Annual Report
2014
GBST is one of Australia’s leading technology services
companies. We specialise in providing securities
transaction and wealth administration software for the
financial services industry.
Our software platforms connect capital markets in
Australasia, Asia, Europe and the United States; and
support more than 7,000 investment options on a
single wealth administration platform.
Our three areas of focus:
Through the Syn~ platform, GBST
Capital Markets provides new-
generation technology to process
equities, derivatives, fixed income
and managed funds transactions to
global capital market participants.
GBST also offers the GBST shares
and DCA (derivatives) platforms.
Through the Composer platform,
GBST Wealth Management provides
fund administration and registry
software to the wealth management
industry in Australia and the UK.
GBST Financial Services is
a wholesale provider of access to
financial products and related data
information transactions for financial
advisors and institutions.
$98.5m
$20.5m
21.5 cents
8.5 cents
83.0
77.0
16.4
16.5
16.5
6.5
67.6
67.5
14.2
13.7
15.2
13.8
11.6
5.0
4.0
2.0
The Year in
Review
Strong international sales drive
record revenue of $98.5 million
Net profit increased by 66%
to $10 million
GBST Composer UK sales
continue to grow
GBST Syn~ now ‘live’ in Asia,
Australia, Europe and the US
Technology development
centre in Ho Chi Minh City
increases GBST’s product
development capacity
Dividends rose to 8.5 cents for
the year, and a final fully franked
dividend of 4.5 cents will be paid
on 15 October 2014
FY10 FY11 FY12 FY13 FY14
FY10 FY11 FY12 FY13 FY14
FY10 FY11 FY12 FY13 FY14
FY10 FY11 FY12 FY13 FY14
Group Total
Revenue
EBITDA
Cash EPS
Dividends
Table of Contents
1 The Year in Review
3
Chairman’s and
Managing Director’s Report
14 Directors’ Report
32
Auditor’s Independence
Declaration
7 GBST Product Suite
8 GBST Executive Team
9 GBST Board of Directors
10
Corporate Governance
Statement
33 Financial Statements
84 Directors’ Declaration
85 Independent Auditor’s Report
87 Additional Information
89 Corporate Directory
Notice of Meeting
GBST Holdings Limited
(GBST) will hold its Annual
General Meeting at
3.30pm (Brisbane Time) on
Thursday 16 October 2014 at
McCullough Robertson, Level
11 Central Plaza Two, 66 Eagle
Street, Brisbane.
GBST Holdings Limited ABN 85 010 488 874 Annual Report
2014
1
GBST Snapshot
Established
1983
ASX listed
2005
Record revenue of
$98.5m
Specialist
in capital markets and wealth management solutions
Continuous
R&D investment
drives future growth
More than 60
clients and expanding
Celebrated 30
years in 2014
More than
470
employees
International sales now
48% of revenue
2
Chairman’s and Managing Director’s Report
F
FY2014 was GBST’s 30th anniversary and
a rewarding year in which our global platform
strengthened. We specialise in providing securities
processing and wealth administration software for the
financial services industry, and our clients include more
than 60 of the world’s leading banks, stockbrokers and fund
managers. Our products and infrastructure support their
core business services, facilitating trading and administration
activities which in many ways are the bedrock of the global
financial system.
We have a record of innovation and of developing
extremely robust, scalable software. With strong demand
for our services, we embarked on international expansion.
While growth has been driven primarily by new client
wins, we have also acquired technologies and integrated
them successfully into our business. Our leading wealth
administration software platform, GBST Composer, and
the powerful international capital markets and post-trade
processing platform, GBST Syn~, are new-world products,
capable of delivering long-term returns for clients with the
flexibility to change. Our business model, therefore, is to
focus on building and developing recurring software-based
annuity income streams.
The success of this strategy is becoming clear with our
international revenue almost trebling in three years. Our
progress, however, has not always been straightforward.
We were not immune to the repercussions of the global
financial crisis which impacted our clients, and the economic
environment, while improving, remains uncertain and our
markets are still recovering.
Financial results and dividends
Against this backdrop, GBST achieved a strong result in
FY2014. The group’s EBITDA increased 24% to $20.5 million.
Adjusted cash net profit after tax was $14.3 million
compared with $11.0 million in FY2013. Reported after-tax
profit was $10.0 million, 66% above FY2013.
This growth reflects our evolution as an internationally-
recognised leader in software for the financial services
industry. Revenue was up 19% to a record $98.5 million,
with the increase due almost entirely to higher international
revenue which grew to 48% of the total, from nearly 40%
in FY2013. Australian revenue remained steady in a difficult
trading environment. Approximately two thirds of total
revenue is high quality recurring, annuity income based on
long-term client contracts.
Strong cash generation, with 102% conversion of EBITDA
to cash flow, enabled us to continue to pay down debt,
and we closed the year with net debt of $3.6 million,
$8.7 million lower than at the end of FY2013. This has
enabled us to continue to invest in GBST’s geographic
expansion, our products and infrastructure, and in building
sales development and support teams to sustain growth.
More than 10% of revenue was invested in research and
development expenditure.
John Puttick
Chairman
Stephen Lake
Managing Director and
Chief Executive Officer
FY2014 was the fourth consecutive year of dividend growth.
The final dividend declared for FY2014 of 4.5 cents per
share brings the total for the year to 8.5 cents per share, an
increase of 29%.
Asian sales of GBST Syn~ boost revenue
GBST Capital Markets revenue was $41.2 million,
$5.0 million or 16% above FY2013. This reflected growing
international sales, particularly in Asia, and an extremely
good performance by our Australian operations in light of the
difficult market conditions.
FY2014 Asian revenue nearly doubled from the previous
year. Significant progress included completing a middle
office solution for one of the world’s largest banks using
the GBST Syn~3.0 platform. This includes substantial
efficiency improvements and services for the custody
market. To support our clients in Asia we have progressively
built our support presence in Singapore, Hong Kong and
Ho Chi Minh.
Asian markets represent a strong growth opportunity as
rising wealth and prosperity is driving demand for capital
markets platforms such as GBST Syn~ which can trade
an extensive range of financial instruments and complete
cross-border transactions on securities exchanges across
the region. Technology spending for the Asia-Pacific
banking market is expected to expand at an annual rate of
about 6.8% over the next five years, as the market changes
and restructures.
The successful deployment of GBST Syn~ for our first
direct US client was a watershed event. This platform
enables the post-trade processing of equities and other
financial instruments to global capital markets. We
helped a major broker-dealer to increase its back- and
middle-office automation and efficiency by greatly improving
straight-through processing from 25% to 95%. We are
well positioned to capitalise on this positive endorsement
and to broaden our relationships with regional capital
markets participants and large investment banks.
GBST Holdings Limited ABN 85 010 488 874 Annual Report
2014
3
Growing regulatory charges and the expected move from
the existing three-day settlement policy, or T+3, to T+2
settlement is a catalyst for change in the US markets.
While European economic conditions remained difficult and
financial markets’ discretionary spending was constrained by
ongoing compliance changes, our new European financial
transaction tax (FTT) module for GBST Syn~ opened
opportunities with institutional clients and was named best
compliance solution at the Systems in the City Awards.
International sales of GBST Syn~ increased by 75% in
FY2014. We continue to invest to drive growth and, as our
operations mature the transition from services revenue to
recurring annual licence fee income, and higher margins, is
expected to increase.
First client transition from GBST Shares to
GBST Syn~ begins
While Australian sales were impacted by subdued retail
trading volumes, we increased market share and revenue
rose 3% to $29.5 million. In this market where GBST’s
products are well established, about 90% of revenue comes
from annuity licence fees.
We continue to deliver on the transformation of the GBST
Syn~ platform for the Australian market. This platform offers
significant opportunities to expand our services in Australia
and also provide regional solutions across Asia.
The Australian market is our foundation stone, which we
support through the extensive domain knowledge of our staff
and a consistent flow of new and enhanced products. These
include the Order Management System (OMS) platform
for derivatives, the risk management solution MarginSuite,
and GBST business intelligence reporting (GBST BIR) to
consolidate information from GBST products and databases.
Sales of GBST Composer continue to grow
The GBST Composer platform offers an integrated system
for the administration of wrap platforms, master trusts,
superannuation, pensions, risk and debt. Sales increased
24% to $53.8 million in FY2014; Sales in the UK have
Cost base before
GBST Composer
Cost base
after deploying
GBST Composer
more than
25% savings
in costs
QUICK FACTS
Reducing costs
for clients
Rolling out GBST
Composer for one UK
client has enabled
workplace savings,
at retirement and
non-advised solutions
to be consolidated
on a single platform,
contributing to more
than 25% cost savings
over four years
4
risen almost six-fold over five years, and were up 41%
to $35.6 million, compared with $25.2 million in FY2013.
The market is still in its early stages and licence revenues
comprise approximately 40% of sales.
The UK life, pensions and investments market has changed
significantly with the recent introduction of the Retail
Distribution Review legislation to protect consumers. The
market now distinguishes between organisations which
facilitate online, low cost delivery models, and enhance
customer experience through providing much more detailed
information. Digital platforms such as GBST Composer,
which supports more than 7,000 investment options, enable
firms to improve their service proposition with an extremely
low cost structure and dynamic pricing abilities, allowing
direct-to-consumer business models to design and adapt
customer offerings efficiently.
As an early entrant to the UK wraps and platforms
market GBST Composer now supports three of the top
six UK retirement saving platforms, and added a leading
UK-based investment and savings platform and a Self
Invested Personal Pensions (SIPP) client during the
year. GBST Composer and GBST’s clients also received
industry awards, including the 2013 Aberdeen Asset
Management Platform Awards for best use of platform
technology, best new platform and best platform-enabled
retirement proposition.
The UK market is evolving with the formation of three key
platform markets – adviser-focused, direct-to-consumer and
employer focused ‘Workplace’ platforms. GBST Composer
has proven its ability to perform in each market, and we have
diversified to strengthen our offering for SIPPs and life and
pensions. GBST Composer now has approximately 10% of
the UK SIPP market. New Budget measures that take effect
in April 2015 have impacted the sale of annuities, creating
new opportunities for GBST as financial services firms
refocus on SIPP and drawdown products.
The life and pensions market represents a significant
opportunity as organisations consider the advantages from
migrating old world systems onto a single modern platform
such as GBST Composer.
In Australia, where GBST Composer is well established
revenue was stable at $18.2 million in FY2014, with licence
fees comprising approximately 75% of income.
We also helped superannuation funds prepare for incoming
government legislation by automating transactions between
them and the Australian Taxation Office, using the new GBST
Composer SuperStream Gateway suite for superannuation
rollover and contribution transactions.
Extending software development capacity
During FY2014 we invested in the establishment of a
technology development centre in Ho Chi Minh City which
now employs more than 70 skilled staff. The centre will make
a valuable contribution to our ongoing product development
and client support.
COMMUNITY
Proudly supporting
Room to Read
In 2014 we sponsored
Room to Read, which
collaborates with
communities and local
governments in Asia and
Africa to assist literacy and
gender equality in education.
Emu Design
Emu Design, which provides user Interface and web design
services for GBST and other organisations, had a difficult
year. The business expanded in the UK but contracts which
were expected to begin in the second half were delayed and
business development costs contributed to a divisional loss
for the year.
In the UK we launched a new calculator console which
enables clients to self-manage deployment of GBST’s
financial calculators. This technology will be launched in
Australia in the coming year.
The online development skills of Emu Design continue to
contribute to the user-friendliness of GBST’s software and
user interfaces for our clients. Through EMU we provide
an extensive range of financial calculators for the financial
services industry.
People and community
We are committed to helping the communities in which we
operate and match employee donations to charities. We also
support our staff’s voluntary charitable work with financial
contributions. In FY2014 the total amount paid to charities
GBST supports was $146 thousand. We also partnered
with Room to Read, a global organisation which promotes
literacy and gender equality in education, establishing school
libraries, building schools and training teachers in literary
education. Its programs have benefited 8.8 million people so
far in Asia and Africa.
We thank our employees who develop our technologies and
help our customers every day with outstanding work and
dedication. We now employ more than 470 staff in Australia,
Asia, Europe and North America. They have driven GBST’s
momentum, and we look forward to building on this in the
year to come.
Forward outlook
While market conditions continue to improve, there remains
considerable uncertainty in financial services sectors
around the world. We have a consistent and successful
strategy in place, product diversity and an increasingly broad
geographic spread of operations.
Over the medium term, we believe that GBST is well placed
as its global presence and product strength continue to
grow. Our significant investment in technology ensures
that our products are competitive, flexible and scalable to
support ever-increasing demands for new capabilities.
In Asia, we have a strong pipeline, and we have invested in
growth in the North American market. In Australia, we expect
capital markets and economic conditions remain subdued.
While the environment remains very competitive changing
regulation continues to provide opportunity for GBST in the
UK, where the wrap and platforms market is expected to
continue grow.
With our leading products, strong opportunities and great
people, we remain cautiously optimistic that GBST’s positive
momentum will continue.
QUICK FACTS
GBST Syn~ delivers 95% automation
GBST Syn~ helped a major North American broker-
dealer firm to automate about 95% of its back- and
middle-office processes, up from 25% before.
GBST Holdings Limited ABN 85 010 488 874 Annual Report
2014
5
Our growing capability
North America
• First direct US client
‘live’ using GBST Syn~
• GBST Syn~’s straight
through processing
significantly increases
automation
• Sales and marketing
support strengthened
Hong Kong
• GBST Syn~ middle-
office clearing solution
implemented for global
bank transaction
• Increasing client wins
• Close working
relationships with clients
United Kingdom
• Growth market for
GBST Composer
• GBST Composer sales
up almost sixfold over
five years
• GBST Syn~ Financial
Transaction Tax ‘live’ at
global investment bank
N E W Y O R K
L O N D O N
Singapore
• GBST Syn~ gaining
sales momentum
• Increased sales and
support team
• Expanding market
connectivity
H O N G K O N G
S I N G A P O R E
Vietnam
• Technology development
centre established
• Proven capacity to
contribute to major
projects
• Employs more than
70 staff
H O C H I M I N H C I T Y
6
Australia
• New products enhance
GBST Shares
• First GBST Shares to
GBST Syn~ transition
underway
• GBST SuperStream
Gateway suite launched
B R I S B A N E
S Y D N E Y
W O L L O N G O N G
M E L B O U R N E
The GBST product suite
T
Through its flagship products GBST provides
industry-leading securities transaction and fund
administration software for the financial services sector.
The GBST Shares platform is the most scalable and
widely used middle- and back-office equities system in
Australia. It helps stockbrokers and third-party clearers to
manage and execute transactions with the Australian
Securities Exchange’s market operations and clearing
systems. It facilitates transactions in virtually every type of
financial instrument including derivatives, margin lending,
foreign equities, term deposits, bonds, bank bills and other
cash products.
GBST’s/Derivatives and Client Accounting system (DCA) a fully
integrated client accounting system for derivatives trading. It is
directly connected to the ASX’s derivatives clearing system
and processes most Australian derivatives transactions.
GBST Front Office is used in the stockbroker’s front office to
provide client advisers with client management software
including their portfolio, risk profile and investment
preferences. GBST’s Business Intelligence reporting (BIR)
provides pre-built reports and dashboards for advisers,
which can be scheduled, emailed and exported.
GBST Syn~ is a new-generation technology platform that
enables capital market participants to manage post-trade
processing requirements across multiple asset classes,
entities, markets and operational centres. It offers a regional
middle- and back-office solution in Australia, Asia, Europe
and the United States.
GBST Composer is the leading administration and registry
platform for the wealth management industry, with the
unique capability to support more than 7,000 investment
options. In Australia, Composer supports wraps, corporate
and personal superannuation, pensions, retail and
wholesale unit trusts, life, risk, loans and cash
management. In the United Kingdom, it offers a
comprehensive solution for the management and
administration of tax wrappers for self-invested personal
pensions, income drawdown, individual savings accounts,
bonds and wraps across multiple investments including
retail and wholesale unit trusts and open ended
investment companies.
It is supplemented by GBST ComposerWeb, which enables
advisers and clients to administer portfolios from the presale
planning stage through to maintaining their portfolios. GBST
SuperStream Gateway provides funds with flexibility and
control while connecting them with the Australian Taxation
Office. GBST Quant provides data analytics and quantitative
services for measuring portfolio performance and after-tax
tools and services.
Product
Capability
Market
• Leading Australian client accounting and securities
transaction platform
• Services for capital markets’ institutional and retail
brokers
• Solutions include cash equities, derivatives and risk,
margin lending, cash management and front office
• Connects an extensive network of financial
institutions
• Global post-trade processing platform
• Regional solutions for Asia, Australia, Europe and
North America
• Manages trades across multiple asset classes,
entities, markets and exchanges
• Consolidated business intelligence reporting
• Wealth administration and registry software for the
Australian funds management industry
• Comprehensive platform for UK wraps, SIPPs, ISAs,
bonds, retail and wholesale unit trusts and OIECs
• Administers more than $400 billion funds under
management
• Supports more than 7,000 investment options
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GBST Holdings Limited ABN 85 010 488 874 Annual Report
2014
7
GBST Executive Team
Stephen Lake Managing Director and
Chief Executive Officer
Robert De Dominicis Chief Executive,
GBST Wealth Management
Mr Stephen Lake joined GBST in
September 2001 after an extensive
career in the capital markets industry in
Australia, the United Kingdom and Asia.
Stephen became a shareholder of
GBST and was appointed Chief
Executive Officer in 2001. Prior to joining
GBST, he was Chief General Manager of Financial Markets
at Adelaide Bank Limited. Stephen was Managing Director
of BZW’s Capital Market’s Division Australia and also
Managing Director of the Fixed Interest Division at BZW
(Asia) Ltd. Stephen is a Member of the Nominations and
Remuneration Committee.
Patrick Salis Chief Operating Officer
Patrick was appointed Group Chief
Operating Officer in August 2012
following previous roles with GBST as
Chief Executive, Global Broker Services
from March 2010 to August 2012 and
Chief Financial Officer from October
2007 to March 2010. Before joining the
company Patrick held senior financial roles in the financial
services industry, most recently as Chief Financial Officer of
Virgin Money Australia Limited. He has extensive experience
working in wealth management, equities and derivatives
broking, superannuation, mortgages and unsecured lending.
Patrick holds a Bachelor of Accounting and is a member of
the Institute of Chartered Accountants in Australia.
Andrew Ritter Chief Financial Officer and
Company Secretary
Andrew commenced with GBST in
November 2011 as Chief Financial
Officer, having spent over 14 years in
public practice and the commercial
sector in both Australia and the United
Kingdom. Most recently, he was Chief
Financial Officer and Company
Secretary of IntraPower Limited. Andrew is a Chartered
Accountant, holds a Bachelor of Commerce degree and
a Graduate Diploma of Applied Corporate Governance.
Isabel Sanchez Chief Technology Officer
Isabel was appointed as Chief
Technology Officer in March 2008.
Isabel has over 19 years experience in
software development and has been
a member of GBST’s Wealth
Management Division (formerly
InfoComp) for 16 years, where she acted
in a similar capacity since 2000. Isabel holds a Bachelor of
Computing Science from the University of Wollongong.
8
Robert is a founding partner of
InfoComp, now GBST’s Wealth
Management Division, with over 25
years experience in the development of
software applications. Robert holds
a Bachelor of Mathematics. Robert has
a business and technical software
background having been part of the Wealth Management
Division’s development and professional services teams.
Denis Orrock Chief Executive, GBST Capital Markets
Denis joined GBST in May 2008 and
was appointed Chief Executive Officer,
Capital Markets in August 2012.
Previously, he managed the company’s
Australian Broker Services and Financial
Services divisions. Prior to joining GBST,
Denis was General Manager of
Infochoice. Denis has worked within the Australian financial
services industry for over 15 years.
Ray Tubman Chief Executive, Wealth Administration
Ray is a founding partner of Infocomp,
now GBST’s Wealth Management
division, and is focused on packaging
and implementing GBST’s Wealth
Management solutions for new markets.
He holds a Bachelor of Mathematics.
Scott Hutchinson Chief Executive, Emu Design
Scott founded Emu Design in 1998 and
continued to manage the business after
its acquisition by GBST in 2008. He
holds four degrees across creative and
technical disciplines.
Liz Bevan CEO, North America
With over fifteen years’ experience in
financial services, Liz has driven
strategic product development, product
management and marketing
programmes during her tenure at GBST.
Liz has a track record of delivering on
strategy development and execution,
new product development, product management, strategies
for pricing, marketing and promotion and risk management.
As the company’s first CEO for North America, she is
charged with delivering overall business growth and
targeted demand generation for the company’s North
American operations.
GBST Board of Directors
John Puttick Non-Executive Chairman
Joakim Sundell Non-Executive Director
Dr John Puttick is the founder and
Chairman of GBST. He holds a Doctor of
the University from Queensland
University of Technology and chartered
accounting qualifications from Auckland
University of Technology. He has over
forty years’ experience in building
commercial systems with information technology, over thirty
of which have been in developing financial services solutions
at GBST.
John is deputy chancellor of Queensland University of
Technology and a Member of the Hall of Fame of the Pearcey
Foundation. John is a Member of the Audit and Risk Committee
and the Nominations and Remuneration Committee.
Stephen Lake Managing Director and Chief Executive Officer
Mr Stephen Lake joined GBST in
September 2001 after an extensive
career in the capital markets industry in
Australia, the United Kingdom and Asia.
Stephen became a shareholder of GBST
and was appointed Chief Executive
Officer in 2001. Prior to joining GBST, he
was Chief General Manager of Financial Markets at Adelaide
Bank Limited.
Stephen was Managing Director of BZW’s Capital Market’s
Division Australia and also Managing Director of the Fixed
Interest Division at BZW (Asia) Ltd. Stephen is a Member of the
Nominations and Remuneration Committee.
Allan Brackin Independent Non-Executive Director
Mr Allan Brackin was appointed to the
Board in April 2005. He has detailed
knowledge of the IT sector having served
as Director and Chief Executive Officer of
Volante Group Limited, one of Australia’s
largest IT services companies from
November 2000 to October 2004. Prior to
this, Allan co-founded a number of IT companies including
Applied Micro Systems (Australia) Pty Ltd, Prion Pty Ltd and
Netbridge Pty Ltd, all national organisations operating under the
Group Company of AAG Technology Services Pty Ltd. Allan is
Chairman of ASX listed mining technology company Runge
Pincock Minarco Limited (since November 2011), currently
serving as Chairman of IT software Company Emagine Pty Ltd
and is a member of the advisory board for Madison
Technologies Pty Ltd and Huon IT Pty Ltd. Allan is Chairman of
GBST’s Audit and Risk Management Committee and is
a member of the Nominations and Remuneration Committee.
Mr Joakim Sundell was appointed
to the Board in 2001.
Joakim has an extensive career in private
equity finance, merchant banking,
and management both in Sydney and
London. He is Managing Director of
Crown Financial Pty Ltd, a private
investment company. He was a Director of Infochoice Limited
(from 13 December 2006 until 5 February 2008).
David Adams Independent Non-Executive Director
Mr David Adams was appointed to the
Board on 1 April 2008. David has an
extensive career in the funds
management industry including the
establishment of Australia’s first cash
management trust at Hill Samuel
Australia in 1980 and Group Head of the
Funds Management Group for Macquarie Bank. He was
a Director at Macquarie Bank from 1983 until 2001.
David was Chairman of the Investment and Financial Services
Association in 2000 and 2001. He was a Visiting Fellow
(Management of Financial Institutions) at Macquarie University
and holds a Bachelor of Science from the University of Sydney
and a Masters in Business Administration from the University
of New South Wales. David is a member of the Audit and Risk
Management Committee and the Chair of the Nominations
and Remuneration Committee.
Ian Thomas Independent Non-Executive Director
Dr Ian Thomas was appointed to the
Board in December 2011. Ian currently
serves as president of Boeing China,
having previously served as president of
Boeing Australia and South Pacific and,
prior to that, president of Boeing India.
Prior to joining Boeing in 2001, Ian served in a variety of staff
and policy roles in the U.S. Department of Defense and is an
authority on U.S. and global security issues. He is co-chair
of the US-China Aviation Cooperation Program. During his
time in Australia, he served as President of the American
Chamber of Commerce and Chairman of the Prime
Minister’s Manufacturing Leaders Group. In 2013 he received
the Royal Aeronautical Society’s Sir Charles Kingsford Smith
Medal for outstanding contributions to aviation.
Ian holds an MPhil in international relations and a PhD
in history from the University of Cambridge, a graduate
degree in social sciences from the University of Stockholm,
and a Bachelor’s degree (cum laude) in history from
Amherst College.
GBST Holdings Limited ABN 85 010 488 874 Annual Report
2014
9
Corporate Governance for the year ended 30 June 2014
Introduction
The ASX document, ‘Principles of Good Corporate
Governance and Best Practice Recommendations with
2010 Amendments’ 2nd Edition (‘Guidelines’) applying to
listed entities was released in August 2007 by the ASX
Corporate Governance Council with the aim of enhancing
the credibility and transparency of Australia’s capital
markets. The Board has made an assessment of the
Company against the Guidelines. The Board has made
decisions in relation to its operations and the operations
of the Company that mean that it does not completely
comply with all of the Guidelines but these are in place
to guide better performance, and the Board outlines its
assessment against the Guidelines below. This statement
on corporate governance reflects the Company’s charter,
policies and procedures on 29 August 2014. The Board
also recognises the third edition of the ASX Corporate
Governance Council’s ‘Corporate Governance Principles
and Recommendations’, and will update its Corporate
Governance Statement and practices in due course in
response to the new recommendations.
(iii) appointment and removal of the Chief Executive
Officer and the Company Secretary;
(iv) reviewing and overseeing systems of risk
management and internal compliance and control,
codes of ethics and conduct, and legal and
statutory compliance;
(v) monitoring senior management’s performance and
implementation of strategy; and
(vi) approving and monitoring financial and other
reporting and the operation of committees.
d) Senior management roles are given authorities and
responsibilities pursuant to both corporate policies
and through directions issued from time to time. The
CEO’s performance is reviewed by the Chairman
in consultation with the Board and the CEO takes
responsibility for the review of other executives’
performance. Formal reviews are conducted at least
annually. The Board uses a variety of means of review
including an internally developed survey of board
members on performance.
Scope of Responsibility of Board
Composition of Board
a) Responsibility for the Company’s proper corporate
governance rests with the Board. The Board’s
guiding principle in meeting this responsibility is to act
honestly, conscientiously and fairly, in accordance with
the law, in the interests of GBST’s shareholders with
a view to building sustainable value for them and the
interests of employees and other stakeholders.
b) The Board’s broad function is to:
The Board performs its roles and function, consistent with
the above statement of its overall corporate governance
responsibility, in accordance with the following principles:
a) the Board should comprise at least five Directors;
b) the Board shall be constituted by members having an
appropriate range of skills and expertise; and
c) at least two Directors will be non-executive Directors
(i) chart strategy and set financial targets for
independent from management.
the Company;
(ii) monitor the implementation and execution of strategy
and performance against financial targets; and
(iii) oversee the performance of executive
management and generally to take and fulfil an
effective leadership role in relation to the Company.
c) Power and authority in certain areas is specifically
reserved to the Board – consistent with its function as
outlined above. These areas include:
(i) composition of the Board itself including the
appointment and removal of Directors and the making
of recommendations to shareholders concerning the
appointment and removal of Directors;
(ii) oversight of the Company including its control and
accountability system;
Board Charter and Policy
a) The Board has adopted a charter (which is kept under
review and amended from time to time as the Board
considers appropriate) to give formal recognition to the
matters outlined above. This charter sets out various
other matters that are important for effective corporate
governance including the following:
(i) a detailed definition of ‘independence’;
(ii) a framework for the identification of candidates for
appointment to the Board and their selection;
(iii) a framework for individual performance review
and evaluation;
(iv) proper training to be made available to Directors
both at the time of their appointment and on an
on-going basis;
10
(v) basic procedures for meetings of the Board and
(viii) review of the external audit function to ensure
its committees – frequency, agenda, minutes and
private discussion of management issues among
non-executive Directors;
prompt remedial action by management, where
appropriate, in relation to any deficiency in or
breakdown of controls;
(vi) ethical standards and values – formalised in a
(ix) assessing the adequacy of external reporting for
detailed code of ethics and values;
the needs of shareholders; and
(vii) dealings in securities – formalised in a detailed
(x) monitoring compliance with the Company’s code
code for securities transactions designed to ensure
fair and transparent trading by Directors and senior
management and their associates; and
(viii) communications with shareholders and the market.
b) These initiatives, together with the other matters provided
for in the Board’s charter, are designed to ‘institutionalise’
good corporate governance and to build a culture of
best practice in GBST’s own internal practices and in
its dealings with others. The Board’s charter is included
within the Company’s corporate governance charter,
which is available from the Company’s web site.
of ethics.
c) Meetings are held at least four times each year. A broad
agenda is laid down for each regular meeting according
to an annual cycle. The committee invites the external
auditors to attend each of its meetings. The committee
has decided to add to its meeting schedule a further
committee meeting to provide further time for review
of accounting matters connected with the Company’s
financial statements to the Board’s annual program.
Nominations and Remuneration
Committee
Audit and Risk Management Committee
a) The purpose of this committee with regard
a) The purpose of this committee is to advise on the
establishment and maintenance of a framework of
internal control and appropriate ethical standards for
the management of the Group. Its members are:
(i) Mr Allan Brackin, Chairman;
(ii) Mr John Puttick; and
(iii) Mr David Adams
b) The committee performs a variety of functions
relevant to risk management and internal and
external reporting and reports to the Board following
each meeting. Among other matters for which the
committee is responsible are the following:
(i) Board and committee structure to facilitate a
proper review function by the Board;
(ii) internal control framework including management
information systems;
(iii) corporate risk assessment and compliance with
internal controls;
(iv) internal audit function and management processes
supporting external reporting;
to remuneration is to review and approve the
remuneration of senior executives, the remuneration
policies for the Group and the structure of equity
based remuneration programmes.
b) The purpose of this committee with regard to
nominations is to consider the structure and membership
of the Board, to review the performance of the Board, to
set desirable criteria for future Board members and to
assess candidates against those criteria.
c) Due to the importance of people to the business of
the Group, the committee comprises 4 directors.
Committee meetings are held from time to time as
required by the Board. Meetings are held at least
twice each year. David Adams, a non-executive and
independent Director is the chair of the committee.
Relevant discussions on nominations and remuneration
have been considered by the Board at various Board
meetings as specific items of business and in general
business. The Board periodically conducts a review
of its own performance with the board surveyed on
a variety of matters related to their own and their
collective performance. The results of any survey are
then tabled with the board and used to assist decision
making on changes to board processes.
(v) review of financial statements and other financial
information distributed externally;
Diversity
(vi) review of the effectiveness of the audit function;
(vii) review of the performance and independence of
the external auditors;
The Board has adopted a diversity policy that documents
the Company’s commitment to diversity to further embed
within the Company’s culture the importance of a diverse
GBST Holdings Limited ABN 85 010 488 874 Annual Report
2014
11
Corporate Governance for the year ended 30 June 2014 continued
work force and an environment that embraces the benefits of
diversity. The Company takes a broad view on diversity and
its policy encourages diversity in the workplace in relation to
gender, sexual orientation, age, race, ethnic origin, religious
beliefs, impairment and nationality. The diversity policy also
recognises a commitment to merit based appointments.
As at 30 June 2014, the proportion of female employees
in the whole organisation, in senior positions and on the
Board was:
Proportion of Women at GBST
Proportion of Women in senior roles at GBST
Proportion of Women on the Board
35%
37%
0%
The Nomination and Remuneration Committee within
its charter is given a specific role to implement and
monitor the Company’s diversity policy. The Nomination
and Remuneration Committee set and met measurable
objectives for the 2014 year including:
1. The development of female leaders within an executive
development program that will be continued in 2014;
2. Continue the practice of requiring the Company to
report twice annually on the statistical performance of
the Company on diversity within GBST; and
3. The formal adoption of a ‘keeping in touch’ program
with employees on parental leave to make sure those
employees are kept up to date on new systems and
corporate developments and aid a smooth transition
on the employee’s return to work.
Several other initiatives have been implemented to
encourage diversity, and the Company’s adoption of a
diversity policy represents a formalisation of the Company’s
values. Such initiatives include developing GBST’s own
paid maternity leave program, offering flexible working
arrangements for staff returning from parental leave,
continued support of female entry into IT roles through
the GBST graduate program and conducting pay equity
audits annually. The Company is proud to have been a
past recipient of the Employer of Choice award conducted
by Women in Technology (WIT), and GBST continues to
support industry initiatives by promoting female participation
in the ICT industry including the support of WIT, Group X
and International Women’s Day. In 2011 GBST signed up to
participate in the Australian Employment Covenant, which
aims to secure sustainable jobs for Indigenous Australians.
Each year the Company is also required to complete a
report with the Workplace Gender Equality Agency, which
details the Company’s compliance with the Workplace
Gender Equality Act 2012.
12
In the 2015 year the Company’s measureable objectives
are to:
1. Ensure diversity principles are embedded in the
Company’s corporate culture, by developing a
learning framework on anti-discrimination, harassment
and bullying;
2. Help employees to maintain work/life balance and
responsibilities while developing and maintaining a
career, including the ‘keep-in-touch’ program, the
continual development of female leadership capability
through the GBST Leadership Development Program
and flexible working arrangements; and
3. Recognise and support the needs of an inter-generational
workforce, by promoting an organisation-wide culture that
supports the abilities of all employees, regardless of age.
Best Practice Commitment
The Company is committed to achieving and maintaining the
highest standards of conduct and has undertaken various
initiatives, as outlined in this section, which are designed to
achieve this objective. GBST’s corporate governance charter
is intended to ‘institutionalise’ good corporate governance
and, to build a culture of best practice both in the Company’s
own internal practices and in its dealings with others.
The following are a tangible demonstration of the
Company’s corporate governance commitment.
a) Independent professional advice
With the prior approval of the Chairman, each Director
has the right to seek independent legal and other
professional advice concerning any aspect of the
Company’s operations or undertakings in order to fulfil
their duties and responsibilities as Directors. Any costs
incurred are borne by the Company.
b) Code of ethics and values
The Company has developed and adopted a detailed
code of ethics and values to guide Directors in the
performance of their duties.
c) Code of conduct for transactions in securities
The Company has developed and adopted a formal
code to regulate dealings in securities by Directors
and senior management and their associates. This
is designed to ensure fair and transparent trading in
accordance with both the law and best practice.
d) Charter
The code of ethics and values and the code of
conduct for transactions in securities (referred to
above) both form part of the Company’s corporate
governance charter which has been formally adopted
and is available for review on the Company’s web site.
GBST’s Assessment against the Guidelines
Principle 1 – Lay solid foundations for management
and oversight
The role of the Board and delegation to management
have been formalised as described above in this section
and will continue to be refined, in accordance with the
Guidelines, in the light of practical experience. GBST
complies with the Guidelines in this area.
Principle 2 – Structure the Board to add value
Together the Directors have a broad range of experience,
skills, qualifications and contacts relevant to the business
of the Company. The majority of the current Board
is not independent. In particular, the Chairman is not
independent in terms of the Guidelines. There are three
independent Directors, namely Mr Allan Brackin, Mr
David Adams and Dr Ian Thomas. GBST believes that the
current Board of Directors is appropriate for a Company
of GBST’s size and the current Directors have been the
best people to act in the interests of stakeholders and
for this reason does not presently fully comply with the
recommendations. The Board will consider increasing
its size should suitable candidates be identified. The
number of independent Directors may be increased as
a result of the additional appointments. The Board calls
specific meetings of the Board as a Nominations and
Remuneration Committee.
Principle 3 – Promote ethical and responsible
decision making
The Board has adopted a detailed code of ethics and
values and a detailed code of conduct for transactions
in securities as referred to above. The purpose of these
codes is to guide Directors in the performance of their
duties and to define the circumstances in which both they
and management, and their respective associates, are
permitted to deal in securities. The Board will ensure that
restrictions on dealings in securities are strictly enforced.
Both codes have been designed with a view to ensuring
the highest ethical and professional standards, as well
as compliance with legal obligations, and therefore
compliance with the Guidelines.
Principle 4 – Safeguard integrity in financial reporting
The Audit and Risk Committee has its own Charter. The
Committee comprises three Directors, the majority of
which are independent. All the members of the Audit
Committee are financially literate.
Principle 5 – Make timely and balanced disclosure
Policies and procedures for compliance with ASX
Listing Rule disclosure requirements are included in the
Company’s corporate governance charter.
Principle 6 – Respect the rights of shareholders
The Board recognises the importance of this principle and
strives to communicate with shareholders both regularly
and clearly – both by electronic means and using more
traditional communication methods. Shareholders are
encouraged to attend and participate at general meetings.
It is intended that the Company’s auditors will always attend
the annual general meeting and be available to answer
shareholders’ questions. The Company’s policies comply
with the Guidelines in relation to the rights of shareholders.
Principle 7 – Recognise and manage risks
The Board, together with management, has constantly
sought to identify, monitor and mitigate risk. Internal controls
are monitored on a continuous basis and, wherever possible
improved. The Company uses its quality management
system and project management methodologies to identify,
assess and manage risk. With the acquisition of new
subsidiaries the Company initiated a program of integration
which involved an assessment of the adequacies of risk
management in the subsidiaries to ensure they were of a
sufficient standard in light of the Board’s requirements in this
area. The whole issue of risk management is formalised in the
Company’s corporate governance charter (which complies
with the Guidelines in relation to risk management) and
will continue to be kept under regular review. Review takes
place at both committee level (Audit and Risk Management
Committee), with meetings at least four times each year, and
at Board level. The Board requires the CEO and CFO to sign
all statements required to be provided under the Guidelines
and Corporations Act in relation to the Company’s financial
statements and risk management generally.
Principle 8 – Remunerate fairly and responsibly
Remuneration of Directors and executives will be fully
disclosed in the annual report and any changes with respect
to key executives announced in accordance with continuous
disclosure principles. The Board from time to time calls
a specific meeting of the Board as a Nominations and
Remuneration Committee. Due to the importance of human
capital within GBST’s business the committee’s composition
and the contribution that each member can make has been
considered appropriate and as a result the committee is not
independent. The Board has structured the committee to
have an independent Director as Chairman. The Chairman
will lead a review of the Directors and the independent
Directors will lead a review of the Chairman. No individual
will be directly involved in deciding his or her remuneration.
GBST Holdings Limited ABN 85 010 488 874 Annual Report
2014
13
Directors’ Report for the year ended 30 June 2014
The Directors of GBST Holdings Limited (‘GBST’ or
the ‘Company’) submit their report together with the
consolidated financial report of the Group, comprising the
Company and its controlled entities for the year ended
30 June 2014 and the audit report thereon.
Directors
The names of the Directors of the Company in office during
the year and to the date of this report are:
Name
Non-executive
Period of
Directorship
Dr John F Puttick (Chairperson)
January 1984
April 2008
• Operating EBITDA increased by 16% to $20.2 million
(2013: $17.5 million).
• EBITDA increased by 24% to $20.5 million
(2013: $16.5 million).
• Profit before income tax increased by 53% to
$12.0 million (2013: $7.8 million).
• Net profit after income tax (NPAT) increased by 66% to
$10.0 million (2013: $6.0 million).
• Adjusted cash net profit after income tax (Cash NPAT)
increased by 30% to $14.3 million (2013: $11.0 million)
• Senior debt decreased by $9.0 million to $5.0 million
at 30 June 2014 from $14.0 million at 30 June 2013.
Net Debt (total borrowings less cash) has reduced from
$12.4 million at 30 June 2013 to $3.6 million.
• Dividend payout ratio of 40% on adjusted Cash NPAT
April 2005
(56% on NPAT) increased (2013: 39%).
July 2001
December 2011
GBST comprised three divisions during
the year:
Mr David C Adams
Mr Allan J Brackin
Mr Joakim J Sundell
Dr Ian Thomas
Executive
Mr Stephen M L Lake (Managing
Director and Chief Executive Officer)
September 2001
Principal activities
The principal activities of GBST during the year ended
30 June 2014 were:
• client accounting and securities transaction technology
solutions for the finance, banking and capital markets
industry globally;
• funds administration and registry software for the
wealth management industry in Australia and the
United Kingdom;
• gateway technology provider to the superannuation
industry; provider of data and quantitative services
offering after tax measurement of portfolio performance
in Australia; and
• website and mobile platform design and digital agency
services focused on e-commerce and the financial
services industry in Australia and Europe.
No significant changes in the nature of these activities
occurred during the year.
Key Financial Results
• Total revenue increased by 19% to $98.5 million
(2013: $83.0 million).
14
• GBST Capital Markets, through the GBST Syn~
platform, provides new-generation technology to
process equities, derivatives, fixed income and
managed funds transactions for global capital markets.
In Australia, GBST also offers the GBST Shares and
DCA (derivatives) platforms which are the country’s
most widely used middle-office and back-office
equities and derivatives systems. Other GBST
products provide fully integrated solutions for trading,
clearing and settlement of multi-instruments, currencies
and markets.
• GBST Wealth Management, through the GBST
Composer platform provides end to end funds
administration and management software to the
wealth management industry, both in Australia and the
United Kingdom. It offers an integrated system for the
administration of wrap platforms, including individual
savings accounts (ISA’s), pensions, self-invested
personal pension (SIPP) and superannuation; as
well as master trusts, unit trusts, risk and debt; and
other investment assets. Other GBST products
provide technology hub solutions, and data analytics
and quantitative services for the measurement of
portfolio performance.
• GBST Financial Services, incorporating Emu Design,
provides independent financial data and digital agency
services for interactive website design, development,
hosting, e-commerce platforms, and mobile and social
networking solutions.
DIVIDENDS
Dividends paid during the year were:
• Final fully franked ordinary dividend of 3.5 cents
per share for the 2013 financial year paid on
23 October 2013, as recommended in the financial
report for the year ended 30 June 2013.
• Interim fully franked ordinary dividend of 4.0 cents per
share paid on 24 April 2014.
Dividends declared after the end of the year:
The Directors recommend a final dividend of 4.5 cents
per share to be paid to the holders of fully paid ordinary
shares. The dividend will be 100% franked and will be paid
on 15 October 2014.
Group results
FULL YEAR TO 30 JUNE
2014
$‘000
2013
$‘000
%
Change
Total revenue and
other income
98,491
83,011
Operating EBITDA
20,210
17,497
Unallocated revenue/
(expenses)
264
(971)
EBITDA
20,474
16,526
Net finance costs
(1,115)
(1,495)
19
16
24
25
Depreciation
& Operating
Amortisation
Investment
Amortisation
Profit before
income tax
(3,100)
(2,262)
(37)
(4,250)
(4,944)
12,009
7,825
Income tax expense
(1,978)
(1,794)
Profit after
income tax
Adjusted Cash
NPAT
Basic EPS (cents)
Cash EPS (cents)
10,031
6,031
14,281
10,975
15.07
21.46
9.06
16.49
14
53
66
30
66
30
The table includes IFRS and non-IFRS financial information. Non-IFRS financial
information is Operating EBITDA, Operating & Investment Amortisation,
Adjusted Cash NPAT and Cash EPS which has not been audited or reviewed by
our auditor, KPMG.
Measures of profitability and basis
of preparation
GBST defines Operating EBITDA as profit before net
finance costs, tax, depreciation, amortisation, and other
unallocated expenses. Operating Amortisation is defined
as amortisation relating to tangible and intangible assets
used as part of on-going operating activities; Investment
Amortisation relates to intangible assets acquired through
acquisition. GBST defines Adjusted Cash NPAT as profit
after income tax plus Investment Amortisation. GBST uses
Operating EBITDA, Adjusted Cash NPAT and Cash EPS
as internal performance indicators for the management
of its operational business segments, and overall Group
performance to allow for better evaluation of business
segment activities and comparison over reporting periods.
Unallocated revenue/(expenses) are legal expenses
associated with non-operating Group matters which are
not associated with any business segment and therefore
are not allocated to a segment. This treatment is in
accordance with Management’s internal measurement
of segment performance and the segment disclosures
in Note 25 to the financial report. Unallocated revenue/
(expenses) are reported to allow for reconciliation between
the Group and segment reports.
Group performance
RECORD SALES AND PROFITABILITY
GBST, which provides software services for securities
processing and wealth administration to the financial
services sector, reported record sales and profitability
in the 2014 financial year. Total revenue including
other income was $98.5 million, up 19% compared to
$83.0 million in the prior year, continuing the strong growth
of the past four years and demonstrating the success of
GBST’s strategy of geographic expansion.
The Group reported increased revenue in its markets
of Australia, Asia, Europe and North America. Both
GBST Capital Markets and GBST Wealth Management,
the Group’s main operating divisions, achieved record
sales supported by new client wins and strong cash
flow generation. This was attributable primarily to the
robustness and high quality of its flagship software
products, GBST Syn~ and GBST Shares for capital
markets and GBST Composer for wealth administration.
This industry leadership is sustained by the Group’s
continued investment in its technology, industry expertise,
domain knowledge and most important of all, people.
GBST Holdings Limited ABN 85 010 488 874 Annual Report
2014
15
Directors’ Report for the year ended 30 June 2014 continued
EBITDA was $20.5 million, up 24% compared to
$16.5 million in the prior year, reflecting the improvement
of GBST Capital Markets’ international operations and
growth in sales of GBST Composer in the United Kingdom.
The increasing international operations means a greater
exposure to foreign exchange movements, resulting in a
net gain for FY2014 from a weaker Australian dollar relative
to FY2013. The Australian business remains very strong,
generating good revenue and high operating margins, and
is the bedrock of the company. GBST Financial Services
reported a loss for the year of $1.1 million, due to increased
business development costs from expansion into the
United Kingdom.
The legal matters associated with non-operating Group
matters, previously recognised as unallocated expenses in
the financial statements, were satisfactorily resolved in the
first half of this financial year.
Finance costs were lower, as gross senior debt reduced
to $5.0 million at 30 June 2014 from $14.0 million at
30 June 2013. Net debt (total borrowings less cash)
reduced to $3.6 million at 30 June 2014 from $12.4 million
at 30 June 2013.
Depreciation and amortisation costs increased, through
office fit out costs for new premises in Brisbane,
Sydney, London and New York; and capital expenditure
to support growth. Staff numbers increased from
approximately 380 at June 2013 to more than 470
today; including staff contracted through our offshore
development centre partner.
GBST’s FY2014 tax rate reduced to 16% due to Australian
and UK tax concessions related to research and
development expenditure.
Net profit for FY2014 was $10.0 million, up 66% compared
to $6.0 million in the prior year. The Directors are pleased
to recommend a final dividend of 4.5 cents per share,
fully franked, up from 3.5 cents per share in the previous
corresponding period. This follows the interim dividend of
4.0 cents per share, fully franked, paid on 24 April 2014,
and maintains GBST’s current dividend payout ratio of
40% of adjusted cash NPAT.
SIGNIFICANT TECHNOLOGY INVESTMENT
DRIVING GROWTH
The benefits of continued investment in GBST’s market
leading products are confirmed by their accelerating
use every year, with a number of clear examples being
demonstrated in the current period. In particular, a key
client’s successful deployment of GBST Syn~ in North
America, replacing less efficient legacy systems, enabled
16
a major broker-dealer firm to automate about 95% of its
back- and middle-office processes, up from approximately
25% before. This delivered significant operational
efficiencies, allowing them to redeploy staff, as well as
improved visibility into their business performance.
Another example is a large United Kingdom based client,
which had a vision for a single back office platform from
which they could build channel-specific offerings and
easily integrate future products. This vision was the
basis for GBST Composer’s initial selection. However,
significant challenges needed to be overcome. These
included managing the speed of taking the new platform
to market with effective risk management and cost control,
and satisfying the distinct needs of three distribution
channels on a single platform. The new system would
need to integrate with complex legacy systems, enabling
the efficient migration of existing clients and products.
It was also important that the new system provide an
infrastructure which was able to flex and grow in line with
the client’s evolution.
A highly effective partnership between the client and GBST
resulted in the on-time, on-budget delivery of a market
leading wrap platform. The platform provided:
• comprehensive range of tax wrappers, enabling
broader consumer choice;
• market-leading decumulation options, which is to assist
the conversion of pension assets into pension income;
• open architecture investment choice,
allowing distribution of multiple investment choices
for consumers;
• white-labelling capability;
• flexible cash management and disbursements; and
• comprehensive and flexible reporting.
Just over a year after its initial launch, sales of the firm’s
platform-based products have already exceeded its
traditional product sales. The platform now administers
more than 40,000 client accounts.
The robustness of this software provides an excellent
return on investment for clients, which helps build a
positive reputation for GBST.
During the year GBST Syn~ 3.0 was launched, a
new-generation technology platform for capital markets
post-trade processing, which now includes improved
relational database support for Oracle and support for
Microsoft SQL Server. Performance has improved, and
less storage is needed. New services for custodians
include safekeeping settlement systems for cash, stock
and daily interest processing.
Improved consistency across products was achieved
through standardising tools. Business intelligence reporting
(GBST BIR) provides information to advisers from GBST
Shares, to the derivatives trading system GBST DCA, and
GBST Composer, enabling these products to share a
common front office and mobility architecture.
GBST Composer is now able to provide dual support
for both the Microsoft SQL Server and Sybase ASE
relational databases, through the development of a new
platform layer which has recently been rolled out in the
United Kingdom.
Two years ago, exploration began into the use of offshore
resources to manage demand for new software and
services. Initial success led us to establish a technology
development centre in Ho Chi Minh City, Vietnam. This has
proved its ability to support large-scale projects and now
employs more than 70 skilled staff.
Another area of significant investment was in business
development, sales and marketing, and we have hired
staff in Hong Kong, Singapore and New York to drive
penetration into those markets.
GBST also improved and extended its internal
management information systems through implementing
a new enterprise resource planning (ERP) system.
This system links project and development activity to
accounting and finance systems, providing greater visibility
into the business and helping to drive margin improvement.
GBST’s Human Resources capability has also been
strengthened to place greater emphasis on talent
management, and a project has begun to implement
a new electronic learning system to improve overall
knowledge management across the group. The Company
has also upgraded core network infrastructure, improving
systems security features and migrating internal systems
into the Cloud.
This sustained investment is important to support the
growth of GBST’s business.
GBST Capital Markets
FY2014
$000’s
FY2013
$000’s
%
Change
Revenue – Australia
29,510
28,757
Revenue –
International
11,722
6,709
Revenue – Total
41,232
35,466
Operating EBITDA –
Australia
Operating EBITDA –
International
Operating EBITDA –
Total
10,329
10,273
(2,498)
(4,569)
7,831
5,704
3
75
16
1
45
37
Strong growth in sales of GBST Syn~ bolstered revenue,
which increased to $41.2 million in FY2014, up 16% on the
prior year. International revenue was $11.7 million, up 75%,
reflecting growth in Asia and North America. Australian
revenue was $29.5 million, up 3% and a good outcome in
a difficult year. Operating EBITDA was $7.8 million, up 37%
compared to the prior year.
Strengthening position and opportunities in
international markets
GBST achieved an important milestone with its first direct
client in the United States going live using GBST Syn~.
This successful deployment at a very well-regarded
super regional broker-dealer means GBST now has a
cornerstone US client. It confirms GBST Syn~’s ability
to significantly improve client business performance by
increasing automation and improving efficiency in the
back-and middle-office. This capability has now been
proven in several different markets in multiple countries,
and in organisations of substantial scale and business
complexity, demonstrating that GBST Syn~ is a truly
global solution.
In Asia, one of the world’s largest banking and financial
services organisations completed its initial deployment of
GBST Syn~ during the year and began providing third-
party clearing services to the broker-dealer community.
This has proven to be highly successful, and the firm is
preparing to roll out GBST Syn~ further.
Through the strengthened business development
teams and offices in Hong Kong and Singapore,
Asia’s most technologically developed markets, GBST
is well-positioned to provide third-party clearing
services to investment banks and retail stockbrokers in
Asian countries.
GBST Holdings Limited ABN 85 010 488 874 Annual Report
2014
17
Directors’ Report for the year ended 30 June 2014 continued
European conditions remained difficult. Discretionary
spending on technology was constrained as the industry
focused on meeting regulatory needs. After identifying as
an opportunity the commitment of 11 European countries
to introduce a financial transaction tax (FTT) by January
1 2016, GBST launched the first post-trade processing
product to assist capital markets participants to manage
their obligations. Following its first sale to a leading
US global investment bank, GBST’s Syn~FTT solution
now manages the bank’s FTT processing including
validation, tax calculation and exemptions and reporting
requirements. The FTT has already been implemented by
two European countries, France and Italy. This product
is well regarded within the industry and won the ‘Best
Compliance Solutions’ award at the UK Systems in the
City awards in 2014.
GBST has continued to invest in building its global
business development team, including sales and
marketing support for global financial services
organisations, large regional broker-dealers, local
investment banks and retail brokers.
Legislative change is a constant driver of growth in the
technology industry. A current example is the potential
introduction of a shortened equities settlement cycle.
The straight-through processing capabilities of GBST
Syn~ is just one factor that will increase the attractiveness
of GBST’s new generation software platform were this
to occur. In the majority of markets globally equities
settlement traditionally completes in three days, or T+3.
A two-day settlement policy, or T+2, is already in place in
some European markets and legislation to introduce T+2 in
North America is being considered.
Initial sales and implementation costs impacted
profitability, and international operations reported
a reduced loss of $2.5 million, down from a loss of
$4.6 million in the prior year.
Solid Australian performance
Australian sales grew to $29.5 million, up 3% on the prior
year. Retail trading continues to trail 2008 activity levels
and market conditions remain volatile. Operating EBITDA
was flat at $10.3 million, representing a good outcome in a
difficult market.
GBST won new clients through its leading back- and
middle-office software platform in Australia, GBST Shares.
Product investment continues, and the long term plan
to replace GBST Shares with GBST Syn~ is progressing
to plan. A project for the first client transition from GBST
Shares to GBST Syn~ has commenced and is scheduled
to go live in 2015.
During the year, GBST Shares and GBST Front Office,
which is used by financial advisers, were enhanced to
support the Australian Securities Exchange’s ASX mFunds
settlement service which provides straight-through
processing of managed funds. GBST Front Office’s
market share maintained growth. Its recent integration
with Microsoft Outlook has helped familiarise advisers with
GBST’s systems.
A new risk management product, MarginSuite was
introduced, which is a pioneering system to enable brokers
to estimate and manage ASX SPAN margins on exchange-
traded derivative products throughout the day.
GBST Wealth Management
FY2014
$000’s
FY2013
$000’s
%
Change
Revenue – Australia
18,150
18,225
Revenue –
International
35,607
25,174
Revenue – Total
53,757
43,399
–
41
24
Operating EBITDA –
Australia
Operating EBITDA –
International
Operating EBITDA –
Total
6,956
6,564
13,520
11,624
16
* No comparative available for FY2013 Operating EBITDA – international.
Revenue from new sales, licensing and support of GBST
Composer was $53.8 million in FY2014, up 24% compared
to the prior year. This maintained the positive momentum of
GBST Composer’s sales which have more than doubled in
four years. Operating EBITDA was $13.5 million, up 16%.
International sales growth continues
In the United Kingdom, GBST secured new contracts and
revenue grew to $35.6 million, up 41%, as the transition
of financial services firms from old world paper-based
systems to new world digital platforms continued. The life,
pensions and investment markets in the United Kingdom
are experiencing the impact of retail market reform, and
the wrap and platform market is expected to quadruple
by 2020. GBST Composer today supports three of the
18
top six UK platforms, and is the top direct-to-consumer
software product for the distribution of tax-incentivised
financial products.
While the wrap and platform market has become more
competitive, new contracts were signed with platform
providers, which will use GBST Composer to launch
direct-to-consumer and adviser-based Self Invested
Personal Pensions (SIPP) products. One of GBST
Composer’s competitive advantages is its ability to support
multiple channels from a single platform. This allows
separate systems for advisers, corporate and direct-
to-consumer services to be consolidated onto GBST
Composer’s new world digital platform.
The budget in the United Kingdom announced in
March 2014 has provided new opportunities. The
retirement industry is expected to be impacted by
declining annuity sales, and will need to refocus. As GBST
Composer offers a contemporary platform for large-scale
account migration negotiations are occurring with several
life and pensions organisations, many of which have aging
technology systems. The significant increase in individual
savings account, or ISA, allowances and the focus on
retirement income are expected to benefit established
platform providers, including GBST clients. GBST has
secured another new client in the (SIPP) segment, and now
holds an approximate 10% market share.
The business in the United Kingdom is still in its early
stages of heavy growth, requiring significant investment in
technology and product development. Operating margins
are steadily improving as the business increases in scale
and annuity license revenue grows.
Steady performance in Australia
Sales in Australia, where GBST Composer has 15 years’
superannuation industry experience and a well-established
client base, were in line with FY13 at $18.2 million. Activity
was driven by work for existing clients, indicating improving
confidence in the funds management sector.
Key projects included completing the migration of
accounts for a global fund manager, and the migration
of more than 100,000 accounts from legacy systems to
GBST Composer for a leading life insurance firm. The
implementation of GBST Composer for a leading bank
in New Zealand commenced, which will result in the
consolidation of customer accounts from three separate
business units onto one platform, delivering significant
operating efficiency, cost reduction and an enhanced
customer offering.
During the year GBST launched its SuperStream Gateway
suite for superannuation rollover and contribution
transactions. This was the first such service to ‘go live’. The
gateway automates transactions across GBST’s network
between superannuation funds, SMSFs and the Australian
Taxation Office, enabling clients to receive SuperStream
standard employer superannuation contributions
electronically. In future, the gateway is expected to become
the infrastructure conduit for other organisations to
communicate digitally with the ATO.
Additional to software development being undertaken in
Vietnam, enhancements planned for GBST Composer
include a web service for private banking, which will offer a
new digital experience for high net worth and sophisticated
investors, and intermediary advisers. GBST Quant entered
into a strategic alliance with a major Australian bank for the
GBST TaxAnalyser product.
GBST Financial Services
FY2014
$000’s
FY2013
$000’s
%
Change
Revenue
Operating EBITDA
3,108
(1,141)
3,542
169
(12)
(775)
GBST’s web design expertise through Emu Design
provides strong support for the Group’s operations in
Australia and the United Kingdom. Revenue declined
compared to the prior year as International contracts
expected to begin in the second half were delayed. The
softer trading environment and business development
costs associated with International expansion impacted
earnings, and the division reported an Operating EBITDA
loss for the year of $1.1 million.
Emu Design acquired new financial services sector
clients in the United Kingdom, helping them to meet
new mortgage market review regulation, and providing
inheritance tax and venture capital trust investment tools
for direct-to-consumer and adviser businesses.
A highlight was the launch of a new GBST
CalculatorConsole in both the United Kingdom and
Australia. This product’s rapid development framework
allows clients to self-manage the deployment of GBST
financial calculators on their websites.
Emu Design continued to develop and license its
e-commerce capabilities, adding new clients on long-term
contracts to its platform in Australia, where it services
some of the country’s largest retailers.
GBST Holdings Limited ABN 85 010 488 874 Annual Report
2014
19
Directors’ Report for the year ended 30 June 2014 continued
Financial position
Environmental issues
The senior debt facility matures on 27 December 2015.
Senior debt as at 30 June 2014 was $5.0 million,
compared to $14.0 million at 30 June 2013. GBST’s net
debt reduced from $12.4 million to $3.6 million over the
same period. At reporting date, all banking covenants have
been met. Based on the Group’s current forecast and
business plan, the Group anticipates that it will continue to
meet its covenants.
Significant changes in state of affairs
As at the reporting date, GBST has on issue 66,561,725
ordinary shares. During the period 528,302 (2013:
1,314,636) performance rights were issued to selected
employees under the GBST Performance Rights and
Option Plan which are subject to performance criteria.
No other significant changes in the state of affairs of the
Group occurred during the financial year, other than those
disclosed in this report.
Subsequent events
No matters or circumstances have arisen since the end
of the financial year which significantly affected or may
significantly affect operations of GBST, the results of
those operations, or the state of affairs of GBST in future
financial years.
As announced to the ASX on 5 August 2014, the Group
issued 345,005 performance rights to selected employees.
The rights were issued under the GBST Performance
Rights and Option Plan approved by GBST shareholders
at the 2012 AGM. Following this grant the total number of
share performance rights issued will be 2,177,388.
The Board of GBST also intends to issue 100,486
performance rights to Mr Stephen Lake, Managing
Director, on the same terms as the issue of these
performance rights. The issue to Mr Lake will be subject to
shareholder approval at the upcoming AGM later this year.
Future developments, prospects and
business opportunities
Information regarding the Company’s future developments,
prospects and business opportunities is included in the
report above. Overall, GBST will continue to:
• Enhance and develop its products and services;
• Expand services to clients geographically; and
• Focus on increasing revenue and market share in the
markets in which it operates, and enter new markets.
20
There are no significant environmental regulations applying
to the Group.
Information on Directors
John Puttick Non-Executive Chairman
Dr John Puttick is the founder and Chairman of GBST.
He holds a Doctor of the University from Queensland
University of Technology and chartered accounting
qualifications from Auckland University of Technology. He
has over forty years’ experience in building commercial
systems with information technology, over thirty of which
have been in developing financial services solutions
at GBST. John has provided the vision for GBST’s
development over these years.
Dr Puttick has numerous external appointments. John
is Deputy Chancellor of the Queensland University of
Technology, as well as adjunct Professor, School of
Information Technology and Electrical Engineering at the
University of Queensland. He has participated in various
Ministerial appointments and overseas missions.
He has also had extensive involvement in the community
as Past President of the Rotary Club of Brisbane; founding
Chair of Vision Queensland; and founding member of
Software Queensland. John’s contribution to the Australian
technology industry has been acknowledged by his
peers naming him as a Member of the Hall of Fame of
the Pearcey Foundation and as a Fellow of the Australian
Computer Society. John was inaugural Chair of Southbank
Institute of Technology.
John is a member of GBST’s Audit and Risk
Management Committee and Nominations and
Remuneration Committee.
Interest in Shares and Options
5,278,356 Ordinary Shares of GBST Holdings Limited were
held by Dr Puttick and associated entities at 30 June 2014.
Stephen Lake Managing Director and Chief
Executive Officer
Mr Stephen Lake joined GBST in September 2001 after
an extensive career in the capital markets industry in
Australia, the United Kingdom and Asia. Stephen became
a shareholder of GBST and was appointed Chief Executive
Officer in 2001. Prior to joining GBST, he was Chief General
Manager of Financial Markets at Adelaide Bank Limited.
Stephen was Managing Director of BZW’s Capital Market’s
Division Australia and also Managing Director of the Fixed
Interest Division at BZW (Asia) Ltd. Stephen is a Member of
the Nominations and Remuneration Committee.
Interest in Shares and Options
5,146,109 Ordinary Shares and 365,177 performance
rights of GBST Holdings Limited were held by Mr Lake at
30 June 2014.
Allan Brackin Independent Director
Mr Allan Brackin was appointed to the Board in April 2005.
He has detailed knowledge of the IT sector having served
as Director and Chief Executive Officer of Volante Group
Limited, one of Australia’s largest IT services companies
from November 2000 to October 2004. Prior to this, Allan
co-founded a number of IT companies including Applied
Micro Systems (Australia) Pty Ltd, Prion Pty Ltd and
Netbridge Pty Ltd. Allan is Chairman of ASX listed mining
technology company RungePincockMinarco Limited
(since November 2011), Chairman of IT software company
Emagine Pty Ltd and Chairman of telecommunications
carrier Opticomm Pty Ltd. Allan is also a member of the
advisory board for several IT companies.
Allan holds a Bachelor of Applied Science from the
Queensland University of Technology and has completed
the OPM (Owner/President Management) program at
Harvard Business School.
Allan is Chairman of GBST’s Audit and Risk Management
Committee and is a member of the Nominations and
Remuneration Committee.
Interest in Shares and Options
381,943 Ordinary Shares of GBST Holdings Limited were
held by Mr Brackin’s associated entities at 30 June 2014.
Joakim Sundell Non-Executive Director
Mr Joakim Sundell was appointed to the Board in 2001.
Joakim has had an extensive career in private equity
finance, merchant banking, and management both in
Sydney and London. He is Managing Director of Crown
Financial Pty Ltd, a private investment company. He was
a Director of Infochoice Limited from 13 December 2006
until 5 February 2008.
David Adams Independent Director
Mr David Adams was appointed to the Board in
April 2008. David has had an extensive career in the
funds management industry including the establishment
of Australia’s first cash management trust at Hill Samuel
Australia in 1980 and as Group Head of the Funds
Management Group for Macquarie Bank. He was a
Director at Macquarie Bank from 1983 until 2001.
David was Chairman of the Investment and Financial
Services Association in 2000 and 2001. He was a
Visiting Fellow (Management of Financial Institutions) at
Macquarie University and holds a Bachelor of Science
from the University of Sydney and a Masters in Business
Administration from the University of New South Wales.
David is a member of the Audit and Risk Management
Committee and the Chair of Nominations and
Remuneration Committee.
Interests in Shares and Options
Nil
Ian Thomas Independent Director
Dr Ian Thomas was appointed to the Board in
December 2011. Ian currently serves as president of
Boeing China, having previously served as president
of Boeing Australia and South Pacific and, prior to that,
president of Boeing India.
Prior to joining Boeing in 2001, Ian served in a variety of
staff and policy roles in the U.S. Department of Defense
and is an authority on U.S. and global security issues.
He is co-chair of the US-China Aviation Cooperation
Program. During his time in Australia, he served as
President of the American Chamber of Commerce and
Chairman of the Prime Minister’s Manufacturing Leaders
Group. In 2013 he received the Royal Aeronautical
Society’s Sir Charles Kingsford Smith Medal for
outstanding contributions to aviation.
Ian holds an MPhil in international relations and a PhD
in history from the University of Cambridge, a graduate
degree in social sciences from the University of Stockholm,
and a Bachelor’s degree (cum laude) in history from
Amherst College.
Interest in Shares and Options
5,781,610 Ordinary Shares of GBST Holdings Limited were
held by Mr Sundell’s associated entities at 30 June 2014.
Interests in Shares and Options
Nil
GBST Holdings Limited ABN 85 010 488 874 Annual Report
2014
21
Directors’ Report for the year ended 30 June 2014 continued
Company Secretary
Mr David M Doyle joined GBST in 1997 as an in house legal advisor and was appointed to the position of Company
Secretary on 18 April 2005. Mr Doyle holds Bachelor degrees in Law and Business (Computing) from Queensland
University of Technology. Mr Doyle resigned on the 14th February 2014.
Mr Sean Norman was appointed to the position of Company Secretary on 14th February 2014. Mr Norman holds
Bachelor degrees in Law and Arts from University of Adelaide and a Graduate Diploma in Legal Practice from University of
South Australia.
Directors’ meetings
The number of Directors’ meetings (including meetings of committees of Directors) and number of meetings attended by
each of the Directors of the Company during the financial year are:
Directors
J Puttick
D Adams
A Brackin
S Lake
J Sundell
I Thomas
DIRECTORS’ MEETINGS
AUDIT AND RISK
COMMITTEE
NOMINATION AND
REMUNERATION COMMITTEE
Eligible to
Attend
Attended
Eligible to
Attend
Attended
Eligible to
Attend
Attended
9
9
9
9
9
9
9
7
8
9
7
9
5
5
5
–
–
–
5
5
5
5*
–
–
3
3
3
3
–
–
3
3
2
3
–
–
* At the request of the Audit and Risk Committee Mr S Lake (CEO) attends the Audit and Risk Committee meetings even though he is not a member of
the committee.
Remuneration report – audited
The information provided in the remuneration report relates to the Group for the year ended 30 June 2014 and has been
audited as required by section 308(3C) of the Corporations Act (2001).
The remuneration report is set out under the following main headings:
a. Remuneration Policies and Practices
b. Group Performance and Remuneration
c. Service Agreements
d. Details of Remuneration
(a) Remuneration Policies and Practices
Remuneration Principles
Key Management Personnel comprise the Directors and Senior Executives who have authority and responsibility for
planning, directing and controlling the activities of the Group.
The principles for determining the nature and amount of remuneration of Key Management Personnel are as follows:
• The Group will use competitive remuneration packages to attract, motivate and retain talented Executives as
determined by the Nomination and Remuneration Committee.
• The employees will be rewarded for sustained and sustainable improvement in the performance of the Group.
22
• Key Management Personnel are encouraged to make
investments in the Group in accordance with the
Group’s share trading guidelines.
• Bonus payments based upon Group performance
and the meeting of corporate objectives – Short Term
Incentive (STI).
• Senior Executive agreements will not allow for
• Equity based remuneration – Long Term Incentive (LTI).
significant termination payments if an employment
agreement has to be terminated for cause.
• The Group will make full disclosure of Director and
Executive remuneration.
• The Group’s practices will be legal, ethical and
consistent with being a good corporate citizen. It will
comply with remuneration disclosures required by law
and will seek to maintain the highest standards of clarity
and transparency in communications with shareholders.
The Board recognises the significant role played by
remuneration in attracting and retaining staff with the
aim to benchmark against other similar roles situated in
other similar companies listed on the Australian Securities
exchange within similar industry sectors.
Remuneration paid to Directors and Executives is valued
at the cost to the Group, except for share based payments
which are valued at fair value.
Remuneration Structure – Non-Executive Directors
Remuneration of non-executive Directors is determined by
the Board with reference to market rates for comparable
companies and reflective of the responsibilities and
commitment required of the Director. The remuneration of
Directors is voted on annually as part of the acceptance
of the Remuneration Report at the Company’s Annual
General Meeting. The current shareholder approved limit is
$750 thousand.
Non-executive Directors are paid fixed annual
remuneration as set out in letters of appointment. Reviews
of each individual Director and Directors as a whole occur
annually. The annual fees paid in 2014 are $135,000 for
the Chairman, $90,000 for Chairmen of Committees of
the Board and $80,000 for Non-Executive Directors.
Non-executive Directors may make investments in the
Company in accordance with the Company’s share trading
guidelines but they do not participate in the existing GBST
Performance Rights and Option Plan. GBST does not
operate a scheme for retirement benefits to Directors.
Remuneration Structure – Senior Executives
The Group’s remuneration structure for Senior Executives
has three components.
• Fixed remuneration of salary and superannuation.
A combination of these comprises the
Executive’s remuneration.
Executive remuneration packages are aligned with
the market and properly reflect the person’s duties,
responsibilities and performance. Executive remuneration
packages are reviewed annually by reference to the
Group’s economic performance, Executive performance
and comparative information from industry sectors. The
performance of Executives is considered annually against
agreed performance objectives relating to both individual
performance goals and contribution to the achievement of
broader Group objectives.
Fixed Annual Remuneration
The fixed remuneration consists of cash salary (base) and
superannuation contributions. The fixed remuneration
is reviewed annually based on individual performance,
salary survey data and comparisons with data from
companies operating in a similar industry. The Executives
responsibilities, changes in responsibility, experience and
the geographic location for the performance of the work
are taken into account during the review process.
Short Term Incentive Remuneration (STI)
The Group operates a short term bonus scheme to provide
competitive performance based remuneration incentives to
both Executives and staff. Its objectives are to:
• Promote continuous improvement in annual
performance outcomes;
• Align the interests of the Executives and staff with those
of shareholders;
• Provide participants with the opportunity to be
rewarded with at risk remuneration where superior
performance outcomes are achieved over the
measurement period;
• Reflect a strong commitment towards attracting and
retaining high performing Executives and staff who are
committed to the ongoing success of the Group; and
• Develop a culture where achievement of financial
objectives is seen as a key measure of success.
Key Performance Indicators (KPI’s) for Executives were
agreed with each Executive at the beginning of the 2014
financial year. Each Executive had specific agreed goals
for determination of Short Term Performance Incentives.
The KPI’s include measures of Group performance and
GBST Holdings Limited ABN 85 010 488 874 Annual Report
2014
23
Directors’ Report for the year ended 30 June 2014 continued
The Company uses Shareholder Return as a performance
hurdle for the LTI plan, measured by growth in earnings
per share.
On 8 November 2012, 1,314,636 performance rights
were issued to select Executive employees. There is a
nil exercise price and the share performance rights vest
in thirty-six months after the date of grant or the date of
release of GBST’s financial results for the 2015 financial
year. The share performance rights expire thirty days after
the vesting date.
The performance criteria associated with the grant of
share performance rights to Key Management Personnel
outstanding under the GBST Performance Rights and
Option Plan is as follows:
1. Cumulative Earnings Per Share (EPS) Target
Vesting of the performance rights granted will be subject
to GBST achieving three year (2013 – 2015 financial
years) cumulative EPS targets of 26 cents, 28 cents, and
32 cents for 25%, 50% and 100% vesting respectively.
There is also a vesting requirement that a minimum EPS of
5 cents is achieved in each year; and,
2. Service Condition
Continuous employment with GBST Holdings Limited from
grant date to vesting date.
For issue to non-Key Management Personnel refer to
Note 29.
individual performance against financial, non-financial and
strategic goals. Achievement of performance objectives
may entitle an Executive to a cash bonus. The Board,
through its Nomination and Remuneration Committee,
supervises all calculations of performance against the
KPI’s to ensure fairness for the Executives and the Group.
The arrangements align the KPI’s for Executives with the
Group’s strategic plan. The Board, where appropriate,
also exercised its discretion to award an additional
bonus in recognition of exceptional contribution to the
Group’s strategy.
Generally, bonus arrangements are capped at a maximum
of 50% of base remuneration, however when exceptional
outcomes are delivered, or where warranted by special
circumstances, a bonus may exceed this amount.
The payment of a performance bonus is subject to a
consideration of whether or not the overall performance of
the Group warrants the payment of a bonus.
The Board assessed the performance hurdles on a
subjective and substantive basis – based on the criteria
determined at the commencement of the financial year.
The STI cash bonuses were determined after that review.
Long Term Incentive Remuneration (LTI)
Performance rights are issued under the GBST
Performance Rights and Options Plan approved at the
Company’s 2012 Annual General Meeting. Under this
scheme selected staff are made individual offers of specific
numbers of share performance rights at the discretion of
the Board. The Board may determine the number of share
performance rights, vesting conditions, vesting period,
exercise price and expiry date. Share performance rights
may be granted at any time, subject to the Corporations
Act and ASX Listing Rules.
The scheme involves the use of performance rights to
acquire shares. The plan is designed to reward Executives
in a manner which aligns this element of remuneration
with the financial performance of the Company and the
interests of shareholders. As such, LTI grants are only
made to Executives and selected employees who are able
to influence the generation of shareholder wealth and thus
have an impact on the Group’s performance against the
relevant long term performance hurdle. Executives are also
required to meet continued service conditions in order to
exercise the performance rights.
24
(b) Group Performance and Remuneration
The table below shows the financial performance of the Group over the last five years. GBST’s remuneration practices
seek to align Executive remuneration with growth in profitability and shareholder value, amongst other things.
EBITDA
Year on Year Growth
Net profit/(loss) before tax
Year on Year Growth
Net profit/(loss) after tax
Year on Year Growth
EPS (cents)
Year on Year Growth
Closing share price
Dividends paid (cents per share)
2010
2011
2012
2013
2014
$16.4m
$13.7m
$14.2m
$16.5m
29%
$(.6)m
(130%)
$(2.4)m
(214%)
(3.68)
(194%)
$0.98
–
(16)%
$3.3m
666%
$1.4m
158%
2.08
157%
$0.80
4
4%
$4.5m
37%
$3.3m
135%
4.87
134%
$0.81
4.5
16%
$7.8m
76%
$6.0m
86%
9.06
86%
$1.70
5.5
$20.5m
24%
$12.0m
53%
$10.0m
66%
15.07
66%
$3.15
7.5
(c) Service Agreements
Remuneration and other terms of employment for Executive Directors and Executives are formalised in service
contracts. All agreements with Executives are subject to an annual review. Each of the agreements provide for base pay,
leave entitlements, superannuation, performance-related bonus and any other benefits. The Group is an international
organisation and when Executives are seconded to other countries their packages are reviewed in line with normal
employment expectations for those countries. This may involve adjustments for cost of living and the provision of benefits
customary in the country of employment. The amounts of the benefits are set out in the table in section (e) below as
Short-Term Benefits Other. The agreements also contain normal provisions relating to the protection of confidential
information and intellectual property rights as well as post-employment restraints.
Service agreements with Executives are currently open ended. Mr Lake’s service agreement has a minimum term of three
years ending in February 2015 and is able to be terminated by either party giving not less than six months’ notice. Other
Executive’s agreements require up to six months’ notice. No other termination payments are applicable.
GBST Holdings Limited ABN 85 010 488 874 Annual Report
2014
25
Directors’ Report for the year ended 30 June 2014 continued
(d) Services from Remuneration Consultants
No remuneration consultants services for Key Management Personnel were obtained in this financial year.
(e) Details of Remuneration
The remuneration for each Director and Executive Officer (Key Management Personnel) of the Group accrued for the
financial year was as follows:
SHORT–TERM BENEFITS
POST–
EMPLOY-
MENT
BENEFITS
OTHER
LONG–
TERM
BENEFITS
SHARE–
BASED
PAYMENT
Base
Salary
and Fees
$
135,000
82,380
90,000
Bonus
$1
Other
$2
Super–
annuation
$
Leave
Entitlement
$
Equity
Options
$
Total
Remu-
neration
$
Equity
Based
%
Perfor-
mance
Related
%
–
–
–
–
–
–
–
7,620
–
–
–
–
–
–
–
135,000
90,000
90,000
–
–
–
–
–
–
641,275
120,000
292,087
1,825
14,750
99,219
1,169,156
8.5
18.8
80,000
80,000
–
–
–
–
–
–
–
–
–
–
80,000
80,000
–
–
–
–
1,108,655
120,000
292,087
9,445
14,750
99,219 1,644,156
2014
Directors
J Puttick
D Adams
A Brackin
S Lake
J Sundell
I Thomas
TOTAL
DIRECTORS
Executives
R De Dominicis
438,795
70,000
121,205
D Orrock
349,604
70,000
236,575
–
–
7,373
49,609
686,982
5,385
49,609
711,173
A Ritter
P Salis
240,000
–
320,000
54,795
I Sanchez
300,000
63,927
–
–
–
22,200
4,615
31,750
298,565
34,805
6,154
39,687
455,441
33,823
5,769
39,687
443,206
7.2
7.0
10.6
8.7
9.0
17.4
16.8
10.6
20.7
24.7
TOTAL
EXECUTIVES
GROUP
TOTAL
1,648,399
258,722
357,780
90,828
29,296
210,342 2,595,367
2,757,054
378,722
649,867
100,273
44,046
309,561 4,239,523
1. Bonus amounts for the financial year represent the amount that vested in the financial year against specific performance criteria. No amounts vest in future
financial years in respect of bonus schemes for the current financial year.
2. Other amounts are short-term benefits that do not constitute base salary, fees and bonus and include cost of living adjustments for Executives on secondment
and fringe benefits tax.
3. The cost of performance rights is reported in accordance with accounting standard AASB 2 Share-based Payments, which has the effect of reporting the cost of
the performance rights over the period between the grant date and vesting date.
26
The remuneration for each Director and Executive Officer (Key Management Personnel) of the Group accrued for the
financial year was as follows:
SHORT-TERM BENEFITS
POST-
EMPLOY-
MENT
BENEFITS
OTHER
LONG-
TERM
BENEFITS
SHARE-
BASED
PAYMENT
Base Salary
and Fees
$
Bonus
$1
Other
$2
Super-
annuation
$
Leave
Entitlement
$
Equity
Options
$
Total
Remunera-
tion $
Equity
Based
%
Perfor-
mance
Related
%
2013
Directors
J Puttick
D Adams
A Brackin
S Lake
J Sundell
I Thomas
TOTAL
DIRECTORS
Executives
–
–
4.4
5.8
6.5
4.9
5.7
–
–
21.7
19.3
15.1
13.8
24.1
95,000
55,046
60,000
–
–
–
–
–
–
–
4,954
–
–
–
–
–
–
–
95,000
60,000
60,000
–
–
–
–
–
–
641,305
135,000
294,142
1,795
14,750
63,880
1,150,872
5.6
17.3
60,000
60,000
–
–
–
–
–
–
–
–
–
–
60,000
60,000
971,351
135,000
294,142
6,749
14,750
63,880 1,485,872
R De Dominicis
438,795
125,000
121,205
–
7,373
31,940
724,313
D Orrock
310,235
75,000
118,717
13,207
5,385
31,940
554,484
A Ritter
P Salis
240,000
27,460
–
24,140
4,615
20,442
316,657
291,197
45,767
77,707
74,360
2,844
25,552
517,427
I Sanchez
300,000
82,380
–
34,620
5,769
25,552
448,321
TOTAL
EXECUTIVES
GROUP
TOTAL
1,580,227
355,607
317,629
146,327
25,986
135,426 2,561,202
2,551,578
490,607
611,771
153,076
40,736
199,306 4,047,074
1. Bonus amounts for the financial year represent the amount that vested in the financial year against specific performance criteria. No amounts vest in future
financial years in respect of bonus schemes for the current financial year.
2. Other amounts are short-term benefits that do not constitute base salary, fees and bonus and include cost of living adjustments for Executives on secondment
and fringe benefits tax.
3. The cost of performance rights is reported in accordance with accounting standard AASB 2 Share-based Payments, which has the effect of reporting the cost of
the performance rights over the period between the grant date and vesting date.
GBST Holdings Limited ABN 85 010 488 874 Annual Report
2014
27
Directors’ Report for the year ended 30 June 2014 continued
Group and Company Key
Management Personnel
Names and positions held of Group and Company Key
Management Personnel in office at any time during the
financial year were:
Key Management
Personnel
Position
J Puttick
D Adams
A Brackin
S Lake
J Sundell
I Thomas
Director (Non-executive Chairman)
Director (Independent)
Director (Independent)
Director (Managing Director and Chief
Executive Officer)
Director (Non-executive)
Director (Independent)
R De Dominicis
Chief Executive Wealth Management
D Orrock
Chief Executive Capital Markets
A Ritter
P Salis
Chief Financial Officer
Chief Operating Officer
I Sanchez
Chief Technology Officer
Performance Right Holdings for Key
Management Personnel
Performance rights issued as part of Remuneration for
the Year Ended 30 June 2014
There were no performance rights issued as
remuneration to key management personnel in the
30 June 2014 financial year.
Performance rights granted as remuneration to
Key Management Personnel in the Year Ended
30 June 2014
There were no performance rights granted as
remuneration to key management personnel in the
30 June 2014 financial year.
Shares issued on exercise of compensation options
There were no performance rights exercised during
the 30 June 2014 financial year that were granted as
compensation in previous financial years as remuneration
to key management personnel.
28
Performance Right Holdings for Key Management Personnel (continued)
The numbers of performance rights in the Company held (directly, indirectly or beneficially) during the financial year by Key
Management Personnel, including their related parties, are set out below.
2014
Directors
S Lake
Balance
01/07/13
365,177
TOTAL DIRECTORS
365,177
Executives
R De Dominicis
D Orrock
A Ritter
P Salis
I Sanchez
182,588
182,588
116,857
146,071
146,071
TOTAL EXECUTIVES
774,175
GROUP TOTAL
1,139,352
Granted as
Compen-
sation
$
Performance
rights
Exercised or
Sold
$
Performance
rights
Cancelled/
Forfeited
$
Total
Vested and
Excercis-
able at
30/06/14
$
Total
Vested and
Unexercis-
able at
30/06/14
$
Balance
30/06/14
$
Total Vested
at 30/06/14
$
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
365,177
365,177
182,588
182,588
116,857
146,071
146,071
774,175
1,139,352
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
365,177
365,177
182,588
182,588
116,857
146,071
146,071
774,175
1,139,352
Details of Performance rights held by Key Management Personnel affecting current and future remuneration
Vested
Number
#
Granted
Number
#
Grant Date
Average
Value per
Performance
right at Grant
Date
$
Exercise Price
$
First Exercise
Date
Last
Exercise Date
Directors
S Lake
TOTAL DIRECTORS
Executives
R De Dominicis
D Orrock
A Ritter
P Salis
I Sanchez
TOTAL EXECUTIVES
GROUP TOTAL
–
–
–
–
–
–
–
–
–
365,177
08.11.12
0.8151
365,177
182,588
08.11.12
182,588
08.11.12
116,857
08.11.12
146,071
08.11.12
146,071
08.11.12
0.8151
0.8151
0.8151
0.8151
0.8151
774,175
1,139,352
Details of these performance rights are set out in Note 29 in the financial statements.
–
–
–
–
–
–
08.11.15
08.12.15
08.11.15
08.12.15
08.11.15
08.12.15
08.11.15
08.12.15
08.11.15
08.12.15
08.11.15
08.12.15
GBST Holdings Limited ABN 85 010 488 874 Annual Report
2014
29
Directors’ Report for the year ended 30 June 2014 continued
Related Parties
Transactions between related parties are on normal commercial terms and conditions no more favourable than those
available to other parties unless otherwise stated.
Transactions with Directors and Key Management Personnel
Compensation and equity interests are set out in the Remuneration Report.
Consultancy fees paid to Mr J Puttick.
Shareholdings
GBST GROUP
30 Jun 2014
$’000
30 Jun 2013
$’000
–
4,000
The numbers of shares in the Company held (directly, indirectly or beneficially) during the financial year by Key
Management Personnel, including their related parties, are set out below.
2014
Directors
J Puttick
A Brackin
S Lake
J Sundell
TOTAL DIRECTORS
Executives
R De Dominicis
P Salis
TOTAL EXECUTIVES
GROUP TOTAL
Balance at
01/07/13
Received as
Compensation
Performance
Rights &
Options
Exercised
Net Change
Other(i)
Balance at
30/06/14
5,697,461
381,943
5,146,109
9,631,610
20,857,123
2,724,659
16,135
2,740,794
23,597,917
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(419,105)
5,278,356
–
–
381,943
5,146,109
(3,850,000)
5,781,610
(4,269,105)
16,588,018
–
–
–
2,724,659
16,135
2,740,794
(4,269,105)
19,328,812
1. Shares purchased or sold, consideration for shareholdings purchased by Group, or excluded from disclosure due to resignation.
Indemnifying Directors and Officers
During the financial year, the Group paid a premium to insure the Directors and Officers of the Group. The terms of the
insurance contract prevent additional disclosure.
In addition, the Company has entered into Deeds of Indemnity which ensure the Directors and Officers of the Group
will incur, to the extent permitted by law, no monetary loss as a result of defending the actions taken against them as
Directors and Officers.
Certain legal expenses have been paid on behalf of a Director under the deed of indemnity with that Director. The Group
is not aware of any other liability that has arisen under these indemnities at the date of the report.
30
Performance rights
Rounding
To assist in the attraction, retention and motivation of
employees, the Company operates a GBST Performance
Rights and Option Plan.
The number of performance rights over ordinary shares
outstanding at 30 June 2014 are as follows:
Grant Date
Exercise Date Exercise Price
Number
08.11.12
16.09.13
11.02.14
08.11.15
16.09.16
11.02.16
$0.00
1,314,636
$0.00
$0.00
514,536
13,766
The Company is of a kind referred to in ASIC Class Order
98/100 dated 10 July 1998 and in accordance with that
Class Order, amounts in the financial report and Directors’
report have been rounded off to the nearest thousand
dollars, unless otherwise stated.
Signed in accordance with a resolution of the Directors
No further employee performance rights have been issued
up to the date of this report.
Dr J F Puttick
Chairman
Mr S M L Lake
Managing Director and Chief Executive Officer
Dated at Brisbane this 18th day of August 2014
Proceedings on behalf of Company
No person has applied for leave of Court to bring
proceedings on behalf of the Company or intervene in
any proceedings to which the Company is a party for the
purpose of taking responsibility on behalf of the Company
for all or any part of those proceedings. The Company was
not a party to any such proceedings during the year.
Non-audit services
The Board of Directors, in accordance with advice from the
Audit and Risk Committee, is satisfied that the provision of
non-audit services during the year is compatible with the
general standard of independence for Auditors imposed by
the Corporations Act (2001).
Refer to Note 21 in the financial report for details of
non-audit service fees.
Lead Auditor’s Independence Declaration
The lead Auditor’s independence declaration can be found
on the page following this Directors’ report and forms part
of the Directors’ report for the year ended 30 June 2014.
GBST Holdings Limited ABN 85 010 488 874 Annual Report
2014
31
ABCD
Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001
Auditor’s Independence Declaration
To: the directors of GBST Holdings Limited
for the year ended 30 June 2014
I declare that, to the best of my knowledge and belief, in relation to the audit for the financial
year ended 30 June 2014 there have been:
•
•
no contraventions of the auditor independence requirements as set out in the Corporations
Act 2001 in relation to the audit; and
ABCD
no contraventions of any applicable code of professional conduct in relation to the audit.
Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001
KPMG
To: the directors of GBST Holdings Limited
I declare that, to the best of my knowledge and belief, in relation to the audit for the financial
year ended 30 June 2014 there have been:
no contraventions of the auditor independence requirements as set out in the Corporations
Act 2001 in relation to the audit; and
no contraventions of any applicable code of professional conduct in relation to the audit.
•
Stephen Board
Partner
•
Brisbane
18 August 2014
KPMG
Stephen Board
Partner
Brisbane
18 August 2014
31
32
31
KPMG, an Australian partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity.
Liability limited by a scheme approved under
Professional Standards Legislation.
KPMG, an Australian partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG
Liability limited by a scheme approved under
International Cooperative (“KPMG International”), a Swiss entity.
Professional Standards Legislation.
Consolidated Statement of Profit or Loss
and Other Comprehensive Income
for the year ended 30 June 2014
Revenue from license and support sales
Revenue from sponsored work
Revenue from sale of third party product
Total revenue
Other income
Total revenue and other income
Product delivery and support expenses
Property and equipment expenses
Corporate and administrative expenses
RESULTS FROM OPERATING ACTIVITIES
Finance costs
Finance income
Net finance costs
PROFIT BEFORE INCOME TAX
Income tax expense
PROFIT ATTRIBUTABLE TO MEMBERS OF THE PARENT ENTITY
OTHER COMPREHENSIVE INCOME
Items that may be reclassified to profit or loss
Exchange differences arising on translation of foreign operations
Total items that may be reclassified subsequently to profit or loss
Other comprehensive (loss)/income for the year, net of income tax
TOTAL COMPREHENSIVE INCOME FOR THE YEAR ATTRIBUTABLE TO
MEMBERS OF THE PARENT ENTITY
Earnings per share
Basic earnings per share (cents)
Diluted earnings per share (cents)
The accompanying notes are an integral part of these consolidated financial statements.
30 Jun 2014
$’000
30 Jun 2013
$’000
Note
58,559
37,646
1,892
98,097
394
98,491
(69,207)
(10,792)
(5,368)
13,124
(1,134)
19
(1,115)
12,009
4 (d)
4 (e)
5
(1,978)
10,031
1,945
1,945
1,945
52,200
28,345
1,862
82,407
604
83,011
(59,423)
(9,154)
(5,113)
9,320
(1,529)
34
(1,495)
7,825
(1,794)
6,031
1,594
1,594
1,594
11,976
7,625
30
30
15.07
15.07
9.06
9.06
GBST Holdings Limited ABN 85 010 488 874 Annual Report
2014
33
Consolidated Statement of
Financial Position as at 30 June 2014
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Inventories and work in progress
Current tax receivable
Other assets
Total Current Assets
NON-CURRENT ASSETS
Plant and equipment
Intangible assets
Deferred tax assets
Other assets
Total Non-Current Assets
TOTAL ASSETS
CURRENT LIABILITIES
Trade and other payables
Loans and borrowings
Current tax liabilities
Provisions
Unearned income
Total Current Liabilities
NON-CURRENT LIABILITIES
Trade and other payables
Loans and borrowings
Deferred tax liabilities
Provisions
Total Non-Current Liabilities
TOTAL LIABILITIES
NET ASSETS
EQUITY
Issued capital
Reserves
Retained earnings
TOTAL EQUITY
The accompanying notes are an integral part of these consolidated financial statements.
34
30 Jun 2014
$’000
30 Jun 2013
$’000
Note
7
8
9
15
12
10
11
15
12
13
14
15
16
17
13
14
15
16
18
19
2,339
16,558
650
11
1,582
21,140
7,091
56,548
6,669
68
70,376
91,516
7,413
657
1,231
5,000
11,115
25,416
2,878
5,251
2,519
2,171
12,819
38,235
53,281
3,505
14,651
1,107
4
1,278
20,545
5,223
59,788
5,166
15
70,192
90,737
7,170
4,473
1,526
4,673
10,182
28,024
1,361
11,299
2,851
1,603
17,114
45,138
45,599
37,664
(2,356)
17,973
53,281
37,664
(4,999)
12,934
45,599
Consolidated Statement of Changes
in Equity for the year ended 30 June 2014
Issued
Capital
$’000
Retained
Earnings
$’000
Foreign
Currency
Translation
Reserve(a)
$’000
Equity
Remuneration
Reserve(b)
$’000
Balance at 1 July 2012
37,664
10,564
(6,823)
Total comprehensive income for the year
Profit for the year
Other comprehensive income
Exchange differences arising on translation of
foreign operations
Total other comprehensive loss
TOTAL COMPREHENSIVE INCOME FOR
THE YEAR
Transactions with owners, recorded directly
in equity
Contributions by and distributions
to owners
Dividends paid (Note 6)
Share based payments – options
Total contributions by owners
Total transactions with owners
–
–
–
–
–
–
–
–
6,031
–
–
–
1,594
1,594
6,031
1,594
(3,661)
–
(3,661)
(3,661)
–
–
–
–
BALANCE AT 30 JUNE 2013
37,664
12,934
(5,229)
Total
$’000
41,405
6,031
1,594
1,594
7,625
–
–
–
–
–
–
(3,661)
230
230
230
230
230
(3,431)
(3,431)
45,599
(a) The foreign currency translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign operations as
well as from the translation of liabilities that hedge the Company’s net investment in a foreign subsidiary.
(b) The equity remuneration reserve is used to record items recognised as expenses on valuation of employee share/options/performance rights granted. When
options/performance rights are exercised, cancelled or forfeited the amount in the reserve relating to those options/performance rights is transferred to
issued capital.
The accompanying notes are an integral part of these consolidated financial statements.
GBST Holdings Limited ABN 85 010 488 874 Annual Report
2014
35
Consolidated Statement of Changes
in Equity (continued) for the year ended 30 June 2014
Issued
Capital
$’000
Retained
Earnings
$’000
Foreign
Currency
Translation
Reserve(a)
$’000
Equity
Remuneration
Reserve(b)
$’000
Total
$’000
Balance at 1 July 2013
37,664
12,934
(5,229)
230
45,599
Total comprehensive income for the year
Profit for the year
Other comprehensive income
Exchange differences arising on translation of
foreign operations
Total other comprehensive income
TOTAL COMPREHENSIVE INCOME FOR
THE YEAR
Transactions with owners, recorded directly
in equity
Contributions by and distributions
to owners
Dividends paid (Note 6)
Share based payments – performance rights
Total contributions by and distributions
to owners
Total transactions with owners
–
–
–
–
–
–
–
–
BALANCE AT 30 JUNE 2014
37,664
10,031
–
–
–
1,945
1,945
10,031
1,945
(4,992)
–
(4,992)
(4,992)
17,973
–
–
–
–
(3,284)
–
–
–
–
–
698
698
698
928
10,031
1,945
1,945
11,976
(4,992)
698
(4,294)
(4,294)
53,281
(a) The foreign currency translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign operations as
well as from the translation of liabilities that hedge the Company’s net investment in a foreign subsidiary.
(b) The equity remuneration reserve is used to record items recognised as expenses on valuation of employee share/options/performance rights granted. When
options/performance rights are exercised, cancelled or forfeited the amount in the reserve relating to those options/performance rights is transferred to
issued capital.
The accompanying notes are an integral part of these consolidated financial statements.
36
Consolidated Statement of Cash Flows
for the year ended 30 June 2014
Cash Flows from Operating Activities
Receipts from customers
Payments to suppliers and employees
Interest income
Sundry income
Finance costs paid
Income tax paid
Note
30-Jun-14
$’000
30-Jun-13
$’000
105,939
92,547
(85,492)
(74,755)
19
394
(875)
(4,364)
34
604
(1,336)
(1,857)
Net cash provided by operating activities
24 (a)
15,621
15,237
Cash Flows from Investing Activities
Proceeds from sale of plant and equipment
Purchase of plant and equipment
Purchase of software intangibles
Deferred consideration received
Net cash used in investing activities
Cash Flows from Financing Activities
Repayment of finance leases
Proceeds from borrowings
Repayment of borrowings
Payment of transaction costs related to loans and borrowings
Dividends paid
Net cash used in financing activities
Net (decrease)/increase in Cash and Cash Equivalents
Effect of exchange rate fluctuations on cash held
Cash and cash equivalents at 1 July
24 (c)
2
(1,890)
(1,535)
1,512
(1,911)
4
(1,633)
(276)
437
(1,468)
(1,010)
(873)
–
16,530
(9,004)
(20,605)
–
6
(4,992)
(15,006)
(1,296)
130
3,505
2,339
(118)
(3,661)
(8,727)
5,042
(206)
(1,331)
3,505
Cash and cash equivalents at end of financial year
24 (b)
The accompanying notes are all an integral part of these consolidated financial statements.
GBST Holdings Limited ABN 85 010 488 874 Annual Report
2014
37
Notes to and forming part of the Consolidated Financial Statements
for the year ended 30 June 2014
Note 1: Reporting Entity
GBST Holdings Limited (“GBST” or the “Company”) is
the Group’s parent Company. The Company is a public
for profit Company limited by shares, incorporated and
domiciled in Australia. The consolidated financial report of
the Company as at and for the year ended 30 June 2014
comprises the Company and its controlled entities
(together referred to as the “Group” and individually as the
“Group entities”).
Note 2: Basis of Preparation
Statement of compliance
The consolidated financial statements are general
purpose financial statements which have been prepared in
accordance with Australian Accounting Standards (AASBs)
adopted by the Australian Accounting Standards Board
(AASB) and the Corporations Act (2001). The consolidated
financial statements comply with International Financial
Reporting Standards (IFRSs) adopted by the International
Accounting Standards Board (IASB).
This consolidated financial report was authorised for
issue in accordance with a resolution of Directors on
18 August 2014.
Basis of measurement
The consolidated financial report has been prepared
on an accruals basis and is based on historical costs,
modified, where applicable, by the measurement at fair
value of selected non-current assets, financial assets and
financial liabilities.
Functional and presentation currency
The functional currency of each of the Group’s
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.
The Company is of a kind referred to in ASIC Class Order
98/100 dated 10 July 1998 and in accordance with that
Class Order, amounts in the financial report and Directors’
report have been rounded off to the nearest thousand
dollars, unless otherwise stated.
Comparative figures
Where required by Accounting Standards comparative
figures have been adjusted to conform to changes in
presentation for the current financial period. Details of any
such changes are included in the financial report.
Use of estimates and judgments
The preparation of the consolidated financial statements
in conformity with IFRSs requires Management to make
judgments, estimates and assumptions that effect the
application of accounting policies and the reported
amounts of assets, liabilities, income and expenses. Actual
results may differ from these estimates. Estimates and
underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the
period in which the estimates are revised and in any future
periods affected.
Information about critical judgments in applying accounting
policies that have the most significant effect on the
amounts recognised in the financial statements is included
in Note 3:
• recognition of revenue;
• treatment of software development costs and whether
these are to be capitalised.
Information about assumptions and estimation
uncertainties that have a significant risk of resulting in
a material adjustment within the next financial year are
included in the following notes:
• recognition of revenue (Note 3);
• impairment testing of the consolidated entity’s
cash-generating units containing goodwill (Note 11);
• utilisation of tax losses (Note 15).
Changes in accounting policies
The Group has adopted the following new standards and
amendments to standards, including any consequential
amendments to other standards, with a date of initial
application of 1 July 2013.
AASB 10 Consolidated Financial Statements (2011) (see (a))
AASB 13 Fair Value Measurement [Recoverable Amount
Disclosures for Non-financial Assets (Amendments to
AASB136) (2013)] (see (b))
The nature and the effect of the changes are further
explained below:
38
(a) Subsidiaries
AASB 10 (2011) introduces a new control model that is
applicable to all investees, by focusing on whether the
Group has power over an investee, exposure or rights to
variable returns from its involvement with the investee and
ability to use its power to affect those returns.
The adoption of AASB 10 has not impacted the Group’s
financial statements as all subsidiaries of GBST are
100% owned.
(b) Fair value measurement
AASB 13 establishes a single framework for measuring
fair value and making disclosures about fair value
measurements, when such measurements are required
or permitted by other AASBs. It unifies the definition of
fair value as the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date.
It replaces and expands the disclosure requirements
about fair value measurements in other AASBs, including
AASB 7 Financial Instruments: Disclosures. These changes
have no significant impact on the Group’s disclosures
as the carrying amount of the assets and liabilities are a
reasonable approximation of their fair value.
In accordance with the transitional provisions of
AASB13 the Group has applied the new fair value
measurement guidance prospectively and has not
provided any comparative information for new disclosures.
Notwithstanding the above, the change had no significant
impact on the Group’s assets and liabilities.
(c) Disclosures of recoverable amount for
non-financial assets
The Group has early adopted the amendments to
AASB 136 (2013) which removes extra disclosure
requirements with regard to the measurement of the
recoverable amount of impaired assets introduced with the
adoption of AASB13.
Note 3: Significant Accounting Policies
The accounting policies set out in Note 3 below have
been applied consistently to all periods presented in these
consolidated financial statements and have been applied
consistently by the Group entities, except for the changes
in accounting policies explained in Note 2.
Basis of Consolidation
A controlled entity is any entity where the Group is
exposed to, or has rights to, variable returns from its
involvement with the entity and has the ability to affect
those returns through its power over the entity.
A list of controlled entities is contained in Note 22 of the
financial statements. All controlled entities have a 30 June
financial year end.
As at reporting date, the assets and liabilities of all
controlled entities have been incorporated into the
consolidated financial statements as well as their results for
the year ended on that date. Where controlled entities have
entered/(left) the consolidated Group during the year, their
operating results have been included/(excluded) from the
date control was obtained/(ceased).
All inter-company balances and transactions between
entities in the Group, including any unrealised profits or
losses, have been eliminated on consolidation. Accounting
policies of subsidiaries are consistent with those adopted
by the parent entity.
Business Combinations
Business combinations are accounted for using the
acquisition method as at the acquisition date, which is the
date on which control is transferred to the Group.
The consideration transferred in a business combination
is measured at fair value, as are the identifiable net assets
acquired. Any goodwill that arises is tested annually for
impairment. Any gain on a bargain purchase is recognised
in profit or loss immediately.
Acquisition-related costs are expensed as incurred unless
associated with issue of debt or equity securities incurred
in connection with a business combination.
Any contingent consideration payable is measured at
fair value at the acquisition date. Subsequent changes
to the fair value of the contingent consideration will be
recognised in profit or loss unless it is classified as equity.
If the contingent consideration is classified as equity, it
shall not be remeasured and settlement is accounted for
within equity.
When the excess is negative, a bargain purchase gain is
recognised immediately in profit or loss.
GBST Holdings Limited ABN 85 010 488 874 Annual Report
2014
39
Notes to and forming part of the Consolidated Financial Statements
for the year ended 30 June 2014 continued
Note 3: Significant Accounting Policies (continued)
Acquisitions before 1 July 2009
Goodwill represents the excess of the cost of the
acquisition over the Group’s interest in the recognised
amount (generally fair value) of the identifiable assets,
liabilities and contingent liabilities of the acquiree.
Subsequent changes to the fair value of contingent
consideration will be recognised as a charge to the cost of
the acquisition.
Transaction costs, other than those associated with the
issue of debt or equity securities, that the Group incurred
in connection with business combinations were capitalised
as part of the cost of the acquisition.
Income Tax
The income tax expense/(benefit) for the year comprises
current income tax expense/(benefit) and deferred tax
expense/(benefit).
Current income tax expense charged to the profit or loss
is the tax payable on taxable income calculated using
applicable income tax rates enacted, or substantially
enacted, as at reporting date. Current tax liabilities/(assets)
are therefore measured at the amounts expected to be
paid to/ (recovered from) the relevant taxation authority.
Deferred income tax expense reflects movements in
deferred tax asset and deferred tax liability balances during
the year as well as unused tax losses.
Current and deferred income tax expense/(benefit) is
charged or credited directly to equity instead of the profit
or loss when the tax relates to items that are credited or
charged directly to equity.
Deferred tax assets and liabilities are ascertained based
on temporary differences arising between the tax bases
of assets and liabilities and their carrying amounts in
the financial statements. Deferred tax assets also arise
from unused tax losses. No deferred income tax will
be recognised from the initial recognition of an asset or
liability, excluding a business combination, where there is
no effect on accounting or taxable profit or loss.
Deferred tax assets and liabilities are calculated at the
tax rates that are expected to apply to the period when
the asset is realised or the liability is settled, based on tax
rates enacted or substantively enacted as at reporting
date. Their measurement also reflects the manner in which
Management expects to recover or settle the carrying
amount of the related asset or liability.
40
Deferred tax assets relating to temporary differences and
unused tax losses are recognised only to the extent that
it is probable that future taxable profit will be available
against which the benefits of the deferred tax asset can
be utilised.
Where temporary differences exist in relation to
investments in subsidiaries, deferred tax assets and
liabilities are not recognised where the timing of the
reversal of the temporary difference can be controlled
and it is not probable that the reversal will occur in the
foreseeable future.
Current tax assets and liabilities are offset where a legally
enforceable right of set-off exists and it is intended that
net settlement or simultaneous realisation and settlement
of the respective asset and liability will occur. 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 income 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.
Tax consolidation
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 GBST Holdings Limited. The
implementation date of the tax-consolidation Group was
1 July 2003.
Inventories
Inventories are measured at the lower of cost and net
realisable value. The cost of inventories is based on first-
in first-out principle and includes expenditure incurred
in acquiring the inventories and other costs incurred in
bringing them to their existing location and condition.
Work in progress is stated at the aggregate of project
development contract costs incurred to date plus
recognised profits less any recognised losses and
progress billings.
Contract costs include all costs directly related to specific
contracts, costs that are specifically chargeable to the
customer under the terms of the contract and an allocation
of overhead expenses incurred in connection with the
Group’s activities in general.
Plant and Equipment
Plant and equipment are carried at cost, less any
accumulated depreciation and where applicable,
impairment losses.
Cost includes expenditure that is directly attributable to the
acquisition of the asset.
Subsequent costs are included in the asset’s carrying
amount or recognised as a separate asset, as appropriate,
only when it is probable that future economic benefits
associated with the item will flow to the Group and the cost
of the item can be measured reliably. All other repairs and
maintenance are charged to the income statement during
the financial period in which they are incurred.
The depreciable amounts of all fixed assets including
capitalised lease assets, are depreciated over their useful
lives to the entity commencing from the time the asset
is held ready for use. Leasehold improvements are
depreciated over the shorter of either the unexpired
period of the lease or the estimated useful lives of the
improvements.
The depreciation rates used for each class of assets are:
Class of
Fixed Asset
Depreciation
Rate
Basis
Owned plant, equipment
5-40%
Straight-Line
Owned plant, equipment
13.3-67% Diminishing Value
Leased plant, equipment
25%-33%
Straight-Line
Gains and losses on disposals are determined by
comparing proceeds with the carrying amount. These
gains and losses are included in profit or loss.
Asset Retirement Obligations
The cost of plant and equipment includes an initial
estimate of the cost of make good allowances, and a
corresponding provision for these future costs is raised.
The Group has a number of lease agreements over office
premises which include an obligation to make good the
premises at the conclusion of the lease term. The Group
recognises a liability and an asset for the estimated cost
of making good at the time of entering a lease agreement.
The resulting asset is amortised over the term of the lease.
Leases
Leases where the Group assumes substantially all
the risks and rewards incidental of the ownership are
classified as finance leases. All other leases are operating
leases and are not recognised on the Group’s statement of
financial position.
Finance leases are capitalised by recording an asset and
a liability at the lower of the amounts equal to the fair value
of the leased property or the present value of the minimum
lease payments, including any guaranteed residual values.
Lease payments are allocated between the reduction of
the lease liability and the lease interest expense for the
period. Leased assets are depreciated on a straight-line
basis over the shorter of their estimated useful lives or the
lease term.
Lease payments for operating leases are charged as
expenses in the periods in which they are incurred.
Lease incentives under operating leases are recognised as
a liability and amortised on a straight-line basis over the life
of the lease term.
Intangible Assets
The Group’s major intangible assets are software systems,
customer contracts and goodwill.
The amortisation rates used for each class of assets
acquired outside a business combination are:
Class of Fixed Asset
Owned software
Leased software
Amortisation
Rate
Basis
25%
25%
Straight-Line
Straight-Line
Acquired in a business combination and or separately
Software systems and customer contracts acquired
outside a business combination are recognised at cost.
Intangible assets acquired in a business combination
are recognised separately from goodwill and capitalised
at fair value as at the date of acquisition. Following initial
recognition, the cost model is applied to the class of
intangible assets.
The useful lives of these intangible assets are assessed
and the asset is amortised over its useful life on a
straight-line basis, ranging from one to ten years.
Intangible assets are tested for impairment where an
indicator of impairment exists. Useful lives are also
examined on an annual basis and adjustments, where
applicable, are made on a prospective basis.
GBST Holdings Limited ABN 85 010 488 874 Annual Report
2014
41
Notes to and forming part of the Consolidated Financial Statements
for the year ended 30 June 2014 continued
Note 3: Significant Accounting Policies (continued)
Internally developed (research and development)
Development costs are capitalised only if development
costs can be measured reliably, the product or process
is technically and commercially feasible, future economic
benefits are probable and the Group intends to and has
sufficient resources to complete development and to
use or sell the asset. The cost capitalised includes the
cost of materials, direct labour and overhead costs that
are directly attributable to preparing the asset for its
intended use. Once development is completed, capitalised
development costs are amortised over their useful life
as determined by Management on a straight-line basis.
Capitalised development expenditure is measured at
cost less accumulated amortisation and accumulated
impairment losses.
Expenditure during the research phase of a project is
recognised as an expense when incurred. Development
costs are expensed in the year in which they are incurred
when future economic benefits are uncertain or the future
economic benefits cannot be measured reliably.
Subsequent expenditure
Subsequent expenditure is capitalised only when it
increases the future economic benefits embodied in the
specific asset to which it relates. All other expenditure,
including expenditure on internally generated goodwill and
brands, is recognised in profit or loss as incurred.
Goodwill
Goodwill is initially recorded at the amount by which
the purchase consideration for a business combination
exceeds the fair value attributed to its net assets at date
of acquisition. Following initial recognition, goodwill is
measured at cost less any accumulated impairment
losses. Goodwill is not amortised.
Goodwill is tested annually for impairment, or more
frequently if events or changes in circumstances indicate
that the carrying value may be impaired.
Borrowing Costs
Borrowing costs directly attributable to the acquisition
or production of a qualifying asset (i.e. an asset that
necessarily takes a substantial period of time to get ready
for its intended use or sale) are capitalised as part of the
cost of the asset. All other borrowing costs are expensed
in the period they occur. Borrowing costs consist of
interest and other costs that the entity incurs in connection
with the borrowing of funds.
42
Financial Instruments
(i) Non-derivative financial liabilities
Financial liabilities are recognised initially on the trade date
at which the Group becomes a party to the contractual
provisions of the instrument. The Group derecognises
a financial liability when its contractual obligations are
discharged or cancelled or expire. Financial liabilities and
assets are offset and the net amount presented in the
statement of financial position when, and only when, the
Group has a legal right to offset the amounts and intends
either to settle on a net basis or to realise the asset and
settle the liability simultaneously.
The Group classified non-derivative financial liabilities
into the other financial liabilities category. Such financial
liabilities are recognised initially at fair value plus any
directly attributable transaction costs.
Subsequent to initial recognition, these financial liabilities
are measured at amortised cost using the effective interest
rate method.
Other financial liabilities comprise loans and borrowings,
bank overdrafts and trade and other payables.
The early adoption of AASB 9 (2009) did not impact the
Group’s accounting policy for financial liabilities.
(ii) Non-derivative financial assets
AASB 9 requires that an entity classifies its financial assets
as subsequently measured at either amortised cost or
fair value depending on the entity’s business model for
managing the financial assets and the contractual cash
flow characteristics of the financial assets. In addition, for
certain investments in equity instruments, an entity may
irrevocably elect to recognise all changes in fair value
directly through other comprehensive income; dividend
income on such equity investments is recognised in profit
or loss.
Accounting policy
The Group initially recognises financial assets on the
trade date at which the Group becomes a party to the
contractual provisions of the instrument.
Financial assets are initially measured at fair value. If
the financial asset is not subsequently measured at
fair value through profit or loss, the initial measurement
includes transaction costs that are directly attributable
to the asset’s acquisition or origination. The Group
subsequently measures financial assets at either fair value
or amortised cost.
Financial assets measured at amortised cost
A financial asset is subsequently measured at amortised
cost using the effective interest method and net of any
impairment loss, if: the asset is held within a business
model with an objective to hold assets in order to collect
contractual cash flows; and the contractual terms of the
financial asset give rise, on specified dates, to cash flows
that are solely payments of principal and interest.
Financial assets measured at fair value
Financial assets other than those subsequently measured
at amortised cost are subsequently measured at fair value
with all changes in fair value recognised in profit or loss.
However, for investments in equity instruments not held
for trading, the Group may elect at initial recognition
to recognise gains and losses in other comprehensive
income. For instruments measured at fair value through
other comprehensive income, gains and losses are never
reclassified to profit or loss and no impairments are
recognised in profit or loss. Dividends earned from such
investments are recognised in profit or loss unless the
dividends clearly represent a recovery of part of the cost
of investment.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and
call deposits with original maturities of three months or
less. Bank overdrafts that are repayable on demand and
form an integral part of the Group’s cash management are
included as a component of cash and cash equivalent for
the purposes of statement of cash flows.
Impairment of Assets
Financial assets
Financial assets at amortised cost
A financial asset at amortised cost is assessed at each
reporting date to determine whether there is objective
evidence that it is impaired. A financial asset at amortised
cost is impaired if objective evidence indicates that a
loss event has occurred after the initial recognition of the
asset and that the loss event had a negative effect on
the estimated future cash flows of that asset that can be
estimated reliably. Objective evidence that these financial
assets are impaired can include default or delinquency
by a debtor, restructuring of an amount due to the Group
on terms that the Group would not consider otherwise or
indications that a debtor or issuer will enter bankruptcy.
The Group considers evidence of impairment for
receivables at both a specific asset and collective level. All
individually significant receivables are assessed for specific
impairment. All individually significant receivables found not
to be specifically impaired are then collectively assessed
for any impairment that has been incurred but not yet
identified. Receivables that are not individually significant
are collectively assessed for impairment by grouping
together receivables with similar risk characteristics. In
assessing collective impairment the Group uses historical
trends of the probability of default, timing of recoveries and
the amount of loss incurred, adjusted for management’s
judgment as to whether current economic and credit
conditions are such that the actual losses are likely to be
greater or less than suggested by historical trends.
An impairment loss in respect of a financial asset
measured at amortised cost is calculated as the difference
between its carrying amount and the present value of
the estimated future cash flows discounted at the asset’s
original effective interest rate. Losses are recognised in
profit or loss and reflected in an allowance account against
receivables. Interest on the impaired asset continues to be
recognised through the unwinding of the discount. When
a subsequent event causes the amount of impairment loss
to decrease, the decrease in impairment loss is reversed
through profit or loss.
The early adoption of AASB 9 did not impact the Group’s
accounting policy for impairment in relation to financial
assets measured at amortised cost.
Accounting policy in respect of equity securities at
fair value
Impairment assessment is not required to be carried out
for equity securities at fair value when the requirements
of AASB 9 are applied as all changes in fair value are
recognised in other comprehensive income.
Non-financial assets
The carrying amounts of the Group’s non-financial assets,
other than deferred tax assets, are reviewed at each
reporting date to determine whether there is any indication
of impairment. If any such indication exists then the
asset’s recoverable amount is estimated. For goodwill and
intangible assets that have indefinite lives or that are not yet
available for use, the recoverable amount is estimated each
year at the same time.
The recoverable amount of an asset is the greater of its
value in use and its fair value less costs of disposal. In
assessing value in use, the estimated future cash flows
GBST Holdings Limited ABN 85 010 488 874 Annual Report
2014
43
Notes to and forming part of the Consolidated Financial Statements
for the year ended 30 June 2014 continued
Note 3: Significant Accounting Policies (continued)
Impairment of Assets – Non-financial assets (continued)
are discounted to their present value using a post-tax
discount rate that reflects current market assessments
of the time value of money and the risks specific to the
asset. For the purpose of impairment testing, assets
are grouped together into the smallest group of assets
that generate cash inflows from continuing use that are
largely independent of the cash inflows of other assets
or groups of assets (the “cash-generating unit”). The
goodwill acquired in a business combination, for the
purpose of impairment testing, is allocated to cash-
generating units that are expected to benefit from the
synergies of the combination.
An impairment loss is recognised if the carrying amount
of an asset exceeds its recoverable amount. Impairment
losses are recognised in profit or loss.
An impairment loss in respect of goodwill is not reversed.
In respect of other assets, impairment losses recognised
in prior periods are assessed at each reporting date for
any indications that the loss has decreased or no longer
exists. An impairment loss is reversed if there has been a
change in the estimates used to determine the recoverable
amount. An impairment loss is reversed only to the extent
that the asset’s carrying amount does not exceed the
carrying amount that would have been determined, net
of depreciation or amortisation, if no impairment loss had
been recognised.
Provisions
Provisions are recognised when the Group 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 are determined by discounting the expected
future cash flows at a pre-tax rate that reflects current
market assessments of the time value of money and the
risks specific to the liability. The unwinding of the discount
is recognised as a finance cost.
Employee Benefits
Provision is made for the Group’s liability for employee
benefits arising from services rendered by employees
to reporting period end. Employee benefits expected to
be settled within one year have been measured at the
amounts expected to be paid when the liability is settled,
plus related oncosts. Other employee benefits payable
later than one year have been measured at the present
value of the estimated future cash outflows to be made
44
for those entitlements. Those cash flows are discounted
using market yields on national government bonds with
terms to maturity that match the expected timing of cash
flows. Contributions are made by the Group to defined
contribution superannuation funds and are charged as
expenses when incurred.
Equity-settled Compensation
The Group operates equity-settled employee Performance
Rights and Option Plan. The fair value of the equity
to which employees become entitled is measured at
grant date and recognised as an expense over the
vesting period, with a corresponding increase to an
equity account. The fair value of the share performance
rights is determined using the Binomial Approximation
Option Valuation Model. The number of performance
rights expected to vest is reviewed and adjusted at
each reporting date such that the amount recognised
for services received as consideration for the equity
instruments granted shall be based on the number of
equity instruments that eventually vest.
Revenue and Other Income
Revenue is measured at the fair value of the consideration
received or receivable after taking into account any trade
discounts and volume rebates allowed. Any consideration
deferred is treated as the provision of finance and is
discounted at a rate of interest that is generally accepted
in the market for similar arrangements. The difference
between the amount initially recognised and the amount
ultimately received is interest revenue. The major business
activities recognised revenue as follows:
Software license fee revenue
A software licensing arrangement is considered to be a
sale if the following conditions are satisfied:
• The rights to the software license are assigned to
the licensee in return for a fixed fee or a
non-refundable guarantee;
• The contract is non-cancellable;
• The licensee is able to exploit its rights to the license
freely; and
• The consolidated entity has no remaining obligations
to perform.
For such arrangements, software license fee revenue is
recognised on the transfer of the rights to the licensee. In
other arrangements, revenue is recognised over the license
term on a straight line basis.
Maintenance/support service revenue for
licensed software
All revenue is stated net of the amount of goods and
services tax (GST).
Unearned income is recognised upon receipt of payment
for maintenance/support contracts. Revenue is brought to
account over time as it is earned.
However, to the extent that GBST has fulfilled all its
obligations under the contract, the income is recognised
as being earned at the time when all GBST’s obligations
under the contract have been fulfilled.
Sponsored implementation and consulting revenue
Revenue from a contract to provide implementation and
consulting services is recognised by reference to the
percentage of completion of the contract. The percentage
of completion of the contract is determined by reference to
the proportion of work performed (costs incurred to date)
to estimated total work performed (total contract costs).
When the percentage of completion cannot be estimated
reliably, contract revenue is recognised only to the
extent of the contract costs incurred that are likely to be
recovered. An expected loss on a contract is recognised
immediately in the Statement of Profit or Loss and Other
Comprehensive Income at inception.
Sponsored project revenue
Revenue received in advance for long-term project
development contracts is deferred. This revenue is
recognised over the period in which expenditure is incurred
in relation to the development of the project. When the
outcome of a long-term service contract can be estimated
reliably, contract revenue and expenses are recognised
in the profit and loss account by reference to the stage of
completion of the contract activity at the reporting date.
The stage of completion is assessed by reference to the
completion of a physical proportion of the contract work to
date for each contract. When the outcome of a long-term
service contract cannot be estimated reliably, revenue is
recognised only to the extent of contract costs incurred
that are probable to be recoverable and contract costs are
recognised as an expense in the period in which they are
incurred. An expected loss on a contract is recognised
immediately in the Statement of Profit or Loss and Other
Comprehensive Income at inception.
Sale of third party product
Revenue from the sale of goods is recognised at the point
of delivery as this corresponds to the transfer of significant
risks and rewards of ownership of the goods and the
cessation of all involvement in those goods.
Interest revenue
Interest revenue is recognised using the effective interest
rate method, which, for floating rate financial assets, is the
rate inherent in the instrument.
Grants
Government grants are recognised initially as deferred
income at fair value when there is reasonable assurance
that they will be received and that the Group will comply
with the conditions associated with the grant. Grants
that compensate the Group for expenses incurred
are recognised in profit or loss as other income on
a systematic basis in the same periods in which the
expenses are recognised. Grants that compensate the
Group for the cost of an asset are recognised in profit or
loss on a systematic basis over the useful life of the asset.
Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the
amount of GST, except where the amount of GST incurred
is not recoverable from the Australian Tax Office. In these
circumstances the GST is recognised as part of the cost
of acquisition of the asset or as part of an item of the
expense. Receivables and payables in the Statement of
Financial Position are shown inclusive of GST.
Cash flows are presented in the Statement of Cash flows
on a gross basis, except for the GST component of
investing and financing activities, which are disclosed as
operating cash flows.
Earnings Per Share
The Group presents basic and diluted earnings per share
(EPS) data for its ordinary shares. Basic EPS is calculated
by dividing the profit or loss attributable to ordinary
shareholders of the Group by the weighted average
number of ordinary shares outstanding during the period.
Diluted EPS is determined by adjusting the profit or loss
attributable to ordinary shareholders and the weighted
average number of ordinary shares outstanding for the
effects of all dilutive potential ordinary shares, which
comprise share options granted to employees, Directors
and related parties (refer to Note 29).
GBST Holdings Limited ABN 85 010 488 874 Annual Report
2014
45
Notes to and forming part of the Consolidated Financial Statements
for the year ended 30 June 2014 continued
c. Retained earnings are translated at the exchange rates
prevailing at the date of the transaction.
Exchange differences arising on translation of foreign
operations are recognised in other comprehensive income
and presented in the Group’s foreign currency translation
reserve in equity. These differences are recognised in profit
or loss in the period in which the operation is disposed.
When the settlement of a monetary item receivable from
or payable to a foreign operation is neither planned nor
likely in the foreseeable future, foreign exchange gains and
losses arising from such a monetary item are considered
to form part of a net investment in a foreign operation and
are recognised in other comprehensive income, and are
presented in the translation reserve in equity.
Share capital
Ordinary shares
Ordinary shares are classified as equity. Incremental costs
directly attributable to the issue of ordinary shares and
share options are recognised as a deduction from equity,
net of any tax effects.
New Standards and Interpretations not
yet adopted
A number of new standards, amendments to standards
and interpretations are effective for annual periods
beginning after 1 July 2014, and have not been applied
in preparing these consolidated financial statements. The
effect of these on the consolidated financial statements of
the Group is still to be assessed.
Note 3: Significant Accounting Policies (continued)
Segment Reporting
An operating segment is a component of the Group
that engages in business activities from which it may
earn revenues and incur expenses, including revenues
and expenses that relate to transactions with any of the
Group’s other components. All operating segments’
operating results are regularly reviewed by the Group’s
CEO to make decisions about resources to be allocated
to the segment and assess its performance, and for which
discrete financial information is available.
Inter-segment pricing is determined on an arm’s
length basis.
Segment results, assets and liabilities that are reported to
the CEO include items directly attributable to a segment as
well as those that can be allocated on a reasonable basis.
Foreign Currency Transactions and Balances
Transactions and balances
Foreign currency transactions are translated into a Group
entities’ functional currency using the exchange rates
prevailing at the date of the transaction. Foreign currency
monetary items are translated at the year-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 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 equity to the
extent that the gain or loss is directly recognised in equity,
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 are translated as follows:
a. Assets and liabilities are translated at year-end
exchange rates prevailing at that reporting date;
b. Income and expenses are translated at average
exchange rates for the period; and
46
Note 4: Profit for the Year
Profit before income tax expense includes the following items of revenue and expense:
(a) Other expenses:
Cost of third party product and services sold
Operating lease rentals
Research & developments costs
(b) Depreciation & amortisation:
Depreciation of plant & equipment
Amortisation of tangible & intangible leased assets
Amortisation of acquired intangibles (excluding leased assets)
(c) Employee benefits expense:
Monetary based expense (includes contributions to defined contribution plans $3.69 million
(2013: $3.23 million))
Share based payments
(d) Finance costs:
Foreign currency losses
Interest paid to external entities
Finance lease charges
Facility fees
(e) Finance income:
Bank interest
GBST GROUP
30 Jun 2014
$’000
30 Jun 2013
$’000
3,824
3,130
10,790
1,734
926
4,690
7,350
3,367
2,767
9,396
1,258
856
5,092
7,206
50,579
43,792
698
230
51,277
44,022
219
351
74
490
173
740
70
546
1,134
1,529
19
19
34
34
GBST Holdings Limited ABN 85 010 488 874 Annual Report
2014
47
Notes to and forming part of the Consolidated Financial Statements
for the year ended 30 June 2014 continued
Note 5: Income Tax Expense
(a) The components of tax expense comprise:
Current tax
Deferred tax (Note 15 (c) (i))
Recognition of previously unrecognised tax losses
(Over)/under provision in respect of prior years
(b) The prima facie tax on profit from ordinary activities before income tax
is reconciled to income tax as follows:
Profit before tax
Prima facie tax payable/(receivable) at 30%
Adjust for tax effect of:
Amortisation of customer contracts
Research & development expenditure claim
Recoupment of temporary differences not previously taken up
Under/(Over) provision in respect of prior years
Recognition of previously unrecognised tax losses
Current year losses for which no deferred tax asset was recognised (i)
Other non-allowable items (net)
Reduction in tax rate
Effect of different tax rates of subsidiaries operating in other jurisdictions
Income tax expense attributable to entity
Weighted average effective tax rates:
GBST GROUP
30 Jun 2014
$’000
30 Jun 2013
$’000
3,888
(2,020)
–
110
1,978
3,782
(1,700)
(367)
79
1,794
12,009
3,603
7,825
2,348
–
78
(3,628)
(1,917)
(91)
63
–
1,565
377
138
(49)
1,978
16%
(68)
94
(367)
1,168
441
52
(36)
1,794
23%
The weighted average effective consolidated tax rate for the year ended 30 June 2014 is 16% (2013: 23%) primarily due to:
• The benefit of Research and Development tax concession deductions and allowances;
• Reduction in United Kingdom (UK) tax rate to 21% from 1 April 2014 (2013: 23%)
There is no tax recognised in other comprehensive income within the current year or prior year.
(i) For GBST Ltd (Coexis) deferred tax assets of $1.25 million have not been recognised in relation to operating losses
for tax purposes, as it is not considered probable that they will be utilised within the foreseeable future given the level
of research and development costs incurred by the Company for which the Company has allowable Research and
Development tax concession deductions (rate: 225%).
48
Note 6: Dividends
Dividend paid in the period:
Interim fully franked (at 30%) dividend paid of 4.0 cents per share (2013: 3.0)
2013 final fully franked (at 30%) dividend paid of 3.5 cents per share (2012: 2.5)
Net Dividend paid
GBST GROUP
30 Jun 2014
$’000
30 Jun 2013
$’000
2,662
2,330
4,992
1,997
1,664
3,661
After the reporting date the Directors recommended a final dividend of 4.5 cents per share to be paid to the holders of
fully paid ordinary shares. The dividend will be 100% franked and will be paid on 15 October 2014. The dividend has not
been provided and there are no income tax consequences.
Dividend franking account:
Balance of franking account at year-end
30% franking credits available to shareholders of GBST Holdings Limited for subsequent
financial years post final dividend payment.
GBST GROUP
30 Jun 2014
$’000
30 Jun 2013
$’000
14,835
13,184
14,779
13,713
The above available amounts are based on the balance of the dividend franking account at year-end adjusted for:
(a) franking credits that will arise from the payment of the current tax liabilities;
(b) franking debits that will arise from the payment of dividends recognised as a liability at the year-end;
(c) franking credits that will arise from the receipt of dividends recognised as receivables by the tax consolidated Group at
the year-end; and
(d) franking credits that the entity may be prevented from distributing in subsequent years.
Note 7: Cash and Cash Equivalents
Cash at bank and on hand
Cash and cash equivalents in the Statement of Cash flows
GBST GROUP
30 Jun 2014
$’000
30 Jun 2013
$’000
2,339
2,339
3,505
3,505
GBST Holdings Limited ABN 85 010 488 874 Annual Report
2014
49
Notes to and forming part of the Consolidated Financial Statements
for the year ended 30 June 2014 continued
Note 8: Trade and Other Receivables
Current
Trade receivables
Accrued revenue
Other amounts receivable
GBST GROUP
30 Jun 2014
$’000
30 Jun 2013
$’000
15,840
12,804
144
574
344
1,503
16,558
14,651
(a) An allowance for impairment is recognised when there is objective evidence that an individual trade or term receivable is impaired. The movement in allowance for
impairment during the year was impairment loss recognised $96 thousand (2013: $215 thousand), amounts written off $535 thousand (2013: $2 thousand).
Note 9: Inventories and Work in Progress
GBST GROUP
30 Jun 2014
$’000
30 Jun 2013
$’000
650
650
1,107
1,107
Current – at cost
Work in progress
50
Note 10: Plant and Equipment
Owned plant and equipment at cost
Accumulated depreciation
Net carrying value
Leased plant and equipment at cost
Accumulated amortisation
Net carrying value
Total plant and equipment
(a) Movement in Plant and Equipment
GBST Group
Year ended 30 June 2013
Balance at 1 July 2012
Additions
Disposals
Depreciation expense
Effect of movements in exchange rates
Balance at 30 June 2013
Year ended 30 June 2014
Balance at 1 July 2013
Additions
Disposals
Depreciation expense
Reclassification to owned assets – cost
Effect of movements in exchange rates
Balance at 30 June 2014
GBST GROUP
30 Jun 2014
$’000
30 Jun 2013
$’000
16,750
(9,979)
6,771
1,229
(909)
320
7,091
14,284
(9,624)
4,660
1,151
(588)
563
5,223
Owned
$’000
Leased
$’000
Total
$’000
2,855
3,031
(88)
(1,258)
120
4,660
4,660
3,765
(36)
(1,734)
13
103
6,771
525
316
–
(283)
5
563
563
81
–
(315)
(13)
4
320
3,380
3,347
(88)
(1,541)
125
5,223
5,223
3,846
(36)
(2,049)
–
107
7,091
Plant and equipment was impairment tested in conjunction with intangible assets, refer Note 11.
GBST Holdings Limited ABN 85 010 488 874 Annual Report
2014
51
Notes to and forming part of the Consolidated Financial Statements
for the year ended 30 June 2014 continued
Note 11: Intangible Assets
At Cost
Software systems
Accumulated amortisation
Net carrying value
Customer contracts
Accumulated amortisation
Net carrying value
Goodwill
Accumulated impairment losses
Net carrying value
Leased software at cost
Accumulated amortisation
Net carrying value
Total intangibles
(a) Movement in Intangibles
GBST Group
Year ended 30 June 2013
Balance at 1 July 2012
Additions
Additions through internal development
Adjustment through controlled entity
acquistion consideration
Disposals
Amortisation charge
Effect of movements in exchange rates
Balance at 30 June 2013
52
GBST GROUP
30 Jun 2014
$’000
30 Jun 2013
$’000
42,234
39,308
(26,565)
(21,605)
15,669
17,703
12,820
12,423
(12,820)
(12,022)
–
401
46,036
(5,657)
40,379
1,916
(1,416)
500
45,445
(4,872)
40,573
1,916
(805)
1,111
56,548
59,788
Software
Systems
$’000
Customer
Contracts
$’000
Goodwill
$’000
Leased
Software
$’000
20,728
1,473
40,845
Total
$’000
64,334
673
36
(973)
(1)
(5,665)
1,384
–
–
(973)
–
–
701
1,288
396
–
–
–
(573)
–
40,573
1,111
59,788
277
36
–
(1)
–
–
–
–
(3,993)
(1,099)
656
17,703
27
401
GBST Group
Year ended 30 June 2014
Balance at 1 July 2013
Additions
Adjustment to controlled entity
acquisition consideration
Disposals
Amortisation charge
Effect of movements in exchange rates
Balance at 30 June 2014
Software
Systems
$’000
Customer
Contracts
$’000
Goodwill
$’000
Leased
Software
$’000
17,703
1,535
–
(6)
(4,276)
713
15,669
401
40,573
1,111
–
–
–
(414)
13
–
–
(830)
–
–
636
40,379
–
–
–
(611)
–
500
Total
$’000
59,788
1,535
(830)
(6)
(5,301)
1,362
56,548
Intangible assets, other than goodwill, have finite useful lives. The current amortisation charges for intangible assets
are included within the Product Delivery and Support expense line in the Statement of Profit or Loss and Other
Comprehensive Income. Goodwill has an infinite life.
The effect of movements in exchange rates represent the period to period foreign currency translation of assets
denominated in Great British Pounds.
Impairment Disclosures
Intangible assets are reviewed for impairment where there are indicators that the carrying amount may not be recoverable.
Goodwill is allocated to each Cash Generating Unit CGU based on the Group’s reporting segments presented below:
Capital Markets Australia segment (Palion)
Wealth Management segment (InfoComp)
Capital Markets International segment (Coexis)
Financial Services segment (Emu)
Total Goodwill
30 Jun 2014
$’000
30 Jun 2013
$’000
3,350
28,238
7,905
886
3,350
28,238
8,099
886
40,379
40,573
The recoverable amount of goodwill for each CGU has been assessed using discounted cash flow projections over five
years and a terminal value. The first year cash flow projections are based on 2015 Board approved budgets, while cash
flows projections for years two to five are based on Management assumptions set out below. Terminal growth rates have
been determined by Management based on their assessment of long term annual growth expected to be achieved in
the countries in which each CGU operates. Discount rates are based on a weighted average cost of capital calculation
for the relevant markets and in the same currency as the cash flows, and adjusted for a risk premium to reflect both the
increase in risk of investing in equities and the risk specific to the CGU. Where fair value less cost to sell is used to assess
recoverable amount, the discount rate is reviewed by Management to assess whether the risk reflects a market return.
For the InfoComp, Palion and Emu CGUs, the key assumptions used for value-in-use calculations consider growth
and discount rates and are generally consistent with past performance or are based upon the Group’s view of future
market activity. Growth rates used are determined by considering factors such as industry and sector expectations,
the markets in which the CGU operates, the size of the business, and past performance. Based on sensitivity analysis,
Management believe that any reasonable change in the respective key assumptions would not have a material impact on
the recoverable amounts of the InfoComp, Palion and Emu CGUs.
GBST Holdings Limited ABN 85 010 488 874 Annual Report
2014
53
Notes to and forming part of the Consolidated Financial Statements
for the year ended 30 June 2014 continued
Note 11: Intangible Assets (continued)
In relation to the Coexis CGU, the recoverable amount of goodwill has been assessed using a fair value less costs to sell
calculation, which is based on the Board approved 2015 budget and uses growth rates in line with historical performance
along with an assessment of costs if the CGU was operating on a stand-alone basis. The forecasts have been based on
expectations as to existing contracts and new contracts to be entered into over the forecast period. In the event that these
forecasts are not achieved the Coexis CGU may need to be impaired in future periods – refer below for sensitivity analysis.
A summary of key assumptions for Coexis and other CGU’s is presented below:
2014
Calculation Method
Revenue growth rates
Cost growth rates
Long term growth rates
Post-tax discount rate
2013
Calculation Method
Revenue growth rates
Cost growth rates
Long term growth rates
Post-tax discount rate
Coexis
Fair value less
cost to sell
InfoComp
Value-in-use
Palion
Value-in-use
EMU
Value-in-use
3-6%
3-5%
3%
7.5%
4%
3%
-5%
3-5%
3%
7.5%
3-5%
3%
13.25% 9.64-13.25%
12.26%
12.26%
Coexis
Fair value less
cost to sell
InfoComp
Value-in-use
Palion
Value-in-use
EMU
Value-in-use
3-6%
3-5%
3%
7.5%
3-5%
3%
-5%
3-5%
3%
7.5%
3-5%
3%
14.90% 10.85-14.90%
10.85%
10.85%
Future anticipated cash flows for all CGU’s indicate that the carrying value of the intangible assets were not required to be
impaired in 2014.
The sensitivity below shows the amount that these key assumptions are required to change individually, in order for the
estimated recoverable amount to be equal to the carrying amount for the Coexis CGU:
Decrease of annual revDecrease of annual revenue against forecast by
13.42% (June 2013: 9.6%)
Increase of annual costs above forecast by
Increase of post-tax discount rate by
18.67% (June 2013: 13.44%)
1,365 bps (June 2013: 781 bps)
54
Note 12: Other Assets
Current
Prepaid expenditure
Non-Current
Prepaid expenditure
Note 13: Trade and other Payables
Current (unsecured)
Trade payables & accruals
Leasehold liability
Non-Current (unsecured)
Trade payables & accruals
Leasehold liability
GBST GROUP
30 Jun 2014
$’000
30 Jun 2013
$’000
1,582
1,582
1,278
1,278
68
68
15
15
GBST GROUP
30 Jun 2014
$’000
30 Jun 2013
$’000
7,142
271
7,413
897
1,981
2,878
7,039
131
7,170
253
1,108
1,361
GBST Holdings Limited ABN 85 010 488 874 Annual Report
2014
55
Notes to and forming part of the Consolidated Financial Statements
for the year ended 30 June 2014 continued
Note 14: Loans and Borrowings
Current
Senior bank facility (secured)(a)
Commercial loan facility (secured)
Finance lease liability (Note 20)
Non-Current
Senior bank facility (secured)(a)
Commercial loan facility (secured)
Finance lease liability (Note 20)
GBST GROUP
30 Jun 2014
$’000
30 Jun 2013
$’000
–
7
650
657
3,461
–
1,012
4,473
4,971
10,471
29
251
–
828
5,251
11,299
The secured bank loans are secured over the Group’s assets of $91.48 million (2013: $90.74 million).
(a) The senior bank facility is provided by the Commonwealth Bank. The facilities are secured by fixed and floating charges over the operating
companies within the Group. The senior bank facility represents a $5.03 million loan at 30 June 2014 maturing on 27 December 2015.
Offsetting this loan are capitalised establishment costs of $59 thousand. Additional payments may be made against facilities without
incurring penalties. The Interest rate under the facility is variable and linked to BBSY. At 30 June 2014 the interest rate for the senior bank
facility was 5.7% p.a.
The equipment finance lease facility for assets already purchased have remained with the NAB until the repayments are completed.
The covenants within the Commonwealth Bank of Australia borrowings require that at 30 June 2014 the debt to EBITDA ratio is below
1.25 to 1, interest cover is above 4 to 1 and net worth ratio is above 45%. Based on the Group’s current forecast and business plan, the
Group anticipates that it will continue to meet its covenants. In respect of the senior bank facility, totaling $5.03 million at 30 June 2014, the
Group met all covenant requirements.
56
Note 15: Tax
(a) Liabilities
Current
Income tax
Non-Current
Deferred tax liability comprises:
Tax allowances relating to plant and equipment
Tax allowances relating to intangibles
(b) Assets
Current
Tax receivable
Non-Current
Deferred tax assets comprise:
Provisions
Other items
Transaction costs on equity issue
Unused tax losses
(c) Reconciliations
(i) Net Movement
The overall movement in the net deferred tax account is as follows:
Opening balance
Recoupment of temporary differences not previously taken up
Tax rate change
Charged to income statement
Foreign currency translation
Charge to equity
Closing balance
GBST GROUP
30 Jun 2014
$’000
30 Jun 2013
$’000
1,231
1,526
114
2,405
2,519
148
2,703
2,851
11
4
4,572
3,812
39
–
2,058
6,669
2,315
90
(140)
2,020
(115)
(20)
4,150
45
20
1,289
5,166
580
270
(57)
1,700
(158)
(20)
2,315
GBST Holdings Limited ABN 85 010 488 874 Annual Report
2014
57
Notes to and forming part of the Consolidated Financial Statements
for the year ended 30 June 2014 continued
Note 15: Tax (continued)
GBST GROUP
30 Jun 2014
$’000
30 Jun 2013
$’000
(ii) Deferred Tax Liability
(a) The movement in deferred tax liability for each temporary difference during the year is as follows:
Tax allowances relating to plant and equipment and intangibles
Opening balance
Recoupment of temporary differences not previously taken up
Charged to income statement
Foreign currency translation
Closing balance
(iii) Deferred Tax Assets
(a) The movement in deferred tax asset for each temporary difference during the year is as follows:
Provisions
Opening balance
Recoupment of temporary differences not previously taken up
Tax rate change
Charged to income statement
Foreign currency translation
Closing balance
Other Items
Opening balance
Recoupment of temporary differences not previously taken up
Tax rate change
Charged to income statement
Foreign currency translation
Closing balance
Transaction costs on equity issue
Opening balance
Charged directly to equity
Closing balance
58
2,851
3,584
–
(575)
243
(32)
(946)
245
2,519
2,851
3,812
3,185
65
(14)
689
20
29
(5)
596
7
4,572
3,812
45
–
(2)
(6)
2
39
20
(20)
–
7
(10)
(1)
47
2
45
40
(20)
20
Unused tax losses
Opening balance
Recoupment of temporary differences not previously taken up
Tax rate change
Charged to income statement
Foreign currency translation
Closing balance
(b) Total deferred tax assets not brought to account as at reporting period end:
– tax losses: operating losses
– tax losses: capital losses
GBST GROUP
30 Jun 2014
$’000
30 Jun 2013
$’000
1,289
25
(124)
762
106
932
219
(51)
111
78
2,058
1,289
7,517
2,812
6,156
2,812
For deferred tax assets that have not been recognised in relation to operating losses, refer Note 5 (i).
GBST Holdings Limited ABN 85 010 488 874 Annual Report
2014
59
Notes to and forming part of the Consolidated Financial Statements
for the year ended 30 June 2014 continued
Note 16: Provisions
Current
Employee benefits
Make Good(a)
Non-Current
Employee benefits
Make Good(a)
GBST Group
Balance at the beginning of the year
Additional provisions
Amounts used
Unused amounts reversed
Balance at 30 June 2014
GBST GROUP
30 Jun 2014
$’000
30 Jun 2013
$’000
4,954
46
5,000
1,337
834
2,171
Employee
benefits
$’000
Make Good
$’000
5,536
3,081
(2,217)
(109)
6,291
740
428
(288)
–
880
4,443
230
4,673
1,093
510
1,603
Total
$’000
6,276
3,509
(2,505)
(109)
7,171
(a) In accordance with rental premises lease agreements across the Group, GBST must restore the leased premises to its original condition at the
end of the lease terms. Expiration dates range from 2015 to 2023.
Note 17: Unearned Income
Current
Revenue received in advance for software usage and support services
GBST GROUP
30 Jun 2014
$’000
30 Jun 2013
$’000
11,115
11,115
10,182
10,182
60
Note 18: Issued Capital
66,561,725 (2013: 66,561,725) fully paid ordinary shares
GBST GROUP
30 Jun 2014
$’000
30 Jun 2013
$’000
37,664
37,664
37,664
37,664
Ordinary shares participate in dividends and the proceeds of winding up of the parent entity in proportion to the number
of shares held. At shareholders’ meetings each ordinary share is entitled to one vote.
The Company does not have an amount of authorised capital or par value in respect of its issued shares.
Options and Performance Rights
For details on employee and placement options and performance rights over ordinary shares, see Note 29.
Note 19: Reserves
Equity remuneration reserve
Foreign currency translation reserve
Note 20: Capital, Leasing and Other Commitments
(a) Finance Leasing Commitments
Payable on leases:
Not later than one year
Later than one year but not later than five years
Less future finance charges
Total liability
Lease liabilities are included in the Statement of Financial Position as:
Current (Note 14)
Non-current (Note 14)
GBST GROUP
30 Jun 2014
$’000
30 Jun 2013
$’000
928
(3,284)
(2,356)
230
(5,229)
(4,999)
GBST GROUP
30 Jun 2014
$’000
30 Jun 2013
$’000
689
263
952
(51)
901
650
251
901
1,084
866
1,950
(110)
1,840
1,012
828
1,840
Finance leases relate to items of plant and equipment and have options to acquire the items on termination.
GBST Holdings Limited ABN 85 010 488 874 Annual Report
2014
61
Notes to and forming part of the Consolidated Financial Statements
for the year ended 30 June 2014 continued
Note 20: Capital, Leasing and Other Committments (continued)
(b) Non-cancellable Operating Leases
Lease amounts are payable:
Not later than one year
Later than one year but not later than five years
Later than five years
3,312
9,975
8,983
22,270
3,209
9,404
10,663
23,276
Non-cancellable leases include rental premises with original lease terms up to ten years. The lease agreements require
that the minimum lease payments shall be increased by incremental contingent rentals based on market or CPI.
Certain leases contain options to renew at the end of their term for a further five years.
(c) Capital and Other Expenditure Commitments
GBST GROUP
30 Jun 2014
$’000
30 Jun 2013
$’000
136
198
334
334
334
298
263
561
561
561
Contracted for:
Capital purchases
Other operating purchases
Payable
Not later than one year
62
Note 21: Auditors’ Remuneration
Audit Services
KPMG Australia
GBST GROUP
30 Jun 2014
30 Jun 2013
Audit & review of financial reports
261,000
207,500
Overseas KPMG firms
Audit & review of financial reports
Other Services
KPMG Australia
Other services
Taxation services
Overseas KPMG firms
Taxation services
41,106
88,960
302,106
296,460
41,200
–
–
1,600
–
105,058
41,200
106,658
GBST Holdings Limited ABN 85 010 488 874 Annual Report
2014
63
Notes to and forming part of the Consolidated Financial Statements
for the year ended 30 June 2014 continued
Note 22: Other Group Entities
(a) Controlled Entities Consolidated
Group Entity
GBST Pty Ltd*
Emu Design (Qld) Pty Ltd*
GBST ESOP Pty Ltd*
GBST Ltd
GBST (Australia) Pty Ltd*
Subsidiaries of GBST Ltd:
GBST Inc
Country of Incorporation
Percentage Owned
Australia
Australia
Australia
100% (June 2013: 100%)
100% (June 2013: 100%)
100% (June 2013: 100%)
United Kingdom
100% (June 2013: 100%)
Australia
100% (June 2013: 100%)
United States of America
100% (June 2013: 100%)
GBST Singapore Pte Limited
Singapore
100% (June 2013: 100%)
Subsidiaries of GBST Australia Pty Ltd:
GBST Hong Kong Limited
Hong Kong
100% (June 2013: 100%)
GBST Registry Solutions Pty Ltd*
GBST Wealth Management Pty Ltd*
Australia
Australia
100% (June 2013: 100%)
100% (June 2013: 100%)
Subsidiaries of GBST Wealth Management Pty Ltd:
GBST UK Holdings Limited
United Kingdom
100% (June 2013: 100%)
Subsidiaries of GBST UK Holdings Ltd:
GBST Hosting Limited
United Kingdom
100% (June 2013: 100%)
GBST Wealth Management Limited
United Kingdom
100% (June 2013: 100%)
(b) Deed of Cross Guarantee
* Pursuant to ASIC Class Order 98/1418 these wholly-owned controlled entities are relieved from the Corporations Act (2001) requirements for preparation, audit and
lodgement of financial reports and Directors’ Report.
It is a condition of the class order that the Company and each of the Australian controlled entities enter into a Deed of Cross Guarantee (“Deed”). The effect of the Deed
is that the Company guarantees to each creditor payment in full of any debt in the event of winding up any of the controlled entities under certain provisions of the
Corporations Act (2001). If a winding up occurs under other provisions of the Corporations Act (2001), the Company will only be liable in the event that after six months
any creditor has not been paid in full. The controlled entities have also given similar guarantees in the event that the Company is wound up.
64
A consolidated statement of profit or loss and other comprehensive income and consolidated statement of financial
position, comprising the Company and controlled entities which are party to the Deed, after eliminating all transactions
between parties to the Deed of Cross Guarantee at 30 June 2014 is set out as follows:
Financial information in relation to:
i. Summarised Statement of Profit or Loss and Other Comprehensive Income
Revenue from license and service sales
Revenue from sponsored work
Revenue from sale of third party product
Other income
Results from Operating Activities
Finance costs
Finance income
Net finance costs
Profit before income tax
Income tax expense
Profit after income tax
Profit Attributable to Members of the Parent Entity
Other Comprehensive Income
Total Comprehensive Income for the Year
ii. Retained Earnings
Retained profits at the beginning of the year
Transfer financial asset reserve to retained earnings
Profit after income tax
Dividends provided for or paid
Retained Earnings at End of the Year
CLOSED GROUP AND
PARTIES TO DEED OF CROSS
GUARANTEE
30 Jun 2014
$’000
30 Jun 2013
$’000
50,069
22,940
1,732
9
46,095
19,327
1,185
124
13,918
9,904
(937)
19
(918)
13,000
(2,306)
10,694
10,694
(1,505)
32
(1,473)
8,431
(1,929)
6,502
6,502
–
–
10,694
6,502
14,600
5,737
10,694
(4,992)
26,039
11,759
–
6,502
(3,661)
14,600
GBST Holdings Limited ABN 85 010 488 874 Annual Report
2014
65
Notes to and forming part of the Consolidated Financial Statements
for the year ended 30 June 2014 continued
Note 22: Other Group Entities (continued)
(b) Deed of Cross Guarantee (continued)
iii. Statement of Financial Position
Current Assets
Cash and cash equivalents
Trade and other receivables
Inventories
Tax Receivable
Other assets
Total Current Assets
Non-Current Assets
Trade and other receivables
Property, plant and equipment
Intangible assets
Investment
Deferred tax assets
Other assets
Total Non-Current Assets
TOTAL ASSETS
Current Liabilities
Trade and other payables
Financial liabilities
Current tax liabilities
Provisions
Unearned income
Total Current Liabilities
66
CLOSED GROUP AND
PARTIES TO DEED OF CROSS
GUARANTEE
30 Jun 2014
$’000
30 Jun 2013
$’000
927
11,791
606
–
939
2,165
11,208
1,011
–
708
14,263
15,092
–
5,367
40,431
32,838
4,372
68
83,076
97,339
4,856
646
1,228
4,955
9,288
10,449
3,632
42,634
17,108
3,688
15
77,525
92,618
3,991
4,447
1,526
4,640
8,631
20,973
23,235
Non-Current Liabilities
Trade and other payables
Financial liabilities
Deferred tax liabilities
Provisions
Total Non-Current Liabilities
TOTAL LIABILITIES
NET ASSETS
Equity
Issued capital
Reserves
Retained earnings
TOTAL EQUITY
Note 23: Financing Arrangements
Financing facilities(a)
Amount utilised
Unused credit facility
CLOSED GROUP AND
PARTIES TO DEED OF CROSS
GUARANTEE
30 Jun 2014
$’000
30 Jun 2013
$’000
2,878
5,247
2,404
1,944
12,473
33,446
63,892
1,361
11,281
2,850
1,399
16,891
40,126
52,492
37,664
37,664
189
26,039
63,892
228
14,600
52,492
GBST GROUP
30 Jun 2014
$’000
30 Jun 2013
$’000
20,943
28,060
(8,392)
(18,499)
12,551
9,561
(a) This amount comprises a working facility, bank guarantees, finance lease facility and senior bill facility with the Commonwealth Bank of Australia (CBA). The
senior facility expires on 27 December 2015 and additional payments may be made against the facility without incurring penalties. The Interest rate under the
facility is variable and linked to BBSY. At 30 June 2014 the interest rate for the senior bank facility was 5.7% p.a. The facilities are secured by fixed and floating
charges over the operating companies within the Group. The equipment financing facility for assets already purchased will remain with the NAB until the
repayments are completed.
A finance lease provided by Microsoft Financing is debt funding for the purchase of Microsoft licences which expire December 2014. Finance leases provided by
BOQ is debt funding for the purchase of Dell hardware which expire November 2015.
GBST Holdings Limited ABN 85 010 488 874 Annual Report
2014
67
Notes to and forming part of the Consolidated Financial Statements
for the year ended 30 June 2014 continued
Note 24: Cash Flow Information
(a) Reconciliation of Net Cash provided by Operating Activities to Profit after Income Tax
GBST GROUP
30 Jun 2014
$’000
30 Jun 2013
$’000
Profit after income tax
Non-cash flows in operating profit:
Depreciation and amortisation
Deferred borrowing costs
Loss on sale of plant & equipment
Share based payments
Changes in assets and liabilities:
Change in receivables
Change in other assets
Change in intangibles (internal costs)
Change in unearned income
Change in inventories
Change in deferred tax balances
Change in tax provision
Change in trade and other payables
Change in provisions
Cash flow from operations
(b) Reconciliation of Cash
Cash at the end of the financial year as shown in the Statement of Cash Flows is reconciled to
items in the Statement of Financial Position as follows:
Cash at bank (Note 7)
10,031
6,031
7,350
7,206
39
29
698
(2,504)
(357)
–
932
457
(1,835)
(302)
188
895
–
60
230
835
(618)
(36)
1,068
(117)
(1,735)
1,656
(230)
887
15,621
15,237
2,339
2,339
3,505
3,505
(c) Non-cash Financing Activities
During the 2014 financial year the Group acquired plant and equipment and software with an aggregate value of
$81 thousand (2013: $954 thousand) by means of finance leases.
68
Note 25: Operating Segment
The Group has four reportable segments, as described below, which are the Group’s strategic business units. The
strategic business units offer different products and services, and are managed separately because they require different
technology and marketing strategies. For each of the strategic business units, the CEO reviews internal management
reports on a monthly basis. The following summary describes the operations in each of the Group’s reportable segments:
Capital Markets Australia offers the GBST Shares and derivatives platform which is the country’s most widely used
middle-office and back-office equities and derivatives system.
Capital Markets International through the GBST Syn~ platform, provides new-generation technology to process equities,
derivatives, fixed income and managed funds transactions for global capital markets.
Wealth Management through the GBST Composer platform, provides end to end funds administration and management
software to the wealth management industry, both in Australia and the United Kingdom. It offers an integrated system
for the administration of wrap platforms, including individual savings accounts (ISA’s), pensions, self-invested personal
pension (SIPP) and superannuation; as well as master trusts, unit trusts, risk and debt; and other investment assets. Other
GBST products provide technology hub solutions; and data analytics and quantitative services for the measurement of
portfolio performance.
Financial Services incorporating Emu Design, provides independent financial data and digital agency services for
interactive website design, development, hosting, e-commerce platforms, and mobile and social networking solutions.
GBST Holdings Limited ABN 85 010 488 874 Annual Report
2014
69
Other income from
external customers
Inter-segment
revenues*
Total segment
revenue
Operating
EBITDA
Depreciation and
amortisation of
segment assets
Notes to and forming part of the Consolidated Financial Statements
for the year ended 30 June 2014 continued
Note 25: Operating Segment (continued)
CAPITAL
MARKETS
AUSTRALIA
CAPITAL
MARKETS
INTERNATIONAL
WEALTH
MANAGEMENT
FINANCIAL
SERVICES
ELIMINATIONS
GBST GROUP
30 Jun
2014
$’000
30 Jun
2013
$’000
30 Jun
2014
$’000
30 Jun
2013
$’000
30 Jun
2014
$’000
30 Jun
2013
$’000
30 Jun
2014
$’000
30 Jun
2013
$’000
30 Jun
2014
$’000
30 Jun
2013
$’000
30 Jun
2014
$’000
30 Jun
2013
$’000
Revenue
Revenue from
external customers 29,510 28,757 11,722
6,709 53,757 43,399
3,108
3,542
–
11
236
228
158
363
–
2
–
–
– 98,097 82,407
–
394
604
318
4
12
12
–
–
128
600
(458)
(616)
–
–
29,828 28,772 11,970
6,949 53,915 43,762
3,236
4,144
(458)
(616) 98,491 83,011
10,329 10,273 (2,498)
(4,569) 13,520 11,624
(1,141)
169
(2,080)
(1,779)
(2,486)
(2,700)
(2,642)
(2,595)
(142)
(132)
Segment result
8,249
8,494 (4,984)
(7,269) 10,878
9,029 (1,283)
37
Unallocated
revenue/
(expenses)**
Net finance costs
Profit before
income tax
Income tax
expense
Profit after
income tax
Capital
expenditure
Segment total
assets
Segment total
liabilities
2,612
2,669
180
264
2,106
974
72
67
31,860 20,945 20,555 21,281 39,517 48,041
(416)
470
13,230 14,044 10,560 19,987 14,168 10,412
277
695
–
–
–
–
–
–
– 20,210 17,497
–
(7,350)
(7,206)
– 12,860 10,291
264
(971)
(1,115)
(1,495)
12,009
7,825
(1,978)
(1,794)
10,031
6,031
– 4,970
3,974
– 91,516 90,737
– 38,235 45,138
* Inter-segment revenue received by Capital Markets International (CMI) from Capital Markets Australia (CMA) of $1.6 million (2013: $1.6 million) for use of intangible
assets is not included to align with reporting to CEO. To align with reporting to the CEO – software development work charges are not included for work received
by CMl from CMA of $454 thousand, by CMA for CMI of $612 thousand and by Wealth Management for Financial Services of $58 thousand. Inter-segment
revenue with an associated direct external cost (typically direct labour costs) are included.
** 2014 amount is net of a recovery of legal expenses previously expensed.
70
Geographical Location:
Australia
Europe and Middle East
Asia
North America
SEGMENT REVENUES
FROM EXTERNAL
CUSTOMERS
CARRYING AMOUNT
OF SEGMENT
NON-CURRENT ASSETS
30 Jun 2014
$’000
30 Jun 2013
$’000
30 Jun 2014
$’000
30 Jun 2013
$’000
50,246
38,224
6,475
3,152
49,247
28,529
3,354
1,277
28,820
34,707
177
3
46,282
18,558
186
-
98,097
82,407
63,707
65,026
Information about Geographical Areas
The consolidated Group’s operating segments are managed in Australia. Capital Markets Australia and Financial Services
have operations and customers in Australia, Wealth Management has operations and customers in Australia and Europe,
and Capital Markets International has operations and customers in Europe, North America, Middle East and Asia. Capital
Markets Australia also has a customer in New Zealand and customers in Asia from sales to Australian entities.
Major Customer
Revenues from the top five customers of the Group represents $44.40 million (2013: $31.90 million) of the Group’s
total revenues.
Reconciliation of Capital Expenditure
The $410 thousand (2013: $82 thousand) difference between the segment capital expenditure disclosure and the
acquisitions recorded in plant and equipment (Note 10) and intangibles (Note 11) relates to the make good increase.
Accounting Policies
Segment revenues and expenses are those directly attributable to the segments and include any joint revenue and
expenses where a reasonable basis of allocation exists. Segment assets include all assets used by a segment and
consist principally of cash, receivables, inventories, intangibles and property, plant and equipment, net of allowances
and accumulated depreciation and amortisation. While most such assets can be directly attributed to individual
segments, the carrying amount of certain assets used jointly by two or more segments is allocated to the segments on a
reasonable basis. Segment liabilities consist principally of payables, employee benefits, accrued expenses, provisions and
borrowings. Segment assets and liabilities do include deferred income taxes.
Intersegment Transfers
Segment revenues, expenses and results include transfers between segments. The prices charged on intersegment
transactions are the same as those charged for similar goods to parties outside of the Group at an arm’s length. These
transfers are eliminated on consolidation.
There have been no changes to the basis of segmentation or the measurement basis for the segment profit or loss since
the prior reporting period.
GBST Holdings Limited ABN 85 010 488 874 Annual Report
2014
71
Notes to and forming part of the Consolidated Financial Statements
for the year ended 30 June 2014 continued
Note 26: Financial Risk Management
Interest Rate Risk
(a) Financial Risk Management Policies
The Group’s principal financial instruments comprise of
accounts receivable and payable, bank accounts, loans
and overdrafts, investments and finance leases.
The main purpose of these financial instruments is to
provide operating finance to the Group.
The exposure to market risk for the changes in interest
rates relates primarily to borrowing obligations,
underpinned by variable interest rates as agreed in the
Restructure of Banking Facilities in December 2012. Falling
interest rates over the past year have validated the current
variable debt rate strategy employed by the Group.
Australian variable interest rate risk
It is, and has been throughout the period under review,
the Group’s policy that financial instruments held are not
intended for trading purposes.
At reporting period, the Group had the following mix of
financial assets and liabilities exposed to Australian variable
interest rate risk.
The Group has exposure to the following risks from their
use of financial instruments – credit risk, liquidity risk and
market risk. This note presents information about the
exposure to each of the above risks. Further quantitative
disclosures are included throughout these consolidated
financial statements.
The Board of Directors has overall responsibility for
the establishment and oversight of the Group’s risk
management framework. Management is responsible for
developing and monitoring the risk management policies,
and reports to the Board.
The risk management policies are established to identify
and analyse the risks faced, to set appropriate risk limits
and controls, and to monitor risks and adherence to limits.
The Board of Directors meet on a regular basis to
analyse financial risk exposure and to evaluate treasury
management strategies in the context of current economic
conditions and forecasts.
The Executive Management Team’s overall risk
management strategy seeks to assist the consolidated
Group in meeting its financial targets, whilst minimising
potential adverse effects on financial performance.
Risk management policies are approved and reviewed by
the Board on a regular basis.
(b) Market Risk
Market risk is the risk that changes in market prices, such
as foreign exchange rates, share prices and interest rates
will affect income or the value of holdings of financial
instruments. The objective of market risk management
is to manage and control market risk exposures within
acceptable parameters, while optimising the return.
Financial assets
Cash
Financial liabilities
Bank loan
GBST GROUP
2014
$’000
87
87
2013
$’000
1,712
1,712
5,047
5,047
14,030
14,030
Lease liabilities have fixed rates, all other items are variable
rate. The exposure to market interest rates relates primarily
to long and short term debt obligations.
Foreign currency variable interest rate risk
At reporting period, the Group had the following mix of
foreign currency exposed to variable interest rate risk.
GBST GROUP
2014
$’000
2013
$’000
Financial assets
Great British Pounds
1,918
1,000
United States of America
Dollars
Euros
Singapore Dollars
Hong Kong Dollars
310
–
17
7
623
114
–
55
2,252
1,792
72
Foreign Currency Risk
The Group is exposed to fluctuations in foreign currencies arising from the sale and purchase of goods and services in
currencies other than the Group’s measurement currency.
The Group constantly monitors its foreign currency exposure, and seeks to utilise existing currency reserves and naturally
hedge foreign currency purchase where possible.
At balance sheet date the Group had exposure to movements in the exchange rate as follows:
Great British Pounds
United States of America Dollars
Euros
Singapore Dollars
Hong Kong Dollars
2014
2013
Cash and
Receivables
$’000
Payables
$’000
Cash and
Receivables
$’000
Payables
$’000
10,956
343
–
17
7
1,205
5,760
961
–
–
6
–
796
114
–
55
–
–
–
–
11,323
1,211
6,725
961
(c) Liquidity Risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The approach
to managing liquidity is to ensure, as far as possible, that there will always be sufficient liquidity to meet liabilities when
due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the
Group’s reputation.
The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of overdrafts,
loans and finance leases. Liquidity risk is managed by monitoring forecasted business performance including cash flows,
the collection of trade receivables, payment of trade payables and maintaining adequate borrowing facilities. In addition,
the Group forecasts bank covenant compliance and completes a compliance certificate to the Commonwealth Bank of
Australia on a quarterly basis.
(d) Credit Risk
The maximum exposure of credit risk at balance date, excluding the value of any collateral or other security, to recognised
financial assets is the carrying amount (net of any allowance for impairment of those assets) as disclosed in the balance
sheet and notes to the financial statements. The Group’s exposure to credit risk arises from potential default of the
counter party, with a maximum exposure equal to the carrying amount of these instruments. Credit risk arises primarily
from exposures to customers. The Group trades only with recognised, creditworthy third parties, and as such collateral
is not requested nor is it the Group’s policy to securitise its trade and other receivables. In addition, receivable balances
are monitored on an ongoing basis with the result that apart from the risks noted below, there are no other material credit
risks to the Group.
In respect of the parent entity, credit risk also incorporates the exposure of GBST Holdings Limited to the liabilities of all
Australian entities under the Deed of Cross Guarantee. Refer to Note 22 for further information.
Except for the following concentrations of credit risks, the Group does not have any material credit risk exposure to any
single debtor or group of debtors under financial instruments entered into. Approximately 44% (2013: 39%) of the Group’s
revenue is derived from five customers providing financial services. All Australian clients satisfy the minimum core capital
requirements of the ASX (where applicable).
GBST Holdings Limited ABN 85 010 488 874 Annual Report
2014
73
Notes to and forming part of the Consolidated Financial Statements
for the year ended 30 June 2014 continued
Note 26: Financial Risk Management (continued)
Trade debtor terms range between fourteen to thirty days. Included in the Group’s trade receivable balance are debtors
with a carrying amount of $3.48 million (2013: $2 million) which are past due at the reporting date for which the Group has
not provided as there has not been a significant change in the credit quality and the Group believes that the amounts are
still considered recoverable. The weighted average age of these receivables is 29 days (2013: 28 days).
The aging of the Group’s trade receivables at the reporting date was:
Not past due
Past due 0-30 days
Past due 30-90 days
Past due more than
90 days
2014
2013
Gross $’000
Impairment $’000
Gross $’000
Impairment $’000
11,848
879
2,179
423
15,329
–
–
–
–
–
11,248
631
814
552
13,245
–
–
–
440
440
The maximum exposure to credit risk to the Group is the carrying value, which at the reporting date was:
Cash and cash equivalents
Trade and other receivables
GBST GROUP
CARRYING AMOUNT
2014
$’000
2,339
16,558
18,897
2013
$’000
3,505
14,651
18,156
The maximum exposure to credit risk for trade and other receivables at reporting date by geographic region was:
GBST GROUP
CARRYING AMOUNT
2014
$’000
6,683
7,568
1,743
53
2013
$’000
9,560
3,668
1,233
190
16,047
14,651
Australia
Europe and Middle East
Asia
United States of America
74
Lease
facilities(2)
Trade
& other
payables
TOTAL
FINANCIAL
LIABILITIES
(e) Financial Instruments
(i) Liquidity Risk:
The following table reflects the undiscounted contractual settlement terms for financial liabilities including
interest payments:
0-1 YEARS
1-2 YEARS
2-5 YEARS
OVER 5 YEARS
TOTAL
CARRYING
AMOUNTS
GBST Group
2014
$’000
2013
$’000
2014
$’000
2013
$’000
2014
$’000
2013
$’000
2014
$’000
2013
$’000
2014
$’000
2013
$’000
2014
$’000
2013
$’000
Financial Liabilities
Bank loan(1)
287
4,349
5,172
5,099
22
6,193
689
1,084
218
786
45
80
–
–
–
5,481
15,641
5,007 13,932
–
952
1,950
901
1,840
7,413
7,170
392
263
1,233
263
1,253
835 10,291
8,531 10,291
8,531
8,389
12,603
5,782
6,148
1,300
6,536
1,253
835 16,724
26,122
16,199 24,303
1. These items have variable interest rates.
2. These items have fixed interest rates. All other items are non-interest bearing.
(ii) Net Fair Values
The fair value of investments traded on active liquid markets are determined with reference to quoted market prices.
Term receivables and other loans and amounts due are determined by discounting the cash flows, at market interest rates
of similar items, to their present value. Other financial assets and financial liabilities net of fair value approximates their
carrying value. Loans payable are determined by discounting the cash flow at market interest rates of similar items, to their
present value. No financial assets or financial liabilities are readily traded on organised markets in standardised form other
than listed investments.
GBST Holdings Limited ABN 85 010 488 874 Annual Report
2014
75
Notes to and forming part of the Consolidated Financial Statements
for the year ended 30 June 2014 continued
Note 26: Financial Risk Management (continued)
Financial assets where the carrying amount exceeds net fair values have not been written down as the Group intends to
hold these assets to maturity.
Aggregate net fair values and carrying amounts of Group financial assets and financial liabilities at balance date:
Financial Assets
Cash and cash equivalents
Trade and other receivables
Financial Liabilities
Trade and other payables
Bank loans and overdrafts
Lease facilities
2014
2013
Carrying
Amount
$’000
Net Fair Value
$’000
Carrying
Amount
$’000
Net Fair Value
$’000
2,339
16,558
18,897
2,339
16,558
18,897
10,291
10,291
5,007
901
5,046
901
16,199
16,238
3,505
14,651
18,156
8,531
13,932
1,840
24,303
3,505
14,651
18,156
8,531
14,030
1,840
24,401
Fair values are materially in line with carrying values. An average discount rate of 5.7% (2013: 6.26%) has been applied to
all non-current borrowings to determine fair value.
(iii) Sensitivity Analysis
Interest Rate Risk, Foreign Currency Risk and Price Risk
The Group has performed sensitivity analysis relating to its exposure to interest rate risk, foreign currency risk and price
risk at balance date. This sensitivity analysis demonstrates the effect on the current year results and equity which could
result from a change in these risks.
Interest Rate Sensitivity Analysis
At 30 June 2014, the net effect on full year profit and equity as a result of changes in the interest rate on variable rate
financial instruments, with all other variables remaining constant would be as follows:
GBST GROUP
2014
$’000
2013
$’000
(50)
50
(140)
140
Increase/(Decrease) in Profit and Equity
Increase in interest rate by 1%
Decrease in interest rate by 1%
76
Foreign Currency Risk Sensitivity Analysis
At 30 June 2014, the effect on profit as a result of changes in the value of the Australian Dollar (AUD) to the Great British
Pound (GBP), United States of America Dollar (USD), Euro (EUR), Hong Kong Dollar (HKD) with all other variables
remaining constant is as follows:
Increase/(Decrease) in Profit
Improvement in AUD to GBP by 10%
Decline in AUD to GBP by 10%
Improvement in AUD to USD by 10%
Decline in AUD to USD by 10%
Improvement in AUD to EUR by 10%
Decline in AUD to EUR by 10%
Improvement in AUD to SGD by 10%
Decline in AUD to SGD by 10%
Improvement in AUD to HKD by 10%
Decline in AUD to HKD by 10%
GBST GROUP
2014
$’000
2013
$’000
(25)
25
92
(75)
–
–
(2)
2
(14)
11
2
(2)
14
(11)
13
(10)
–
–
5
(6)
At 30 June 2014, the effect on equity as a result of changes in the value of the Australian Dollar (AUD) to the Great
British Pound (GBP), United States of America Dollar (USD), Euro (EUR), Hong Kong Dollar (HKD) with all other variables
remaining constant is as follows:
Change in Equity
Improvement in AUD to GBP by 10%
Decline in AUD to GBP by 10%
Improvement in AUD to USD by 10%
Decline in AUD to USD by 10%
Improvement in AUD to EUR by 10%
Decline in AUD to EUR by 10%
Improvement in AUD to SGD by 10%
Decline in AUD to SGD by 10%
Improvement in AUD to HKD by 10%
Decline in AUD to HKD by 10%
Price Risk
At 30 June 2014 there no investments in listed shares.
GBST GROUP
2014
$’000
2013
$’000
12
(12)
92
(75)
–
–
(2)
2
(14)
11
530
(530)
14
(11)
13
(10)
–
–
5
(6)
GBST Holdings Limited ABN 85 010 488 874 Annual Report
2014
77
Notes to and forming part of the Consolidated Financial Statements
for the year ended 30 June 2014 continued
Note 27: Contingent Liabilities
As at 30 June 2014, GBST has with its clients a variety of software supply agreements, each of which contain service and
performance warranties and indemnities. These warranties and indemnities are of the standard type used in the industry
and the likelihood of liabilities arising under these warranties and indemnities is considered remote.
The Group is also involved in litigious matters arising in the course of business.
It is impractical to estimate the maximum contingent asset or liability in relation to these matters, and in the opinion of the
Directors’ disclosure of any further information would be prejudicial to the interests of the Group.
Note 28: Related Parties
Transactions between related parties are on normal commercial terms and conditions no more favourable than those
available to other parties unless otherwise stated.
(a) Transactions with Directors and Key Management Personnel
Compensation and equity interests are set out in the Remuneration Report.
Consultancy fees paid to Mr J Puttick.
Short-term employee benefits
Post-employment benefits
Other long-term benefits
Share-based payments
GBST GROUP
2014
$
–
2013
$
4,000
GBST GROUP
2014
2013
3,785,643
3,653,956
100,273
153,076
44,046
40,736
309,561
199,306
4,239,523
4,047,074
Detailed disclosures on compensation for Key Management Personnel are set out in the Remuneration Report included in
the Directors’ Report.
Note 29: Share Based Payments
To assist in the attraction, retention and motivation of employees, the Company operates a GBST Performance Rights and
Option Plan.
Share based payments entered into in the year are detailed below.
Share Performance Rights
At the Company’s 2012 annual general meeting the issue of these performance rights and the GBST Performance Rights
and Option Plan was approved by shareholders.
Under this Scheme select staff are made individual offers of specific numbers of share performance rights at the discretion
of the Board. The Board may determine the number of share performance rights, vesting conditions, vesting period,
exercise price and expiry date. Share performance rights may be granted at any time, subject to the Corporations Act and
ASX Listing Rules.
78
As at reporting date, the expense for these share performance rights for the period ending 30 June 2014 was
$698 thousand (2013: $230 thousand) included in share based payment expense.
The share performance rights outstanding at 30 June 2014 had a weighted remaining contractual life of 20 months.
FY13 issue
On 8 November 2012, 1,314,636 performance rights were issued to select Executive employees. There is a nil exercise
price and the share performance rights vest in thirty-six months after the date of grant or the date of release of GBST’s
financial results for the 2015 financial year, whichever is later. The share performance rights expire thirty days after the
vesting date.
The share performance rights are conditional on the employees meeting continuous service conditions and the group
meeting certain financial performance measures.
FY14 issue
During the year, 514,536 and 13,766 performance rights were issued to select employees on 16 September 2013 and
11 February 2014 respectively. There is a nil exercise price and the share performance rights vest in thirty-six months after
the date of grant or the date of release of GBST’s financial results for the 2016 financial year, whichever is later. The share
performance rights expire thirty days after the vesting date.
The share performance rights are conditional on the employees meeting continuous service conditions and the group
meeting certain financial performance measures.
GBST Holdings Limited ABN 85 010 488 874 Annual Report
2014
79
Notes to and forming part of the Consolidated Financial Statements
for the year ended 30 June 2014 continued
Note 29: Share Based Payments (continued)
The performance criteria associated with the grant of share performance rights outstanding under the GBST Performance
Rights and Option Plan is summarised below:
Performance Criteria
Grant Date
8 November 2012*
Financial Performance hurdle
Cumulative Earnings Per Share (EPS) Target
• Subject to GBST achieving three year (2013 – 2015 financial years)
cumulative EPS targets of 26 cents, 28 cents, and 32 cents for 25%,
50% and 100% vesting respectively.
Minimum EPS
• A minimum EPS of 5 cents is achieved in each year
Service Condition
• Continuous employment with the Group from grant date for three years.
16 September 2013**
Cumulative Earnings Per Share (EPS) Target
• Subject to GBST achieving three year (2014 – 2016 financial years)
cumulative EPS targets of 32 cents, 36 cents, and 40 cents for 25%,
50% and 100% vesting respectively.
Minimum EPS
• A minimum EPS of 5 cents is achieved in each year
Service Condition
• Continuous employment with the Group from grant date for three years.
11 February 2014**
Cumulative Earnings Per Share (EPS) Target
• Subject to GBST achieving three year (2014 – 2016 financial years)
cumulative EPS targets of 32 cents, 36 cents, and 40 cents for 25%,
50% and 100% vesting respectively.
Minimum EPS
• A minimum EPS of 5 cents is achieved in each year
Service Condition
• Continuous employment with the Group from grant date for three years.
* The fair value of the share performance rights at the 8 November 2012 of $0.8151 each was determined using the Binomial Approximation Option Valuation
Model. The model inputs were: the share price at date of grant $0.96, expected volatility of 46.8 percent, expected dividends of 5.42 percent, a term of three
years and a risk-free interest rate of 2.61 percent. The exercise price for the share performance rights is nil.
** The fair value of the share performance rights of $2.5425 each was determined using the Binomial Approximation Option Valuation Model. The model inputs
were: the share price at date of grant $2.85, expected volatility of 40.02 percent, expected dividend yield of 3.80 percent, a term of three years and a risk-free
interest rate of 2.81 percent. The exercise price for the share performance rights is nil.
80
Movement in Share Performance Rights
The following table illustrates the number, weighted average exercise price (WAEP) and movement in share performance
rights under the Share Performance Rights Scheme issued during the period.
Outstanding at the beginning of the period
Granted during the period
Forfeited during the period
Exercised during the period
Expired during the period
Outstanding at the end of the period
Exercisable at the end of the period
Jun 2014
Number
Jun 2014
WAEP
Jun 2013
Number
Jun 2013
WAEP
1,314,636
528,302
(10,555)
–
–
1,832,383
–
–
–
–
–
–
–
–
–
1,314,636
–
–
–
1,314,636
–
–
–
–
–
–
–
–
No person entitled to exercise any performance right had or has any right by virtue of the performance right to participate
in any share issue of any other body corporate.
Note 30: Earnings Per Share
Basic earnings per share (cents)
Diluted earnings per share (cents)
(a) Reconciliation of earnings to net profit
Net Profit
Earnings used in the calculation of basic EPS
Earnings used in the calculation of dilutive EPS
GBST GROUP
2014
15.07
15.07
$’000
10,031
10,031
10,031
2013
9.06
9.06
$’000
6,031
6,031
6,031
(b) Weighted average number of ordinary shares
Weighted average number of ordinary shares outstanding during the year used in calculation
of basic EPS
66,561,725
66,561,725
Weighted average number of ordinary shares outstanding during the year used in
calculation of dilutive EPS
66,561,725
66,561,725
The average market value of the Company’s shares for purposes of calculating the dilutive effect of share options was
based on quoted market prices for the period during which the options were outstanding.
GBST Holdings Limited ABN 85 010 488 874 Annual Report
2014
81
Notes to and forming part of the Consolidated Financial Statements
for the year ended 30 June 2014 continued
Note 31: Subsequent Events
The financial report was authorised for issue on 18 August 2014 by the Board of Directors.
No matters or circumstances have arisen since the end of the financial year which significantly affected or may significantly
affect operations of GBST, the results of those operations, or the state of affairs of GBST in future financial years.
As announced to the ASX on 5 August 2014, the Group issued 345,005 performance rights to selected employees. The
rights were issued under the GBST Performance Rights and Option Plan approved by GBST shareholders at the 2012
AGM. Following this grant the total number of share performance rights issued will be 2,177,388.
The Board of GBST also intends to issue 100,486 performance rights to Mr Stephen Lake, Managing Director, on the
same terms as the issue of these performance rights. The issue to Mr Lake will be subject to shareholder approval at the
upcoming AGM later this year.
Note 32: Parent Entity Disclosures
As at, and throughout the financial year ending 30 June 2014 the parent company of the Group was GBST Holdings Limited.
GBST HOLDINGS
30 Jun 2014
$’000
30 Jun 2013
$’000
Results of the Parent Entity
PROFIT ATTRIBUTABLE TO MEMBERS OF THE PARENT ENTITY
2,608
2,114
OTHER COMPREHENSIVE INCOME
Items that will not be reclassified to profit or loss
Total Comprehensive Income for the Year
Financial Position of the Parent Entity at Year End
Current Assets
Total Assets
Current Liabilities
Total Liabilities
Total Equity of the Parent Entity Comprising of:
Issued capital
Equity remuneration reserve
Retained earnings
Total Equity
–
2,608
–
2,114
5,378
8,692
142,430
194,139
8,988
14,610
90,468
146,227
37,664
37,664
928
13,370
51,962
230
10,018
47,912
Parent Entity Contingencies
The Directors are of the opinion that no provisions are required in respect of parent entity contingencies.
82
Contingent Liabilities not Considered Remote
The parent entity has guaranteed, to an unrelated party,
the performance of a subsidiary in relation to a contract for
the supply of software and services.
GBST HOLDINGS
30 Jun 2014
$’000
30 Jun 2013
$’000
Parent Entity Capital
and Other Expenditure
Commitments
Contracted for:
Capital and other
operating purchases
Payable
Not later than one year
Guarantees
Property Leases
105
105
105
246
246
246
In accordance with property lease requirements, the
Company has provided bank guarantees to the lessors.
Lending Facilities
The Groups’ lending facilities are supported by guarantees
from its subsidiaries.
Performance Guarantees
The parent entity provides certain guarantees in relation
to subsidiary performance of contract.
Parent Entity Guarantees in Respect of Debts of its
Subsidiaries
The parent entity has entered into a Deed of Cross
Guarantee with the effect that the Company guarantees
debts in respect of its subsidiaries.
Further details of the Deed of Cross Guarantee and the
subsidiaries subject to the deed, are disclosed in Note 22.
Note 33: Company Details
The registered office of the Company is:
GBST Holdings Limited
c/- McCullough Robertson
Level 11, Central Plaza Two
66 Eagle Street
BRISBANE QLD 4000
The Group’s places of business are:
Level 4
410 Ann Street
BRISBANE QLD 4000
Level 24
259 George Street
SYDNEY NSW 2000
Level 2
63 Market Street
WOLLONGONG NSW 2530
Level 8
34 Queen Street
MELBOURNE Vic 3000
8th Floor Linen court
10 East Road
LONDON NI 6AD
Building 5
Croxley Green Business Park
Hatters Lane, Watford
HERTFORDSHIRE WD 18 8Y
19th Floor
222 Broadway
NEW YORK NY 10007
Unit 2904, 29F
Universal Trade Centre
3-5A Arbuthnot Road
HONG KONG
Level 10
55 Market St
SINGAPORE 048941
GBST Holdings Limited ABN 85 010 488 874 Annual Report
2014
83
Directors’ Declaration for the year ended 30 June 2014
Directors’ Declaration
1. In the opinion of the Directors of GBST Holdings Limited (‘the Company’):
a) the consolidated financial statements and Notes 1 to 33 and the Remuneration report in the Directors’ report, set
out on pages 22 to 30, are in accordance with the Corporations Act (2001), including:
i) giving a true and fair view of the Group’s financial position as at 30 June 2014 and of its performance for the
financial year ended on that date; and
ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the
Corporations Regulations (2001); and
b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become
due and payable.
2. There are reasonable grounds to believe that the Company and the Group entities identified in Note 22 will be able
to meet any obligations or liabilities to which they are or may become subject to by virtue of the Deed of Cross
Guarantee between the Company and those Group entities pursuant to ASIC Class Order 98/1418.
3. The Directors have been given the declarations required by Section 295A of the Corporations Act (2001) from the
Chief Executive Officer and Chief Financial Officer for the financial year ended 30 June 2014.
4. The Directors draw attention to Note 2 to the consolidated financial statements, which includes a statement of
compliance with International Financial Reporting Standards.
Signed in accordance with a resolution of the Directors:
Dr J F Puttick
Chairman
Mr S M L Lake
Managing Director and Chief Executive Officer
Dated at Brisbane this 18th day of August 2014
84
Independent Auditor’s Report
for the year ended 30 June 2014
ABCD
Independent auditor’s report to the members of GBST Holdings Limited
Report on the financial report
We have audited the accompanying financial report of GBST Holdings Limited (the company),
which comprises the consolidated statement of financial position as at 30 June 2014, and
consolidated statement of profit or loss and other comprehensive income, consolidated statement
of changes in equity and consolidated statement of cash flows for the year ended on that date,
notes 1 to 33 comprising a summary of significant accounting policies and other explanatory
information and the directors’ declaration of the Group comprising the company and the entities
it controlled at the year’s end or from time to time during the financial year.
Directors’ responsibility for the financial report
The directors of the company are responsible for the preparation of the financial report that gives
a true and fair view in accordance with Australian Accounting Standards and the Corporations
Act 2001 and for such internal control as the directors determine is necessary to enable the
preparation of the financial report that is free from material misstatement whether due to fraud or
error. In note 2, the directors also state, in accordance with Australian Accounting Standard
AASB 101 Presentation of Financial Statements, that the financial statements of the Group
comply with International Financial Reporting Standards.
Auditor’s responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We
conducted our audit in accordance with Australian Auditing Standards. These Auditing
Standards require that we comply with relevant ethical requirements relating to audit
engagements and plan and perform the audit to obtain reasonable assurance whether the financial
report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the financial report. The procedures selected depend on the auditor’s judgement,
including the assessment of the risks of material misstatement of the financial report, whether
due to fraud or error. In making those risk assessments, the auditor considers internal control
relevant to the entity’s preparation of the financial report that gives a true and fair view 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 entity’s internal control. An audit also includes
evaluating the appropriateness of accounting policies used and the reasonableness of accounting
estimates made by the directors, as well as evaluating the overall presentation of the financial
report.
We performed the procedures to assess whether in all material respects the financial report
presents fairly, in accordance with the Corporations Act 2001 and Australian Accounting
Standards, a true and fair view which is consistent with our understanding of the Group’s
financial position and of its performance.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our audit opinion.
GBST Holdings Limited ABN 85 010 488 874 Annual Report
2014
85
91
KPMG, an Australian partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG
Liability limited by a scheme approved under
International Cooperative (“KPMG International”), a Swiss entity.
Professional Standards Legislation.
Independent Auditor’s Report
for the year ended 30 June 2014
ABCD
Independence
In conducting our audit, we have complied with the independence requirements of the
Corporations Act 2001.
Auditor’s opinion
In our opinion:
(a)
the financial report of the Group is in accordance with the Corporations Act 2001,
including:
(i)
(ii)
giving a true and fair view of the Group’s financial position as at 30 June 2014 and
of its performance for the year ended on that date; and
complying with Australian Accounting Standards and the Corporations Regulations
2001.
(b)
the financial report also complies with International Financial Reporting Standards as
disclosed in note 2.
Report on the remuneration report
We have audited the Remuneration Report included in pages 22 to 30 of the directors’ report for
the year ended 30 June 2014. The directors of the company are responsible for the preparation
and presentation of the remuneration report in accordance with Section 300A of the
Corporations Act 2001. Our responsibility is to express an opinion on the remuneration report,
based on our audit conducted in accordance with auditing standards.
Auditor’s opinion
In our opinion, the remuneration report of GBST Holdings Limited for the year ended
30 June 2014, complies with Section 300A of the Corporations Act 2001.
KPMG
Stephen Board
Partner
Brisbane
18 August 2014
86
Additional Information for the year ended 30 June 2014
Shareholding Information as at 29 August 2014
a. Distribution of Shareholders
Category (size of holding)
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,0000
100,001 and over
Total
b. The number of shareholdings in less than marketable parcels is 141
c. The names of the substantial shareholders listed in the company’s register are:
Shareholder
Crown Financial Pty Ltd
Perpetual Limited
John Francis Puttick
Stephen Maurice Linton Lake
Renaissance Smaller Companies Pty Ltd
National Nominees Ltd ACF Australian Ethical Smaller Companies Trust
National Australia Bank Limited and its associated entities
Number ordinary
576
715
241
180
44
1,756
Number ordinary
6,277,610
6,226,781
5,278,356
5,146,109
3,688,368
3,621,638
3,585,018
d. Voting rights
The company only has ordinary shares on issue. There are 66,561,725 ordinary shares on issue.
Each ordinary share is entitled to one vote when a poll is called, otherwise each member present at a meeting or by proxy
has one vote on a show of hands. No shares are the subject of voluntary escrow.
GBST Holdings Limited ABN 85 010 488 874 Annual Report
2014
87
Additional Information for the year ended 30 June 2014
Total Units
12,893,361
% IC
19.37%
4,366,234
4,280,693
3,768,148
3,563,051
3,448,902
2,450,000
2,343,096
2,233,000
2,013,462
2,000,000
1,691,000
932,511
751,553
730,123
707,839
707,839
703,594
639,632
615,908
600,000
6.56%
6.43%
5.66%
5.35%
5.18%
3.68%
3.52%
3.35%
3.02%
3.00%
2.54%
1.40%
1.13%
1.10%
1.06%
1.06%
1.06%
0.96%
0.93%
0.90%
e. 20 Largest Shareholders – Ordinary Shares
Rank
Name
NATIONAL NOMINEES LIMITED
BNP PARIBAS NOMS PTY LTD
RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED
CROWN FINANCIAL PTY LTD
J P MORGAN NOMINEES AUSTRALIA LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
MR JOHN FRANCIS PUTTICK
STEPHEN MAURICE LINTON LAKE
DEKACROFT PTY LTD
MR JOAKIM SUNDELL & MRS SHARA SUNDELL
BRAZIL FARMING PTY LTD
MRS AMBER ROBYN LAKE
BOND STREET CUSTODIANS LIMITED
BERISLAV BECAREVIC & IVANKA BECAREVIC
MR STEPHEN MAURICE LAKE
ROBERT DEDOMINICIS
RAYMOND TUBMAN
TIMENOW PTY LTD
BOND STREET CUSTODIANS LIMITED
MR DONAL O'BRIEN
RJAE PTY LTD
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
16
17
18
19
20
88
Corporate Directory for the year ended 30 June 2014
Share Registry
Link Market Services
Level 19, 324 Queen Street
Brisbane QLD 4000
Ph +61 1300 554 474
Fax +61 2 9287 0309
Stock Exchange Listing
GBST Holdings Limited shares are quoted on the Australian
Stock Exchange under the code GBT.
Unquoted Securities
The company has 2,177,388 Performance Rights on issue.
Auditors
KPMG
Level 16, 71 Eagle Street
Brisbane QLD 4000
Ph +61 7 3233 3111
Fax +61 7 3233 3100
Registered Office
c/- McCullough Robertson, Lawyers
Level 11, Central Plaza Two
66 Eagle Street
BRISBANE QLD 4000
Ph +61 7 3233 8888
Fax +61 7 3229 9949
Principal Place of Business
Level 4, 410 Ann Street
Brisbane QLD 4000
Ph +61 7 3331 5555
Fax +61 7 3839 7783
www.gbst.com
Postal Address
PO Box 1511
Milton QLD 4064
Directors
John Francis Puttick
Stephen Maurice Linton Lake
Joakim James Sundell
Allan James Brackin
David Campbell Adams
Ian Thomas
Company Secretary
Andrew David Ritter
Sean Anthony Norman
GBST Holdings Limited ABN 85 010 488 874 Annual Report
2014
89
www.gbst.com