any provisions
for impairment of those assets, as disclosed in the statement of financial position and notes to the financial statements. The Group
does not hold any collateral.
Credit risk is managed by a risk assessment process for all customers, which takes into account past experience.
(c) Liquidity risk
Liquidity risk management requires the Group to maintain sufficient liquid assets (mainly cash and cash equivalents) to be able to
pay debts as and when they become due and payable.
The Group manages liquidity risk by maintaining adequate cash reserves by continuously monitoring actual and forecast cash flows
and matching the maturity profiles of financial assets and liabilities.
Financing arrangements
The Group does not have any borrowing facilities in place at the reporting date.
Maturities of financial liabilities
The following table details the Group’s remaining contractual maturity for its financial instrument liabilities. The table has been drawn
up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the financial liabilities are required
to be paid. The tables include both interest and principal cash flows disclosed as remaining contractual maturities and therefore
these totals may differ from their carrying amount in the statement of financial position.
61 FREELANCER LIMITED ANNUAL REPORT 2018
2018
Non-derivatives
Non-interest bearing
Trade and other payables
Total
2017
Non-derivatives
Non-interest bearing
Trade and other payables
Total
Note
13
13
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1 year
or less
$000
Between 1
and 2 years
Between 2
and 5 years
$000
$000
Over 5
years
$000
Remaining
contractual
maturities
$000
36,019
36,019
32,956
32,956
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Trade and other payables are payable as and when they are due. The cash flows in the maturity analysis above are not expected to
occur significantly earlier than disclosed.
4. Operating segments
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker.
These include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated
items comprise mainly corporate assets (primarily the Company’s headquarters), head office expenses, and income tax assets and
liabilities. The Board of Directors are identified as the chief operating decision makers (CODM).
Identification of reportable operating segments
The Group is organised into two operating segments: namely an online marketplace and online payment services. These segments
are based on the internal reports that are reviewed and used by the CODM in assessing performance and in determining the
allocation of resources (AASB 8 para. 5(b)).
The CODM assess the performance of the operating segments based on a measure of revenue and operating EBITDA (earnings
before share based payments, interest, tax, depreciation and amortisation). The accounting policies adopted for internal reporting to
the CODM are consistent with those adopted in the financial statements.
The Group operates predominantly in Australia, where the majority of online revenues and expenses are incurred. Although the
Group has staff and operations in Philippines, United Kingdom, Argentina, the United States and Canada in addition to Australia,
these geographic operations are considered, based on internal management reporting and the allocation of resources by the Group’s
CODM, as one geographic segment.
The information reported to the CODM is at least on a monthly basis.
FREELANCER LIMITED ANNUAL REPORT 2018 62
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Year end 31 December 2018
Segment revenue
Segment revenue
Total segment revenue
Segment result
Segment profit
Share based payments
Depreciation and amortisation expenses
Loss before income tax
Income tax benefit
Loss for year
Segment Assets
At 31 December 2018
Segment assets
Intergroup eliminations
Deferred tax assets
Intangibles
Total assets
Segment liabilities
At 31 December 2018
Segment liabilities
Intergroup eliminations
Deferred tax liabilities
Total liabilities
Year end 31 December 2017
Segment revenue
Segment revenue
Total segment revenue
Segment result
Segment profit
Share based payments
Depreciation and amortisation expenses
Loss before income tax
Income tax benefit
Loss for year
Segment Assets
At 31 December 2017
Segment assets
Intergroup eliminations
Deferred tax assets
Intangibles
Total assets
Segment liabilities
At 31 December 2017
Segment liabilities
Intergroup eliminations
Deferred tax liabilities
Total liabilities
63 FREELANCER LIMITED ANNUAL REPORT 2018
Online
Marketplace
Online
Payments
44,667
44,667
(1,248)
-
-
-
40,351
(5,322)
-
-
35,029
7,184
7,184
543
-
-
-
6,385
-
-
-
6,385
Total
51,851
51,851
(705)
(558)
(530)
(1,793)
309
(1,484)
46,736
(5,322)
4,674
25,028
71,116
(37,984)
-
-
(7,133)
5,322
-
(45,117)
5,322
(246)
(37,984)
(1,812)
(40,041)
Online Marketplace
$000
Online Payments
$000
Total
$000
43,850
43,850
6,420
6,420
(2,095)
(1,644)
-
-
-
38,806
(4,554)
-
-
-
-
-
5,393
-
-
-
34,252
5,393
50,270
50,270
(3,739)
(986)
(701)
(5,426)
653
(4,773)
44,199
(4,554)
4,003
25,042
68,690
(35,072)
-
-
(6,244)
4,554
-
(41,316)
4,554
(5)
(35,072)
(1,690)
(36,767)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
5. Revenue
The Company’s net revenues result from transaction and other fees generated in its online marketplaces and in providing online
escrow services. Revenues are recognised when evidence of an arrangement exists, the fee is fixed and determinable, no significant
obligation remains and collection of the receivable is reasonably assured. Amounts disclosed as revenue are net of refunds and
amounts collected on behalf of third parties. Where services have not been provided but the Company is obligated to provide the
services in the future, revenue recognition is deferred. Provision for doubtful accounts and transaction losses are made at the time
of revenue recognition based on the Company’s historical experience. The provision for doubtful accounts and transaction losses are
recorded as charges to cost of sales.
Revenue is recognised for the major business activities as follows:
Marketplace and payment services
The Group enters into short-term contracts with customers for marketplace and payment services. Such contracts are entered into
before the delivery of the service which is paid in advance of receipt of the service. The performance obligation is the delivery of
the service which is recognized by the system controls. The system does not draw fees from the customer until the delivery of the
service. Therefore, revenue is recognised at a point in time upon delivery of the service when the system recognizes that the service
has completed. No rebates or volume discounts are provided to customers.
Project Services
The project services revenue stream focuses on projects negotiated with customers to meet their needs on short to long-term
contracts. Revenue is recognised when milestones as determined in the contact are completed. Under AASB 15: Revenue from
Contracts with Customers, this happens over time. The Group has an enforceable right to payment for work completed to date and
therefore, revenue is recognised over time. The Group considers the cost-to-cost method an appropriate measure of progress for the
completion of the performance obligation. The cost-to-cost method is based on the proportion of costs incurred for work performed
to date relative to the estimated total contract costs.
A customer is billed for the project services when a certain series of milestones have been achieved. A contract asset is recognised
for revenue recognised but not yet billed due to the milestone billing arrangement. Once an invoice is issued, the corresponding
contract asset is reclassified to trade receivables. A contract liability is recognised if the milestone payment exceeds the revenue
recognised to date under the cost-to-cost method. No significant financing components have been identified in the contracts with
customers, as the period between the payment and the recognition of revenue (cost-to-cost method) is always less than 12 months.
Interest income
Interest revenue is recognised using the effective interest rate method, which, for floating rate financial assets, is the rate inherent in
the instrument.
Government grants
Government grants are recognised at fair value where there is reasonable assurance that the grant will be received and all grant
conditions will be met. Grants relating to expense items are recognised as income over the periods necessary to match the grant to
the costs it is compensating.
All revenue is stated net of the amount of goods and services tax (GST) and Valued Added Tax (VAT).
Sales revenue
Marketplace and payment services
Enterprise services
Other revenue
Interest income
Government grants
Proceeds from working capital adjustment on acquisition of Escrow.com
Other
Total revenue
2018
$000
51,085
590
26
72
-
78
2017
$000
49,775
-
37
111
326
21
51,851
50,270
FREELANCER LIMITED ANNUAL REPORT 2018 64
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
6. Expenses
Loss before income tax benefit includes the following specific net losses and expenses:
Employee expenses
Wages and salaries (including superannuation)
Other employment costs
Total employee expenses *
Depreciation and amortisation
Plant and equipment
Leasehold improvements
Total depreciation and amortisation expenses
Rental expense relating to operating leases
Minimum lease payments
2018
$000
18,587
1,883
20,470
416
114
530
2,702
Net foreign exchange losses
1,353
Finance costs
Interest expense
* inclusive of employee expenses included in cost of sales
Total employee benefits expenses are inclusive of:
Short-term obligations
33
2017
$000
19,820
2,208
22,028
433
268
701
2,776
816
15
Employee benefits that are expected to be settled within 12 months have been measured at the amounts expected to be paid when
the liabilities are settled, plus related on-costs. The liability for annual leave is recognised in the provision for employee benefits. All
other short term employee benefit obligations are presented as payables.
Other long-term employee benefit obligations
Employee benefits payable later than 12 months have been measured at the present value of the estimated future cash outflows to
be made for those benefits. In determining the liability, consideration is given to employee wages increases and the probability that
the employee may satisfy any vesting requirements. Those cash flows are discounted using market yields on national government
bonds with terms to maturity that match the expected timing of cash flows attributable to employee benefits.
Short-term incentive plans
The Group recognises a liability and an expense for bonuses payable under short term incentive plans. Short term incentive
plans are based on the achievement of targeted performance levels that may be set at the beginning of each financial year. The
Group recognises a liability to pay out short term incentives when contractually obliged based on the achievement of the stated
performance levels, or where there is a past practice that has created a constructive obligation.
7. Income tax
The income tax expense or revenue for the period is the tax payable on the current period’s taxable income based on the applicable
tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to
unused tax losses.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting
period in the countries where the Company’s subsidiaries operate and generate taxable income. Management periodically evaluates
positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes
provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for:
•
temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and
that affects neither accounting nor taxable profit or loss
65 FREELANCER LIMITED ANNUAL REPORT 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
•
temporary differences related to investments in subsidiaries, associates and jointly controlled entities to the extent that the
Group is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the
foreseeable future
•
taxable temporary differences arising on the initial recognition of goodwill.
The measurement of deferred tax reflects the tax consequences that would follow 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 is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates
enacted or substantively enacted at the reporting date.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they
relate to taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current
tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.
A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences, to the extent that it is
probable that future taxable profits will be available against which they can be utilised. Deferred tax assets are reviewed at each
reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.
In determining the amount of current and deferred tax the Group takes into account the impact of uncertain tax positions and
whether additional taxes and interest may be due. This assessment relies on estimates and assumptions and may involve a
series of judgements about future events. New information may become available that causes the Group to change its judgement
regarding the adequacy of existing tax liabilities; such changes to tax liabilities will impact the tax expense in the period that such a
determination is made.
The Company and its wholly-owned Australian resident entities are part of a tax consolidated group. As a consequence, all members
of the tax-consolidated group are taxed as a single entity. The head entity within the tax-consolidated group is Freelancer Limited.
(a) Income tax
Current tax
Deferred tax
Income tax (benefit)
Deferred income tax expense included in income tax benefit comprises:
(Increase) in deferred tax assets
Increase in deferred tax liability
Total deferred income tax
(b) Numerical reconciliation of income tax benefit to prima facie
income tax payable
Loss from ordinary activities before income tax expense
Tax at the Australian rate of 30%
Tax effect amounts which are not deductible / (taxable) in calculating taxable income:
R&D tax incentive
Difference in tax rate
Share based payments
Over provision in prior years
Future benefit of foreign losses
Timing differences not recognized as deferred tax asset
Other non-allowable items
Income tax (benefit)
(c) Amounts recognised directly in equity
Deferred tax associated with capital raising
2018
$000
90
(399)
(309)
(646)
237
(409)
(1,793)
(538)
(53)
46
168
16
(73)
(97)
220
(311)
28
2017
$000
70
(723)
(653)
(725)
2
(723)
(5,426)
(1,628)
(81)
92
296
-
(20)
-
688
(653)
60
FREELANCER LIMITED ANNUAL REPORT 2018 66
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(d) Deferred tax assets
The balance comprises temporary differences attributable to:
2018
$000
2017
$000
Amounts recognised in profit or loss:
Employee benefits
Provision for user disputes & refunds
Prepayments
Legal fees
Foreign exchange losses
Provision for impairment of receivables
Audit fees
Future benefit of tax losses
Future benefit of foreign tax losses
Total amounts recognised in profit or loss
Amounts recognised directly in equity:
Capital raising costs
Total amounts recognised in equity
Net deferred tax assets
Movements:
Opening balance at beginning of year
Credited to the profit or loss statement
Exchange differences
Closing balance at end of year
(e) Deferred tax liabilities
The balance comprises temporary differences attributable to:
Foreign exchange losses
Fixed assets
Net deferred tax liabilities
Movements:
Opening balance at beginning of year
Credited to the profit or loss statement
Exchange differences
Closing balance at end of year
(f) Current tax assets
Current tax assets
(g) Current tax liabilities
Current tax liabilities
(h) Franking credits
Franking credits available at the reporting date based on a tax rate of 30%
311
77
(9)
22
603
829
82
2,199
532
4,646
28
28
4,674
4,003
646
25
4,674
241
5
246
5
237
4
246
-
71
66
278
58
-
24
110
699
77
2,443
254
3,943
60
60
4,003
3,278
725
-
4,003
-
5
5
3
2
-
5
105
61
66
Freelancer Limited and its wholly-owned Australian entities elected to form an income tax consolidated group as of 12 April 2010.
67 FREELANCER LIMITED ANNUAL REPORT 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
8. Cash and cash equivalents
For cash flow statement presentation purposes, cash and cash equivalents includes cash on hand, deposits held at call with banks,
other short term highly liquid investments with original maturities of three months or less that are readily convertible to known
amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts.
Current
Cash at bank and on hand
Term deposits
Total cash and cash equivalents
9. Trade and other receivables
2018
$000
32,407
804
33,211
2017
$000
31,111
797
31,908
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest
method, less provision for impairment. This provision includes amounts that are not considered to be recoverable from debtors and
amounts that are expected to be credited to debtors. Trade receivables are generally due for settlement no more than 30 days from
the date of recognition. They are presented as current assets unless collection is not expected for more than 12 months after the
reporting date.
Collectability of trade receivables is reviewed on an ongoing basis. A provision for impairment of trade receivables is established
when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the
receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation,
and default or delinquency in payments are considered indicators that the trade receivable is impaired. In addition, the trade
receivables balances are considered for credit notes that are expected to be raised against individual and collective balances.
Current
Trade receivables
Payment gateway receivables
Less: provisions for impairment of trade receivables
Current trade receivables net of provisions for impairment
Other receivables
Total current trade and other receivables
Non-Current
Payment gateway receivables
Total trade and other receivables
(a) Provision for impaired trade receivables
Opening balance
Increase / (Decrease) in provisions for impairment during the year
Exchange differences
Closing balance
(b) Ageing of current trade receivables
1 – 30 days
31 – 60 days
61 – 90 days
90+ days
Provision for impairment
Total trade receivables net of provision for impairment
2018
$000
3,743
2,545
(2,814)
3,474
-
3,474
1,103
4,577
2,331
209
274
2,814
3,187
394
256
2,451
(2,814)
3,474
2017
$000
2,521
2,803
(2,331)
2,993
65
3,058
871
3,929
2,679
(115)
(233)
2,331
3,185
215
171
1,753
(2,331)
2,993
FREELANCER LIMITED ANNUAL REPORT 2018 68
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
10. Other assets
Current
Prepayments
Other
Total current other assets
Non-current
Security deposits
Total non-current other assets
Total other assets
11. Plant and equipment
2018
$000
969
3
972
696
696
1,390
2017
$000
868
1
869
521
521
1,390
Plant and equipment is stated at historical cost less depreciation, amortisation and impairment losses. Historical cost includes
expenditure that is directly attributable to the acquisition of the items.
The carrying amount of plant and equipment is reviewed annually by directors to ensure it is not in excess of the recoverable amount
from these assets. The recoverable amount is assessed on the basis of the expected net cash flows that will be received from the
asset’s employment and subsequent disposal. The expected net cash flows have not been discounted in determining recoverable
amounts.
Depreciation of all fixed assets is calculated using the straight-line method to allocate their cost, net of their residual values, over their
estimated useful lives, as follows:
• Fixtures and fittings
• Motor vehicles
• Office and computer equipment
• Software
4 - 5 years
4 years
4 - 5 years
3 years
•
Leasehold improvements
shorter of either the unexpired period of the lease or the estimated useful lives
of the improvements
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its
estimated recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains or losses are
recognised in the profit and loss in the period in which they arise. When revalued assets are sold, amounts included in the revaluation
surplus relating to that asset are transferred to retained earnings.
69 FREELANCER LIMITED ANNUAL REPORT 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2018
$000
2,406
(1,925)
481
507
(456)
51
-
-
-
19
(18)
1
753
(729)
24
557
2017
$000
2,315
(1,556)
759
494
(394)
100
42
(42)
-
19
(16)
3
730
(679)
51
913
Non-current
Office and computer equipment – at cost
Accumulated depreciation
Carrying value of office and computer equipment
Fixtures and fittings – at cost
Accumulated depreciation
Carrying value of fixtures and fittings
Motor vehicles – at cost
Accumulated depreciation
Carrying value of motor vehicles
Software – at cost
Accumulated depreciation
Carrying value of software
Leasehold improvements – at cost
Accumulated amortisation
Carrying value of leasehold improvements
Total carrying value of plant and equipment
Reconciliations
Reconciliations of the carrying amount of plant and equipment and leasehold improvements at the beginning and end of the current
financial year are set out below:
Office and
computer
equipment
$000
Fixtures and
fittings
$000
Motor Vehicles
$000
Software
$000
Leasehold
improvements
$000
842
365
-
(448)
759
81
(359)
481
152
29
-
(81)
100
3
(52)
51
-
-
-
-
-
-
-
-
7
-
-
(4)
3
-
(2)
1
310
11
(102)
(168)
51
90
(117)
24
Total
$000
1,311
405
(102)
(701)
913
174
(530)
557
Balance at 1 January 2017
Additions
Disposals
Depreciation and amortisation
Balance at 31 December 2017
Additions
Disposals
Depreciation and amortisation
Balance at 31 December 2018
12. Intangible assets
Goodwill
Goodwill is initially recorded at the amount by which the purchase price for a business combination exceeds the fair value attributed
to the interest in the net fair value of identifiable assets, liabilities and contingent liabilities acquired at date of acquisition. Goodwill is
not amortised. Instead goodwill is tested for impairment annually or more frequently if events or changes in circumstances indicate
that it might be impaired, and is carried at cost less accumulated impairment losses.
Domain Names
Domain names are valued at cost of acquisition. Domain names are tested for impairment annually or more frequently if events or
changes in circumstances indicate that it might be impaired, either individually or at the cash generating unit level. Useful lives are
also examined on an annual basis and adjustments, where applicable, are made on a prospective basis.
FREELANCER LIMITED ANNUAL REPORT 2018 70
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Intellectual Property
Intellectual property is valued at cost of acquisition. Intellectual property is tested for impairment annually or more frequently if
events or changes in circumstances indicate that it might be impaired, either individually or at the cash generating unit level. Useful
lives are also examined on an annual basis and adjustments, where applicable, are made on a prospective basis.
Trademarks
Trademarks are valued at cost of acquisition and are amortised on a straight-line basis over the period in which the benefits are
expected to be realised. Trademarks are tested for impairment where an indicator of impairment exists, either individually or at the
cash generating unit level. Useful lives are also examined on an annual basis and adjustments, where applicable, are made on a
prospective basis.
Non Current
Domain names – at cost
Accumulated impairment
Carrying value of domain names
Intellectual property – at cost
Accumulated impairment
Carrying value of domain names
Goodwill
Accumulated impairment
Carrying value of goodwill
Total carrying value of intangible assets
Reconciliations
2018
$000
4,910
(28)
4,882
2,198
-
2,198
19,349
-
19,349
26,429
2017
$000
4,877
(28)
4,849
2,198
-
2,198
19,395
-
19,395
26,442
Reconciliations of the carrying amount of intangible assets at the beginning and end of the current and previous financial year are set
out below:
Balance at 1 January 2017
Additions
Impairment
Amortisation
Balance at 31 December 2017
Additions
Adjustment to goodwill from acqusition
Impairment
Amortisation
Domain names
$000
Intellectual property
$000
4,108
741
-
-
4,849
33
-
-
-
2,198
-
-
-
Goodwill
$000
19,395
-
-
-
Total
$000
25,701
741
-
-
2,198
19,395
26,442
-
-
-
-
40
(86)
-
-
73
(86)
-
-
Balance at 31 December 2018
4,882
2,198
19,349
26,429
The Directors have determined the useful life of domain names is indefinite and subject to an annual test for impairment of the fair value
of the domain names. The Directors have assessed the recoverability of domain names, intellectual property and goodwill based on
value in use calculations.
The recoverable amount of the Group’s intangible assets has been determined by a value-in-use calculation using a discounted cash
flow model, based on a 12 month projection period for the Group approved by management and extrapolated for a further 5 years with a
discounted terminal value.
Goodwill is allocated to cash-generating units which are based on the Group’s reporting segments:
Online marketplace
Online payments
Total
71 FREELANCER LIMITED ANNUAL REPORT 2018
2018
$000
14,780
11,649
26,429
2017
$000
14,793
11,649
26,442
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The recoverable amount of each cash-generating unit above is determined based on value-in-use calculations. Value- in-use is
calculated based on the present value of cash flow projections over a 5 year period with the period extending beyond 5 years
extrapolated using a 2% terminal growth rate. The cash flows are discounted based on management’s estimate of the time value of
money and the Group’s weighted average cost of capital adjusted for the risk free rate and the volatility of the share price relative to
market movements.
The following key assumptions were used in the value-in-use calculations:
Online marketplace
Online payments
CAGR
Rate
11%
15%
Discount
Rate
15%
15%
Management has based the value-in-use calculations on budgets for each reporting segment. These budgets use historical weighted
average growth rates to project revenue. Costs are calculated taking into account historical gross margins as well as estimated
weighted average inflation rates over the period, which are consistent with inflation rates applicable to the locations in which the
segments operate. Discount rates are pre-tax and are adjusted to incorporate risks associated with a particular segment.
Based on the above, management is satisfied that there are no indicators of impairment to the current carrying value of intangible
assets.
13. Trade and other payables
These amounts represent liabilities for goods and services provided to the Group and amounts outstanding to users of the
Company’s websites at the end of financial year which are unpaid. The amounts are unsecured and are payable as and when they
are due. Trade and other payables are presented as current liabilities unless payment is not due within 12 months from the reporting
date.
Current
Trade payables
Sundry payables and accrued expenses
User obligations
Total trade and other payables
14. Borrowings
Current
Working capital loan
Total borrowings
2018
$000
2,491
730
32,677
35,898
2018
$000
121
121
2017
$000
3,184
840
28,932
32,956
2017
$000
-
-
This loan has been provided from non-controlling shareholders of Freightlancer Holdings Pty Limited to provide working capital
funding. The loan is unsecured, interest free and has no fixed date of repayment.
15. Provisions
Provisions are recognised when the Company has a legal or constructive obligation, as a result of past events, for which it is probable
that an outflow of economic benefits will result and that outflow can be reliably measured. Provisions recognised represent the best
estimate of the amounts required to settle the obligation at reporting date.
A provision for onerous contracts is recognised when the expected benefits to be derived by the Group from a contract are lower than
the unavoidable cost of meeting the obligations under the contract. The provision is stated at the present value of the future net cash
outflows expected to be incurred in respect of the contract.
FREELANCER LIMITED ANNUAL REPORT 2018 72
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Current
Provision for user disputes and refunds
Employee benefits
Provision for indirect taxes
Provision for penalties*
Total current provisions
Non-current
Make-good provisions
Employee benefits
Total non-current provisions
Total provisions
2018
$000
256
1,012
252
398
1,918
300
339
639
2,557
2017
$000
192
931
-
897
2,020
266
243
509
2,529
*At the time of the acquisition of the Escrow.com business in November 2015, it held eight money transmission and/or escrow
licences in the US. After the acquisition, the Company has pursued an aggressive program of applying for money transmission and/
or escrow licenses in the remaining states in the US. At 31 December 2018, thirty eight licences were in place. As part of this process,
in FY18 the division incurred one-off regulatory penalties of $0.8 million (FY17: $0.2 million) for unlicensed activity (substantially pre-
acquisition). In addition the Company has further made provision of $0.4 million as an estimate of probable penalties.
a) Movements
Balance at 1 January 2017
Additional provisions
Amounts used
Unused amounts reversed
Foreign exchange differences
Balance at 31 December 2017
Balance at 1 January 2018
Additional provisions
Amounts used
Unused amounts reversed
Foreign exchange differences
Balance at 31 December 2018
16. Contract liabilities
Provision for
User Disputes/
Refunds
Provision for
Indirect Taxes
Employee
Benefits
Provision for
Penalties
Provision for
Make-good
Total Provisions
$000
346
140
(115)
(154)
(25)
192
192
81
-
(41)
24
256
$000
-
-
-
-
-
-
-
248
-
-
4
252
$000
1,116
685
(652)
-
25
1,174
1,174
591
(227)
(208)
21
1,351
$000
-
897
-
-
-
897
897
313
(829)
(80)
97
398
$000
237
62
-
(22)
(11)
266
266
41
-
(17)
10
300
$000
1,699
1,784
(767)
(176)
(11)
2,529
2,529
1,274
(1,056)
(346)
156
2,557
Refer to Note 5 for the accounting policy on marketplace and payment services revenue recognition policy. Revenue is recognised
when these conditions are met.
Amounts received in advance of delivery for services
Total contract liabilities
Current
Non-current
Total contract liabilities
Significant changes in contract assets and liabilities
There were no significant changes in the contract liability balances during the 2018 year.
73 FREELANCER LIMITED ANNUAL REPORT 2018
2018
$000
1,148
1,148
620
528
1,148
2017
$000
1,216
1,216
911
305
1,216
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
17. Contributed equity
(a) Share capital
Ordinary shares
Fully paid
Total share capital
Note
2018
Number
2017
Number
15(b)
455,197,935
456,835,488
2018
$000
38,106
38,106
(b) Movements in ordinary share capital
Reconciliation to 31 December 2017
Balance at 1 January 2017
Issue / (cancellation) of ordinary shares:
Issue of ESP shares1
Buy-back and cancellation of ESP shares
Contributed equity arising from repayment of ESP loans
Balance at 31 December 2017
Reconciliation to 31 December 2018
Balance at 1 January 2018
Issue / (cancellation) of ordinary shares:
Issue of ESP shares1
Buy-back and cancellation of ESP shares
Contributed equity arising from repayment of ESP loans
Balance at 31 December 2018
Number of shares
Average price
458,728,081
1,885,928
(3,778,521)
-
456,835,488
$0.52
$0.84
-
Number of shares
Average price
456,835,488
1,115,150
(2,752,703)
-
455,197,935
$0.54
$1.06
-
2017
$000
38,049
38,049
$000
37,750
-
-
299
38,049
$000
38,049
-
-
57
38,106
1. As the ESP is considered in substance a share option, the ESP shares issued and corresponding loan receivables are not recognised by the Group in its financial statements. The
loan receivable does not satisfy the “probable future benefits following to the entity” criteria on the basis that the loan is non-recourse. The ESP shares will not be considered issued to
participants until the corresponding loan has been repaid, at which time there will be an increase in the issued capital and increase in cash.
(c) Ordinary shares
Ordinary shares have the right to receive dividends as declared, and, in the event of winding up the Company, to participate in the
proceeds from the sale of all surplus assets in proportion to the number of and amounts paid up on shares held. Ordinary shares
entitle their holder to one vote, either in person or by proxy, at a meeting of the Company.
(d) Employee Share Plan (ESP)
Information relating to the ESP, including details of shares issued under the plan, is set out in Note 23.
(e) Capital risk management
The Group’s objectives when managing capital are to safeguard its ability to continue as a going concern, so that it can provide
returns to shareholders and benefits for other stakeholders and to maintain an optimum capital structure to reduce the cost of
capital.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital
to shareholders, issue new shares or sell assets to reduce debt. The Group would look to raise capital when an opportunity to invest
in a business or company was seen as value adding relative to the current parent entity’s share price at the time of the investment.
The Group actively pursues additional investments as part of its growth strategy.
The capital risk management policy remains unchanged from the 2017 Annual Report.
FREELANCER LIMITED ANNUAL REPORT 2018 74
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
18. Equity – reserves
(a) Movements
Share based payment reserve movements
Balance at the beginning of the period
Share based payment expense
Balance at the end of the period
Foreign currency translation reserve movements
Balance at the beginning of the period
Currency translation differences arising during the period
Balance at the end of the period
Total reserves
(b) Nature and purpose of reserves
Share-based payments reserve
2018
$000
3,824
558
4,382
(383)
1
(382)
4,000
2017
$000
2,838
986
3,824
(405)
22
(383)
3,441
This amount represents the value of the ESP share grants to employees under the Freelancer Employee Share Plan and other
compensation granted in the form of equity.
Foreign currency translation reserve
The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial
statements of its overseas subsidiaries.
19. Key management personnel disclosures
(a) Directors
The following persons were Directors of Freelancer Limited during the financial year:
Mr Robert Matthew Barrie – Executive Chairman
Mr Darren Nicholas John Williams – Non-Executive Director
Mr Simon Alvin Clausen – Non-Executive Director
(b) Other key management personnel
The following persons also had the authority and responsibility for planning, directing and controlling the major activities of the Group,
directly or indirectly, during the financial year:
Mr Neil Leonard Katz – Chief Financial Officer and Company Secretary
(c) Key management personnel compensation
Short-term employee benefits
Share based employee benefits
Other long term benefits
Total benefits
Short-term employee benefits
2018
$000
943
111
62
1,116
2017
$000
956
142
62
1,160
These amounts include fees and benefits paid to the Non-Executive Directors as well as all salary, paid leave benefits, fringe benefits
and cash bonuses awarded to Executive Directors and other KMP.
Other long-term benefits
These amounts represent long service leave benefits accruing during the year, long-term disability benefits and deferred bonus payments.
Share based payments
These amounts represent the expense related to the participation of KMP in equity-settled schemes as measured by the fair value of
the options rights and shares granted on grant date.
Further information in relation to KMP remuneration can be found in the Remuneration Report, which is included in the Director’s Report.
75 FREELANCER LIMITED ANNUAL REPORT 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
20. Remuneration of auditors
During the year the following fees were paid for services provided by the auditor of the parent entity, its related practices and non-
related audit firms:
(a) Hall Chadwick
Audit and other assurance services
Audit and review of financial reports
Taxation services
Tax compliance services, including review of Company income tax returns
Total remuneration of Hall Chadwick
(b) Audit firms other than Hall Chadwick
Audit and other assurance services
Audit and review of financial reports
Taxation services
Tax compliance services, including review of subsidiary income tax returns
Total remuneration of audit firms other than Hall Chadwick
2018
$000
2017
$000
113
2
37
152
32
8
40
109
-
21
130
60
13
73
Total auditors’ remuneration
192
203
21. Contingent liabilities
Except for the items listed below, there are no other contingent liabilities as at 31 December 2018:
• a collateral amount of USD450,000 (2017: USD100,000) is in place in one of the Group’s PayPal accounts in favour of PayPal
Australia Pty Ltd;
•
term deposits of $76,822 (2017: $71,257) are secured for corporate credit card facilities in place;
• deposits of $1,200,000 (2017: $1,200,000) are held by various credit card processing providers, as security for any contractual
compensation arising under these agreements;
•
included in cash is an amount of $724,000 (2017: $724,000) on term deposit, which is secured against a bank guarantee that
has been provided to the lessor in respect of premises occupied by the Company at Level 20, 680 George Street Sydney.
•
included in cash is an amount of USD455,000 (2017: USD455,000), which is secured in connection with surety bonds in place
with certain regulators in the US.
•
Included in cash is an amount of USD104,000 (2017: USD82,000), which is held as a reserve to satisfy escrow regulatory
requirements in respect of credit card transactions.
22. Commitments for expenditure
Leases in which a significant portion of the risks and rewards of ownership are not transferred to the Group as lessee are classified
as operating leases. Leases are made up of operating leases of property. Payments made under operating leases (net of any
incentives received from the lessor) are charged to the consolidated profit or loss statement on a straight-line basis over the period
of the lease. Benefits that are provided to the Group as an incentive to enter into a lease arrangement are recognised as a liability and
amortised on a straight-line basis over the life of the lease.
Where the Group acts as lessor in an operating lease arrangement, rental income from operating leases is accounted for on a
straight-line basis over the period of the lease. Lease incentives provided are recognised over the lease term on a straight-line basis.
FREELANCER LIMITED ANNUAL REPORT 2018 76
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(a) Non-cancellable operating leases
The Group has entered into commercial leases for office property. As at 31 December 2018 these leases had remaining lives ranging
from 1 month up to 35 months. Rentals paid under operating leases are charged to the income statement on a straight line basis
over the period of the lease. Future minimum rentals payable under non-cancellable operating leases as at 31 December are as
follows:
Less than one year
Between one and five years
More than five years
Total operating lease commitments
(b) Non-cancellable operating services
2018
$000
2,626
1,185
-
3,811
2017
$000
4,284
2,138
-
6,422
The Group has entered into a commercial agreement for web hosting services with an annual fee commitment for 2 years
commencing on 1 January 2018. Fees paid under this agreement are charged to the income statement on a usage basis over the
period of the agreement. This commitment is fixed in USD. The future minimum fee commitment under this agreement has been
calculated using the spot exchange rate at 31 December 2018 and may be subject to variation due to changes in exchange rates.
The amounts are as follows:
Less than one year
Between one and five years
More than five years
Total operating lease commitments
(c) Other capital commitments
There were no capital commitments as at 31 December 2018
23. Share based payments
2018
$000
5,657
-
-
5,657
2017
$000
4,639
5,103
-
9,742
The Group operates an employee share plan. The fair value of the effective option over the shares granted under the Company’s
Employee Share Plan (ESP) is recognised as an employee benefit expense with a corresponding increase in equity. The fair value
is measured at grant date and recognised over the period during which the employees become unconditionally entitled to the ESP
shares.
The fair value at grant date is independently determined using a Black-Scholes option pricing model that takes into account the
exercise price, the term of the ESP shares, the vesting and performance criteria, the impact of dilution, the non-tradeable nature of
the ESP share, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the
risk-free interest rate for the term of the ESP share.
The fair value of share grants issued outside of the ESP is independently determined based on the value of the shares at grant date
less the present value of dividends expected to be distributed between the grant date and the vesting dates.
During the year ended 31 December 2013, the Company established a share based payment plan, the Employee Share Plan (ESP) to
assist the Company in retaining and attracting current and future employees by providing them with the opportunity to own shares in
the Company. Resolutions to amend and approve the ESP were passed at the AGM held on 17 May 2016.
The key terms of the ESP are as follows:
•
the Board may invite a person who is employed or engaged by or holds an office with the Group (whether on a full or part-time
basis) and who is declared by the Board to be eligible to participate in the ESP from time to time (Eligible Employee) to apply for
fully paid ordinary shares under the plan from time to time (ESP shares);
•
invitations to apply for ESP shares offered to Eligible Employees subsequent to the Company’s initial public offering are to be
made on the basis of the market price per share defined as the volume weighted average price at which the Company’s shares
have traded during the 30 days immediately preceding the date of the invitation;
•
invitations to apply for ESP shares under the ESP will be made on a basis determined by the Board (including as to the
conditionality on the achievement of any key performance indicators) and notified to Eligible Employees in the invitation, or if no
such determination is made by the Board, on the basis that ESP shares will be subject to a 4 year vesting period, with:
»
»
10% of ESP shares applied for vesting on the date that is the first anniversary of the issue date of the ESP shares;
20% of ESP shares applied for vesting on the date that is the second anniversary of the issue date of the ESP shares;
77 FREELANCER LIMITED ANNUAL REPORT 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
»
»
30% of ESP shares applied for vesting on the date that is the third anniversary of the issue date of the ESP shares; and
40% of ESP shares applied for vesting on the date that is the fourth anniversary of the issue date of the ESP shares.
• Eligible Employees who accept an invitation (ESP Participants) may be offered an interest free loan from the Company to
finance the whole of the purchase of the ESP shares they are invited to apply for (ESP Loan). ESP Loans will have a term of 4
years and become repayable in full on the earlier of:
»
»
the fourth anniversary of the issue date of the Employee Offer Shares; and
if the ESP Participant ceases to be an Eligible Employee, either:
»
»
the date 30 days after the date of cessation, if the Eligible Employee is a good leaver (as defined in the ESP); or
that date of cessation, if the Eligible Employee is a bad leaver (as defined in the ESP).
• any dividends received by the ESP Participant whilst the whole or part of the ESP Loan remains outstanding must be applied to
the repayment of the ESP Loan. In addition, an ESP Participant may make pre-payments at any time;
•
the maximum number of ESP shares for which invitations may be issued under the ESP together with the number of ESP
shares still to be issued in respect of already accepted invitations and that have already been issued in response to invitations
in the previous 5 years (but disregarding ESP shares that are or were issued following invitations to non-residents, that did
not require a disclosure document under the Corporations Act, or that were issued under a disclosure document under
the Corporations Act) must not exceed 5% of the total number of ordinary shares on issue in the Company at the time the
invitations are made;
•
in the event of a corporate reconstruction, the Board will adjust, subject to the Listing Rules (if applicable), any one or more of
the maximum number of Shares that may be issued under the ESP (if applicable), the subscription price, the buy-back price and
the number of ESP shares to be vested at any future vesting date (if applicable), as it deems appropriate so that the benefits
conferred on ESP Participants after a corporate reconstruction are the same as the benefits enjoyed by the ESP Participants
before the corporate reconstruction. On conferring the benefit of any corporate reconstruction, any fractional entitlements to
shares will be rounded down to the nearest whole share;
• ESP Participants will continue to have the right to participate in dividends paid by the Company despite some or all of their ESP
shares not having vested yet or being subject to an ESP Loan. If an ESP Loan has been made to the ESP Participant, then any
dividend due must first be applied to reducing any outstanding ESP Loan amount applicable to the ESP shares on which the
dividend is paid;
• ESP shares which have not vested and/or are subject to repayment of the ESP Loan will be restricted (escrowed) from trading;
•
the Company may buy-back at the issue price any ESP shares which:
»
»
have not vested, or are incapable of vesting at any time (including as a result of the ESP Participant failing to meet any key
performance indicators on which vesting of ESP shares is conditional); or
remain in escrow and/or are the subject of an ESP Loan, on the occurrence of:
»
the ESP Participant ceasing to be an Eligible Employee (unless the Board, in its sole and absolute discretion
determines otherwise, subject to any conditions that it may apply, including the repayment of any outstanding ESP
Loan); or
»
the expiration of the term of the ESP Loan.
• any bonus securities issued in relation to ESP shares which remain unvested or are subject to an ESP Loan which becomes
repayable in full will be the subject of a buy-back by the Company at the issue price for no consideration;
• on the death or permanent disability of an ESP Participant, all ESP shares held by the ESP Participant or their estate will
immediately vest subject to the repayment of any outstanding ESP Loan by the curator, executor or nominated beneficiary(ies)
(as the case may be) within 30 days of their appointment (or such longer period as the Company in its discretion may allow).
Failing such repayment, the Company will buy-back all ESP shares in respect of which there is an outstanding ESP Loan;
•
the rules of the ESP and any amendment to the rules of the ESP must be in accordance with the Listing Rules and the
Corporations Act;
•
if, while the Company’s shares are traded on the ASX or any other stock exchange, there is any inconsistency between the
terms of the ESP and the Listing Rules, the Listing Rules will prevail; and
•
the ESP is governed by the laws of the State of New South Wales, Australia.
The full terms of the ESP are available on the Company’s website, www.freelancer.com.
FREELANCER LIMITED ANNUAL REPORT 2018 78
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(a) ESP share grants
Set out below are summaries of ESP shares granted and issued under the plan:
Grant date
2018
14 October 2013
13 November 2013
28 February 2014
22 May 2014
3 November 2014
20 February 2015
10 March 2015
10 April 2015
3 June 2015
12 August 2015
15 October 2015
24 November 2015
21 December 2015
7 March 2016
24 March 2016
26 April 2016
22 June 2016
27 July 2016
4 November 2016
30 October 2017
8 December 2017
19 December 2017
2 March 2018
18 October 2018
12 November 2018
Total
2017
14 October 2013
13 November 2013
28 February 2014
22 May 2014
3 November 2014
20 February 2015
10 March 2015
10 April 2015
3 June 2015
12 August 2015
15 October 2015
24 November 2015
21 December 2015
7 March 2016
24 March 2016
26 April 2016
22 June 2016
27 July 2016
4 November 2016
30 October 2017
8 December 2017
19 December 2017
Total
Issue
price
Balance at
the start of
the year
Granted /
issued
Released
from
restrictions
Forfeited /
cancelled
Balance at
the end of
the year
Balance of
unvested
ESP shares
Balance of
vested ESP
shares
$0.50
$0.50
$1.54
$1.14
$0.70
$0.66
$0.77
$1.01
$1.08
$1.40
$1.45
$1.76
$1.76
$1.53
$1.32
$1.38
$1.55
$1.59
$1.34
$0.48
$0.52
$0.52
$0.40
$0.53
$0.65
$0.50
$0.50
$1.54
$1.14
$0.70
$0.66
$0.77
$1.01
$1.08
$1.40
$1.45
$1.76
$1.76
$1.53
$1.32
$1.38
$1.55
$1.59
$1.34
$0.48
$0.52
$0.52
-
-
-
-
-
1,000,000
1,250,000
250,000
150,000
735,000
375,000
75,000
100,000
30,000
-
70,000
300,000
765,539
530,000
50,000
835,928
1,000,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
15,150
1,000,000
100,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(10,000)
(50,000)
940,000
39,587
900,413
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(22,218)
(75,000)
-
-
-
(1,250,000)
(50,000)
-
(175,000)
(175,000)
-
-
-
-
(20,000)
(300,000)
(325,000)
(200,000)
(50,000)
(57,703)
(100,000)
-
-
-
-
200,000
150,000
560,000
200,000
75,000
100,000
30,000
-
-
16,668
60,000
224,000
80,000
30,000
40,000
15,000
-
-
133,332
90,000
336,000
120,000
45,000
60,000
15,000
-
50,000
25,000
25,000
-
440,539
330,000
-
756,007
825,000
15,150
-
220,270
195,000
-
588,117
810,000
-
1,000,000
1,000,000
100,000
100,000
-
220,269
135,000
-
167,890
15,000
15,150
-
-
7,516,467
1,115,1500
(107,218)
(2,752,703)
5,771,686
3,443,642
2,328,054
900,000
1,501,287
-
-
-
1,000,000
1,500,000
600,000
300,000
825,000
375,000
125,000
100,000
30,000
400,000
320,000
300,000
1,065,539
530,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
50,000
835,928
1,000,000
-
(900,000)
(212,766)
(1,288,521)
-
-
-
-
(250,000)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(350,000)
(150,000)
(90,000)
-
(50,000)
-
-
(400,000)
(250,000)
-
(300,000)
-
-
-
-
-
-
-
-
-
1,000,000
1,250,000
250,000
150,000
735,000
375,000
75,000
100,000
30,000
-
70,000
300,000
765,539
530,000
50,000
835,928
-
-
-
-
-
-
-
-
-
-
291,671
708,329
468,750
781,250
83,335
166,665
105,000
45,000
514,500
220,500
262,500
112,500
52,500
70,000
22,500
-
52,500
247,500
22,500
30,000
7,500
-
17,500
52,500
622,905
142,634
450,000
80,000
50,000
835,928
-
-
-
9,871,826
1,885,928
(462,766)
(3,778,521)
7,516,467
5,129,589
2,386,878
1,000,000
1,000,000
79 FREELANCER LIMITED ANNUAL REPORT 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
All Eligible Employees who accepted an offer of ESP shares were given an interest free loan from the Company to finance the whole
of the purchase of the ESP shares they were invited to apply for (ESP Loan).
The ESP Loans are provided to participants on a non-recourse basis and upon vesting must be repaid in order to remove trading
restrictions on vested ESP shares. The term of the ESP Loan is four years; however, participants may forfeit their ESP shares if they
do not repay the ESP Loan or leave the Company. As the ESP removes the risk to participants from decreases in the share price
by limiting the maximum loan amount repayable to the value of the ESP shares disposed and waiving the ESP Loan should the
participant forfeit their ESP shares, whilst still allowing participants the rewards of any increase in share price, the Company has
effectively granted the participants an option to the ESP shares due to the ESP Loans being non-recourse. As such, this arrangement
is accounted for under AASB 2.
The assessed weighted average fair value at grant date of the effective share options granted during the financial year is $0.27 per
option (2017: $0.22). Options were priced using a Black-Scholes option pricing model that takes into account the exercise price,
the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the
expected dividend yield and the risk free interest rate for the term of the option. The expected price volatility of the Company’s shares
is based on the historical volatility of ASX listed companies considered to be comparable to Freelancer Limited.
(b) Share grants
On 29 October 2014, the Company agreed to issue a maximum of 1,733,333 fully paid ordinary shares to certain employees. The
agreement to issue shares was made outside of the ESP. The issue of the incentive shares was to occur in several tranches, with
each tranche conditional only upon the respective personnel being in on-going employment on the respective issue dates. At 31
December 2016, the Company has issued 658,333 of these shares. The remaining 1,075,000 shares will not be issued as the
respective personnel are no longer employed with the Company.
The 658,333 incentive shares issued ranked equally with existing ordinary shares in the Company and the issue price of each tranche
was the 5 day volume weighted average price of the Company’s shares on the date of issue of the incentive shares.
The assessed weighted average fair value at grant date of the share grants issued is nil (2017: nil). The fair value of the share grants
is determined based on the value of the shares at grant date less the present value of dividends expected to be distributed between
the grant date and the issue dates.
24. Related party transactions
(a) Parent entity
Freelancer Limited is the parent entity and ultimate controlling entity.
(b)
Interests in controlled entities
Interests in subsidiaries are set out in Note 27.
(c) Transactions with key management personnel
Disclosures relating to key management personnel are set out in Note 19 and the Remuneration Report.
(d) Transactions with related parties
Receivable from and payable to related parties
There were no receivables from or payable to related parties at reporting date in relation to transactions with related parties detailed
above.
Loans to / from related parties
There were no loans to or from related parties at the reporting date.
Terms and conditions
All transactions were made on normal commercial terms and conditions and at market rates.
FREELANCER LIMITED ANNUAL REPORT 2018 80
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
25. Parent entity information
The financial information for the parent entity, Freelancer Limited has been prepared on the same basis as the consolidated financial
statements, except as set out below.
Investments in subsidiaries
Investments in subsidiaries are accounted for at cost in the financial statements of Freelancer Limited. Investments in subsidiaries
are tested for impairment whenever changes in events or circumstances indicate that the carrying amount may not be recoverable.
Income tax consolidation legislation
Freelancer Limited and its wholly-owned Australian entities have elected to form an income tax consolidated group.
Freelancer Limited (as the head entity) and its wholly-owned Australian entities (as members of the Freelancer income tax
consolidated group) account for their own current and deferred tax amounts. These tax amounts are measured as if each entity in
the income tax consolidated group continues to be a standalone taxpayer in its own right.
In addition to its own current and deferred tax amounts, Freelancer Limited also recognises the current tax liabilities (or assets)
assumed from its wholly-owned entities in the income tax consolidated group.
Set out below is the supplementary information about the parent entity.
Statement of comprehensive income
Loss after tax
Total comprehensive loss
Statement of financial position
Current assets
Non-current assets
Total assets
Current liabilities
Total liabilities
Net assets
Contributed equity
Reserves
Accumulated losses
Total equity
Contingent liabilities
2018
$000
(564)
(564)
3,575
33,144
36,719
2
2
36,717
38,106
4,382
(5,771)
36,717
2017
$000
(1,460)
(1,460)
3,875
32,761
36,636
24
24
36,612
38,049
3,824
(5,261)
36,612
The parent entity had no contingent liabilities at 31 December 2018 and 31 December 2017.
Capital commitments – plant and equipment
The parent entity had no capital commitments as at 31 December 2018 and 31 December 2017.
Significant accounting policies
The accounting policies of the parent entity are consistent with those of the Group, except for investments in subsidiaries which are
accounted for at cost, less any impairment.
81 FREELANCER LIMITED ANNUAL REPORT 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
26. Business Combinations
Business combinations occur where an acquirer obtains control over one or more businesses.
A business combination is accounted for by applying the acquisition method, unless it is a combination involving entities or
businesses under common control. The business combination will be accounted for from the date that control is attained, whereby
the fair value of the identifiable assets acquired and liabilities (including contingent liabilities) assumed is recognised (subject to
certain limited exceptions).
When measuring the consideration transferred in the business combination, any asset or liability resulting from a contingent
consideration arrangement is also included. Subsequent to initial recognition, contingent consideration classified as equity is not
remeasured and its subsequent settlement is accounted for within equity. Contingent consideration classified as an asset or liability
is remeasured each reporting period to fair value, recognising any change to fair value in profit or loss, unless the change in value can
be identified as existing at acquisition date.
All transaction costs incurred in relation to the business combination are expensed to the statement of profit or loss and
comprehensive income. The acquisition of a business may result in the recognition of goodwill or a gain from a bargain purchase.
(a) Acquisition of Channel 40 business
On 4 October 2018, Freightlancer Holdings Pty Limited, a Group subsidiary entered into a business and asset sale and purchase
agreement to acquire the business and assets of Channel 40 Pty Ltd, which is an online marketplace for buyers and sellers of freight.
The transaction was completed on 20 November 2018, at which date the Group assumed control of the business. The business was
immediately rebranded as freightlancer.com. Freightlancer.com contributed revenues of $58,000 for the period 20 November 2018 to
31 December 2018.
The total purchase price was $40,000, which was paid to the seller as a combination of cash and shares in Freightlancer Holdings
Pty Limited. After the issue of shares the Group retains a 50% shareholding in Freightlancer Holdings Pty Ltd.
Purchase consideration:
Cash
Shares issued in Freightlancer Holdings Pty Ltd
Total purchase price
Purchase consideration:
Goodwill on acquisition
Total purchase consideration
A$000
20
20
40
40
40
FREELANCER LIMITED ANNUAL REPORT 2018 82
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
27. Interests in controlled entities
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with
the accounting policy described in Note 28:
Name of entity
Subsidiaries of Freelancer Limited:
Freelancer International Pty Ltd
Freelancer Technology Pty Ltd
Freelancer India Pty Ltd
Warrior Forum Pty Ltd
Warrior Technology Pty Ltd
Payments Pty Ltd
Payments International Pty Ltd
Payments Australia Pty Ltd
Payments IP Pty Ltd
StartCon Pty Ltd
Freightlancer Holdings Pty Ltd **
Freightlancer Technology Pty Ltd **
Freightlancer Pty Ltd **
Freelancer Networks (Canada), Inc.
Freelancer Outsourcing, Inc.
Canadian Payments, Inc
Freelancer.com Pte Limited
Freelancer International GmbH
Freemarket (Switzerland) GmbH
Freelancer Online India Private Limited
Freelancer.com Philippines, Inc.
Freelancer Outsourcing UK Limited
Payments Europe Limited
Freelancer (Shanghai) Information Technology Co., Ltd.
Westmor Management, Inc. *
Escrow.com, Inc. *
EC Services Corporation*
IES International, Inc. *
Internet Escrow Services, Inc. *
Freightlancer, Inc. **
* Escrow.com group
** Freightlancer group
Country of
Incorporation
Percentage Owned (%)
2018
2017
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Canada
Canada
Canada
Singapore
Switzerland
Switzerland
India
Philippines
United Kingdom
United Kingdom
China
United States
United States
United States
United States
United States
United States
100
100
100
100
100
100
100
100
100
100
50
50
50
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
50
100
100
100
100
100
100
100
100
100
100
-
-
-
100
100
-
100
100
100
100
100
100
100
100
100
100
100
100
100
-
28. Events occurring after the reporting date
There are no other matters or circumstances that have arisen since 31 December 2018 that have significantly affected, or may
significantly affect:
•
•
•
the aggregated entity’s operations in the future financial years, or
the results of those operations in future financial years, or
the aggregated entity’s state of affairs in the future financial affairs.
83 FREELANCER LIMITED ANNUAL REPORT 2018
29. Reconciliation of loss after tax to net cash flow from operating activities
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Loss for the year
Cash flows excluded from loss attributable to operating activities:
Proceeds from working capital adjustment on acquisition of Escrow.com
Non-cash items in operating loss:
Depreciation and amortisation
Profit on disposal of fixed assets
Share based payments expense
Net exchange differences
Changes in operating assets and liabilities:
(Increase) / Decrease in trade and other receivables
(Increase) in deferred tax assets
(Increase) / Decrease in other assets
Increase in trade and other creditors
Increase in provision for income tax
Increase in deferred tax liabilities
Increase in provisions for employee benefits
(Decrease) / Increase in other provisions
Net cash (outflow) from operating activities
(a) Non-cash Financing
i. Share issue:
2018
$000
(1,247)
2017
$000
(4,773)
-
(326)
530
(23)
558
(137)
(283)
(649)
(278)
407
115
-
177
(149)
(979)
701
-
986
319
658
(725)
78
1,652
30
2
58
772
(568)
100 ordinary shares were issued in Freightlancer Holdings Pty Limited at $200 per share as part of the consideration for the
purchase of the business and assets of Channel 40 Pty Ltd. The share issue was on an arm’s length basis.
30. Earnings per share (EPS)
Basic earnings per share
Basic earnings per share is calculated by dividing:
•
the profit attributable to owners of the Company, excluding any costs of servicing equity other than ordinary shares
• by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in
ordinary shares issued during the year and excluding treasury shares.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account:
•
•
the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares, and
the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential
ordinary shares.
FREELANCER LIMITED ANNUAL REPORT 2018 84
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(a) Basic earnings per share
From operations attributable to the ordinary equity of the Company
Total basic earnings per share attributable to the ordinary equity holders of
the Company
(b) Diluted earnings per share
From operations attributable to the ordinary equity of the Company
Total basic earnings per share attributable to the ordinary equity holders of
the Company
(c) Reconciliation of earnings used in calculating earnings per share
Basic earnings per share:
Loss from continuing operations
Diluted earnings per share:
Loss attributable to the ordinary equity holders of the Company
2018
Cents
(0.33)
(0.33)
(0.33)
(0.33)
$000
(1,484)
(1,484)
2018
Shares
2017
Cents
(1.06)
(1.06)
(1.04)
(1.04)
$000
(4,773)
(4,773)
2017
Shares
(d) Weighted average number of shares used as the denominator
Weighted average number of ordinary shares used in calculating basic earn-
ings per share
Adjustments for calculation of ordinary shares usedin calculating diluted earnings
per share:
ESP shares
Share grants
Weighted average number of ordinary shares used in calculating diluted
earnings per share
449,326,669
449,055,421
5,591,286
-
9,668,625
-
454,917,955
458,724,046
(e) Information on the classification of securities
ESP shares and share grants
ESP shares granted to employees under the ESP and shares granted to employees outside of the ESP are considered to be potential
ordinary shares and have been included in the determination of diluted earnings per share to the extent to which they are dilutive.
The ESP shares and share grants have not been included in the determination of basic earnings per share. Details relating to the ESP
shares are set out in Note 23.
31. Other significant accounting policies
(a) Principles of consolidation
The consolidated financial statements incorporate all of the assets, liabilities and results of Freelancer Limited and all subsidiaries.
Subsidiaries are all entities over which the Group has control. The Group controls an entity when it is exposed to, or has rights to,
variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities
of the entity. A list of the subsidiaries is provided in Note 27.
The assets, liabilities and results of all subsidiaries are fully consolidated into the financial statements of the Group from the date
on which control is obtained by the Group. The consolidation of a subsidiary is discontinued from the date that control ceases.
Intercompany transactions, balances and unrealised gains or losses on transactions between group entities are fully eliminated on
consolidation. Accounting policies of subsidiaries have been changed and adjustments made where necessary to ensure uniformity of
the accounting policies adopted by the Group.
Equity interests in a subsidiary not attributable, directly or indirectly, to the Group are presented as “non-controlling interests”. The Group
initially recognises non-controlling interests that are present ownership interests in subsidiaries and are entitled to a proportionate
share of the subsidiary’s net assets on liquidation at either fair value or at the non- controlling interests’ proportionate share of the
subsidiary’s net assets. Subsequent to initial recognition, non-controlling interests are attributed their share of profit or loss and each
component of other comprehensive income. Non-controlling interests are shown separately within the equity section of the statement
85 FREELANCER LIMITED ANNUAL REPORT 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
of financial position and statement of comprehensive income.
(b) Goods and Services Tax (GST) and Valued Added Tax (VAT)
Revenues, expenses and assets are recognised net of the amount of associated GST and VAT, except where the amount of GST and
VAT incurred is not recoverable from the relevant taxation authority. In these circumstances, the GST and VAT is recognised as part of
the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables are stated inclusive of the amount of
GST and VAT receivable or payable. The net amount of GST and VAT recoverable from, or payable to, the relevant taxation authority is
included with other receivables or payables in the statement of financial position.
Cash flows are presented in the cash flow statement on a gross basis. The GST and VAT components of cash flows arising from
investing or financing activities which are recoverable from, or payable to, the taxation authority are presented as operating cash flows
included in receipts from customers or payments to suppliers.
Commitments and contingencies are disclosed net of the amount of GST and VAT recoverable from, or payable to, the relevant taxation
authority.
(c) Research & development
Costs relating to research and development of new software products are expensed as incurred until technological feasibility in the
form of a working model has been established. At such time costs may be capitalised, subject to recoverability. Software development
costs incurred subsequent to the establishment of technological feasibility have not been significant, and the Group has not capitalised
any software development costs to date.
(d) Foreign currency transactions and balances
Functional and presentation currency
The functional currency of each of the Group entities is measured using the currency of the primary economic environment in which
that entity operates. The consolidated financial statements are presented in Australian dollars, which is the parent entity’s functional
and presentation currency.
Transactions and balances
Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date of the transaction.
Foreign currency monetary items are translated at the period-end exchange rate. Non-monetary items measured at historical cost
continue to be carried at the exchange rate at the date of the transaction. Non-monetary items measured at fair value are reported at
the exchange rate at the date when fair values were determined.
Exchange differences arising on the translation of monetary items are recognised in the profit or loss, except where deferred in equity
as a qualifying cash flow or net investment hedge.
Exchange differences arising on the translation of non-monetary items are recognised directly in other comprehensive income to the
extent that the underlying gain or loss is recognised in other comprehensive income; otherwise the exchange difference is recognised in
profit or loss.
Group companies
The financial results and position of foreign operations whose functional currency is different from the Group’s presentation currency is
translated as follows:
• Assets and liabilities are translated at period end exchange rates prevailing at that reporting date.
•
Income and expenses are translated at average exchange rates for the period.
• Retained earnings are translated at the exchange rates prevailing at the date of the transaction.
Exchange differences arising on translation of foreign operations with functional currencies other than Australian dollars are recognised
in other comprehensive income and included in the foreign currency translation reserve in the statement of financial position. The
cumulative amount of these differences is reclassified into profit or loss in the period in which the operation is disposed of.
(e)
Impairment of assets
At the end of each reporting date, the Group reviews the carrying values of its tangible and intangible assets to determine whether there
is any indication that those assets have been impaired. If such an indication exists, the recoverable amount of the asset, being the
higher of the asset’s fair value less costs to sell and value in use, is compared to the asset’s carrying value. Any excess of the asset’s
carrying value over its recoverable amount is recognised immediately in the profit or loss.
Impairment testing is performed annually for goodwill and intangible assets with indefinite lives.
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.
FREELANCER LIMITED ANNUAL REPORT 2018 86
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(f) Comparative figures
When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the current
financial year.
Where the Group has retrospectively applied an accounting policy, made a retrospective restatement or reclassified items in its financial
statements, an additional statement of financial position as at the beginning of the earliest comparative period will be disclosed.
(g) Critical accounting estimates and judgments
The directors evaluate estimates and judgements incorporated into the financial report based on historical knowledge and best
available current information. Estimates assume a reasonable expectation of future events and are based on current trends and
economic data, obtained both externally and within the Group. The resulting accounting estimates will, by definition, seldom equal
the related actual results. The estimates and judgements that have a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year are discussed below.
Business Combinations
Following the guidance in AASB 3: Business Combinations, the Group has made assumptions and estimates to determine the purchase
price of businesses acquired as well as its allocation to acquired assets and liabilities. To do so, the Group is required to determine at
the acquisition date fair value of the identifiable net assets acquired, including intangible assets such as brand, customer relationships
and liabilities assumed. Goodwill is measured as the excess of the fair value of the consideration transferred including the recognised
amount of any non-controlling interest over the net recognised amount of the identifiable assets and liabilities.
The assumptions and estimates made by the Group have an impact on the asset and liability amounts recorded in the financial
statements. In addition, the estimated useful lives of the acquired amortisable assets, the identification of intangible assets and the
determination of the indefinite or finite useful lives of intangible assets acquired will have an impact on the Group’s future profit or loss.
Impairment of intangible assets
The Group assesses impairment at each reporting date by evaluating conditions specific to the group that may lead to impairment of
assets. Where an impairment trigger exists, the recoverable amount of the asset is determined. Value-in- use calculations performed in
assessing recoverable amounts incorporate a number of key estimates. During the year ended 31 December 2018, no impairment has
been recognised in respect of intangible assets. The Group assessed recoverability of goodwill based on the present value of cash flow
projections over a 6 year period. Should any of the intangible assets fail to perform, an impairment loss would be recognised up to the
maximum carrying value of intangible assets at 31 December 2018 of $26,429,000 (2017: $26,442,000).
Provisions for doubtful accounts and transaction losses
Provision is made in respect of the Group’s best estimate of doubtful accounts and transaction losses based on historical experience.
Share based payments
The Group measures the cost of equity settled transactions with employees by reference to the fair value of the equity instruments
at the date at which they are granted. The fair value is determined with the assistance of an external valuation with the assumptions
detailed in Note 23. The accounting estimates and assumptions relating to equity settled share based payments would have no impact
on the carrying amounts of assets and liabilities within the next annual reporting period but may impact expenses and equity.
Income taxes
The Group is subject to income taxes in Australia and jurisdictions where it has foreign operations. Judgment is required in determining
the worldwide provision for income taxes. There are transactions and calculations undertaken during the ordinary course of business
for which the ultimate tax determination is uncertain. The Group estimates its tax liabilities based on the Group’s understanding of the
tax law. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will
impact the current and deferred tax provisions in the period in which such determination is made.
Deferred tax assets
Deferred tax assets are recognised for deductible temporary differences and unused tax losses as management considers that
it is probable that future taxable profits will be available to utilise those temporary differences and unused tax losses. Significant
management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely
timing and the level of future taxable profits.
Trust assets and liabilities
The Group’s Online Payments segment, namely the business of Escrow.com, is a regulated entity that holds funds on behalf of its users
in trust bank accounts. At 31 December 2018 the cash balance in trust amounted to A$32,157,000 (2017: A$32,355,000), which has a
corresponding liability of the same amount owing to its users.
The Group has determined that trust cash is not a resource controlled by the Group, nor does the Group derive any economic benefit
from these user funds, and therefore the Group does not have the risks and rewards of ownership of the funds. Consequently, trust
87 FREELANCER LIMITED ANNUAL REPORT 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
assets are not recognised as an asset in the Group’s financial statements, and neither is the corresponding trust liability recognised as
a liability in the Group’s financial statements.
(h) Changes in accounting policies
The accounting policies applied by the Group in this consolidated financial report are the same as those applied by the Group in its
consolidated financial report for the year ended 31 December 2018.
(i)
New Accounting Standards for application in future periods
Accounting Standards and Interpretations issued by the AASB that are not yet mandatorily applicable to the Group, together with an
assessment of the potential impact of such pronouncements on the Group when adopted in future periods, are discussed below:
•
AASB 16: Leases (applicable to annual reporting periods beginning on or after 1 January 2019).
When effective, this Standard will replace the current accounting requirements applicable to leases in AASB 117: Leases and
related Interpretations. AASB 16 introduces a single lessee accounting model that eliminates the requirement for leases to be
classified as operating or finance leases.
The main changes introduced by the new Standard are as follows:
»
»
»
»
recognition of a right-to-use asset and liability for all leases (excluding short term leases with less than 12 months of tenure
and leases relating to low-value assets);
depreciation of right-to-use assets in line with AASB 116: Property, Plant and Equipment in profit or loss and unwinding of the
liability in principal and interest components;
inclusion of variable lease payments that depend on an index or a rate in the initial measurement of the lease liability using
the index or rate at the commencement date;
application of a practical expedient to permit a lessee to elect not to separate non-lease components and instead account for
all components as a lease; and
»
additional disclosure requirements.
The transitional provisions of AASB 16 allow a lessee to either retrospectively apply the Standard to comparatives in line with
AASB 108 or recognise the cumulative effect of retrospective application as an adjustment to opening equity on the date of initial
application.
Impact on Freelancer Limited
The Company have assessed that its leases for which it has commitments amounting to $3,811,000 will go on the balance sheet,
impacting asset and liability balances for future lease commitments based on the current leases where the Company is a lessee.
FREELANCER LIMITED ANNUAL REPORT 2018 88
DIRECTORS’ DECLARATION
Directors’ Declaration
In the Directors’ opinion:
(a)
the Financial Statements and notes of the consolidated entity set out on pages
53 to 88 are in accordance with the Corporations Act 2001, including:
(i)
giving a true and fair view of the consolidated entity’s financial posi-
tion as at 31 December 2018 and of its performance for the financial
year ended on that date; and
(ii)
complying with Australian Accounting Standards, the Corporations
Regulations 2001 and other mandatory professional reporting
requirements;
(b) Note 2(a) confirms that the Financial Statements also comply with Interna-
tional Financial Reporting Standards as issued by the International Accounting
Standards Board;
(c)
there are reasonable grounds to believe that the Company will be able to pay its
debts as and when they become due and payable; and
(d)
the Directors have been given the declarations by the Chief Executive Officer
and Chief Financial Officer required by section 295A of the Corporations Act
2001 for the financial year ending 31 December 2018.
This declaration is made in accordance with a resolution of the Directors.
On behalf of the directors
Matt Barrie
Chairman
18 February 2019
89 FREELANCER LIMITED ANNUAL REPORT 2018
Independent Auditor’s Report
INDEPENDENT AUDITOR’S REPORT
FREELANCER LIMITED
ABN 66 141 959 042
AND CONTROLLED ENTITIES
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
FREELANCER LIMITED AND CONTROLLED ENTITES
Opinion
We have audited the accompanying financial report of Freelancer Limited (the Group),
which comprises the consolidated statement of financial position as at 31 December 2018,
the consolidated statement of profit or loss and other comprehensive income, the
consolidated statement of changes in equity, the consolidated statement of cash flows for
the year ended and notes comprising a summary of significant accounting policies and
other explanatory information, and the directors’ declaration.
In our opinion:
(a) the accompanying financial report of the Consolidated Entity is in accordance with
the Corporations Act 2001, including:
i.
giving a true and fair view of the Consolidated Entity’s financial position as
at 31 December 2018 and of its performance for the year ended on that
date; and
complying with Australian Accounting Standards and the Corporations
Regulations 2001
ii.
(b) the financial report also complies with International Financial Reporting Standards
as disclosed in Note 2(a).
Basis of Opinion
We conducted our audit in accordance with Australian Auditing Standards. Those
standards require that we comply with relevant ethical requirements relating to audit
engagements and plan and perform the audit to obtain reasonable assurance about
whether the financial report is free from material misstatement. Our responsibilities under
those standards are further described in the Auditor’s responsibility section of our report.
We are independent of the Consolidated Entity in accordance with the Corporations Act
2001 and the ethical requirements of the Accounting Professional and Ethical Standards
Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are
relevant to our audit of the financial report in Australia. We have also fulfilled our other
ethical responsibilities in accordance with the Code.
We confirm that the independence declaration required by the Corporations Act 2001 has
been given to the directors of the group.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most
significance in our audit of the financial report of the current period. These matters were
addressed in the context of our audit of the financial report as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these matters.
We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
SYDNEY · PENRITH · MELBOURNE · BRISBANE · PERTH · DARWIN
Liability limited by a scheme approved under Professional Standards Legislation
www.hallchadwick.com.au
FREELANCER LIMITED ANNUAL REPORT 2018 90
INDEPENDENT AUDITOR’S REPORT
Independent Auditor’s Report
FREELANCER LIMITED
ABN 66 141 959 042
AND CONTROLLED ENTITIES
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
FREELANCER LIMITED AND CONTROLLED ENTITITES
Key Audit Matter
(cid:14)ro(cid:20)edures
the Group’s
(cid:15)e(cid:27)ian(cid:20)e on auto(cid:28)ated pro(cid:20)ess and
(cid:20)ontro(cid:27)s
Freelancer’s revenue is primarily generated
from new and existing users posting and
fulfilling projects and contests on
the
therefore a
Freelancer.com website and
significant part of
financial
reporting processes are heavily reliant on IT
systems with automated processes and
controls over the capturing, valuing and
recording of transactions. Similarly other IT
includes
platforms of
the business
Warrior
Escrow.Com
Forum are also heavily reliant on IT systems.
This is a key audit matter because of the:
• Complex IT environment supporting the
and
that
Group’s business processes
• Mix of manual and automated controls
• Multiple internal and outsource support
arrangements
• Large volume of low value transactions
(cid:9)(cid:28)pair(cid:28)ent of (cid:8)ood(cid:36)i(cid:27)(cid:27) and (cid:9)ntan(cid:24)i(cid:19)(cid:27)e
Assets
Refer to Note 12 (cid:66) Intangible Assets and
Note 31 (h) (cid:6) Critical Accounting Estimates
and (cid:28)udgements
The Group has recognised intangible assets
of (cid:2)2(cid:14).(cid:12) million at 31 December 2018
resulting from business combinations and
asset acquisitions.
impairment of
the
The assessment of
Group’s
balances
intangible
incorporated significant judgement in respect
of factors such as discount rates, revenue
growth and cost assumptions.
asset
Our procedures included, amongst others:
We understood and tested management’s controls over its
systems relevant to financial reporting.
We involved our IT specialist to conduct general IT controls tests
that related to applications that support the effective functioning of
application controls. This included a review of the policies and
procedures, change management and access security.
Our IT specialist performed application controls testing over the
three main applications. The testing included procedures used to
initiate, record, process and report transactions and other financial
data, with particular focus on recognition and measurement of fee
income, transactions including payment gateways and exception
report testing.
When testing controls was not considered an appropriate or
efficient testing approach, alternative audit procedures were
performed on the financial information.
Our procedures included, amongst others:
We evaluated management’s goodwill and intangible assets
impairment assessment. We obtained the Group’s value in use
model and agreed amounts to a combination of budgets and
future plans.
Key inputs in the value in use model included forecast revenue,
costs, discount rates and terminal growth rates. We corroborated
those assumptions by comparing forecasts to historical actuals.
our
involved
valuation
We
recalculate
management’s discount rates based on external data where
available. The valuation specialist was also involved in assessing
the value in use model used for valuation methodology including
treatment of the net present value calculations.
specialists
to
to amounts
We have focussed on this area as a key audit
matter due
involved being
material; the inherent subjectivity associated
with critical
in
relation to forecast future revenue and costs;
discount rates; and terminal growth rates.
judgements being made
We performed sensitivity analysis on the fee income; terminal
growth rate; and discount rate inputs.
We assessed the Group’s disclosures of the quantitative and
qualitative considerations in relation to the carrying value of
goodwill and intangible assets, by comparing these disclosures to
our understanding of this matter.
91 FREELANCER LIMITED ANNUAL REPORT 2018
Independent Auditor’s Report
INDEPENDENT AUDITOR’S REPORT
FREELANCER LIMITED
ABN 66 141 959 042
AND CONTROLLED ENTITIES
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
FREELANCER LIMITED AND CONTROLLED ENTITITES
Ot(cid:25)er (cid:9)nfor(cid:28)ation
The directors are responsible for the other information. The other information comprises the
information in the Group’s annual report for the year ended 31 December 2018, but does not
include the financial report and the auditor’s report thereon.
Our opinion on the financial report does not cover the other information and we do not express
any form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other
information and, in doing so, consider whether the other information is materially inconsistent
with the financial report or our knowledge obtained in the audit or otherwise appears to be
materially misstated. If, based on the work we have performed, we conclude that there is a
material misstatement of the other information, we are required to report that fact. We have
nothing to report in this regard.
(cid:15)esponsi(cid:19)i(cid:27)ities of t(cid:25)e (cid:5)ire(cid:20)tors for t(cid:25)e (cid:7)inan(cid:20)ia(cid:27) (cid:15)eport
The directors of the Group are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australia Accounting Standards and the Corporations Act
2001 and for such internal control as directors determine is necessary to enable the preparation
of the financial report that gives a true and fair view and is free from material misstatement,
whether due to fraud or error.
In preparing the financial report, the directors are responsible for assessing the Consolidated
Entity’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the directors either intend to
liquidate the Consolidated Entity or to cease operations, or have no realistic alternative but to do
so.
Auditor(cid:38)s (cid:15)esponsi(cid:19)i(cid:27)ities for t(cid:25)e Audit of t(cid:25)e (cid:7)inan(cid:20)ia(cid:27) (cid:15)eport
Our objectives are to obtain reasonable assurance about whether the financial report as a
whole is free from material misstatement, whether due to fraud or error, and to issue an
auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with the Australian Auditing
Standards will always detect a material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on the basis of this
financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise
professional judgement and maintain professional scepticism throughout the audit. We also:
(cid:66)
(cid:66)
Identify and assess the risks of material misstatement of the financial report, whether due
to fraud or error, design and perform audit procedures responsive to those risks, and
obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.
The risk of not detecting a material misstatement resulting from fraud is higher than for
one resulting from error, as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control
Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Group’s internal control.
FREELANCER LIMITED ANNUAL REPORT 2018 92
INDEPENDENT AUDITOR’S REPORT
Independent Auditor’s Report
FREELANCER LIMITED
ABN 66 141 959 042
AND CONTROLLED ENTITIES
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
FREELANCER LIMITED AND CONTROLLED ENTITITES
(cid:66)
(cid:66)
(cid:66)
(cid:66)
Evaluate the appropriateness of accounting policies used and the reasonableness of
accounting estimates and related disclosures made by the directors.
Conclude on the appropriateness of the directors’ use of the going concern basis of
accounting and, based on the audit evidence obtained, whether a material uncertainty
exists related to events or conditions that may cast significant doubt on the Group’s ability
to continue as a going concern. If we conclude that a material uncertainty exists, we are
required to draw attention in our auditor’s report to the related disclosures in the financial
report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are
based on the audit evidence obtained up to the date of our auditor’s report. However,
future events or conditions may cause the Group to cease to continue as a going
concern.
Evaluate the overall presentation, structure and content of the financial report, including
the disclosures, and whether the financial report represents the underlying transactions
and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the
entities or business activities within the Group to express an opinion on the financial
report. We are responsible for the direction, supervision and performance of the Group
audit. We remain solely responsible for our audit opinion.
We communicate with the directors regarding, among other matters, the planned scope and
timing of the audit and significant audit findings, including any significant deficiencies in internal
control that we identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and
other matters that may reasonably be thought to bear on our independence, and where
applicable, related safeguards.
From the matters communicated with the directors, we determine those matters that were of
most significance in the audit of the financial report of the current period and are therefore the
key audit matters. We describe these matters in our auditor’s report unless law or regulation
precludes public disclosure about the matter or when, in extremely rare circumstances, we
determine that a matter should not be communicated in our report because the adverse
consequences of doing so would reasonably be expected to outweigh the public interest
benefits of such communication.
93 FREELANCER LIMITED ANNUAL REPORT 2018
Independent Auditor’s Report
INDEPENDENT AUDITOR’S REPORT
FREELANCER LIMITED
ABN 66 141 959 042
AND CONTROLLED ENTITIES
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
FREELANCER LIMITED AND CONTROLLED ENTITITES
(cid:15)eport on t(cid:25)e (cid:15)e(cid:28)uneration (cid:15)eport
We have audited the remuneration report included in pages (cid:12)8 to (cid:13)1 of the directors’ report for
the year ended 31 December 2018.
The directors of the Group are responsible for the preparation and presentation of the
remuneration report in accordance with s 300A of the Corporations Act 2001. Our responsibility
is to express an opinion on the remuneration report, based on our audit conducted in
accordance with Australian Auditing Standards.
Opinion
In our opinion the remuneration report of Freelancer Limited for the year ended 31 December
2018 complies with s 300A of the Corporations Act 2001.
Hall Chadwick
Level (cid:12)0, 2 Park Street
Sydney NSW 2000
(cid:16)A(cid:12)(cid:5)(cid:6)(cid:6)(cid:14) K(cid:17)MA(cid:15)
Partner
Dated: 18 February 201(cid:16)
FREELANCER LIMITED ANNUAL REPORT 2018 94
ADDITIONAL ASX INFORMATION
Additional ASX Information
Shareholder information
Additional information required by the Australian Securities Exchange Limited Listing Rules and not disclosed elsewhere in this
report. This additional information was applicable as at 12 March 2019.
Substantial shareholders
The names of substantial shareholders who have notified the Company in accordance with section 671B of the
Corporations Act 2001 are:
Robert Matthew Barrie1
Simon Clausen and Startive Holdings Limited and its related bodies1
Top 20 Shareholders as at 12 March 2019
Rank Name
1 MATT BARRIE
2 CITICORP NOMINEES PTY LIMITED
3 HSBC CUSTODY NOMINEES
4 MR DARREN WILLIAMS
5 J P MORGAN NOMINEES AUSTRALIA
6 HSBC CUSTODY NOMINEES
7 NATIONAL NOMINEES LIMITED
8 BNP PARIBAS NOMS (NZ) LTD
9 BNP PARIBAS NOMINEES PTY LTD
10 MR NICHOLAS PETER DE JONG
11 CS THIRD NOMINEES PTY LIMITED
12 SARGON CT PTY LTD
13 MRS RIKA WESTWOOD
14 MR RODNEY JOHN SELLICK
15 MR NEIL LEONARD KATZ
16 INFILSEC PTY LTD
17 MR JONATHON SEALLY
18 MAROBAR HOLDINGS PTY
19 CUSTODIAL SERVICES LIMITED
20 MR MICHAEL JOHN RUHFUS
Total Top 20
Total remaining
Number of Shares
199,552,417
166,135,486
Number of ordinary
shares held
% of ordinary
shares held
191,435,150
101,743,599
73,879,639
10,605,660
9,025,867
5,680,028
5,504,427
5,165,396
3,527,035
2,106,164
1,626,427
1,440,390
1,125,000
1,109,833
995,539
978,727
900,000
789,500
782,823
694,831
419,116,035
42.0%
22.3%
16.2%
2.3%
2.0%
1.2%
1.2%
1.1%
0.8%
0.5%
0.4%
0.3%
0.2%
0.2%
0.2%
0.2%
0.2%
0.2%
0.2%
0.2%
92%
36,489,126
8.0%
1. Includes a relevant interest in 6,135,486 fully paid ordinary shares by virtue of the Director having had a voting power of over 20% in the Company, which
had a relevant interest as a result of trading restrictions over shares issued under the ESP.
95 FREELANCER LIMITED ANNUAL REPORT 2018
Distribution of ordinary shareholders as at 12 March 2019
1-1,000
1,001-5,000
5,001-10,000
10,001-100,000
100,001-99,999,999,999
Totals
ADDITIONAL ASX INFORMATION
Number of shareholders
Number of Shares
600
1,050
361
443
86
2,540
366,866
2,959,303
2,841,718
13,705,321
435,731,953
455,605,161
Restricted securities as at 12 March 2019
There are no restricted securities on issue for the purpose of the ASX Listing Rules.
There are ordinary shares on issue that are subject to trading restrictions pursuant to the ESP. The table below sets out the number of
shares subject to trading restrictions.
Class of restricted securities
Nature of restriction
Quoted ESP shares
Unquoted ESP shares
Various dates ending no later than 19 February 2023
Various dates ending no later than 3 November 2020
Total shares subjected to trading restrictions
Number of Shares
4,909,947
1,225,539
6,135,486
Voting Rights
The voting rights attaching to ordinary shares, set out in the Company’s Constitution are:
a. at meetings of members, each member is entitled to vote in person or by proxy, attorney or representative; and
b. on a show of hands, every person present who is a member has one vote, and on a poll every member present has a vote for each
fully paid share owned.
There are no voting rights attached to unlisted options, voting rights will be attached to unlisted ordinary shares once issued and to
options upon exercise.
On-market Buy Back
There is no current on-market buy back.
FREELANCER LIMITED ANNUAL REPORT 2018 96
CORPORATE DIRECTORY
Corporate Directory
Company Directors
Mr Robert Matthew Barrie
Chairman and Chief Executive Officer
Mr Darren Nicholas John Williams
Non-Executive Director
Mr Simon Alvin Clausen
Non-Executive Director
Company Secretary
Mr Neil Leonard Katz
Registered Office
Level 20
680 George Street
Sydney NSW 2000
Telephone: +61 (02) 8599 2700
Share Registry
Boardroom Limited
Level 12
255 George Street
Sydney NSW 2000
External Auditors
Hall Chadwick
Level 40
2 Park Street
Sydney NSW 2000
Securities exchange listing
Freelancer Limited shares are listed on the Australian Securities Exchange (Listing code: FLN)
97 FREELANCER LIMITED ANNUAL REPORT 2018