2017 Annual Report
GBST is a
specialist financial
technology company
which provides
administration
and transaction
processing solutions
for retail wealth
management
organisations and
global and regional
investment banks.
Our software
platforms support
more than 7,000
investment options
on a single wealth
administration
platform and
connects capital
markets in
Australasia,
Asia, Europe and
North America.
GBST HOLDINGS LIMITED ABN 85 010 488 874
1 GBST Snapshot
Chairman’s and
2
Managing Director’s Report
7 GBST Product Suite
8 GBST Executive Team
9 Directors’ Report
34 Auditor’s Independence Declaration
35 Financial Statements
76 Directors’ Declaration
77 Independent Auditor’s Report
81 Additional Information
83 Corporate Directory
GBST Holdings Limited will hold its
Annual General Meeting at 3.00pm (Sydney
time) on Thursday 26 October 2017 at
the Waratah Room, Australian Institute of
Company Directors, Level 1, 10 Bond Street,
Sydney NSW Australia.
GBST Snapshot
More than
60
clients
worldwide
$88m
revenue
67%
of revenue comes
from recurring
license fees
53%
of revenue
generated
internationally
For life and pension companies, brokers,
fund managers, platforms and banks
Customers in Australia,
Asia, New Zealand,
United Kingdom
For global and regional investment banks
Customers in Australia, Asia,
Europe, North America
CLIENTS
• Well established provider in
Australia in wealth management
and broking, and major
expansion in the UK with
11 customers
• Benefiting from UK industry
consolidation
CLIENTS
• Australian market leader
with more than
10 international customers
and growing steadily
• Syn~ now Australian post
trade processing product
leader with 25% market
share
MARKETS
• Rapidly growing UK wealth
management market with
£6.9 trillion under
management including
£1.8 trillion in retail markets
• Strong UK market position
STRONG
GLOBAL
GROWTH
MARKETS
• GBST Syn~ is a multi-product,
multi-market, multi-currency,
multi-entity transaction
processing platform in use
globally
• GBST Syn~ TAC deployments
and market demand growing
globally
BUSINESS
OPPORTUNITY
• Regulatory change is transforming
the industry, requiring
participants to make major
investments in technology
solutions such as
GBST Composer
BUSINESS
OPPORTUNITY
• New generation technology
platform enables long term cost
management and new revenue
opportunities through
automation and business
model flexibility
2017 ANNUAL REPORT | 1
Chairman’s and
Managing Director’s
Report
Rob DeDominicis
Chief Executive Officer
and Managing Director
Allan Brackin
Chairman
Dear Shareholders,
FINANCIAL OVERVIEW
While FY17 was a challenging year, we
were able to demonstrate the strengths
of our business model which is based
on building and developing recurring
revenue streams, from well regarded
software products.
We specialise in providing wealth administration and
post trade processing software for the financial services
industry. Our flagship products include Composer for
wealth management industry registry administration
and management, used in Australia and the United
Kingdom; Shares, the most widely used back office and
middle office equity processing technology in Australia;
and Syn~, our new generation global capital markets
post trade processing platform.
Our technology solutions are recognised globally
for their high quality, innovation and scalability. They
support the core business services of our clients, which
include more than 60 of the world’s leading institutional
banks, stockbrokers and wealth managers, including
many well-recognised global brands. Our software is
critical to their business operations.
Australia is our cornerstone market and during the
past decade we have driven significant global growth,
establishing new markets for our products in the
UK, Asia and North America. The financial services
industries that we serve provide very large, long-term
growth opportunities, we are investing significantly in
our software to capitalise on their potential.
GBST’s results for FY17 were impacted by client-related
project delays and the decline of the British pound
against the Australian dollar. Total revenue for the year
was $88.0m compared to $108.1m in the previous year.
53% of revenue was generated from outside Australia.
Operating earnings before interest, tax, depreciation,
amortisation (EBITDA) and strategic R&D costs were
$21.8m in FY17, compared to $23.6m in the previous
year, with $1.8m of the reduction due to adverse foreign
exchange movements.
We operate in fast-changing markets and, in line
with our commitments to clients, we have increased
investment in our software to ensure long-term
technology leadership. Expensed strategic R&D
increased to $9.6m in FY17, compared to $3.6m in the
previous year. Operating EBITDA after strategic R&D
was $12.2m, in line with guidance issued in February
2017, compared to $20.0m in the previous year. In
FY17, net profit was $7.0m, compared to $9.3m in the
previous year.
Recurring licence fees from long term contracts were
67% of revenue in FY17, highlighting the strength
and maturity of GBST’s global customer base.
We also generate services revenue through new
implementations and product development, which
leads to recurring licence fees when clients go ‘live’.
Our company has a strong balance sheet and
underlying cash flow, and achieved 88% conversion
of EBITDA to cash flow for FY17. At 30 June 2017, the
company held $11.7m net cash and had no debt.
The final dividend declared for FY17 of 2.5 cents per
share brings the total for the year to 6.2 cents per share
fully franked.
2 | GBST HOLDINGS LIMITED ABN 85 010 488 874
BUSINESS OVERVIEW
Wealth UK
The Composer platform is the top direct-to-consumer
software platform for the distribution of
tax-incentivised products in the UK and powers
some of the leading platforms in the market. The
opportunities are significant as more than £6.9 trillion
is managed by the UK investment industry. Estimates
by the independent industry analyst, Lang Cat, indicate
that, of a total £1.8 trillion retail market, up to £1.1 trillion
may still be available for transition to platform solutions
such as Composer.
According to the analyst firm Gartner Group,
rapidly changing digital technologies and customer
expectations are placing pressure on the traditional
wealth management business model, which is being
disrupted by new market entrants, the increasing
use of lower-cost passive products and alternative
asset classes.
Wealth managers are responding by moving towards
an “open architecture” model, supporting clients with a
wider range of investment products. We are embracing
this model, allowing clients to offer new asset classes at
lower cost, with flexible options that can be launched in
a shorter time frame.
A highlight of FY17 was a new contract with a leading
insurance brand leader in the UK, which will be
delivered through a software as a service (SaaS) model.
This will showcase the dynamic marketing capabilities
of our Composer and ComposerWeb (CWeb) products,
which offer exciting ways to engage consumers.
Our market is driven by regulatory change to protect
consumers, and by industry consolidation. This benefits
GBST, as Composer offers a digital solution enabling
wealth managers to exploit digitisation, enhance their
value chains and reduce cost. Future initiatives such
as the General Data Protection Regulation to improve
data privacy are also likely to require financial services
organisations to modernise legacy systems.
Further change is expected through the Markets in
Financial Instruments Directive II implementation
currently set to take effect on 3 January 2018. This is
the cornerstone of the European Union’s regulation of
financial markets to improve market competitiveness
and harmonise protection for investors. The regulation
will impact all trading processes, transaction reporting
and client services to IT and human resources systems.
We are working closely with clients to ensure they
are ready.
Our new projects in the UK are under way and
progressing well. These include a new installation
for Aegon which is migrating the recently acquired
Cofunds retail platform. The foundation of the new
platform has been built and, once completed, an
additional 800,000 policies will be migrated onto
Composer. This will deliver an integrated cross-channel
deployment in the UK, managing workplace, orphan,
direct and advised business allowing clients to move
easily across categories.
Development of the platform for Retirement Advantage
has been extended to support annuities, and clients
are expected to be migrated onto Composer during
the first half of FY18. The platform for Alliance Trust
Savings is now ‘live’ and accounts will be migrated from
legacy products onto Composer systematically.
Improvements to Composer during the year included
adding Lifetime ISAs (individual savings accounts),
allowing our clients to be among the first to market
with this product. We also provided new Application
Programming Interfaces (APIs) enabling clients to
create tailored automated marketing solutions for their
businesses, which were extremely well received.
2017 ANNUAL REPORT | 3
Chairman’s and Managing Director’s Report (continued)
Australia, Asia and North America
In Australia, we extended our capability in the business
process outsourcing market through a new partnership
with MainstreamBPO. This provides new opportunities
in the $2.4 trillion funds management industry and
other international markets.
MainstreamBPO’s fund administration service FundBPO
supports a Global 100 asset manager’s platform which,
now migrated onto Composer, benefits from real-time
reporting, integration with administrators and uses
GBST’s Fund Gateway product to exchange messages
with external transaction networks. Migration of
another asset manager’s platform onto Composer is
about to commence.
We also completed installations of ComposerWeb for
Mainstream BPO and for a leading international fund
manager, as well as migration projects for the wealth
management arm of a major retail bank.
Completing the transition of a major institutional bank’s
back and middle-office from Shares to Syn~, in close
collaboration with our client, was a significant milestone
validating our software investment program. This
was our fourth live Syn~ installation in Australia and
the largest to date, making Syn~ the market’s post-
trade processing leader with more than 25% of equity
market trades.
Through our Syn~, Shares and Clearview products,
GBST remains Australia’s leading back and middle-
office provider, processing more than 60% of total ASX
market volume and 46% of the equity options market.
We are pleased to report that an operational
restructure of GBST’s institutional capital markets
business and focus on Asian markets has, after several
years of product investment and business development,
returned this business to profitability.
We serve the top two broker-dealers in the Hong Kong
market and have assisted a major institutional broker-
dealer to provide outsourced middle office and clearing
services to regional stockbrokers and custodians.
New projects in FY17 included an expansion of GBST’s
automated back and middle-office platform for Haitong
International, and two Asia-based clients are now using
Syn~ to process regional equity trades across Asia
and Australia.
Our Asian growth opportunities are significant. Our
maturing Syn~ technology provides competitive
advantages for financial markets utilities that need
automated processing technology to realise economies
of scale. Syn~’s fully integrated back and middle-office
capability provides a multi-market, multi-asset service,
enabling them to lower post-trade processing costs
across global operations.
In North America, we successfully extended an
implementation of Syn~ for Raymond James, a major
regional broker dealer which supports 3 million client
accounts through 7,300 financial advisers in the US,
Canada and overseas.
INVESTMENT IN OUR FUTURE
Innovation drives GBST’s competitive strength. An
important component of software development
planning is the ability to sustain a long period of
investment, such as the success of our recent Syn~
installation in Australia which has elevated our product
to market leadership. Investment in our capital markets
products is ongoing, albeit at lower levels than
in FY2017.
Our wealth management software development
is focused on the E-VOLVE program to transform
Composer and develop a contemporary front-end
called ComposerWeb 2.0. This will transform our
existing ComposerWeb product and provide users with
a contemporary digital user experience. Composer
has already been significantly enhanced with multiple
database support, and the E-VOLVE program will
provide a more open platform with APIs in a multi-tier
architecture, increasing clients’ operational efficiency.
Our development program experienced challenges
in the use of an automated migration tool which has
impacted implementation of the project. As a result,
GBST has decided to undertake much of the migration
and development work itself. This allows greater
control, and we are currently replanning the project.
4 | GBST HOLDINGS LIMITED ABN 85 010 488 874
OUTLOOK
GBST has a strong business model, a clear growth
strategy, and significant new business opportunities
in its key markets in Australia, Asia, UK and
North America.
We have provided operating EBITDA guidance before
strategic R&D in product development in the range
$20m - $25m for FY18. Strategic R&D in product
development expenditure is expected to be in the
range $10m - $15m, with $10 - $12m of that related to
E-VOLVE and ComposerWeb 2.0.
Our financial technology markets globally are growing,
and we aim to capitalise on the expanding wealth
management and capital markets sectors, which are
expected to remain high-growth markets through 2020
and the next decade.
In the next three years, we will increase strategic
R&D investment in our digital solutions to take
advantage of long-term market growth. We have
aligned development to client priorities, increasing
emphasis on providing a strong front-office digital
capability through ComposerWeb 2.0. This product
will modernise the intermediary portal for adviser
and consumer engagement, beginning in the UK, and
is expected to be completed in FY18. Interest from
existing clients is very high and work has commenced
on an initial implementation.
PEOPLE AND GOVERNANCE
In light of the increased investment in strategic R&D,
we have strengthened our management team with
the appointment of a Chief Technology Officer who
brings significant technology and delivery experience
to the role. We have also created a Board Technology
Committee to strengthen governance and monitor the
progress of our R&D investment programs.
GBST has a strong client-focused business culture.
During the year we progressed development of a
performance framework to support our global growth
strategy. This aligns the Company’s values and business
objectives, and empowers GBST’s commitment to
clients. We have developed a considerable talent
pool with significant capital markets and wealth
management expertise. Our people are passionate
about our clients, and their comprehensive domain
knowledge ensures the high quality of our services.
We were delighted to welcome to the Board two
new independent directors. Deborah Page AM was
appointed on 1 July 2016 and Tam Vu was appointed
on 1 January 2017. Deborah strengthens the Board’s
financial, risk and governance skills and Chairs the
Audit and Risk Committee. Tam brings a strong skillset
and experience in leading technology change and
innovation, and Chairs the Technology Committee.
2017 ANNUAL REPORT | 5
2017 Key Points
Brisbane
Sydney
Wollongong
Melbourne
London
AUSTRALIA
UK
• GBST extended its capability in the business
outsourcing market through Mainstream BPO
• Major Composer migration projects completed
• Aegon’s Cofunds migration progressing well
• Major new contract with prominent insurance brand
• Increased Composer capability helping clients grow
• Major client transition from Shares to Syn~ successful
• Major software renewal investment underway
• Syn~ now post trade processing market leader
Tampa
REST OF THE WORLD
• Ongoing expansion of Syn~ for major broker
dealer continuing
• New projects include expansion of Haitong
International’s Syn~ platform
• Large Syn~ rollout at major global bank continues
• Raymond James extended Syn~ deployment complete
6 | GBST HOLDINGS LIMITED ABN 85 010 488 874
Ho Chi Minh CityHong KongSingapore GBST Product Suite
GBST provides industry-leading retail wealth and institutional
software products for the financial services sector.
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 UK, 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 provides
digital tools for investment platforms and superannuation.
The GBST Shares platform is the most scalable middle-
and back-office equities system in Australia. It helps
stockbrokers and third-party clearers to manage and
execute transactions with the ASX’s market operations
and clearing systems. GBST’s Derivatives and Client
Accounting system (DCA) is a fully integrated client
accounting system for derivatives trading. GBST
Catalyst integrates GBST FrontOffice, GBST Business
Intelligence Reporting (BIR) and GBST MarginSuite
products for the retail wealth market. These products
provide client relationship and portfolio management,
client on-boarding and comprehensive reporting, and
firm-wide risk management.
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
Quant provides data analytics and quantitative services
for measuring portfolio performance including after-
tax tools.
2017 ANNUAL REPORT | 7
GBST is designing a more powerful, simpler solution architecture to facilitate digital engagement for retail and institutional markets.B2B ADMINISTRATION(cid:31)|(cid:31)INVESTORS(cid:31)|(cid:31)EMPLOYEES(cid:31)|(cid:31)ADVISORS(cid:31)|(cid:31)BROKERSCOMPOSERSYN~DIGITALPLATFORMComposer, CWeb 2.0, Front Offi ce,BIRGBST web appsand toolsSmart datasourceWorkfl ow/Business Process ManagementAPIsThird party weband mobile appsAdministration and registry solutions, and transaction processing solutionsThird party products and servicesMulti-product, multi-market transaction processing solutionsTaxoptimisationPortfolio administrationAsset managementDerivative tradingEquitytradingSyn~OpsSyn~TAC GBST Executive Team
Patrick Salis
Chief Financial Officer
Patrick has been with GBST
since September 2007, in
a variety of roles including
Chief Financial Officer, Chief
Executive for GBST Capital
Markets International Division,
and Chief Operating Officer. He
is based in Sydney, in his current role of Chief Financial
Officer. Before joining the company Patrick held
CFO roles in the financial services industry, including
Virgin Money Australia Limited and prior to that JDV
Limited. He has extensive experience working in
wealth management, equities and derivatives broking,
superannuation, mortgages, credit cards and unsecured
lending. Patrick holds a Bachelor of Accounting and is
a member of the Institute of Chartered Accountants
in Australia.
David Simpson
Head of Europe, the Middle
East and Africa
David Simpson joined GBST
as head of Europe, the Middle
East and Africa in July 2016.
He manages client activity and
drives the ongoing regional
growth of the group’s retail
wealth platforms for wraps, life and pensions and banks,
and for institutional capital markets. Previously, he
was employed by SEI Investments Company as chief
relationship officer for SEI Europe’s Wealth Platform.
Prior to joining SEI in 2010 as business development
director, he held various roles at Barclays Wealth where
he was employed for 22 years, including Managing
Director of UK Asset Management and Retail Platforms
from 2004 to 2010.
Denis Orrock
Head of Asia Pacific
Denis joined GBST in May
2008 and was named Head of
Asia Pacific in April 2016 after
serving as Chief Executive
Officer for Capital Markets
since 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 and has also held advisory and
trading positions with UBS, Grange Securities and
Taylor Collison. Having worked within the Australian
financial services industry for over 15 years, Denis has
a broad understanding of domestic wholesale and
retail markets.
Mark Knowlton
Chief Technology Officer
Mark Knowlton joined GBST
as Chief Technology Officer
in April 2017 leading the
technology team which
designs, builds and optimises
GBST solutions. Prior to GBST,
Mark worked from 2011 with
Macquarie Bank as Chief Information Officer for their
Banking and Financial Services business. Before
that, Mark worked for AXA in various technology
leadership roles. His early career was shaped in various
software engineering and management consultancy
roles with KPMG, CSC and CAP (now SEMA). Mark
has extensive experience in digital disruption within
Financial Services and is passionate about leading
transformational change to deliver the best outcomes
for clients, colleagues and shareholders. He holds an
Honours Bachelor’s degree from the University of
Nottingham, U.K.
8 | GBST HOLDINGS LIMITED ABN 85 010 488 874
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 2017 and the audit report thereon.
DIRECTORS
The following persons were Directors of the Company
in office during the year and up to the date of
this report:
Allan Brackin – Independent
Director and Chair
Appointed 27 April 2005
Allan Brackin was appointed
Chair of GBST in December
2015. Allan initially joined the
Board as a Non-Executive
Director prior to listing and has
seen the Company evolve into
a global business.
Allan has been involved in the technology
industry for over 30 years at both executive and
non-executive level.
At executive level he was Group CEO of ASX listed
Volante Limited (ASX:VGL), from 2000-2004. Volante
was one of Australia’s largest IT services companies.
From 1986-2000 Allan cofounded a number of IT
companies. These companies all became part of the
Volante Group.
At non-executive level, Allan is also Chairman of ASX
listed mining software company RPM Global Holdings
Limited (ASX:RUL), Chairman of telecommunications
software company Emagine Pty Ltd and is a Director
of telecommunications software carrier Opticomm
Pty Ltd. He is also a member of the advisory board
for several IT companies and mentors a number of
technology entrepreneurs.
Allan has held no other listed company directorships in
the last three years.
Allan has a Bachelor of Applied Science from the
Queensland University of Technology and has attended
the Owner President Management Program at Harvard
University.
Allan is a member of the Audit and Risk
Management Committee and the Nominations and
Remuneration Committee.
Interest in Shares and Options
200,000 Ordinary Shares in GBST Holdings Limited
were held by Mr Brackin’s associated entities at
30 June 2017.
Robert DeDominicis –
Managing Director and
Chief Executive Officer
Appointed 15 December 2015
Robert DeDominicis is the
Managing Director and Chief
Executive Officer of the
Company. He joined GBST in
2008 and is a founding partner
of InfoComp, now GBST’s
Wealth Management Division, with over 30 years’
experience in the development of software applications.
Robert has no other listed company directorships and
has held no other listed company directorships in the
last three years.
Robert has a business and technical software
background having been part of the Retail Wealth
Business development and professional services teams.
Robert holds a Bachelor of Mathematics and
is a member of the Australian Institute of
Company Directors.
Interest in Shares and Options
609,055 Ordinary Shares and 112,367 Performance
Rights in GBST Holdings Limited were held by Mr
DeDominicis at 30 June 2017. Of these performance
rights 99,807 subsequently lapsed as the performance
hurdles were not met as at the approval of these FY17
financial statements. Robert has elected not to accept
the 12,560 shares arising from the performance rights
due to vest in August 2017.
90,000 Ordinary Shares in GBST Holdings Limited
were held by Mr DeDominicis’ associated entities at
30 June 2017.
Christine Bartlett –
Independent Director and
Deputy Chair
Appointed 24 June 2015
Christine Bartlett is the Deputy
Chair of GBST.
Christine is an experienced
CEO and senior executive with
extensive line management
experience gained through roles with IBM, Jones
Lang LaSalle and National Australia Bank Limited.
Her executive career has included Australian, regional
and global responsibilities based in Australia, the USA
and Japan. Christine brings a commercial perspective
especially in the areas of financial discipline, identifying
risk, complex project management, execution of
strategy, fostering innovation and taking advantage of
new emerging technologies.
2017 ANNUAL REPORT | 9
Directors’ Reportfor the year ended 30 June 2017 Christine is currently an Independent Non-Executive
Director of the Mirvac Group (ASX:MGR), Sigma
Healthcare Limited (ASX:SIG), TAL Services Limited
and an external Director for Clayton Utz. Christine is the
Chairman of The Smith Family, a national, independent
children’s charity. She is a member of Chief Executive
Women, the Australian Institute of Company Directors
and the UNSW Australian School of Business
Advisory Board.
Christine has held no other listed company
directorships in the last three years.
Christine holds a Bachelor of Science from the
University of Sydney and has completed senior
executive management programs at INSEAD.
Christine is a member of the Audit and Risk
Management Committee, Technology Committee and
the Nominations and Remuneration Committee.
Interest in Shares and Options
4,750 Ordinary Shares in GBST Holdings Limited were
held by Ms Bartlett at 30 June 2017.
David Adams –
Independent Director
Appointed 1 April 2008
David Adams 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. David was a Director at Macquarie
Bank from 1983 until 2001 and was also Chairman of the
Investment and Financial Services Association in 2000
and 2001.
David has no other listed company directorships and
has held no other listed company directorships in the
last three years.
David was a Visiting Fellow (Management of Financial
Institutions) at Macquarie University and holds a
Bachelor of Science from the University of Sydney as
well as a Masters in Business Administration from the
University of New South Wales.
David is the Chair of the Nominations and
Remuneration Committee and a member of the Audit
and Risk Management Committee.
Interests in Shares and Options
Nil at 30 June 2017.
10 | GBST HOLDINGS LIMITED ABN 85 010 488 874
Deborah Page AM –
Independent Director
Appointed 1 July 2016
Deborah Page is an
experienced company director
and Chartered Accountant.
She has worked exclusively
as a Non-Executive Director
since 2001 across a range
of industries including insurance, financial services,
property and energy. Prior to that she held senior
executive positions with Commonwealth Bank,
Allen, Allen and Hemsley and the Lend Lease Group
(including MLC Life and a joint venture with IBM). She
currently holds Board positions with BT Investment
Management Limited (ASX:BTT), Brickworks Limited
(ASX:BKW) and Service Stream Limited (ASX:SSM).
Deborah was Chairman of Investa Listed Funds
Management Limited, the responsible entity of
Investa Office Fund (ASX:IOF) until April 2016, and a
Non-Executive Director of Australian Renewable Fuels
Limited (ASX: ARW) until October 2015.
Deborah holds a Bachelor of Economics from The
University of Sydney, is a Fellow of the Institute of
Chartered Accountants, Fellow of the Australian
Institute of Company Directors and was honoured in
2006 as a Member in the General Division of the Order
of Australia for services to Public Health, Business and
the Accounting Profession.
Deborah is the Chair of the Audit and Risk
Management Committee.
Interests in Shares and Options
9,250 Ordinary Shares in GBST Holdings Limited were
held by Mrs Page at 30 June 2017.
Tam Vu – Independent
Director
Appointed 1 January 2017
Tam Vu’s career in leading
technology change, innovation
and entrepreneurship has
spanned over 25 years, working
extensively in Australia, Asia
Pacific, Europe and USA. Tam
has held numerous senior technology and business
leadership roles at IBM Consulting Group, BP Australia
and BP UK, Mars and SEEK. He was formerly the Chief
Information Officer at SEEK where he led a large
transformation program and prior to this, Tam was the
Global Chief Information Officer for BP’s retail business.
In the last six years, Tam has founded a highly
successful professional services business providing
advisory and delivery services to a number of leading
Directors’ Reportfor the year ended 30 June 2017 continued organisations, with a strong focus on retail and financial
services. Tam has also provided advisory services
to a number of technology start-up businesses in
Australia. Tam is currently the Managing Director
of Vitae Partners and a member of the Audit, Risk
and Compliance Committee at the National Gallery
of Victoria.
Tam has no other listed company directorships and has
held no other listed company directorships in the last
three years.
Tam holds a Bachelor of Science (Hons) from the
University of Adelaide and has attended several
executive leadership courses at MIT, IMD and
Stanford University.
Tam is the Chair of the Technology Committee.
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.
Dr Ian Thomas – Independent Director
Appointed 8 December 2011; resigned 31 January 2017.
Dr Ian Thomas is Chairman and CEO of Thomas Global
Ventures, a strategic advisory and investment firm. He
brought global experience to GBST, having held many
senior positions in the aerospace and defense industry,
including President of Boeing China, President of
Boeing Australia and South Pacific, President of Boeing
India. Prior to joining Boeing in 2001, Ian served in a
variety of staff and policy roles as a political appointee
in the U.S. Department of Defense.
Interests in Shares and Options
Nil at 30 June 2017.
RETIRED DIRECTORS DURING 2016-17
Joakim Sundell – Non-Executive Director
Appointed 9 August 2001; resigned 27 July 2016.
Mr Joakim Sundell was appointed to the Board in
2001 prior to the Company’s listing. Joakim has had an
extensive career in private equity finance, merchant
DIRECTORS’ MEETINGS
COMPANY SECRETARY
Jillian Bannan
B.Comm/LLB, Grad Dip Legal Practice
Jillian Bannan was appointed Company Secretary and
General Counsel on 18 July 2016. She is a member of
the Queensland Law Society and was admitted as a
Solicitor of the Supreme Court of Queensland in 1998.
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
A Brackin
C Bartlett
D Adams
D Page
T Vu1
R DeDominicis
J Sundell2
I Thomas3
BOARD MEETINGS
AUDIT AND RISK
MANAGEMENT
COMMITTEE
NOMINATION AND
REMUNERATION
COMMITTEE
TECHNOLOGY
COMMITTEE
Eligible to
Attend
Attended
Eligible to
Attend
Attended
Eligible to
Attend
Attended
Eligible to
Attend
Attended
10
10
10
10
6
10
1
4
10
10
10
10
6
10
1
3
4
4
4
4
–
4
4
4
4
–
3
3
3
–
–
4**
4**
3**
–
–
–
–
–
–
3
3
3
2*
–
3**
–
–
–
4
–
–
4
4
–
–
–
4
–
–
4
4
–
–
Note: The Board also has a Disclosure Committee which meets as and when required. No meetings where held during the financial year.
1 Appointed 1 January 2017
2 Resigned 27 July 2016
3 Resigned 31 January 2017
* Attended meeting as a guest
** R DeDominicis attends as a Standing Invitee.
2017 ANNUAL REPORT | 11
PRINCIPAL ACTIVITIES
OPERATING AND FINANCIAL REVIEW
agency services focused on e-commerce and the
financial services industry in Australia and Europe.
EBITDA
The principal activities of GBST during the year ended
30 June 2017 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
No significant changes in the nature of these activities
occurred during the year.
GBST RESTRUCTURED INTO THREE
REGIONAL DIVISIONS DURING THE YEAR:
GBST has aligned its products and services to
focus on clients in three key regions: Australia,
the United Kingdom, and the Rest of the World
(ROW). Financial reporting now recognises three
regionally-based divisions:
• In Australia, GBST provides its full range of retail
wealth and institutional solutions for the wealth
management and capital markets industries. The
company’s industry-leading software platforms
include GBST Composer, which provides end to end
funds administration and management software for
the wealth management industry; GBST Syn~, which
provides a new generation post-trade processing
platform for equities, derivatives, fixed income and
managed fund processing; and GBST Shares, which
is the most widely-used back and middle-office
processing equities software in Australia.
• In the United Kingdom, GBST Composer offers
an integrated system for the administration of
wrap platforms, including individual savings
accounts (ISAs), pensions, self-invested personal
pensions (SIPPs) and superannuation; as well as
master trusts, unit trusts, risk and debt; and other
investment assets.
• In the Rest of the World, the GBST Syn~ platform
supports institutional capital markets primarily in
Asia and North America.
12 | GBST HOLDINGS LIMITED ABN 85 010 488 874
FULL YEAR TO 30 JUNE
2017
$’000
2016
$‘000
%
Change
87,975
108,143
(19)
Total revenue and
other income
Operating EBITDA
before strategic
R&D
21,787
23,567
Strategic R&D
9,606
3,570
Operating EBITDA
12,181
19,997
Restructure and
other non-operating
expenses
(192)
(2,802)
11,989
17,195
Net finance costs
(611)
(776)
Depreciation
& Operating
Amortisation
Investment
Amortisation
Profit before
income tax
Income tax credit
Statutory Net Profit
after income tax
(2,862)
(3,273)
(3,493)
(4,089)
5,023
1,962
9,057
213
6,985
9,270
Adjusted NPAT
10,478
13,359
Basic EPS (cents)
10.31
13.82
8
(169)
(39)
(30)
21
13
15
(45)
(25)
(22)
(25)
Adjusted EPS
(cents)
15.46
19.92
(22)
The table includes IFRS and non-IFRS financial information. Non-IFRS
financial information is Operating EBITDA, Operating & Investment
Amortisation, Adjusted NPAT and Adjusted EPS; this information 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. Strategic R&D is defined
as research and development expenditure for strategic
product and technology investments which form
part of the Company’s long-term product roadmap.
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 NPAT as profit after
income tax plus Investment Amortisation. GBST uses
Operating EBITDA, Adjusted NPAT and Adjusted EPS
as internal performance indicators for the management
of its operational business segments, and overall
Directors’ Reportfor the year ended 30 June 2017 continued Group performance to allow for better evaluation
of business segment activities and comparison over
reporting periods.
and middle-office provider, processing more than
60% of total market volume and 46% of the equity
options market.
Restructure and other non-operating expenses are
costs associated with organisation restructuring
following the departure of the former CEO. These
costs 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.
Restructure and other non-operating expenses are
reported to allow for reconciliation between the Group
and segment reports.
FINANCIAL OVERVIEW OF THE
PERFORMANCE OF THE GROUP
Result in line with guidance
In FY17 GBST reported operating EBITDA of $12.2m
in line with guidance, compared to $20.0m in FY16.
Earnings were impacted by increased product
development costs to upgrade the group’s wealth
administration and capital markets software platforms.
Net profit was $7.0m, compared to $9.3m in FY16.
Adjusted net profit after income tax (Adjusted NPAT),
or net profit plus investment amortisation which is a key
measure of the Group’s results, decreased by 22% to
$10.5m (2016: $13.4m).
Total revenue and other income was $88.0m compared
to $108.1m in the previous corresponding period. This
primarily reflected client-related project delays and
the decline of the British pound against the Australian
dollar. Although the company had hoped to deliver a
stronger outcome, the strength of GBST’s recurring
revenue ensures the underlying business is in a strong
position. GBST’s business model is to build and develop
high-quality recurring revenue streams, annuity revenue
was 67% of the total. This highlights the strength
and maturity of GBST’s global customer base, which
includes some of the world’s leading wealth managers
and capital markets participants. More than half of the
Group’s revenue is generated outside Australia, and
international revenue was 53% of the total.
Syn~ market share growing
A significant milestone was the transition of a major
institutional bank’s back and middle-office from Shares
to GBST’s post-trade processing platform Syn~. This
was a significant event and the successful culmination
of several years of software development in close
collaboration with the client. Syn~ is now the leading
Australian platform, processing more than 25% of
equity market trades. Through Shares and Clearview,
GBST processes a further 35% of equity market
trades. GBST continues to be Australia’s leading back
The high quality, flexibility and scalability of our
products underpins GBST’s earnings, and an extensive
development program is underway to improve the
Group’s Composer, Catalyst and Syn~ software
platforms. In FY17 GBST significantly increased
expenditure in line with commitments to clients.
Expensed strategic R&D costs were $9.6m in FY17, up
169% compared to $3.6m in FY16.
Excluding R&D costs, operating EBITDA was
$21.8 million in FY17, compared to $23.6m in FY16.
In FY17, GBST reported an income tax credit of $2.0m.
This largely relates to benefits received from Research
& Development tax incentives in Australia and the UK,
and the private binding ruling confirming contributions
paid to the Employee Share and Option Plan for vested
performance rights are tax deductible.
Earnings per share before investment amortisation
charges were 15.5 cents (FY16: 19.9 cents). The
Company has a strong balance sheet, with cash of
$11.7m at 30 June 2017.
Investment in our people
GBST has a strong client-focused business culture,
and during the year progressed development of a
performance framework to support its global growth
strategy. This aligns the Company’s values and business
objectives, and empowers GBST’s commitment to
clients. The long-term experience and strong industry
knowledge of employees helps differentiate the
Company in GBST’s markets.
CTO appointed and Board Technology
Committee established
In light of the increased investment in strategic R&D,
GBST has increased its technology delivery and
governance capability. GBST has strengthened its
management team with the appointment of a Chief
Technology Officer, Mark Knowlton, who brings
significant technology thought leadership and delivery
experience to the role. GBST also recently appointed
a new head of human resources. Both roles are based
in Australia.
To assist the Board and management to provide
appropriate governance and oversight, GBST also
created a Board Technology Committee to measure
and monitor the progress of the R&D investment.
Board renewal
The Group’s board renewal program continued,
and during FY17 GBST welcomed to the Board two
new independent directors. Deborah Page AM was
appointed on 1 July 2016 and Tam Vu was appointed on
2017 ANNUAL REPORT | 13
1 January 2017. Deborah strengthens the Board’s financial, risk and governance skills and Chairs the Audit and Risk
Management Committee. Tam brings a strong skillset and experience in leading technology change and innovation,
and Chairs the Technology Committee.
SHAREHOLDER RETURNS
Profit attributable to the owners of
the Company
Basic EPS (cents)
Dividends paid
Dividends paid per share (cents)
Closing share price 30 June
Return on capital employed
2013
2014
2015
2016
2017
$6.0m
$10.0m
$15.3m
9.06
$3.7m
5.5
$1.70
14.9%
15.07
$5.0m
7.5
$3.21
19.9%
22.94
$6.3m
9.5
$5.73
23.5%
$9.3m
13.82
$7.4m
11.0
$4.14
13.6%
$7.0m
10.31
$6.2m
9.2
$2.97
8.1%
INVESTMENTS FOR FUTURE PERFORMANCE
During FY17, the Group restructured to realign
products and operations more closely with clients, and
product investment was increased to ensure long-term
technology leadership in the wealth management and
capital markets sectors.
The Company’s key development programs include:
• The E-VOLVE program to transform Composer;
• development of a contemporary front-end called
ComposerWeb 2.0 to provide users with a modern
digital user experience; and
• further improvement of Syn~ including projects to
increase scale and align Syn~ with clients and the
broader market.
The E-VOLVE program has been designed to build
a more powerful wealth administration platform.
Composer has already been significantly enhanced
with multiple database support, and the main focus
of E-VOLVE has been to provide a more open
platform with Application Programming Interfaces
(APIs) in a multi-tier architecture. This will increase
clients’ operational efficiency and improve the
digital experience for advisers and their customers.
The development program is having to overcome
challenges, particularly related to the automated
migration of code by a third-party vendor which will
require changes to our method of upgrade by using
more internal development capability.
These challenges will impact the timing of the
implementation of the project. Having reviewed a
number of strategic options, it has been decided
that GBST will undertake much of the migration and
development work internally.
replanning the project and this process is expected to
take at least two months to complete.
Digital disruption is driving wealth management
businesses to redesign their operating models and
focus on aggressive cost control, operational efficiency,
and using data as a strategic asset. GBST is helping
to transform the customer experience with simplicity,
transparency and smart-technology flexibility.
Focus on digital solutions
Over the next three years, GBST will increase its
strategic R&D investment to enhance its digital
solutions, enabling the Company to take advantage of
long-term market growth. Development will be aligned
to client priorities, and the E-VOLVE program now has
increased emphasis on providing a strong front-office
digital capability.
As a result, development will also focus on GBST’s
digital ComposerWeb 2.0 product which will modernise
the intermediary portal for adviser and consumer
engagement, beginning in the UK. This is expected
to be completed in FY18. Interest from existing
clients is very high and work has commenced on an
initial implementation.
Expected development cost
These investments related to the E-VOLVE and
ComposerWeb 2.0 project referred to above are
expected to cost up to $50m and will be delivered over
the next three financial years. The rate and ultimate
amount of this spend will depend on many factors
including project scope, client demand and overall
company performance. The company will continue to
invest in its other platforms, including Shares and Syn~,
to ensure market-leading capability and performance
for customers.
This will allow GBST to have greater control of the
program and assist in delivering a final product that
will meet our clients’ expectations. GBST is currently
GBST is confident of the program’s success. The
Company has a clear customer-focused strategy, and
is working closely with clients to provide new APIs,
14 | GBST HOLDINGS LIMITED ABN 85 010 488 874
Directors’ Reportfor the year ended 30 June 2017 continued automated services, cloud deployment, digital advice
channels and digital marketing.
Ongoing technology enhancement
Improvements to Composer during the year included
upgrading services for wrap and platform providers to
include Lifetime ISAs (individual savings accounts). The
new APIs developed during the year were extremely
well received by clients; these allow Composer to
be deeply embedded in clients’ systems, including
customer relationship management (CRM), business
process management (BPM), and enable clients to
create tailored automated marketing solutions for
their businesses.
GBST’s markets are growing rapidly, UK funds under
management increased to £1.1 trillion at the end of
June 2017, up from £949bn at the end of June 2016.
E-VOLVE will enable the Company to capitalise on this
growth and build on the strong foundations that have
been established over the past 10 years.
UK enhancements to Composer in FY17 included:
• Expansion of an enhanced annuity capability for
multiple annuity providers in the UK
• Increased market trading capability including limit
and market orders, foreign assets using CDIs and
investor/asset tax classification
• Lifetime ISA, allowing our clients to be among the
first to market with this product.
Catalyst is a new API enabled front-end digital platform
which provides a growth path in Australia in the
converging wealth management and capital markets.
It integrates GBST’s Front Office, Business Intelligence
Reporting and MarginSuite products. Its development
path will enable integration of GBST’s capital markets
product suite with Composer and ComposerWeb,
including deployment through a software-as-a-
service (SaaS) model. This will allow Catalyst to
serve retail customers directly, and increase GBST’s
addressable market.
Following completion of the Shares to Syn~ transition
program, further investment in Syn~ is expected to
be at lower levels. Improvements to Syn~ during the
year included:
• Market trade processing optimisation
• Settlement for global bank hub operations,
supporting financial market utilities
• Custody transactions and SWIFT messaging
• Corporate actions processing
• Managing multiple accounting regulations
• Reconciliation with multiple ledgers
• Chinese language support for reporting.
Review of operating
segments of the Group
UNITED KINGDOM – WEALTH MANAGEMENT
%
FY2017
Change
$’000
FY2016
$’000
Revenue
32,559
43,906
(26)
Operating EBITDA
– before Strategic
R&D
4,122
10,337
(60)
UK services revenue was impacted by delays in
ongoing Composer projects with existing clients, total
revenue was $32.5m for FY17 compared to $43.9m in
the previous year. These delays were unrelated to the
E-VOLVE project. As revenue from new installation
work decreased, recurring licence revenue increased to
54% of the total from 47% in FY2016.
Market leading position
The Composer platform is the top direct-to-consumer
software platform for the distribution of
tax-incentivised products in the UK and powers some
of the leading platforms in the market. These include an
installation for Aegon which is integrating the recently
acquired Cofunds retail platform onto Composer. The
foundation of the new platform has been built and
features are being added from the Cofunds platform
that intermediaries have highlighted they value.
First integrated cross-channel deployment in UK
Once completed, more than 800,000 policies will
be migrated onto Composer, and Cofunds users will
benefit from access to a wider range of investments,
reduced manual processes, and increased efficiency
and operational performance. Development continues
for the Nationwide Building Society, which is part of the
Composer implementation for Aegon’s ARC platform.
Implementation is expected to begin during FY2018
with migration to follow.
Moving funds administration to the Composer platform
is expected to contribute an estimated £60 million
in annual cost synergies to Aegon through improved
straight through processing and distribution. This
is the first integrated cross-channel deployment in
the UK, managing workplace, orphan, direct and
advised business and allowing clients to move easily
across categories.
Development of the platform for Retirement Advantage
has been extended to support annuities, and clients
are expected to be migrated onto Composer during
the first half of FY18. The platform for Alliance
Trust Savings is already ‘live’ and will be rolled out
systematically to clients through 2017.
2017 ANNUAL REPORT | 15
New customer wins
During the year, GBST won a significant new contract
with an insurance brand leader, and digital development
is underway. This deployment will be delivered through
a software as a service model, using the dynamic
marketing capabilities of Composer and ComposerWeb
to engage consumers.
New services for wrap and platform providers such as
Lifetime ISAs1, which help savings providers to facilitate
subscriptions and transfers, were extremely well
received by clients.
GBST continues to be a beneficiary of regulatory
change to protect consumers and new initiatives
are being planned that will require financial services
organisations to upgrade legacy systems to meet their
obligations, one example is General Data Protection
Regulation (GDPR). Organisations will need to be able
to demonstrate 14 data privacy capabilities to evidence
compliance with GDPR. It is estimated that £667bn of
assets in direct contribution (DC) schemes are now
available for potential transfer to platforms, with more
than £1,400bn of assets held by consumers in the 55 to
74-year age group.
Lang Cat, indicate that of a total £1.8 trillion market,
up to £1.1 trillion may still be available for transition to
outsourced technologies in the retail market.
Further change is anticipated through the MiFID II
legislation which will impact all trading processes,
transaction reporting and client services to IT and
human resources systems. GBST is working closely
with clients to ensure they are ready. Another
change which may benefit GBST is the UK Pension
Dashboard initiative being driven by the Association
of British Insurers, which aims to provide a snapshot
of a consumer’s entire pension savings holding in one
place. GBST has experience of similar initiatives in
Australia, and this will help the Company to leverage
UK opportunities.
AUSTRALIA – WEALTH MANAGEMENT
FY2017
$000’s
FY2016
$000’s
%
Change
Revenue
16,567
17,805
(7)
Operating EBITDA
before Strategic
R&D
8,496
5,591
52
This represents a significant growth opportunity and
GBST is exploring opportunities to assist life and
pension companies to transform their retirement
propositions. The Company is also benefiting from
consolidation in the self-invested personal pensions
(SIPP), and direct-to-consumer platforms markets as
price competition drives mergers to achieve economies
of scale. Banks are also exploring opportunities to
re-enter the advice market through digital automated
advice, and this represents a further market for GBST.
Restructure improves Wealth Management
profitability
Wealth Management activity was lower in the second
half following the completion of major projects, and
revenue for FY17 was $16.6m, compared to $17.8m
in the previous year. Operating EBITDA increased to
$7.1m in FY17, up 55% from $4.6m after restructuring
increased efficiency, enabling product specialists to
support clients more effectively across the Group’s full
range of product solutions.
Leading analyst firm, Gartner Group, notes that
the rapid rate of change in digital technologies
and customer expectations is creating tremendous
pressure on the traditional wealth management
business model. Wealth management revenue growth
is challenged by nontraditional players entering the
market, as well as by the increasing use of lower-cost
passive products and alternative asset classes. As a
result, wealth management firms are moving towards
an “open architecture” model where they support
clients with a wider range of investment products.
Embracing this model allows GBST to introduce new
asset classes for clients, providing them with lower cost,
and more flexible options that can be launched in a
shorter timeframe.
UK market growing
The size of the market is significant, as more than
£6.9 trillion is managed by the UK investment industry.
Estimates by the independent industry analyst,
Expansion into business process outsourcing
In FY17, GBST entered the business process
outsourcing (BPO) market through a partnership with
MainstreamBPO, one of Australia’s largest independent
fund administrators. Through Mainstream BPO’s
FundBPO, GBST’s Composer platform now supports
a Global 100 asset manager’s platform. The migration
of another asset manager’s platform onto Composer is
about to commence. The BPO market is significant for
GBST as more than 75% of fund managers and 80% of
large superannuation funds use third party services in
their back office, creating new opportunities.
The Mainstream BPO service also includes GBST’s
new Fund Gateway product which automates secure
business-to-business messaging services for external
transaction networks. This enables funds to manage
assets directly and benefit from real-time reporting.
GBST completed installations of ComposerWeb for
Mainstream BPO and for a leading international fund
1 Individual Savings Accounts (ISAs) allow savers to invest money without paying tax on interest or on investment returns
16 | GBST HOLDINGS LIMITED ABN 85 010 488 874
Directors’ Reportfor the year ended 30 June 2017 continued manager, as well as migration projects for the wealth
management arm of a major retail bank.
Rollover processing times reduced from 20 days
to 3 days
GBST’s Superstream Gateway helped expedite
processing times, reducing Superstream rollovers,
contributions and insurance processing from an
average of 20 business days to 3 business days.
Industry use of Quant’s tax optimisation capability
continued to grow, with one client attributing a 25 basis
points performance improvement to the product.
TOTAL WEALTH MANAGEMENT (UK + AU)
FY2017
$000’s
FY2016
$000’s
%
Change
Revenue
49,126
61,711
(20)
Operating EBITDA
– before Strategic
R&D
Strategic R&D
Operating EBITDA
– Total
12,618
6,489
15,928
2,639
(21)
(146)
6,129
13,289
(54)
Lower operating EBITDA reflected the significant
ongoing investment in development of Composer and
ComposerWeb for the UK and Australian markets,
which is essential to maintain GBST’s product
leadership position.
AUSTRALIA – CAPITAL MARKETS
FY2017
$000’s
FY2016
$000’s
%
Change
Revenue
24,883
32,675
(24)
Operating EBITDA
before Strategic
R&D
7,539
12,147
(38)
Syn~ now Australia’s post-trade processing
market leader
Capital markets revenue was impacted by increased
competition and regulatory changes, revenue was
$24.9m for FY17, compared to $32.7m in the previous
year. Strategic R&D expenditure was $2.9m for FY17,
up from $1.0m in FY16, as the Company increased
development on Syn~ and Catalyst. Operating EBITDA
was $4.6m in FY17, compared to $11.2m in FY16.
Following a difficult year, the capital markets business
has stabilised and implementation of Syn~ by a major
institutional bank has propelled Syn~ to the market
leadership position in Australia, where it now processes
more than 25% of equity market trades.
This new installation of Syn~ was the fourth in Australia,
and represents the most comprehensive use of the
platform. Its successful implementation demonstrated
the benefits of GBST’s close collaboration with
clients, as well as GBST’s significant infrastructure and
domain expertise.
Shares and DCA continue to perform strongly in
equity and derivatives trading and hold dominant
market positions.
Another new opportunity with a significant local
institution to develop Catalyst is continuing.
Improvements to Syn~’s capability included custody
transactions, SWIFT messaging and corporate actions
capabilities which extend the platform’s services for
financial markets utilities.
GBST’s digital business, Emu launched two new
implementations of the ecommerce platform Umeeco
in Australia, with further projects taking place in
the UK. This platform is extremely stable, flexible
and scalable, and features a fully integrated content
management system.
REST OF THE WORLD – CAPITAL MARKETS
FY2017
$000’s
FY2016
$000’s
%
Change
Revenue
13,600
13,253
3
Operating EBITDA
before Strategic
R&D
1,630
(4,508)
136
Major turnaround to profitability
A highlight of the year was the successful operational
restructure of GBST’s institutional business which
operates in Asia, Europe and North America. Revenue
increased to $13.6m in FY17 compared to $13.3m in the
previous year. Operating EBITDA was $1.4m in FY17, a
significant turnaround from an operating loss of $4.5m
in FY16. Focus on institutional business opportunities
in the Group’s core Asia market has enabled this return
to profitability. Financial improvement in this business
was especially pleasing after several years of product
investment and business development, and GBST is
beginning to see rewards through clients’ increased use
of Syn~, new customers and a growing reputation as a
market leading solution.
Syn~ usage increasing
In Asia, GBST’s clients include the top two broker-
dealers in the Hong Kong market and the Company
has assisted a major institutional broker-dealer to
provide outsourced middle office and clearing services
to regional stockbrokers and custodians. GBST is also
migrating this firm’s global markets business onto Syn~.
Further new projects included an expansion of GBST’s
automated back and middle-office platform for Haitong
International, and two Asia-based clients are now using
Syn~ to process regional equity trades across Asia
and Australia.
2017 ANNUAL REPORT | 17
The Group has significant expansion opportunities in
Asian markets including several possible projects for
Chinese banks in Hong Kong, extensions of Syn~ for
existing clients and a project in Japan.
The maturing Syn~ technology provides competitive
advantages for financial markets utilities in Asia
that need automated straight-through processing
technology to realise economies of scale. Institutional
banks can leverage Syn~’s fully integrated back and
middle-office capability to provide a multi-market,
multi-asset service, lowering post-trade processing
costs across their global operations.
In North America, GBST successfully extended an
implementation of Syn~ for Raymond James, a major
regional broker dealer which supports 3 million client
accounts through 7,300 financial advisers in the US,
Canada and overseas.
This further improved Raymond James’ middle office
straight through processing and financial reporting,
and ensured T+2 readiness (allowing settlement of
security transactions in two days after the transaction)
and support for key regulatory initiatives including
Consolidated Audit Trail (CAT) and MiFID II. Benefits
also included increased access to Omgeo’s electronic
trade confirmation network supporting over 100 US-
and London-based clients, support of multi-currency
trade and commission allocation and reporting, and
integration with global settlement systems and new
global markets systems.
GBST now employs both direct and partner sales
models in North America, enabling access to growth
opportunities without the need for a large sales force.
As the North American post-trade processing industry
moves to a T+1 settlement cycle, GBST has a flexible,
modular system with modern software architecture and
is well positioned for growth.
TOTAL CAPITAL MARKETS (AU + ROW)
FY2017
$000’s
FY2016
$000’s
%
Change
Revenue
38,483
45,928
(16)
Operating EBITDA
before Strategic
R&D
Strategic R&D
9,169
3,117
7,639
931
Operating EBITDA
6,052
6,708
20
(235)
(10)
The capital markets business generated significant
margin improvement. Increased product and
technology investment is expected to contribute to
business growth in future years.
18 | GBST HOLDINGS LIMITED ABN 85 010 488 874
FINANCIAL POSITION
Net assets decreased by $1.0m to $64.9m
(June 2016: $65.9m).
Factors impacting this were:
• lower than expected earnings due to project delays
and higher costs;
• decline of the Great British Pound (GBP) to the
Australian Dollar for contracts denominated in GBP;
• $6.2m of dividend payments during the year (June
2016: $7.4m).
Current assets exceeded current liabilities by $8.6m
(June 2016: $8.6m).
GBST’s cash position was $11.7m at 30 June 2017 (June
2016: $8.8m).
OVERALL GROUP STRATEGY, PROSPECTS
AND RISKS
Through its market-leading products, GBST has
significant growth prospects in Australia, Asia, the
UK, and North America. The Company has more
than 60 clients around the world, with particularly
strong positions in the UK and Australasian wealth
management markets and the Australasian and
Asia-Pacific capital markets.
The Company has a strong business model and an
established annuity revenue base with many long-
standing clients.
Major projects in the UK are progressing. GBST is
working closely with its clients to exploit the flexible
marketing capabilities of Composer. Development
of ComposerWeb 2.0, targeting wealth managers’
growing demand for a contemporary digital front
office, will commence in FY18 and is expected to launch
in the second half of FY18. GBST has already secured
one client and anticipates further sales.
The next release of Composer in the UK, which is
scheduled for release in the second half of FY18,
will include greater cloud deployment support and
automation, as well as further product enhancements
to support the General Data Protection Regulation
and Markets in Financial Instruments Directive (MiFID).
As E-VOLVE progresses GBST will collaborate with
clients, allowing their feedback to guide design and
future enhancements. The E-VOLVE project extension
will not impact existing clients’ operations or business
plans. E-VOLVE will be delivered, as incremental regular
releases, for both UK and Australian regions.
The UK market continues to grow, with funds under
management increasing above £1 trillion in 2017 to
£1.1 trillion in June 2017.2
2 https://www.theinvestmentassociation.org/fund-statistics/funds-under-
management.html?what=table&show=7
Directors’ Reportfor the year ended 30 June 2017 continued The Catalyst product provides GBST’s wealth
management business with a growth path in Australia
and the Group’s BPO and Fund Gateway products also
provide opportunities.
Following completion of GBST’s program to transition
a leading global institutional bank’s back and middle-
offices from Shares to Syn~, the Company has
benefited from the Syn~ platform’s market leadership
and has several growth opportunities in Australia,
where investment continues to increase automation
and scalability. GBST has good prospects for growth
in Asia-Pacific and Japan, where it has an ongoing
pipeline of work with existing clients and potential
new clients are in the advanced stages of scoping
business requirements.
MATERIAL BUSINESS RISKS
The Company expects operating EBITDA before
strategic R&D in product development in the range
of $20m – $25m for FY18. Strategic R&D in product
development expenditure is expected to be in the
range of $10m – $15m for FY18, with $10 – $12m of that
related to E-VOLVE and ComposerWeb 2.0.
The Company’s financial technology markets globally
are growing, and GBST has significant growth potential.
GBST aims to capitalise on the expanding wealth
management and capital markets sectors, which are
expected to remain high-growth markets through 2020
and the next decade.
The material business risks that have the potential to impact the Group are outlined below, with mitigating actions
undertaken to minimise these risks.
Risk
Nature of Risk
Mitigation
Industry disruption
Technology and financial services
are industries that are both at
considerable risk for disruption
and disintermediation. Innovative
technologies could be a threat or
an opportunity.
Information security,
protection of
intellectual property and
system failure
Due to the nature of the Company’s
business it is at risk of material
damage from any breach of
information security, loss of its
intellectual property or failure of
Company products and solutions
which are critical systems in our
customers’ operations.
GBST’s program of ongoing research
& development investment into its
technology and products is essential
to the management of these risks.
The program is managed by a team of
highly skilled technical, product and
subject matter experts, and done in
close collaboration with GBST’s global
customer base.
The recent introduction of a Board
Technology Committee will provide
further oversight and governance to
help keep the Company focussed on the
longer-term risks and opportunities.
These risks are mitigated through the
following measures: -
• A dedicated team of information
security specialists, supported by
external expertise.
• Regular independent audits by
third parties.
• Proven track record of disaster
recovery capability.
• Adequate built in redundancy for all
critical systems and procedures.
2017 ANNUAL REPORT | 19
Risk
Nature of Risk
Mitigation
Regulatory compliance
The cost of complying with the
regulatory framework that GBST
and its customers operate in is a
major cost to the Company and can
have a negative impact on business
performance if not properly managed.
Project execution
Failure to successfully develop,
implement and support GBST’s
products and solutions could have
a material adverse impact on the
Company’s financial performance and
reputation. This occurs across both
client and internal projects.
Project execution is sometimes not
only reliant on the work of GBST staff,
but also that of external vendors.
Outsourcing may introduce a higher
level of risk.
GBST monitors closely all developments
in the regulatory environment that it
and its customers operate in. GBST also
works closely with the relevant regulatory
bodies in all jurisdictions and is regarded
as a key source of industry knowledge
and expertise in the design and
implementation of regulatory change.
The Company actively engages with its
entire customer base to stay on top of all
trends and changes globally.
The Company has a long history and
culture of developing high quality
products and providing a world class
level of services to our customers.
GBST’s staff are critical in managing this
area of risk. GBST is focussed on the
hiring, retention and training of its staff of
dedicated professionals that are essential
to the long-term success of the business.
The Board requires the Managing
Director to report upon any project
that may be at significant risk of either
incurring substantial penalties or
incurring substantial over-runs.
Internal systems and processes have
been developed and are being enhanced
to manage execution risk, including the
establishment of a Board Technology
Committee, that will provide additional
governance over all major projects.
Customer concentration
GBST is exposed to loss of major
clients through outsourcing decisions,
industry amalgamation, and
technology change.
GBST is actively pursuing diversification
of income by continuing to develop a
broader offering through its range of
service and geographic reach.
Top 5 customers generate 40+%
of revenue.
More than half of the major client revenue
is related to fixed licence fees, secured by
long-term contracts.
GBST is committed to ongoing
investment in R&D to keep products
contemporary.
20 | GBST HOLDINGS LIMITED ABN 85 010 488 874
Directors’ Reportfor the year ended 30 June 2017 continued Risk
Nature of Risk
Mitigation
Customer demand and
Resource management
Variability in customer demand
presents operational challenges.
This is an ongoing risk that will likely
increase in the future as the Company
continues to search for growth. There
is a risk that customer demand does
not meet forecasts.
Currency risk
GBST is at risk of sustaining losses by
having earnings, assets and liabilities
denominated in currencies other than
the Australian dollar.
GBST is in the process of introducing
better systems and processes to build
a pool of talent that can be utilised
as required.
To minimise future risk – GBST will
increase its utilisation of low cost
offshore resources and onshore
contractors to meet the variability in
customer demand.
A pilot business unit has been established
using Enterprise Agile principles
including people, roles, structure,
systems, processes, tools, culture &
values, governance, metrics, controls,
and reporting. This will be rolled out in
the course of FY18.
Wherever possible the Company tries
to match revenues and costs into the
local currency of the jurisdiction that
it operates in. GBST makes clear in its
financial reporting the exposure to and
impact of foreign currency fluctuations
on the Group’s financial performance.
DIVIDENDS
A final fully franked ordinary dividend of 5.5 cents per
share for the 2016 financial year was paid on 14 October
2016, as declared in the financial report for the year
ended 30 June 2016.
An interim fully franked ordinary dividend of 3.7 cents
per share was paid on 20 April 2017.
Dividends declared after the end of the year:
The Directors have declared a final dividend of 2.5 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 13 October 2017.
SIGNIFICANT CHANGES IN STATE
OF AFFAIRS
During the year, the Company issued 435,376
shares in respect of performance rights that vested
after meeting the performance conditions from the
24 September 2013 grant of performance rights
to selected employees issued under the GBST
Performance Rights and Option Plan (LTI Plan).
The remainder of performance rights granted
on 24 September 2013 had been forfeited prior
to the vesting date. On 26 September 2016 and
27 October 2016, a new issue of 311,863 and 62,124
performance rights were granted to selected
employees under the LTI Plan which were subject
to performance and service conditions. These
performance rights will not meet the first targeted
performance condition and will therefore be cancelled
in accordance with the LTI Plan rules.
No other significant changes in the state of affairs of
the Group occurred during the financial year, other than
those disclosed in this report.
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.
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.
ENVIRONMENTAL ISSUES
There are no significant environmental regulations
applying to the Group.
2017 ANNUAL REPORT | 21
PERFORMANCE RIGHTS
To assist in the attraction, retention and motivation
of employees, the Company operates a Performance
Rights and Option Plan (LTI Plan).
to Mr Lake to cover legal costs incurred in defending
these proceedings since he first claimed under his
indemnity in 2012. These amounts are expensed
as incurred.
The number of performance rights over ordinary shares
outstanding at 30 June 2017 are as follows:
The Group is not aware of any other liability that has
arisen under these indemnities at the date of this report.
Exercise
Date
Exercise
Price
Number
05.08.14 & 16.10.14
31.08.17
$0.00
264,615
26.09.16 & 27.10.16
26.09.19
$0.00
318,075
Of these performance rights 75% of the 5 August 2014
and 16 October 2014 issue have subsequently lapsed
as the performance hurdles were not met as at the
approval of these FY17 financial statements.
Of these performance rights 100% of the 26 September
2016 and 27 October 2016 issue have subsequently
lapsed as the performance hurdles were not met as at
the approval of these FY17 financial statements.
In addition, 435,376 new shares were issued to meet
the exercise of employee performance rights during
the financial year (no amounts are unpaid on any of the
shares). The remainder of performance rights issued on
24 September 2013 lapsed prior to the vesting date and
have been cancelled.
No further shares or employee performance rights have
been issued up to the date of this report.
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 Management 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) for the following reasons:
• All non-audit services were subject to the
corporate governance procedures adopted by
the Group and have been reviewed by the Audit
and Risk Management Committee to ensure they
do not impact the integrity and objectivity of the
auditor; and
INDEMNIFYING DIRECTORS AND OFFICERS
• The non-audit services provided do not undermine
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 actions taken
against them as Directors and Officers.
During the year, GBST advanced $273,000 to a former
director and executive, Mr Stephen Lake, in accordance
with the terms of the Deed of Access, Indemnity and
Insurance (“the Deed”) with Mr Lake. The advances
were paid to cover legal costs incurred in defending
proceedings brought against Mr Lake in the Supreme
Court of Queensland by Mr Malcolm Murdoch, a former
director and shareholder of GBST. The proceedings
relate to a dispute surrounding the terms on which
proceedings by Mr Murdoch in 2003 were settled in
2004. All amounts advanced by GBST under the Deed
are repayable if, upon the final adjudication of the
proceedings, Mr Lake is not entitled to be indemnified
by GBST. To date, GBST has advanced a total of $1.15m
22 | GBST HOLDINGS LIMITED ABN 85 010 488 874
the general principles relating to auditor
independence as set out in APES 110 Code of Ethics
for Professional Accountants, as they did not involve
reviewing or auditing the auditor’s own work, acting
in a management or decision making capacity for the
Group, acting as an advocate for the Group or jointly
sharing risks and rewards.
Details of the amounts paid to the auditor of the Group,
KPMG, and its network firms for non-audit services
provided during the year are set out below:
Taxation services
Accounting & Corporate advice
$267,291
$35,567
$302,858
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 2017.
Directors’ Reportfor the year ended 30 June 2017 continued ROUNDING
The Company is of a kind referred to in the ASIC
Corporations (Rounding in Financial/Directors’
Reports) Instrument 2016/191 and in accordance with
that instrument, amounts in the financial report and
Directors’ report have been rounded to the nearest
thousand dollars, unless otherwise stated.
Key Management
Personnel
Position
I Thomas
M Knowlton
Director (Independent) (resigned
31 January 2017)
Chief Technology Officer (appointed
3 April 2017)
D Orrock
Head of Asia Pacific
REMUNERATION REPORT – AUDITED
J O’Sullivan
The information provided in the remuneration report
relates to the Group for the year ended 30 June 2017
and has been audited as required by section 308(3C) of
the Corporations Act (2001).
P Salis
I Sanchez
Head of Technology, Institutional
(resigned 24 February 2017)
Chief Financial Officer
Head of Technology, Retail Wealth
(restructure 2 April 2017)
The remuneration report is set out under the following
main headings:
D Simpson
Head of EMEA (appointed
1 July 2016)
a) Group and Company Key Management Personnel
b) Remuneration Policies and Practices
c) Group Performance and Remuneration
d) Service Agreements
e) Services from Remuneration Consultants
f) Loans to Directors and Transactions with KMP
Related Parties
g) Details of Remuneration
h) Performance Rights Holdings of Key
Management Personnel
i) Shareholdings of Key Management Personnel
(a) 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
A Brackin
C Bartlett
D Adams
D Page
T Vu
Director (Non-executive Chair)
(Independent)
Director (Non-executive Deputy
Chair) (Independent)
Director (Independent)
Director (Independent) (appointed
1 July 2016)
Director (Independent) (appointed
1 January 2017)
R DeDominicis
Director (Managing Director and
Chief Executive Officer)
J Sundell
Director (Non-executive) (resigned
27 July 2016)
Remuneration Principles
Key Management Personnel (KMP) 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.
• Key Management Personnel (KMP) are encouraged
to make investments in the Group in accordance with
the Group’s share trading guidelines.
• Senior Executive agreements will not allow for
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.
2017 ANNUAL REPORT | 23
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 $750,000.
Non-Executive Directors are paid a fixed annual
remuneration (inclusive of superannuation where
relevant). The annual fees paid to Non-Executive
Directors in 2017 are $135,000 (inclusive of
superannuation) for the Chair, $90,000 (inclusive of
superannuation) for the Deputy Chair and Committee
Chairs and $80,000 (inclusive of superannuation) 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 Company LTI 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.
• Bonus payments based upon Group performance
and the meeting of corporate objectives – Short
Term Incentive (STI).
• Equity based remuneration – Long Term
Incentive (LTI).
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
24 | GBST HOLDINGS LIMITED ABN 85 010 488 874
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.
Performance Linked Compensation
Short Term Incentive Remuneration
The Company operates a short-term incentive (STI)
scheme based upon Group financial performance and
the meeting of corporate goals to provide competitive
performance based remuneration incentives to both
Executives and senior employees. The objectives of the
STI scheme are to:
• Promote continuous improvement in annual
performance outcomes;
• Align the interests of the Executives and senior
employees 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 senior
employees 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.
In practice
STI payments are made in cash to reward eligible
Executives and senior employees on delivering against
annual key performance indicators that are linked to
GBST’s strategy and are expected to deliver benefits to
shareholders. The Board, through its Nomination and
Remuneration Committee, supervises all calculations
of short term incentive remuneration to ensure
suitability and relevance for both the Executives and
the Group.
Generally, STI arrangements are capped at a
maximum of 50% of base remuneration, however
when exceptional outcomes are delivered, or where
warranted by special circumstances, an STI payment
may exceed this amount. The approval of any STI
payment is subject to a consideration by the Board as
to whether or not the overall financial performance of
the Group warrants the payment of any STIs for the
relevant financial year.
The Board always retains a discretion to reward
outstanding performance by an employee.
Directors’ Reportfor the year ended 30 June 2017 continued Purpose and link to GBST’s strategy
STI payments are awarded where Executives or senior employees meet or exceed agreed Key Performance
Indicators (‘KPIs’), which are set annually and include a combination of both Group financial hurdles and individual
goals for each participant.
The KPI’s cover financial and non-financial measures relating to business and individual leadership goals. The
financial performance hurdles for STI payments are measured against Group EBITDA and Divisional Operating
EBITDA targets.
FY2017
For FY2017, a Group EBITDA target set by the Board had to be achieved to trigger any STI payment opportunity.
Executives and senior employees were also incentivised on personal performance related to their specific role
within the Group. Below is a table outlining the KPIs for key management personnel for FY2017 in addition to the
Group EBITDA target (if any):
STI Target
Amount
for FY17 as
percentage
of fixed
remuneration
61%
32%
38%
Role
Robert
DeDominicis
(CEO)
Patrick Salis
(CFO)
Denis Orrock
(Head of Asia
Pacific)
David Simpson
(Head of EMEA)
52%
27%
Isabel Sanchez
(Head of
Technology –
Retail Wealth)
Mark Knowlton
(CTO)
1st
Performance
Measure
Portion of STI
subject to 1st
Performance
Measure
2nd
Performance
Measure
Portion of STI
subject to 2nd
Performance
Measure
3rd
Performance
Measure
Portion of STI
subject to 3rd
Performance
Measure
100%
100%
70%
30%
25%
Achievement
of Group
Operating
EBITDA
Margin
Achievement
of Group
EBITDA
Target
Operating
EBITDA
Target – Asia
Pacific
Achievement
of Group
Cash NPAT
EBITDA
Target – Asia
Pac Retail
Wealth
30%
70%
25%
Business and
Leadership
Objectives
Operating
EBITDA
Margin –
EMEA
EBITDA
Target –
EMEA Retail
Wealth
Business and
Leadership
Objectives
50%
Commenced on 3 April 2017 – No participation for FY17, however a sign-on bonus was payable
As the Group EBITDA target set by the Board to trigger any STI payment opportunity for FY2017 was not achieved,
no STI payments were made to Key Management Personnel for the financial year.
New STI scheme for FY2018
During the FY2017, the Board carried out a review of the STI scheme with the assistance of an external
remuneration consultant. A new STI scheme was recently approved by the Board for FY2018 for Executives and
senior employees, following recommendations to ensure that the incentive plan met the fundamental purpose
to drive and reward high performance on annual business objectives. The financial measure of Group EBITDA
will continue to serve as the STI funding gate for a designated portion of payment for each participant within the
Company, with the balance of their STI opportunity subject to a role-specific custom funding gate or quantifiable
performance objective threshold.
2017 ANNUAL REPORT | 25
The below table outlines the FY2018 STI pool qualifier structure for specified roles:
Role
Portion of STI subject to
Group EBITDA performance
Portion of STI subject
to custom performance
measure
CEO, CFO, Legal Counsel
and Head of HR
100%
Regional Heads
CTO
Product Managers
Project Leaders
50%
75%
50%
40%
–
50%
25%
50%
60%
Description of custom
performance measure
–
Regional revenue, less
controllable expenses
Agreed objective(s)
Product objective(s)
Project objective(s)
There will also be an additional bonus plan for other
non-sales/non-management employees. This plan will
have two purposes:
rights that were granted prior to his appointment as a
KMP Executive on 1 October 2015. These shares were
issued for a nil exercise price.
1. To reward key project contributors, for payment
after critical project milestones.
FY2015 issue
2. To reward high performers, manage retention risks
and provide more competitive total remuneration to
high performers/potentials.
Long Term Incentive Remuneration (LTI)
Performance rights are issued under the Company’s LTI
Plan approved at the Company’s 2012 Annual General
Meeting. The LTI Plan involves the use of performance
rights to acquire shares in the Company.
The LTI Plan is designed to reward employees in a
manner which aligns this element of remuneration with
the financial performance of the Company and the
interests of shareholders. As such, grants under the LTI
Plan are only made to KMP 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.
Selected employees are made individual offers
of specific numbers of performance rights at the
discretion of the Board and in accordance with the LTI
Plan rules. The Board may determine the number of
performance rights, vesting conditions, vesting period,
exercise price and expiry date. Performance rights may
be granted at any time, subject to the Corporations Act
and ASX Listing Rules.
The Company uses Earnings per Share (EPS) as a
performance hurdle for the LTI Plan, measured by
growth in earnings per share. EPS was selected to align
employee and shareholder interests. Participants in the
LTI Plan are also required to meet continued service
conditions in order to exercise the performance rights.
FY2014 issue
On 26 September 2016, 26,347 shares were issued to
Justin O’Sullivan relating to the exercise of performance
26 | GBST HOLDINGS LIMITED ABN 85 010 488 874
On 5 August 2014, the Group issued 204,321
performance rights to current KMP Executives.
The FY2015 performance rights are conditional
upon the participants meeting continuous service
conditions and the Company meeting certain financial
performance measures (as set out below).
There is a nil exercise price and the FY2015
performance rights vest on the later of three (3)
years after the grant date or the date of release of
GBST’s audited financial results for the year ended
30 June 2017.
The FY2015 performance rights expire thirty days after
the vesting date. Subsequent to 30 June 2017 75% of
these performance rights lapsed due to failure to meet
the financial performance targets as at the approval of
these FY2017 financial statements.
The performance criteria associated with the FY2015
performance rights is as follows:
1. Cumulative Earnings Per Share (EPS) Target
Vesting of the performance rights granted will be
subject to the Company achieving three year (2015
to 2017 financial years) cumulative EPS targets of 45
cents, 50 cents, and 60 cents for 25%, 50% and 100%
vesting respectively (interpolated). There is also a
vesting requirement that a minimum EPS of 10 cents is
achieved in each financial year.
2. Service Condition
Continuous employment with the Company from
the grant date to the date of vesting of the FY2015
performance rights.
Since the grant dates, 144,168 FY15 performance
rights have lapsed due to cessation of employment of
KMP participants.
Directors’ Reportfor the year ended 30 June 2017 continued FY2016 issue
On 5 October 2015 and 19 April 2016, the Group issued 263,881 and 30,303 performance rights to selected
employees. These performance rights were forfeited due to failure to meet the financial performance targets for
the 2016 financial year.
FY2017 issue
On 26 September 2016 and 27 October 2016, the Company issued 181,404 FY2017 performance rights to KMP
Executives. The FY2017 performance rights are conditional upon the participants meeting continuous service
conditions and the Company meeting certain financial performance measures (as set out below).
There is a nil exercise price and the FY2017 performance rights vest on the later of three (3) years after the grant
date or the date of release of GBST’s audited financial results for the year ended 30 June 2019.
The FY2017 performance rights expire thirty days after the vesting date. Subsequent to 30 June 2017 these
performance rights lapsed due to failure to meet the financial performance targets as at the approval of these
FY2017 financial statements.
The performance criteria associated with the FY2017 performance rights is as follows:
1. Cumulative Earnings Per Share (EPS) Target
Vesting of the performance rights granted will be subject to the Company achieving three year (2017 – 2019
financial years) cumulative EPS targets of 50 cents, 53 cents, and 57 cents for 25%, 50% and 100% vesting
respectively (interpolated). There is also a vesting requirement that a minimum EPS of 13 cents is achieved in each
financial year.
2. Service Condition
Continuous employment with the Company from grant date to the vesting date of the FY2017 performance rights.
Since the grant dates, 19,880 FY2017 performance rights have lapsed due to cessation of employment by a
KMP participant.
For issues to non-Executive Personnel refer to Note 29.
(c) 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
2013
2014
2015
2016
2017
$16.5m
$20.5m
$24.5m
$17.2m
$12.0m
16%
24%
20%
Net profit/(loss) before tax
$7.8m
$12.0m
$17.3m
Year on Year Growth
Net profit/(loss) after tax
Year on Year Growth
Basic EPS (cents)
Year on Year Growth
Closing share price
Dividends paid (cents per share)
76%
53%
44%
$6.0m
$10.0m
$15.3m
86%
9.06
86%
$1.70
5.5
66%
15.07
66%
$3.15
7.5
52%
22.94
52%
$5.73
9.5
(30)%
$9.1m
(48)%
$9.3m
(39)%
13.82
(39)%
$4.14
11.0
(30)%
$5.0m
(45)%
$7.0m
(25)%
10.3
(25)%
$2.97
9.2
(d) Service Agreements
Remuneration and other terms of employment for Executives and the Managing Director are formalised in
employment agreements. All employment agreements are subject to an annual review. Each of the agreements
provide for base pay, leave entitlements, superannuation, performance-related bonus and any other benefits. They
also contain normal provisions relating to the protection of confidential information and intellectual property rights
as well as post-employment restraints.
2017 ANNUAL REPORT | 27
(f) Loans to Directors and Transactions with KMP
Related Parties
There have been no loans to Directors or KMP
executives during the financial year.
Mr Kim Sundell and Dr Ian Thomas are Directors and
shareholders of FinClear Pty Ltd (‘FinClear’). On 10
October 2016, FinClear purchased Lonsec Limited
which had an existing agreement with GBST for the
provision of front office services (‘Agreement’). This
Agreement ended on 3 February 2017 and GBST does
not currently provide any other products or services to
FinClear. The total revenue relating to the front office
agreement was $6,500 during the financial year. The
amount owing at 30 June 2017 was $nil. There were no
doubtful debts provided for or expensed during the
period with regard to these transactions. The terms and
conditions of the Agreement are no more favourable
than those available, or which might be reasonably
expected to be available, in similar transactions with
non-key management personnel related companies on
an arm’s length basis.
There have been no other related party transactions
with Directors or KMP executives during the
financial year.
As the Group is an international organisation,
when Executives are seconded to other countries
their remuneration is reviewed in line with normal
employment expectations for the relevant country.
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 (g) below and are identified as
“Short Term Benefits – Other”.
All Executives are employed on a continuing basis
and are required to provide not less than three
months’ written notice. The Managing Director, Mr
DeDominicis, is also employed on a continuing basis
and he is required to provide not less than six months’
written notice. The Company is not bound to provide
termination benefits beyond those required by law.
(e) Services from Remuneration Consultants
The Nomination and Remuneration Committee
engaged Crichton and Associates to provide
professional services in respect of Long-Term Incentive
Plans and supply associated documentation and
valuation reports. Crichton and Associates was paid
$6,073 for these consulting services.
The Nomination and Remuneration Committee
engaged Pegala Consulting to provide professional
services in respect of the development of a Short-Term
Incentive Plan for the Company. Pegala Consulting was
paid $8,750 for this consulting service.
The Board is satisfied that the remuneration
recommendations made by Crichton and Associates
and Pegala Consulting were free from undue influence
by members of the Key Management Personnel about
whom the recommendations may relate.
The Board undertook its own inquiries and review of
the processes and procedures followed by Crichton
and Associates and Pegala Consulting during the
course of their assignments and is satisfied that the
remuneration recommendations were made free from
undue influence.
28 | GBST HOLDINGS LIMITED ABN 85 010 488 874
Directors’ Reportfor the year ended 30 June 2017 continued e
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2017 ANNUAL REPORT | 29
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Directors’ Reportfor the year ended 30 June 2017 continued
(h) Performance Right Holdings for Key Management Personnel
Details of performance rights granted as compensation to each key management person during the reporting
period and details of performance rights vested during the period:
Number of
rights granted
during
2016-17
#(i)
Vested
Number
#
Fair Value at
Grant Date
$
Grant Date
Exercise Price
$
First Exercise
Date
Last
Exercise Date
–
–
–
62,124
62,124
27.10.16
4.0242
24,850
26.09.16
4.0242
26,387
–
05.08.14
3.2800
–
–
–
–
19,880
26.09.16
29,820
26.09.16
19,880
26.09.16
24,850
26.09.16
4.0242
4.0242
4.0242
4.0242
–
–
–
–
–
–
–
26.09.19
26.10.19
26.09.19
26.10.19
16.09.16
16.10.16
26.09.19
26.10.19
26.09.19
26.10.19
26.09.19
26.10.19
26.09.19
26.10.19
Directors
R DeDominicis
TOTAL DIRECTORS
Executives
D Orrock
J O’Sullivan(ii)
J O’Sullivan
P Salis
I Sanchez
D Simpson
TOTAL EXECUTIVES
26,387
119,280
GROUP TOTAL
26,387
181,404
(i) Subsequent to 30 June 2017 these performance rights lapsed due to failure to meet the financial performance targets as at the approval of these FY17
financial statements.
(ii) On 26 September 2016, shares were issued to J O’Sullivan relating to the exercise of performance rights that were granted prior to his appointment as a
KMP Executive on 1 October 2015. These shares were issued for a nil exercise price.
Details of vesting profiles of the performance rights granted as compensation:
Number of
performance
rights issued
Grant Date
% vested in
year
% forfeited
in year/
restructure
FY in which
grant vests
Maximum
total value of
grant yet to
vest $
Directors
R DeDominicis(iv)
R DeDominicis(v)
Executives
D Orrock(iv)
D Orrock(v)
J O’Sullivan(i)
J O’Sullivan(i) (ii)
J O’Sullivan(ii)
P Salis(iv)
P Salis(v)
I Sanchez(iii) (iv)
I Sanchez(v)
D Simpson(v)
50,243
05.08.14
62,124
27.10.16
50,243
05.08.14
24,850
26.09.16
–
–
–
–
26,387
24.09.13
100
13,398
05.08.14
19,880
26.09.16
43,544
05.08.14
29,820
26.09.16
46,893
05.08.14
19,880
26.09.16
24,850
26.09.16
–
–
–
–
–
–
–
–
–
–
–
–
100
100
–
–
N/A
N/A
–
2018
2020
2018
2020
2017
2018
2020
2018
2020
2018
2020
2020
164,797
249,999
164,797
100,001
–
–
–
142,824
120,002
N/A
N/A
100,001
(i) Performance rights issued prior to 1 October 2015 when J O’Sullivan was appointed as a KMP.
(ii) Service period conditions were not met for the performance rights which were subsequently cancelled.
(iii) I Sanchez ceased as a KMP on 2 April 2017 due to a restructure where the Head of Technology now reports to the CTO.
(iv) 75% of the 5 August 2014 issue have subsequently lapsed as the performance hurdles were not met at 30 June 2017. R DeDominicis has elected not to
accept 12,560 shares arising from the performance rights due to vest in August 2017.
(v) 100% of the 26 September 2016 and 27 October 2016 issue have subsequently lapsed as the performance hurdles were not met as at the approval of
these FY17 financial statements.
2017 ANNUAL REPORT | 31
PERFORMANCE RIGHT HOLDINGS OF KEY MANAGEMENT PERSONNEL (CONTINUED)
The movement in the number 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.
Performance
rights
Cancelled/
Forfeited/
Lapsed/
Restructure
Performance
rights
Exercised or
Sold
Total
Vested at
30/06/17
Total
Unvested and
Unexercisable
at 30/06/17
Balance
30/06/17
2017
Directors
Balance at
01/07/16
Granted as
Compensation
R DeDominicis(v)
50,243
62,124
50,243
62,124
–
50,243
39,785
43,544
46,893
–
–
24,850
19,880
29,820
19,880
24,850
–
–
–
–
–
–
–
–
(26,387)
(33,278)
112,367
112,367
–
75,093
N/A
–
–
–
–
73,364
(66,773)
N/A
–
24,850
TOTAL
DIRECTORS
Executives
M Knowlton
D Orrock
J O’Sullivan(i) (ii)
P Salis
I Sanchez(iii)
D Simpson
TOTAL
EXECUTIVES
–
–
–
–
–
–
–
–
–
–
112,367
112,367
–
75,093
N/A
73,364
N/A
24,850
173,307
285,674
180,465
119,280
(26,387)
(100,051)
173,307
GROUP TOTAL
230,708
181,404
(26,387)
(100,051)
285,674
(i) Service period conditions were not met for the performance rights which were subsequently cancelled.
(ii) Performance rights issued prior to 1 October 2015 when J O’Sullivan was appointed as a KMP.
(iii) I Sanchez ceased as a KMP on 2 April 2017 due to restructure where the Head of Technology now reports to the CTO.
(iv) The following performance rights subsequently lapsed as a result of the Group not achieving specified performance hurdles as at the approval of these
FY17 financial statements:
a. R DeDominicis 99,807
b. D Orrock 62,533
c. P Salis 62,478
d. D Simpson 24,850
(v) R DeDominicis has elected not to accept the 12,560 shares arising from the performance rights due to vest in August 2017.
Details of all performance rights are set out in Note 29 in the financial statements.
32 | GBST HOLDINGS LIMITED ABN 85 010 488 874
Directors’ Reportfor the year ended 30 June 2017 continued (i) Shareholdings of Key Management Personnel
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.
2017
Directors
A Brackin
C Bartlett
D Adams
D Page
T Vu
J Sundell
I Thomas
R DeDominicis
TOTAL DIRECTORS
Executives
M Knowlton
D Orrock
J O’Sullivan*
P Salis
I Sanchez**
D Simpson
TOTAL EXECUTIVES
GROUP TOTAL
Balance at
01/07/16
Received as
Compensation
Performance
Rights &
Options
Exercised
Net Change
Other(1)
Balance on
Resignation
Balance at
30/06/17
140,000
1,750
–
–
–
2,253,969
–
609,055
3,004,774
–
–
–
104,636
89,211
–
193,847
3,198,621
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
60,000
3,000
–
9,250
–
–
–
90,000
–
–
–
–
–
(2,253,969)
–
–
200,000
4,750
–
9,250
–
N/A
N/A
699,055
162,250 (2,253,969)
913,055
–
–
–
–
–
–
26,387
(12,500)
(13,887)
N/A
–
–
–
–
–
–
–
104,636
(89,211)
–
N/A
–
26,387
(12,500)
(103,098)
104,636
26,387
(174,750)
(2,357,067)
1,017,691
(i) Shares purchased or sold and consideration for shareholdings purchased by Group.
* J O’Sullivan resigned on 24 February 2017.
** I Sanchez ceased as a KMP on 2 April 2017 due to restructure where the Head of Technology now reports to the CTO.
Signed in accordance with a resolution of the Directors:
Mr A J Brackin
Chairman
Mr R DeDominicis
Managing Director and Chief Executive Officer
Dated at Sydney this 28th day of August 2017
2017 ANNUAL REPORT | 33
34 | GBST HOLDINGS LIMITED ABN 85 010 488 874
Auditor’s Independence Declarationfor the year ended 30 June 2017 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. Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001 To the Directors of GBST Holdings Limited I declare that, to the best of my knowledge and belief, in relation to the audit of GBST Holdings Limited for the financial year ended 30 June 2017 there have been: i. no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and ii. no contraventions of any applicable code of professional conduct in relation to the audit. KPMG Simon Crane Partner Brisbane 28 August 2017 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. Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001 To the Directors of GBST Holdings Limited I declare that, to the best of my knowledge and belief, in relation to the audit of GBST Holdings Limited for the financial year ended 30 June 2017 there have been: i. no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and ii. no contraventions of any applicable code of professional conduct in relation to the audit. KPMG Simon Crane Partner Brisbane 28 August 2017 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
Sales and marketing expenses
General and administrative expenses
RESULTS FROM OPERATING ACTIVITIES
Finance costs
Finance income
Net finance costs
PROFIT BEFORE INCOME TAX
Income tax credit
PROFIT ATTRIBUTABLE TO MEMBERS OF THE PARENT ENTITY
OTHER COMPREHENSIVE INCOME
Items that may be reclassified subsequently to profit or loss
Foreign operations – foreign currency translation differences
Total items that may be reclassified subsequently to profit or loss
Other comprehensive loss 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)
30 Jun 2017
$’000
30 Jun 2016
$’000
Note
59,119
27,346
1,144
69,471
36,301
1,867
87,609
107,639
366
504
87,975
108,143
(72,729)
(87,044)
(4,908)
(4,704)
5,634
(703)
92
(611)
5,023
1,962
6,985
(5,133)
(6,133)
9,833
(817)
41
(776)
9,057
213
9,270
(1,446)
(1,446)
(1,446)
(2,374)
(2,374)
(2,374)
5,539
6,896
4 (d)
4 (e)
5
30
30
10. 31
10.30
13.82
13.73
The accompanying notes are an integral part of these consolidated financial statements.
2017 ANNUAL REPORT | 35
Consolidated Statement of Profit or Loss and Other Comprehensive Incomefor the year ended 30 June 2017 CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Work in progress
Current tax receivables
Other assets
Total Current Assets
NON-CURRENT ASSETS
Work in progress
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
30 Jun 2017
$’000
30 Jun 2016
$’000
Note
7
8
9
12
9
10
11
15
12
13
14
16
17
13
14
15
16
11,728
12,660
4,092
750
2,217
9,011
13,817
3,396
2,265
2,374
31,447
30,863
788
6,542
84
8,116
45,120
48,889
8,778
6,306
151
112
61,379
63,507
92,826
94,370
6,739
6,919
252
385
6,058
9,449
100
131
5,567
9,588
22,883
22,305
2,006
2,426
–
810
2,244
5,060
76
1,458
2,217
6,177
27,943
28,482
64,883
65,888
18
19
39,473
38,366
(4,153)
(1,299)
29,563
28,821
64,883
65,888
The accompanying notes are an integral part of these consolidated financial statements.
36 | GBST HOLDINGS LIMITED ABN 85 010 488 874
Consolidated Statement of Financial Positionas at 30 June 2017
Balance at 1 July 2015
37,664
26,920
(538)
2,409
66,455
Issued
Capital
$’000
Retained
Earnings
$’000
Foreign
Currency
Translation
Reserve(a)
$’000
Equity
Remune-
ration
Reserve(b)
$’000
Total
$’000
Total comprehensive income for the year
Profit for the year
Other comprehensive income
Foreign operations – foreign currency
translation differences
Total other comprehensive loss
TOTAL COMPREHENSIVE INCOME FOR
THE YEAR
Transactions with owners, recorded directly
in equity
Contributions by and distributions to owners
–
9,270
–
–
9,270
–
–
–
–
–
(2,374)
(2,374)
9,270
(2,374)
–
–
–
(2,374)
(2,374)
6,896
Dividends paid (Note 6)
–
(7,369)
Issuing or ordinary shares – vesting of
performance rights
Share based payments – performance rights
Total contributions by and distribution
to owners
Total transactions with owners
702
–
702
702
–
–
(7,369)
(7,369)
–
–
–
–
–
BALANCE AT 30 JUNE 2016
38,366
28,821
(2,912)
–
(7,369)
(702)
(94)
(796)
(796)
1,613
–
(94)
(7,463)
(7,463)
65,888
(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 retained earnings.
The accompanying notes are an integral part of these consolidated financial statements.
2017 ANNUAL REPORT | 37
Consolidated Statement of Changes in Equityfor the year ended 30 June 2017 Issued
Capital
$’000
Retained
Earnings
$’000
Foreign
Currency
Translation
Reserve(a)
$’000
Equity
Remune-
ration
Reserve(b)
$’000
Total
$’000
Balance at 1 July 2016
38,366
28,821
(2,912)
1,613
65,888
Total comprehensive income for the year
Profit for the year
Other comprehensive income
Foreign operations – foreign currency
translation differences
Total other comprehensive income
TOTAL COMPREHENSIVE INCOME FOR
THE YEAR
Transactions with owners, recorded directly
in equity
Contributions by and distributions to owners
–
6,985
–
–
6,985
–
–
–
–
–
(1,446)
(1,446)
6,985
(1,446)
–
–
–
(1,446)
(1,446)
5,539
Dividends paid (Note 6)
–
(6,243)
Issuing of ordinary shares – vesting of
performance rights
Share based payments – performance rights
Total contributions by and distributions
to owners
Total transactions with owners
1,107
–
1,107
1,107
–
–
(6,243)
(6,243)
–
–
–
–
–
–
(6,243)
(1,107)
(301)
–
(301)
(1,408)
(6,544)
(1,408)
(6,544)
BALANCE AT 30 JUNE 2017
39,473
29,563
(4,358)
205
64,883
(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 retained earnings.
The accompanying notes are an integral part of these consolidated financial statements.
38 | GBST HOLDINGS LIMITED ABN 85 010 488 874
Consolidated Statement of Changes in Equityfor the year ended 30 June 2017 Cash Flows from Operating Activities
Receipts from customers
Payments to suppliers and employees
Interest income
Sundry income
Finance costs paid
Income tax paid
30 Jun 2017
$’000
30 Jun 2016
$’000
Note
92,148
117,317
(82,054)
(104,855)
40
364
(95)
515
41
493
(150)
(906)
Net cash provided by operating activities
24 (a)
10,918
11,940
Cash Flows from Investing Activities
Proceeds from sale of plant and equipment
Purchase of plant and equipment
Purchase of software intangibles
Net cash used in investing activities
Cash Flows from Financing Activities
Repayment of finance leases
Proceeds from borrowings
Repayment of borrowings
Dividends paid
Net cash used in financing activities
Net increase in Cash and Cash Equivalents
Effect of exchange rate fluctuations on cash held
Cash and cash equivalents at 1 July
Cash and cash equivalents at 30 June
2
–
(523)
(2,390)
(1,155)
(111)
(1,676)
(2,501)
(79)
263
(109)
(268)
–
(8)
6
(6,243)
(7,369)
(6,168)
(7,645)
3,074
(357)
9,011
24 (b)
11,728
1,794
(568)
7,785
9,011
The accompanying notes are all an integral part of these consolidated financial statements.
2017 ANNUAL REPORT | 39
Consolidated Statement of Cash Flowsfor the year ended 30 June 2017 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 2017 comprises the Company and its
controlled entities (together referred to as the “Group”
and individually as the “Group entities”).
The address of the Company’s registered office and
the principal place of business is Level 4, West Tower,
410 Ann Street, Brisbane, Queensland.
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
28 August 2017.
Basis of measurement
The consolidated financial report has been prepared on
an accruals basis and is based on historical costs.
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 the ASIC
Corporations (Rounding in Financial/Directors’
Reports) Instrument 2016/191 and in accordance with
that instrument, 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 AASBs requires
Management to make judgments, estimates and
40 | GBST HOLDINGS LIMITED ABN 85 010 488 874
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 3
and 11);
• utilisation of tax losses (Note 15).
Measurement of fair values
A number of the Group’s accounting policies and
disclosures require the measurement of fair values, for
both financial and non-financial assets and liabilities.
The Group has an established framework with respect
to the measurement of fair values, whereby significant
fair value measurements determined by Management,
including Level 3 fair values (refer below), are reported
to the Group’s Audit & Risk Committee. If third party
information is used to measure fair values, then
evidence obtained from the third parties to support the
conclusion is assessed such that valuations meet the
requirements of AASB, including the level in the fair
value hierarchy in which valuations should be classified.
When measuring fair value of an asset or a liability, the
Group uses observable market data as far as possible.
Fair values are categorised into different levels in
fair value hierarchy based on the inputs used in the
valuation techniques as follows:
• Level 1 – quoted prices (unadjusted) in active markets
for identical assets or liabilities;
• Level 2 – inputs other than quoted prices included in
Level 1 that are observable for the asset or liability,
either directly or indirectly;
• Level 3 – inputs for the asset or liability that
are not based on observable market data
(unobservable inputs).
Notesto and forming part of the Consolidated Financial Statements for the year ended 30 June 2017 If the inputs used to measure the fair value of an
asset or liability fall into different levels of the fair
value hierarchy, then the fair value measurement is
categorised in its entirety in the same level of the fair
value hierarchy as the lowest input that is significant to
the entire measurement.
Changes in accounting policies
For the year ended 30 June 2017, there has been no
significant change in accounting policies since the
previous year for the Group.
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.
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.
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.
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.
Deferred tax assets and liabilities are offset if 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-consolidated Group was 1 July 2003.
Work in Progress
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
2017 ANNUAL REPORT | 41
Note 3: Significant Accounting Policies (continued)
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.
are classified as finance leases. All other leases are
operating leases and are not recognised on the Group’s
statement of financial position.
The depreciation rates used for each class of assets are:
Owned software
Class of Fixed Asset
Depreciation
Rate
Basis
Leased software
Amortisation
Rate
Basis
25%
25%
Straight-Line
Straight-Line
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.
Class of
Fixed Asset
Owned plant,
equipment
Owned plant,
equipment
5%-33%
Straight-Line
15-67%
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
42 | GBST HOLDINGS LIMITED ABN 85 010 488 874
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 asset 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.
Payments made under operating leases are recognised
in profit or loss on a straight-line basis over the term of
the lease. Lease incentives received are recognised as
an integral part of the total lease expense, over the term
of the lease.
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:
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.
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.
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.
Notesto and forming part of the Consolidated Financial Statements for the year ended 30 June 2017 continued 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.
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.
Other financial liabilities comprise loans and
borrowings, bank overdrafts and trade and
other payables.
(ii) Non-derivative financial assets
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.
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.
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.
Subsequent to initial recognition, these financial
liabilities are measured at amortised cost using the
effective interest rate method.
The Group considers evidence of impairment for
receivables at both a specific asset and collective level.
All individually significant receivables are assessed
2017 ANNUAL REPORT | 43
Note 3: Significant Accounting Policies (continued)
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.
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
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.
44 | GBST HOLDINGS LIMITED ABN 85 010 488 874
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 for those entitlements. Those cash flows are
discounted using market yields on corporate 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 an 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.
Notesto and forming part of the Consolidated Financial Statements for the year ended 30 June 2017 continued 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;
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.
• The licensee is able to exploit its rights to the license
freely; and
Sale of third party product
• 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.
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.
All revenue is stated net of the amount of goods and
services tax (GST) or Value added Tax (VAT).
Maintenance/support service revenue for
licensed software
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.
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.
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
2017 ANNUAL REPORT | 45
Note 3: Significant Accounting Policies (continued)
and the weighted average number of ordinary shares
outstanding for the effects of all dilutive potential
ordinary shares, which comprise of performance rights
granted to employees.
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 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 | GBST HOLDINGS LIMITED ABN 85 010 488 874
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 2017, and have not been applied
in preparing these consolidated financial statements.
AASB15 Revenue from Contracts with Customers
AASB 15 establishes a comprehensive framework for
determining whether, how much and when revenue is
recognised. It replaces existing revenue recognition
guidance, including AASB 18 Revenue, AASB 11
Construction Contracts and AASB Interpretation 13
Customer Loyalty Programs.
AASB 15 is effective for annual reporting periods
beginning on or after 1 January 2018, with early
adoption permitted.
The Group is continuing to assess the potential
impact of AASB15 on its systems, processes,
consolidated financial statements and reported
results. A detailed implementation plan has been
prepared and preparatory work will continue over
the next 12 months prior to reporting under the new
standard from 1 July 2018. GBST expects to use the
modified retrospective transition approach prescribed
by the standard, whereby the cumulative effect of
its application to incomplete contracts is posted
to the retained earnings account (with required
additional disclosures).
Notesto and forming part of the Consolidated Financial Statements for the year ended 30 June 2017 continued An initial assessment of multifaceted contracts was
drafted for consideration by the Audit and Risk
Committee and external auditors. Once an initial view
has been formed about likely revenue treatments,
this assessment will need to be applied to all major
incomplete contracts to determine an overall impact
on the Group’s results. Key issues to be reviewed and
determined for each contract include:
• Whether Licence fees should be bundled with
customisation and development services or
maintenance and upgrade services and treated as
combined Performance Obligations;
• Whether the Licence Fees or combined Performance
Obligations created above should be recognised at a
point in time or over time (such as the licence term);
• How to separately fair value components or
individual Performance Obligations within a
multiservice contract, where stand-alone market
prices for some services may not exist.
Due to the complexity and material differences
between many contracts across GBST’s product and
service range, it is not possible to quantify or specify
the likely impact of these assessments at this time.
AASB 9 Financial Instruments
AASB 9, published in July 2014, replaces the existing
guidance in AASB 139 Financial Instruments:
Recognition and Measurement. AASB 9 includes
revised guidance on the classification and measurement
of financial instruments, a new expected credit loss
model for calculating impairment on financial assets,
and new general hedge accounting requirements. It
also carries forward the guidance on recognition and
derecognition of financial instruments from AASB
139. AASB 9 is effective for annual reporting periods
beginning on or after 1 January 2018, with early
adoption permitted.
The Group is assessing the potential impact on its
consolidated financial statements resulting from
the application of AASB 9. The actual impact of
adopting AASB 9 on the Group’s consolidated financial
statements in 2018 is not known and cannot be reliably
estimated because it will be dependent on the financial
instruments that the Group holds and economic
conditions at that time as well as accounting elections
and judgements that it will make in the future. The new
standard will require the Group to revise its accounting
processes and internal controls related to reporting
financial instruments and these changes are not
yet complete.
AASB 16 Leases
AASB 16 removes the lease classification test for
lessees as either operating leases or finance leases as
is required by AASB 17 and instead, introduces a single
lessee accounting model. Applying that model, a lessee
is required to recognise and disclose:
1. assets and liabilities for all leases with a term of
more than 12 months, unless the underlying asset is
of low value; and
2. amortisation of lease assets separately from interest
on lease liabilities in the income statement.
AASB 16 is effective for annual reporting periods
beginning on or after 1 January 2019, with early
adoption permitted, where AASB 15 is adopted at the
same time.
At GBST, operating leases with terms of more than
12 months relate to leases of office facilities.
The Group is assessing the potential impact on its
consolidated financial statements resulting from the
application of AASB 16.
On a high-level basis, if the Group was to adopt AASB
16 as at 30 June 2017, the present value of the future
minimum lease payments for non-cancellable operating
leases as noted in Note 20 would be recognised as a
financial liability in the statement of financial position,
and under one of the transition provisions available
to the Group, it would recognise a corresponding
amount as a Right-of-Use asset. In addition, the nature
of expenses related to those leases will now change
as AASB 16 replaces the straight-line operating lease
expense with a depreciation charge for right-of-use
assets and interest expense on lease liabilities.
2017 ANNUAL REPORT | 47
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 & development 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 for superannuation & other
retirement benefits of $3.64m (2016: $4.09m))
Share based payments
(d) Finance costs:
Foreign currency (gains)/losses
Interest paid to external entities
Finance lease charges
Facility fees
(e) Finance income:
Bank interest
GBST GROUP
30 Jun 2017
$’000
30 Jun 2016
$’000
1,655
2,821
18,837
4,090
3,203
18,139
2,216
2,556
55
4,084
6,355
140
4,666
7,362
48,026
55,537
(301)
(94)
47,725
55,443
608
12
2
81
703
92
92
667
1
45
104
817
41
41
48 | GBST HOLDINGS LIMITED ABN 85 010 488 874
Notesto and forming part of the Consolidated Financial Statements for the year ended 30 June 2017 continued NOTE 5: INCOME TAX EXPENSE
(a) The components of tax expense comprise:
Current tax
Deferred tax (Note 15 (c)(i))
Over 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 at 30%
Adjustment for tax effect of:
Research & development expenditure claim
Contributions to Employees Share and Option Plan
UK R&D tax credit – current & prior years(1)
Over provision in respect of prior years
Current year losses for which no deferred tax asset was recognised
Other (deductible)/non-allowable items (net)
Reduction in tax rate on deferred tax balances
Effect of different tax rates of subsidiaries operating in other jurisdictions
Income tax credit attributable to entity
Weighted average effective tax rates:
GBST GROUP
30 Jun 2017
$’000
30 Jun 2016
$’000
1,421
(3,103)
(280)
(1,962)
619
(594)
(238)
(213)
5,023
1,507
9,057
2,717
(2,387)
(559)
(78)
(280)
318
(14)
21
(490)
(1,962)
(39%)
(1,991)
(1,023)
(616)
(238)
1,201
376
60
(699)
(213)
(2%)
(i) The UK permits the surrender of research and development enhanced tax losses in exchange for a refundable tax credit. The above figure includes the credit
arising in relation to the year ended 30 June 2017.
2017 ANNUAL REPORT | 49
NOTE 6: DIVIDENDS
Dividends paid in the period:
2016 final fully franked (at 30%) dividend paid of 5.5 cents per share (2015: 5.5)
2017 Interim fully franked (at 30%) dividend paid of 3.7 cents per share (2016: 5.5)
Net Dividend paid
GBST GROUP
30 Jun 2017
$’000
30 Jun 2016
$’000
3,732
2,511
6,243
3,661
3,708
7,369
After the reporting date the Directors recommended a final dividend of 2.5 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 14 October 2017. 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 2017
$’000
30 Jun 2016
$’000
13,443
16,231
13,063
13,486
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 on deposit
Cash and cash equivalents in the Statement of Cash flows
NOTE 8: TRADE AND OTHER RECEIVABLES
Current
Trade receivables
Accrued revenue
Other amounts receivable
GBST GROUP
30 Jun 2017
$’000
30 Jun 2016
$’000
10,376
9,011
1,352
11,728
–
9,011
GBST GROUP
30 Jun 2017
$’000
30 Jun 2016
$’000
11,917
12,981
377
366
343
493
12,660
13,817
An allowance for impairment is recognised when there is objective evidence that an individual trade or term
receivable is impaired, including factors such as the amount of time a receivable has been outstanding and the
solvency of the counterparty. The movement in allowance for impairment during the year was an impairment loss
recognised of $281k (2016: $341k). The amount written off of $1,196k was provided for in previous years (2016: $12k).
50 | GBST HOLDINGS LIMITED ABN 85 010 488 874
Notesto and forming part of the Consolidated Financial Statements for the year ended 30 June 2017 continued NOTE 9: WORK IN PROGRESS
Current – at cost
Work in progress
Non-Current – at cost
Work in progress
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 2016
Balance at 1 July 2015
Additions
Disposals
Depreciation expense
Effect of movements in exchange rates
Balance at 30 June 2016
Year ended 30 June 2017
Balance at 1 July 2016
Additions
Disposals
Depreciation expense
Effect of movements in exchange rates
Balance at 30 June 2017
GBST GROUP
30 Jun 2017
$’000
30 Jun 2016
$’000
4,092
4,092
3,396
3,396
788
788
84
84
GBST GROUP
30 Jun 2017
$’000
30 Jun 2016
$’000
21,653
21,136
(15,121)
(13,050)
6,532
1,140
(1,130)
10
6,542
8,086
1,205
(1,175)
30
8,116
Owned
$’000
Leased
$’000
Total
$’000
8,139
2,682
(75)
(2,556)
(104)
8,086
8,086
786
–
(2,216)
(124)
6,532
86
–
–
8,225
2,682
(75)
(57)
(2,613)
1
30
30
–
–
(103)
8,116
8,116
786
–
(20)
(2,236)
–
10
(124)
6,542
Plant and equipment was impairment tested in conjunction with intangible assets, refer Note 11.
2017 ANNUAL REPORT | 51
NOTE 11: INTANGIBLE ASSETS
At Cost
Software systems
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 2016
Balance at 1 July 2015
Additions – externally acquired
Additions – internally developed
Amortisation charge
GBST GROUP
30 Jun 2017
$’000
30 Jun 2016
$’000
43,632
43,642
(38,561)
(35,333)
5,071
8,309
45,138
45,988
(5,283)
(5,638)
39,855
40,350
626
(432)
194
626
(396)
230
45,120
48,889
Software
Systems
$’000
Goodwill
$’000
Leased
Software
$’000
Total
$’000
12,761
41,420
164
709
(4,666)
–
–
–
139
174
–
54,320
338
709
(83)
(4,749)
Effect of movements in exchange rates
(659)
(1,070)
–
(1,729)
Balance at 30 June 2016
8,309
40,350
230
48,889
Year ended 30 June 2017
Balance at 1 July 2016
Additions – externally acquired
Additions – internally developed
Amortisation charge
8,309
40,350
230
48,889
316
839
(4,084)
–
–
–
–
–
(35)
(1)
316
839
(4,119)
(805)
Effect of movements in exchange rates
(309)
(495)
Balance at 30 June 2017
5,071
39,855
194
45,120
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 indefinite life.
The effect of movements in exchange rates represent the period to period foreign currency translation of assets
denominated in Great British Pounds, Hong Kong Dollars, Singapore Dollars and US Dollars.
52 | GBST HOLDINGS LIMITED ABN 85 010 488 874
Notesto and forming part of the Consolidated Financial Statements for the year ended 30 June 2017 continued Impairment Disclosures
Intangible assets with finite lives are reviewed for impairment where there are indicators that the carrying
amount may not be recoverable. Goodwill is tested for impairment at least annually and is allocated to each Cash
Generating Unit (CGU) as below:
Capital Markets Australia (Palion)
Wealth Management Australia (InfoComp)
Capital Markets International (Coexis)
Financial Services (Emu)
Total Goodwill
30 Jun 2017
$’000
30 Jun 2016
$’000
3,350
3,350
28,238
28,238
7,381
886
7,876
886
39,855
40,350
InfoComp, Palion and Emu CGUs
The recoverable amount of goodwill for each CGU was based on value in use, estimated using discounted cash
flow projections. The cash flow projections included specific estimates for five years and a terminal growth rate
thereafter. The first year cash flow projections are based on 2018 Board approved budgets, while cash flow
projections for years two to five are based on Management assumptions set out below.
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. 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. 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.
Coexis CGU
The recoverable amount of the Coexis CGU was determined using a fair value less costs of disposal method,
estimated using discounted cash flows. The fair value measurement was categorised as a Level 3 fair value, based
on the inputs in the valuation technique used (refer to Note 2).
The cash flow projections included specific estimates for four years and a terminal growth rate thereafter. The first
and subsequent year’s cash flow projections are based on the latest 2017 normalised actual results and use growth
rates in line with historical and future expected performance along with an assessment of costs if Coexis was
operating on a standalone basis.
The key assumptions used for fair value less costs of disposal are outlined below together with sensitivity analysis
for those assumptions. 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. Terminal growth rates are based on forecast real GDP
growth and CPI in the UK and forecast growth in the industry.
2017 ANNUAL REPORT | 53
Note 11: Intangible Assets (continued)
A summary of key assumptions for Coexis and other CGU’s is presented below:
2016
Calculation Method
Revenue growth rates
Cost growth rates
Long term growth rates
Post-tax discount rate
2017
Calculation Method
Revenue growth rates
Cost growth rates
Long term growth rates
Post-tax discount rate
Coexis
Fair value
less cost to
disposal
InfoComp
Value-in-use
Palion
Value-in-use
EMU
Value-in-use
3-6%
3-5%
2.5%
14.1%
7.5%
4.0%
3.0%
9.6%
0.0%
4.0%
3.0%
12.3%
7.5%
4.0%
3.0%
12.3%
Coexis
Fair value
less cost to
sell
InfoComp
Value-in-use
Palion
Value-in-use
EMU
Value-in-use
3-6%
3-5%
2.5%
7.5%
4.0%
3.0%
0.0%
4.0%
3.0%
7.5%
4.0%
3.0%
15.0%
10.0%
13.0%
13.0%
Future anticipated cash flows for all CGU’s indicate that the carrying value of the intangible assets were not
required to be impaired in 2017.
For the Coexis fair value, Management has identified that a reasonably possible change in the following
assumptions would cause the carrying amount to exceed the recoverable amount:
Decrease of annual revenue against forecast by
Increase of annual costs above forecast by
Increase of post-tax discount rate by
NOTE 12: OTHER ASSETS
Current
Prepaid expenditure
Non-Current
Prepaid expenditure
54 | GBST HOLDINGS LIMITED ABN 85 010 488 874
10.8% (June 2016: 1.7%)
13.7% (June 2016: 2.3%)
12.1% (June 2016: 1.4%)
GBST GROUP
30 Jun 2017
$’000
30 Jun 2016
$’000
2,217
2,217
2,374
2,374
151
151
112
112
Notesto and forming part of the Consolidated Financial Statements for the year ended 30 June 2017 continued NOTE 13: TRADE AND OTHER PAYABLES
Current (unsecured)
Trade payables & accruals
Leasehold liability
Non-Current (unsecured)
Trade payables & accruals
Leasehold liability
NOTE 14: LOANS AND BORROWINGS
Current
Commercial loan facility (secured)
Finance lease liability (Note 20)
Non-Current
Finance lease liability (Note 20)
GBST GROUP
30 Jun 2017
$’000
30 Jun 2016
$’000
6,451
288
6,739
800
1,206
2,006
6,631
288
6,919
932
1,494
2,426
GBST GROUP
30 Jun 2017
$’000
30 Jun 2016
$’000
176
76
252
–
–
252
21
79
100
76
76
176
2017 ANNUAL REPORT | 55
NOTE 15: TAX
(a) Deferred tax liabilities
Deferred tax liability comprises:
Tax allowances relating to plant and equipment
Tax allowances relating to intangibles
Other items
(b) Deferred tax assets
Deferred tax assets comprise:
Provisions
Tax allowances relating to plant and equipment
Tax allowances relating to intangibles
Other items*
Recognised tax losses
GBST GROUP
30 Jun 2017
$’000
30 Jun 2016
$’000
117
693
–
810
2,352
389
2,958
1,525
1,554
8,778
180
1,253
25
1,458
2,134
356
2,592
–
1,224
6,306
*Other items include deferred tax assets arising from income classified as unearned for accounting purposes but accessable for tax purposes.
(c) Reconciliations
Net Movement
The overall movement in the net deferred tax account is as follows:
Opening balance
Credited to the income statement
Foreign currency translation
Charge to equity
Closing balance
(d) Total deferred tax assets not brought to account as at reporting
period end:
– tax losses: operating losses
– tax losses: capital losses
4,848
3,103
(64)
81
4,218
594
(137)
173
7,968
4,848
6,878
1,147
6,618
1,147
In respect of the deferred tax assets which have not been recognised in relation to operating losses for tax
purposes, 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 Subsidiary of the Group for which it has allowable tax concessions.
56 | GBST HOLDINGS LIMITED ABN 85 010 488 874
Notesto and forming part of the Consolidated Financial Statements for the year ended 30 June 2017 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 2017
GBST GROUP
30 Jun 2017
$’000
30 Jun 2016
$’000
6,007
5,567
51
–
6,058
5,567
1,158
1,086
2,244
Make Good
$’000
1,138
–
–
(1)
1,079
1,138
2,217
Total
$’000
7,784
3,718
(3,056)
(144)
1,137
8,302
Employee
benefits
$’000
6,646
3,718
(3,056)
(143)
7,165
(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 2018 to 2026.
NOTE 17: UNEARNED INCOME
Current
Revenue received in advance for software usage and support services
GBST GROUP
30 Jun 2017
$’000
30 Jun 2016
$’000
9,449
9,449
9,588
9,588
2017 ANNUAL REPORT | 57
NOTE 18: ISSUED CAPITAL
Fully paid ordinary shares – opening balance
Issuing of ordinary shares – vesting of performance rights
Ordinary shares
Opening Balance
Issuing of ordinary shares – vesting of performance rights
GBST GROUP
30 Jun 2017
$’000
30 Jun 2016
$’000
38,366
37,664
1,107
702
39,473
38,366
No.
No.
67,423,542
66,561,725
435,376
861,817
67,858,918 67,423,542
Ordinary shares participate in dividends and the proceeds of winding up of the parent entity in proportion to
the number of shares held, should that event occur. 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
GBST GROUP
30 Jun 2017
$’000
30 Jun 2016
$’000
205
1,613
(4,358)
(2,912)
(4,153)
(1,299)
58 | GBST HOLDINGS LIMITED ABN 85 010 488 874
Notesto and forming part of the Consolidated Financial Statements for the year ended 30 June 2017 continued 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 2017
$’000
30 Jun 2016
$’000
80
–
80
(4)
76
76
–
76
82
80
162
(7)
155
79
76
155
Finance leases relate to items of plant and equipment and have options to acquire the items on termination.
(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
3,293
12,537
2,593
18,423
3,388
13,015
4,868
21,271
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
Contracted for:
Capital purchases
Other operating purchases
Payable
Not later than one year
167
490
657
657
657
63
107
170
170
170
2017 ANNUAL REPORT | 59
NOTE 21: AUDITORS’ REMUNERATION
Audit Services
KPMG Australia
GBST GROUP
30 Jun 2017
$
30 Jun 2016
$
Audit & review of financial reports
300,746
240,100
Overseas KPMG firms
Audit & review of financial reports
Other Services
KPMG Australia
Taxation services
Other services
Overseas KPMG firms
Taxation services
Other services
174,941
156,379
475,687
396,479
97,707
131,990
25,258
193,437
169,584
101,822
10,309
5,978
302,858
433,227
60 | GBST HOLDINGS LIMITED ABN 85 010 488 874
Notesto and forming part of the Consolidated Financial Statements for the year ended 30 June 2017 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 Employee Share Scheme Trust
Principal place of Business
Percentage Owned
Australia
Australia
Australia
Australia
100% (June 2016: 100%)
100% (June 2016: 100%)
100% (June 2016: 100%)
100% (June 2016: 100%)
GBST Ltd
United Kingdom
100% (June 2016: 100%)
GBST (Australia) Pty Ltd*
Australia
100% (June 2016: 100%)
Subsidiaries of GBST Ltd:
GBST Inc
United States of America
100% (June 2016: 100%)
GBST Singapore Pte Limited
Singapore
100% (June 2016: 100%)
Subsidiaries of GBST Australia Pty Ltd:
GBST Hong Kong Limited
GBST Registry Solutions Pty Ltd*
GBST Wealth Management Pty Ltd*
Hong Kong
Australia
Australia
100% (June 2016: 100%)
100% (June 2016: 100%)
100% (June 2016: 100%)
Subsidiaries of GBST Wealth Management Pty Ltd:
GBST UK Holdings Limited
United Kingdom
100% (June 2016: 100%)
Subsidiaries of GBST UK Holdings Ltd:
GBST Hosting Limited
United Kingdom
100% (June 2016: 100%)
GBST Wealth Management Limited
United Kingdom
100% (June 2016: 100%)
* Pursuant to Wholly owned companies instrument 2016/785 (16RU-008) these wholly-owned controlled entities are relieved from the Corporations Act (2001)
requirements for preparation, audit and lodgement of financial reports and Directors’ Report.
(b) Deed of Cross Guarantee
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.
2017 ANNUAL REPORT | 61
Note 22: Other Group Entities (continued)
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 2017 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 benefit/(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 2017
$’000
30 Jun 2016
$’000
49,911
12,036
1,023
60
56,971
17,029
1,597
120
2,686
8,532
(844)
(1,119)
92
40
(752)
(1,079)
1,934
7,453
1,177
3,111
3,111
514
7,967
7,967
–
–
3,111
7,967
22,491
22,543
–
3,111
(650)
7,967
(6,243)
(7,369)
19,359
22,491
62 | GBST HOLDINGS LIMITED ABN 85 010 488 874
Notesto and forming part of the Consolidated Financial Statements for the year ended 30 June 2017 continued iii. Statement of Financial Position
Current Assets
Cash and cash equivalents
Trade and other receivables
Work in progress
Current tax receivable
Other assets
Total Current Assets
Non-Current Assets
Work in progress
Property, plant and equipment
Intangible assets
Investments
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
CLOSED GROUP AND
PARTIES TO DEED OF
CROSS GUARANTEE
30 Jun 2017
$’000
30 Jun 2016
$’000
5,620
9,306
2,940
–
1,648
3,893
12,646
1,955
1,156
1,837
19,514
21,487
788
84
6,726
6,667
33,258
35,458
9,690
12,055
7,140
5,045
28
77
57,630
59,386
77,144
80,873
3,455
3,769
252
348
5,825
7,219
17,099
100
–
5,499
6,777
16,145
1,792
2,300
–
693
1,888
4,373
76
1,254
1,794
5,424
21,472
21,569
55,672
59,304
39,473
38,366
(3,160)
(1,553)
19,359
22,491
55,672
59,304
2017 ANNUAL REPORT | 63
NOTE 23: FINANCING ARRANGEMENTS
Financing facilities(a)
Amount utilised
Unused credit facility
GBST GROUP
30 Jun 2017
$’000
30 Jun 2016
$’000
13,582
13,668
(1,989)
(4,501)
11,593
9,167
(a) The balance as at 30 June 2017 primarily comprises of facilities for working capital, bank guarantees, equipment finance and corporate cards with
Commonwealth Bank of Australia (CBA) and HSBC.
NOTE 24: CASH FLOW INFORMATION
GBST GROUP
30 Jun 2017
$’000
30 Jun 2016
$’000
(a) Reconciliation of Net Cash provided by Operating Activities to Profit after Income Tax
Profit after income tax
Non-cash flows in operating profit:
Depreciation and amortisation
Profit on sale of plant and equipment
Share based payments
Changes in assets and liabilities:
Change in receivables
Change in other assets
Change in unearned income
Change in work in progress
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)
6,985
9,270
6,355
7,362
(2)
(301)
1,157
118
(139)
(1,400)
(3,120)
1,769
(11)
(94)
1,810
(145)
(825)
(400)
(630)
(359)
(1,022)
(3,615)
518
(423)
10,918
11,940
11,728
11,728
9,011
9,011
(c) Non-cash Financing Activities
During the 2017 financial year the Group acquired software with an aggregate value of $nil (2016: $174k) by means
of finance leases and acquired plant and equipment of $263k (2016: $nil) by means of an equipment loan.
NOTE 25: OPERATING SEGMENT
From 1 July 2016 the Group’s management structure and reporting was reorganised into three regional business
units – Australia (inclusive of two operating segments: Capital Markets and Wealth Management); United Kingdom
– Wealth Management and Rest of the World – Capital Markets. The strategic business units offer different
products and services, and are managed separately because they require different technology and marketing
strategies. For each business unit, the CEO reviews internal management reports on a monthly basis. The following
summary describes the operations in each of the Group’s reportable segments:
64 | GBST HOLDINGS LIMITED ABN 85 010 488 874
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2017 ANNUAL REPORT | 65
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Note 25: Operating Segment (continued)
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.
* Inter-segment revenue received by Rest of the World of $23k from Australia (2016: $1.6m) for use of intangible assets is not included to align with
reporting to CEO. In addition, margin to reflect arm’s length transactions for re-charges for software development work charges and other costs received
by Australia from Rest of the World of $740k (2016: $1.2m revenue), and by Rest of the World from Australia $1.3m (2016: $1.3m revenue) and by Australia
and United Kingdom of $1.1m (2016: $1.8m). United Kingdom revenue includes all license revenue relating to United Kingdom based clients and as IP is
owned by Australia an inter-segment sales commission of $5.7m is remitted to the UK. (2016: $5.5m). Inter-segment revenue with an associated direct
external cost (typically direct labour costs) is included.
Major Customers
Revenues from the top five customers of the Group represents $37.1m (2016: $43.1m) of the Group’s total revenues.
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.
NOTE 26: FINANCIAL RISK MANAGEMENT
(a) Financial Risk Management Policies
The Group’s principal financial instruments comprise of accounts receivable and payable, bank accounts, loans and
overdrafts and finance leases.
The main purpose of these financial instruments is to provide operating finance to the Group.
It is, and has been throughout the period, the Group’s policy that financial instruments held are not intended for
trading purposes.
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.
Australian variable interest rate risk
At reporting period, the Group had the following mix of financial assets exposed to Australian variable interest
rate risk.
Financial assets
Cash
66 | GBST HOLDINGS LIMITED ABN 85 010 488 874
GBST GROUP
2017
$’000
2016
$’000
2,492
2,492
478
478
Notesto and forming part of the Consolidated Financial Statements for the year ended 30 June 2017 continued 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 date, the Group did not have any foreign currency accounts that were exposed to variable interest
rate risk.
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 purchases 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
2017
2016
Cash and
Receivables
$’000
12,680
3,887
2
508
230
Payables
$’000
3,035
154
–
77
240
Cash and
Receivables
$’000
10,987
4,500
11
139
198
Payables
$’000
2,939
60
–
112
162
17,307
3,506
15,835
3,273
(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.
(d) Credit Risk
The maximum exposure to 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 42% (2016: 40%)
of the Group’s revenue is derived from five customers providing financial services, who represent 42% of the gross
trade debtor balance as at 30 June 2017. All Australian clients satisfy the minimum core capital requirements of the
ASX (where applicable).
Trade debtor terms range between fourteen to thirty days. Included in the Group’s trade receivable balance are
debtors with a carrying amount of $4.38m (2016: $3.28m) which are past due at the reporting date for which the
2017 ANNUAL REPORT | 67
Note 26: Financial Risk Management (continued)
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 27 days (2016:
32 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
2017
Gross
$’000
7,529
2,436
1,028
1,217
12,210
Impairment
$’000
–
–
–
293
293
2016
Gross
$’000
9,748
622
2,479
1,340
14,189
Impairment
$’000
50
–
49
1,109
1,208
The movement in the allowance for impairment in respect of trade receivables during the year was as follows:
Opening balance
Impairment loss recognised
Amounts written off
Closing balance
GBST GROUP
CARRYING AMOUNT
2017
$’000
1,208
281
(1,196)
293
2016
$’000
879
341
(12)
1,208
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
2017
$’000
2016
$’000
11,728
12,660
24,388
9,011
13,817
22,828
The maximum exposure to credit risk for trade and other receivables at reporting date by geographic region was:
Australia & New Zealand
Europe
Asia
North America
(e) Financial Instruments
(i) Liquidity Risk:
GBST GROUP
CARRYING AMOUNT
2017
$’000
2016
$’000
4,572
5,794
1,298
996
12,660
6,516
5,039
2,237
25
13,817
The following table reflects the undiscounted contractual settlement terms for financial liabilities including
interest payments:
68 | GBST HOLDINGS LIMITED ABN 85 010 488 874
Notesto and forming part of the Consolidated Financial Statements for the year ended 30 June 2017 continued 0-1 YEARS
1-2 YEARS
2-5 YEARS
OVER 5 YEARS
TOTAL
CARRYING
AMOUNTS
GBST Group
2017
$’000
2016
$’000
2017
$’000
2016
$’000
2017
$’000
2016
$’000
2017
$’000
2016
$’000
2017
$’000
2016
$’000
2017
$’000
2016
$’000
Financial Liabilities
Bank loan
Lease
facilities(1)
Trade & other
payables
TOTAL
FINANCIAL
LIABILITIES
176
–
80
82
–
–
–
80
–
–
–
–
–
–
–
176
–
176
–
–
80
162
76
155
6,739
6,919
487
546
1,345
1,511
174
369
8,745 9,345
8,745 9,345
6,995
7,001
487
626
1,345
1,511
174
369 9,001 9,507 8,997 9,500
(i) These items have fixed interest rates. All other items are non-interest bearing.
(ii) Net Fair Values
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. For other financial assets and financial liabilities their carrying
amount is a reasonable approximation of their fair 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.
For financial assets and liabilities of the Group, the carrying value is a reasonable approximation of the 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 and foreign currency 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.
2017 ANNUAL REPORT | 69
Note 26: Financial Risk Management (continued)
Foreign Currency Risk Sensitivity Analysis
At 30 June 2017, the effect on profit as a result of changes in the value of currencies relevant to GBST’s operations
not denominated in Australian dollars (with all other variables remaining constant) is as follows:
(i) Profit:
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 SGD by 10%
Decline in AUD to SGD by 10%
Improvement in AUD to HKD by 10%
Decline in AUD to HKD by 10%
(ii) Equity:
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 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
2017
$’000
2016
$’000
454
(454)
(81)
81
9
(9)
6
(6)
422
(422)
(301)
301
25
(25)
6
(6)
GBST GROUP
2017
$’000
2016
$’000
1,850
(1,850)
(1,046)
1,046
62
(62)
54
(54)
1,530
(1,530)
(968)
968
55
(55)
62
(62)
NOTE 27: CONTINGENT LIABILITIES
During the year, GBST advanced $273,000 to a former director and executive, Mr Stephen Lake, in accordance
with the terms of the Deed of Access, Indemnity and Insurance (“the Deed”) with Mr Lake. The advances were
paid to cover legal costs incurred in defending proceedings brought against Mr Lake in the Supreme Court of
Queensland by Mr Malcolm Murdoch, a former director and shareholder of GBST. The proceedings relate to a
dispute surrounding the terms on which proceedings by Mr Murdoch in 2003 were settled in 2004. All amounts
advanced by GBST under the Deed are repayable if, upon the final adjudication of the proceedings, Mr Lake is not
entitled to be indemnified by GBST. To date, GBST has advanced a total of $1.15m to Mr Lake to cover legal costs
incurred in defending these proceedings since he first claimed under his indemnity in 2012. These amounts are
expensed as incurred.
The indemnity provided results in the Group having a potential liability for further legal fees.
As previously disclosed to the ASX on 26 March 2016, the Company is involved in a dispute with its former
Managing Director and CEO, Stephen Lake, regarding the termination of his employment. An amended claim
and statement of claim was received by the Company on 14 November 2016. The Company intends to vigorously
70 | GBST HOLDINGS LIMITED ABN 85 010 488 874
Notesto and forming part of the Consolidated Financial Statements for the year ended 30 June 2017 continued defend the claim. On the basis of present information, the Company has made no provision for any loss or damage
in relation to this claim.
As at 30 June 2017, 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.
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.
Key Management Personnel Compensation
Short-term employee benefits
Post-employment benefits
Other long-term benefits
Termination benefits
Share-based payments
GBST GROUP
2017
$
2016
$
2,733,333
3,192,272
163,851
159,370
39,524
37,343
–
142,643
(247,883)
(55,594)
2,688,825
3,476,034
Detailed disclosures on compensation for Key Management Personnel are set out in the Remuneration Report
included in the Directors’ Report.
Key Management Personnel Transactions
Mr Kim Sundell and Dr Ian Thomas are Directors and shareholders of FinClear Pty Ltd (‘FinClear’). On
10 October 2016, FinClear purchased Lonsec Limited which had an existing agreement with GBST for the provision
of front office services (‘Agreement’). This Agreement ended on 3 February 2017 and GBST does not currently
provide any other products or services to FinClear. The total revenue relating to the front office agreement was
$6.5k during the financial year. The amount owing at 30 June 2017 was $nil. There were no doubtful debts provided
for or expensed during the period with regard to these transactions. The terms and conditions of the Agreement
are no more favourable than those available, or which might be reasonably expected to be available, in similar
transactions with non-key management personnel related companies on an arm’s length basis.
NOTE 29: SHARE BASED PAYMENTS
Performance rights are issued under the Company’s LTI Plan approved at the Company’s 2012 Annual General
Meeting. The LTI Plan involves the use of performance rights to acquire shares in the Company.
The LTI Plan is designed to reward employees in a manner which aligns this element of remuneration with the
financial performance of the Company and the interests of shareholders. As such, grants under the LTI Plan 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.
Selected employees are made individual offers of specific numbers of performance rights at the discretion of the
Board and in accordance with the LTI Plan rules. The Board may determine the number of performance rights,
vesting conditions, vesting period, exercise price and expiry date. Performance rights may be granted at any time,
subject to the Corporations Act and ASX Listing Rules.
The Company uses Earnings per Share (EPS) as a performance hurdle for the LTI Plan, measured by growth in
earnings per share. EPS was selected to align employee and shareholder interests. Participants in the LTI Plan are
also required to meet continued service conditions in order to exercise the performance rights.
Options
There were no options issued during the period.
2017 ANNUAL REPORT | 71
Note 29: Share Based Payments (continued)
Share Performance Rights
On 26 September 2016, 435,376 performance rights issued on 24 September 2013 vested. The remainder of
performance rights issued on 24 September 2013 lapsed prior to the vesting date and have expired.
The performance rights issued in the 2014 financial year were tested against the cumulative EPS targets resulting
in forfeiture of 75% of the outstanding performance rights due to failure to meet the financial performance targets
EPS targets of 50 cents, and 60 cents for 50% and 100% vesting respectively (interpolated).
On 26 September 2016 and 27 October 2016, the Group issued 311,863 and 62,124 performance rights to selected
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 2019 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.
These performance rights are to be forfeited due to failure to meet the financial performance target for the 2017
financial year.
During the year, the following movement in balances occurred:
24 September 2013
05 August 2014
26 September 2016
27 October 2016
Total
Opening
Balance
435,376
288,062
Granted
Forfeited
Exercised
Expired
–
–
(23,447)
–
(435,376)
–
–
311,863
(55,912)
62,124
–
723,438
373,987
(79,359)
(435,376)
–
–
–
Closing
Balance
–
264,615
255,951
62,124
582,690
–
–
–
–
–
As at reporting date a net $301k benefit (2016: $94k benefit) was included in share based payments expense.
This benefit was as a result of employees not meeting the employment service conditions and performance rights
failing to meet the financial performance targets for the 2017 financial year:
(i) 75% of the 5 August 2014 and 16 October 2014 issue have subsequently lapsed as the performance hurdles were
not met at 30 June 2017.
(ii) 100% of the 26 September 2016 and 27 October 2016 issue have subsequently lapsed as the performance
hurdles were not met at 30 June 2017.
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 2017
Number
Jun 2017
WAEP
Jun 2016
Number
Jun 2016
WAEP
723,438
373,987
(79,359)
(435,376)
–
582,690
–
–
–
–
–
–
–
–
2,279,763
303,508
(998,016)
(861,817)
–
723,438
–
–
–
–
–
–
–
–
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.
Adjusting for the performance rights that subsequently lapsed as the performance hurdles were not met as at
the approval of these FY17 financial statements, the outstanding performance rights had a weighted remaining
contractual life of three months. Unless otherwise stated, all issues of performance rights under the plan have
a nil exercise price and vest in thirty-six months after the date of grant or the date of release of GBST’s audited
72 | GBST HOLDINGS LIMITED ABN 85 010 488 874
Notesto and forming part of the Consolidated Financial Statements for the year ended 30 June 2017 continued financial results, whichever is later. The share performance rights expire thirty days after the vesting date, and
are conditional on the employees meeting continuous service conditions and the group meeting certain financial
performance measures.
The performance criteria associated with the grant of share performance rights outstanding from prior years under
the GBST Performance Rights and Option Plan is detailed in the following table:
Grant Date
Financial Performance hurdle
24 September 2013(1)
Cumulative Earnings Per Share (EPS) Target
514,536 performance rights
• Subject to GBST achieving three year (2014 – 2016 financial years)
(435,376 exercised; remainder
forfeited)
cumulative EPS targets of 32 cents, 36 cents, and 40 cents for 25%,
50% and 100% vesting respectively (interpolated).
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.
5 August 2014(2)
Cumulative Earnings Per Share (EPS) Target
345,005 performance rights
• Subject to GBST achieving three year (2015 – 2017 financial years)
(198,465 – failed the cumulative EPS
target for 50 cents and 60 cents;
remainder 80,390 service target failed)
cumulative EPS targets of 45 cents, 50 cents, and 60 cents for 25%,
50% and 100% vesting respectively (interpolated).
Minimum EPS
• A minimum EPS of 10 cents is achieved in each year
Service Condition
• Continuous employment with the Group from grant date for
three years.
26 September 2016(3)
Cumulative Earnings Per Share (EPS) Target
373,987 performance rights
• Subject to GBST achieving three year (2017 – 2019 financial years)
(318,075 – failed minimum EPS target;
remainder service target failed)
cumulative EPS targets of 50 cents, 53 cents, and 57 cents for 25%,
50% and 100% vesting respectively (interpolated).
Minimum EPS
• A minimum EPS of 13 cents is achieved in each year
Service Condition
• Continuous employment with the Group from grant date for
three years.
(1) The fair value of the share performance rights of $2.54 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.
(2) The fair value of the share performance rights of $3.28 each was determined using the Binomial Approximation Option Valuation Model. The model
inputs were: the share price at date of grant $3.52, expected volatility of 45 percent, expected dividend yield of 2.298 percent, a term of three years and a
risk-free interest rate of 2.62 percent. The exercise price for the share performance rights is nil.
(3) The fair value of the share performance rights of $4.0242 each was determined using the Binomial Approximation Option Valuation Model. The model
inputs were: the share price at date of grant $4.32, expected volatility of 46.76 percent, expected dividend yield of 2.39 percent, a term of three years and
a risk-free interest rate of 1.54 percent. The exercise price for the share performance rights is nil.
2017 ANNUAL REPORT | 73
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 and dilutive EPS
(b) Weighted average number of ordinary shares
GBST GROUP
2017
2016
10.31
10.30
13.82
13.73
$’000
$’000
6,985
6,985
9,270
9,270
Weighted average number of ordinary shares outstanding during the year used in
calculation of basic EPS
67,755,143 67,076,604
Weighted average number of ordinary shares outstanding during the year used in
calculation of dilutive EPS
67,821,297
67,511,980
The weighted average number of performance rights that are due to vest (based on achievement of performance
conditions) in the period immediately following the reporting date are included for the purposes of calculating the
Group’s dilutive EPS.
NOTE 31: SUBSEQUENT EVENTS
The financial report was authorised for issue on 28 August 2017 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.
NOTE 32: PARENT ENTITY DISCLOSURES
As at, and throughout the financial year ending 30 June 2017 the parent company of the Group was GBST
Holdings Limited.
GBST HOLDINGS
30 Jun 2017
$’000
30 Jun 2016
$’000
Results of the Parent Entity
PROFIT ATTRIBUTABLE TO MEMBERS OF THE PARENT ENTITY
5,392
6,795
OTHER COMPREHENSIVE INCOME
Total 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
74 | GBST HOLDINGS LIMITED ABN 85 010 488 874
–
–
5,392
6,795
7,079
76,937
7,827
10,635
7,781
79,812
9,044
12,358
39,473
38,366
205
1,613
26,624
27,475
66,302
67,454
Notesto and forming part of the Consolidated Financial Statements for the year ended 30 June 2017 continued Parent Entity Contingencies
The Directors are of the opinion that no provisions are required in respect of parent entity contingencies. On the
basis of present information, the Company has made no provision for any loss or damage in relation to this claim.
Refer to Note 27.
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.
Parent Entity Capital and Other Expenditure Commitments
Contracted for:
Capital and other operating purchases
Payable
Not later than one year
Guarantees
Property Leases
GBST HOLDINGS
30 Jun 2017
$’000
30 Jun 2016
$’000
562
562
562
160
160
160
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.
2017 ANNUAL REPORT | 75
1.
In the opinion of the Directors of GBST Holdings Limited (‘the Company’):
a) the consolidated financial statements and Notes 1 to 32 and the Remuneration Report in the Directors’
Report, set out on pages 23 to 33, 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 2017 and of its performance for
the financial year ended on that date; and
(ii) complying with Australian Accounting Standards 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 Corporations (Wholly owned
Companies) Instrument 2016/785.
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 2017.
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:
Mr A J Brackin
Chairman
Mr R DeDominicis
Managing Director and Chief Executive Officer
Dated at Sydney this 28th day of August 2017
76 | GBST HOLDINGS LIMITED ABN 85 010 488 874
Directors’ Declarationfor the year ended 30 June 2017 Independent Auditor’s Report
Independent Auditor’s Report
To the shareholders of GBST Holdings Limited
To the shareholders of GBST Holdings Limited
Report on the audit of the Financial Report
Report on the audit of the Financial Report
Opinion
Opinion
We have audited the Financial Report of
GBST Holdings Limited (the Company).
We have audited the Financial Report of
GBST Holdings Limited (the Company).
In our opinion, the accompanying Financial
Report of the Company is in accordance
In our opinion, the accompanying Financial
with the Corporations Act 2001, including:
Report of the Company is in accordance
with the Corporations Act 2001, including:
• giving a true and fair view of the
Group’s financial position as at 30
• giving a true and fair view of the
June 2017 and of its financial
Group’s financial position as at 30
performance for the year ended on
June 2017 and of its financial
that date; and
performance for the year ended on
that date; and
complying with Australian Accounting
Standards and the Corporations
complying with Australian Accounting
Regulations 2001.
Standards and the Corporations
Regulations 2001.
•
•
Basis for opinion
June 2017
The Financial Report comprises:
The Financial Report comprises:
• Consolidated statement of financial position as at 30
• Consolidated statement of financial position as at 30
June 2017
• Consolidated statement of profit or loss and other
comprehensive income, Consolidated statement of
• Consolidated statement of profit or loss and other
changes in equity, and Consolidated statement of
comprehensive income, Consolidated statement of
cash flows for the year then ended
changes in equity, and Consolidated statement of
cash flows for the year then ended
• Notes including a summary of significant accounting
policies
• Notes including a summary of significant accounting
• Directors’ Declaration.
• Directors’ Declaration.
The Group consists of the Company and the entities it
controlled at the year-end or from time to time during
The Group consists of the Company and the entities it
the financial year.
controlled at the year-end or from time to time during
the financial year.
policies
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Our responsibilities under those standards are further described in the Auditor’s responsibilities for
the audit of the Financial Report section of our report.
Our responsibilities under those standards are further described in the Auditor’s responsibilities for
the audit of the Financial Report section of our report.
We are independent of the Group in accordance with the Corporations Act 2001 and the ethical
requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics
We are independent of the Group in accordance with the Corporations Act 2001 and the ethical
for Professional Accountants (the Code) that are relevant to our audit of the Financial Report in
requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics
Australia. We have fulfilled our other ethical responsibilities in accordance with the Code.
for Professional Accountants (the Code) that are relevant to our audit of the Financial Report in
Australia. We have fulfilled our other ethical responsibilities in accordance with the Code.
Key Audit Matters
Key Audit Matters
The Key Audit Matters we identified are:
The Key Audit Matters we identified are:
• Revenue recognition
• Revenue recognition
• Valuation of the Capital Markets
International CGU
• Valuation of the Capital Markets
International CGU
Key Audit Matters are those matters that, in our
professional judgment, were of most significance in our
Key Audit Matters are those matters that, in our
audit of the Financial Report of the current period.
professional judgment, were of most significance in our
audit of the Financial Report of the current period.
These matters were addressed in the context of our
audit of the Financial Report as a whole, and in forming
These matters were addressed in the context of our
our opinion thereon, and we do not provide a separate
audit of the Financial Report as a whole, and in forming
opinion on these matters.
our opinion thereon, and we do not provide a separate
opinion on these matters.
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.
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.
Liability limited by a scheme approved under
Professional Standards Legislation.
2017 ANNUAL REPORT | 77
Independent Auditor’s Reportfor the year ended 30 June 2017
Revenue recognition
Refer to Note 3 in the Financial Report
The key audit matter
How the matter was addressed in our audit
The Group provides its products and services to
customers in bundled packages. These
packages may contain two or more of the
following elements: software licenses,
maintenance and support services for licensed
software, implementation and consulting
revenue, and sponsored project revenue.
This is a key audit matter due to the level of
judgment we applied when considering
management’s determination of revenue
allocated to the different elements.
Significant judgments include:
•
Implementation and consulting revenue
may be provided on a percentage of
completion basis (“POC”). Determining the
POC of the contract may include estimates
of cost contingencies.
• The allocation of revenue to the individual
elements of the contract and the need to
assess the timing of recognition for each
element presents a risk of accelerated or
delayed recognition of revenue.
Our procedures included, amongst others:
• We critically assessed the allocation of
revenue to the individual elements of the
contract by selecting a sample of significant
contracts and comparing the relative fair
values of each element. Management
determine the relative fair value on a cost plus
margin basis. We also assessed the forecast
cost of each element against management
budget’s and evaluated the margin applied
against historical results.
• For contracts that were not completed at the
balance date we assessed the calculation of
stage of completion. Cost incurred to date
primarily includes labour costs and our
procedures included assessing whether those
costs are appropriately allocated to the
contracts. Where cost contingencies are
included in the calculation of costs to
complete, we inspected and critically
assessed the rationale for the basis for their
calculation with the project managers
responsible for delivering the projects.
Valuation of the Capital Markets International CGU
Refer to Note 11 in the Financial Report
The key audit matter
How the matter was addressed in our audit
required by us
The valuation of goodwill and intangible assets
allocated to the Capital Markets International
CGU is a key audit matter due to the level of
in evaluating
judgment
management’s assessment.
With the exception of the current financial year,
the Capital Markets International CGU has a
history of operating losses which increases
forecasting risk and gives rise to complexity in
our audit.
The significant judgments incorporated into
management’s fair value less cost of disposal
model used to assess the valuation of the CGU
include:
• Assumptions underlying
forecast cash
flows;
78 | GBST HOLDINGS LIMITED ABN 85 010 488 874
Our procedures included, amongst others:
• We evaluated management’s process
regarding the valuation of the Capital Markets
International CGU’s goodwill and other non-
financial assets. We challenged the
methodology and assumptions used in
management’s model. This included
benchmarking the implied earnings multiples
against comparable companies and against
comparable transactions in the market. We
compared short term growth assumptions
against historical results actually achieved.
• Using our valuation specialists, we challenged
the Group’s key judgements included in their
discount rate by using our knowledge of the
client, and their industry to form our own
Independent Auditor’s Reportfor the year ended 30 June 2017
2017 ANNUAL REPORT | 79
• Growth rate assumptions; and • Discount rates applied in the model. In addressing this key audit matter, we involved more senior team members, including valuation specialists, who understand the Group’s business and the economic environment in which it operates. assessment in relation to key inputs to the discount rate and long term growth assumptions. • We performed our own break even analysis on the assumptions and considered the likelihood of the assumptions reaching these break-even points. Our assessment included consideration of the potential of bias and consideration of the historical accuracy of management’s forecasts. Other Information Other Information is financial and non-financial information in GBST Holdings Limited’s annual reporting which is provided in addition to the Financial Report and the Auditor's Report. The Directors are responsible for the Other Information. The Other Information we obtained prior to the date of this Auditor’s Report was the Directors’ Report and Remuneration Report. The Year in Review, Chairman’s and Managing Director’s Report, GBST Product Suite, GBST Executive Team, Additional Shareholder Information and the Corporate Directory are expected to be made available to us after the date of the Auditor's Report Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not express an audit opinion or any form of assurance conclusion thereon, with the exception of the Remuneration Report and our related assurance opinion. In connection with our audit of the Financial Report, our responsibility is to read the Other Information. In doing so, we consider whether the Other Information is materially inconsistent with the Financial Report or our knowledge obtained in the audit, or otherwise appears to be materially misstated. We are required to report if we conclude that there is a material misstatement of this Other Information, and based on the work we have performed on the Other Information that we obtained prior to the date of this Auditor’s Report we have nothing to report. Responsibilities of the Directors for the Financial Report The Directors are responsible for: • preparing the Financial Report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 • implementing necessary internal control to enable the preparation of a Financial Report that gives a true and fair view and is free from material misstatement, whether due to fraud or error • assessing the Group’s ability to continue as a going concern. This includes disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless they either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so. 80 | GBST HOLDINGS LIMITED ABN 85 010 488 874
Independent Auditor’s Reportfor the year ended 30 June 2017 continuedAuditor’s responsibilities for the audit of the Financial Report Our objective is: •to obtain reasonable assurance about whether the Financial Report as a whole is free frommaterial misstatement, whether due to fraud or error; and•to issue an Auditor’s Report that includes our opinion.Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error. They are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this Financial Report. A further description of our responsibilities for the audit of the Financial Report is located at the Auditing and Assurance Standards Board website at: http://www.auasb.gov.au/auditors_files/ar2.pdf. This description forms part of our Auditor’s Report. Report on the Remuneration ReportOpinion In our opinion, the Remuneration Report of GBST Holdings Limited for the year ended 30 June 2017, complies with Section 300A of the Corporations Act 2001. Directors’ responsibilities The Directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with Section 300A of the Corporations Act 2001. Our responsibilities We have audited the Remuneration Report included on pages 23 to 33 of the Directors’ report for the year ended 30 June 2017. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. KPMG Simon Crane Partner Brisbane 28 August 2017 Distribution of shareholdings at 29 August 2017
Category (size of holding)
No. Holders
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and over
Total No. of Holders
1,199
1,653
459
344
28
3,683
The number of shareholders holding less than a marketable parcel is 427
Substantial shareholders at 29 August 2017
The following shareholders have disclosed a substantial shareholder notice to the ASX:
Name
National Nominees Ltd ACF Australian Ethical Investment Limited
AustralianSuper Pty Ltd
Voting rights
No. Ordinary
Shares
% of
Voting Power
6,756,530
4,219,645
9.96%
6.22%
The Company has ordinary shares on issue. There are 67,912,508 ordinary shares on issue.
At a general meeting, each shareholder present at a meeting or by proxy, representative or attorney has one vote
on a show of hands. Each fully paid ordinary share is entitled to one vote when a poll is called.
No shares are the subject of voluntary escrow.
2017 ANNUAL REPORT | 81
Additional Informationas at 29 August 2017 20 Largest Shareholders at 29 August 2017 – Ordinary Shares
Rank Name
No. Ordinary
Shares
% of
Issued Capital
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
J P MORGAN NOMINEES AUSTRALIA LIMITED
NATIONAL NOMINEES LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
12,630,877
11,252,091
5,182,190
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED-GSCO ECA
3,371,690
MR JOHN FRANCIS PUTTICK
BNP PARIBAS NOMS PTY LTD
MR JOAKIM SUNDELL & MRS SHARA SUNDELL
CITICORP NOMINEES PTY LIMITED
BNP PARIBAS NOMINEES PTY LTD
2,746,015
2,289,071
2,013,462
1,927,280
1,746,081
RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED
1,645,200
MRS AMBER ROBYN LAKE
BERISLAV BECAREVIC & IVANKA BECAREVIC
RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED
ROBERT DEDOMINICIS
CROWN FINANCIAL PTY LTD
BOND STREET CUSTODIANS LIMITED
DONAL O'BRIEN
BNP PARIBAS NOMINEES PTY LTD HUB24 CUSTODIAL SERV
LTD DRP
MIRRABOOKA INVESTMENTS LIMITED
BRISPOT NOMINEES PTY LTD
Total
1,224,836
751,553
745,712
609,055
496,000
425,194
345,635
293,029
269,493
232,654
50,197,118
On-market buy-back
There is no current on-market buy-back
18.60
16.57
7. 6 3
4.96
4.04
3.37
2.96
2 . 8 4
2.57
2.42
1.80
1.11
1.10
0.90
0 . 7 3
0.63
0.51
0.43
0.40
0.34
73.91
82 | GBST HOLDINGS LIMITED ABN 85 010 488 874
Additional Informationas at 29 August 2017 (continued) Corporate Directory
for the year ended 30 June 2017
REGISTERED OFFICE AND 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
GPO Box 2221
Brisbane QLD 4000
DIRECTORS
Allan Brackin
Christine Bartlett
David Adams
Deborah Page AM
Tam Vu
Robert DeDominicis
COMPANY SECRETARY
Jillian Bannan
SHARE REGISTRY
Link Market Services
Level 15, 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 Securities Exchange under the ASX
code: GBT.
AUDITORS
KPMG
Level 16, 71 Eagle Street
Brisbane QLD 4000
Ph +61 7 3233 3111
Fax +61 7 3233 3100
Designed and produced by FCR
www.fcr.com.au
2017 ANNUAL REPORT | 83