ANNUAL REPORT 2013 Contents Highlights Chairman and Chief Executive Officer Joint Report Who we are What we do Information on Directors and Company Secretary Directors' Report Auditor’s Independence Declaration 01 02 04 05 08 10 20 Financial Statements Consolidated Statement of Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows 21 22 23 24 25 Notes to the Financial Statements 26 Directors' Declaration Independent Auditor's Report Corporate Governance Statement ASX Additional Information 56 57 59 68 notiCe of AnnuAl GenerAl MeetinG The Annual General Meeting of the Company is to be held on Wednesday 27th November at 11am at 2 Frederick Street, Doncaster, Victoria 3108. highlights 2013 $63.8 Million operating revenue $15.7 Million eBitDa $9.1 Million after-tax profit 5.7 Cents earnings per share company profile The Hansen Technologies Group (ASX: HSN) is a global business that develops, implements and supports proprietary customer care and billing software solutions for service providers within the Energy, Pay TV and Telecommunications sectors in 40+ countries. The Hansen family’s suite of software solutions includes HUB (Hansen Unified Billing), ICC (Intelligent Customer Care), NirvanaSoft, Peace and Utilisoft. Hansen also provides facilities management and IT services from its purpose-built data centres in Melbourne, as well as superannuation administration software. Hansen is recognized by the relevance of its technology and the extensive industry knowledge of the people who support it. Our innovative solutions are constantly evolving alongside their respective industries to accommodate business, market and technology driven changes. Hansen’s experienced implementation teams have an impeccable record of delivering solutions through flexible engagement approaches. Founded in 1971 Hansen has offices in Australia, New Zealand, United States of America, United Kingdom and China, as well as branches in Argentina and South Africa, and employs in excess of 400 people. AnnuAl RepoRt 2013 | HAnsen tecHnologies | 1 Key Offices Branches Customer Locations chairman & chief executive officer Joint report Fiscal 2013 was a year during which we delivered on a number of our key corporate objectives, establishing a new foundation upon which to continue to build and take the Hansen business to its next level of activity. – During the year we added Pay TV as a new industry vertical to our Energy and Telecommunications focus. – We expanded our software solutions for the Energy market to include market integration solutions as well as continuing the development of interval meter billing solutions. – We increased our international footprint considerably with a significant increase in our International revenue base and worldwide delivery capability. – We implemented a more proactive sales and marketing strategy that has contributed positively, especially in North America. The activities of Fiscal 2013 changed the face of the Hansen business. We are now a genuine international software solutions provider with: – A focus across 3 distinct international industry verticals with a complementary suite of software solutions. – An expanded employee base which now exceeds 400, up from 261 last year: – Approximately 50% are located outside of Australia. – With personnel located in 11 countries. – Software solutions operating in 43 countries around the world. – Approximately 60% of our revenue now being derived from international customers, up from 42% last year. At an operational level we dealt with a lesser level of demand than anticipated for our Energy solutions while managing around a continuation of a historically high exchange rate for the Australian Dollar. The operational result was disappointing and less than we have been achieving in recent years but it was still, by industry standards, a solid operating performance. We are pleased that we have continued to drive a strong cash flow generation enabling us to maintain our distribution to shareholders at 6 cents per share for the year, (with 5 cents fully franked) while funding two acquisitions and retaining adequate funds for our operational requirements. While the strength in the Australian currency was a disadvantage operationally, it afforded the positive benefit of enabling us to acquire a significant international business at an advantageous exchange rate which, as the $A falls to more traditional levels, will provide the opportunity for margin improvement for our operations. We operate in a competitive sector supporting industries which are undergoing substantive change in and around our areas of expertise. Over the years we have pursued a strategy of broadening our client base, geographically and by sector, to minimise risk. We elect to pursue relationships with customers which incorporate annuity style revenue structures whenever possible, sometimes at the expense of short term gains. As a result, our exposure to geographic and industry specific driven change or downturn is lower than if we specialised in just one or two areas or geographies. The two acquisitions we completed and integrated this year are consistent with this criteria. We have been looking for some time to add a new industry vertical to expand our areas of software influence. We have been challenged in our investigations to find fairly priced value propositions with applications compatible with our existing software in a new industry that supports a financial model with a strong annuity revenue influence. When the opportunity to acquire the ICC Pay TV business was evaluated it quickly became apparent to us that this business model was built around fundamentals consistent with the existing Hansen business and met all the criteria we were looking for in a new industry vertical opportunity. In addition, the ICC businesses worldwide installed customer base represented a great opportunity to take a huge leap forward in the internationalisation of the Hansen business. The ICC Software is a mission critical billing and customer care software solution promoted into tier one customers worldwide with a solid underlying annuity based revenue stream. These characteristics make the ICC business compatible with our billing solutions for the Energy and Telecommunication industries. The ICC business has expanded our Company’s international geographic presence significantly adding upwards of 140 international based staff to our payroll and introducing the Hansen business into an additional 35 countries around the world. Following the acquisition of ICC on 1 January 2013 the integration of the business proceeded smoothly and we are already seeing broad synergies being generated from the integration of our international business units. On 1 March 2013 we also acquired the Melbourne based Utilisoft business. Utilisoft’s software solutions for Energy market integration represent a logical extension of our software solution suite for the Australian Energy market. Hansen was the logical buyer of this business, and with its Melbourne location, the integration of the Utilisoft business unit into our Doncaster premises was achieved in an extraordinarily short period of time. The acquisition of Utilisoft has expanded our Australian customer base and $A Revenue stream. We also see genuine opportunity to adapt the Utilisoft solutions for international markets. We are confident that the acquisition of these two businesses and the expansion they represent of our Australian and International businesses is a great step forward for Hansen. To have been able to achieve this growth and forward momentum while using only the existing cash resources 2 | cHAiRmAn & cHief executive officeR Joint RepoR t | HAnsen tecHnologies | AnnuAl RepoRt 2013 of the company leaves us extremely well positioned. The relative ease with which the businesses have been integrated and the performance improvement emerging also reinforces our view that our acquisition methodology and management capability is well positioned to continue with our pursuit of strategic growth through acquisition. We have again demonstrated that we can be selective in making cost effective acquisitions, achieving speedy and effective integration. With a debt free balance sheet, strong cash generating business units and a track record of success in integrating businesses, we will continue to maintain acquisitions as a key element of our strategic growth strategy. However we will maintain our conservative approach to growing our business and not get carried away with the success of these recent acquisitions. Our objective has always been to make decisions with a medium to long-term focus. This may limit opportunities for substantially above-average earnings in any one particular year but it ensures the company can continue to operate successfully and invest with confidence. We are as proud of the decisive decisions we have made on acquisition targets we have walked away from as we are of the ones we have determined to proceed with. While we may consider it a fundamental strength to operate without debt, we are not adverse to the benefits of leveraging the strength of our financial position into growth supported by third party debt facilities. The future for Hansen looks to be encouraging. We have in place the elements of the formulae that we see as being necessary to facilitate our growth strategies and objectives. Fiscal 2013 has delivered the foundation upon which we can pursue our corporate objectives. 2012/13 finanCial perforManCe Operating revenue of $63.8 million for the year was 12.7%, up on the previous year, and included 6 months and 4 months respectively from the two new businesses acquired during the year. Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) of $15.7 million, represented a return on operating revenue of 24.6%. Net Profit after Tax of $9.1 million represented a return of 5.7 cents per share compared with 8.2 cents per share in the previous year. Following the release of the full year’s operating results the Directors declared a consistent fully franked final dividend of 3 cents per share to be paid on 30 September 2013 to those shareholders of record as at 9 September 2013. When combined with the 3 cents per share interim dividend paid in March 2013 the total dividend distribution of 6 cents per share is consistent with the previous year. hansen people We would like to record our appreciation for the ongoing commitment and dedication of the Hansen team of personnel. We have added a considerable number of industry experts to the team this year as a result of the acquisitions. It is pleasing to note that the integration of the recently acquired businesses was achieved in a relatively seamless and constructive manner. Our observation of the ICC and Utilisoft personnel is that they share similar values and demonstrate the same level of dedication and commitment that we admire from all Hansen employees. We welcome all of the new staff to the Hansen family and we look forward to a mutually satisfying long term relationship. The fundamental strength of our expanding business continues as it has for years as a reflection of the quality of our people. The addition of the ICC and Utilisoft personnel has done nothing but enhance the reputation of our company’s personnel. Thank you. Thanks also to the Board who have diligently overseen and supported the policies and strategies developed and implemented by the management team. Global Revenue by Region 2008 Global Revenue by Region 2013 3% 27% APAC EMEA AMERICAS 70% 19% 31% 50% APAC EMEA AMERICAS AnnuAl RepoRt 2013 | HAnsen tecHnologies | cHAiRmAn & cHief executive officeR Joint RepoR t | 3 Who We are The Hansen business comprises multiple independent but compatible software solutions applied across 3 industry verticals and deployed in a multiplicity of countries around the world. Our goal has been to develop an individual and unique brand for each business unit, offering them their own individual personality but with uniformity across the group while recognising that each business unit is part of the broader Hansen group that delivers consistent values. faMily BranDing approaCh: logo MoDernisation: Hansen Technologies launched a rebranding initiative with a “family branding” approach. Family branding allows customers to develop familiarity and trust with the company, which makes new product introduction easier; acceptance of acquired brands is associated with strong tie to the corporate brand. Under this new approach, Hansen updated all of the logos. The goal was to give the product logos a familiar design element that tied them back to the Hansen corporate brand, but included a uniqueness that allowed them to have their own personality. 4 | WHo We ARe | HAnsen tecHnologies | AnnuAl RepoRt 2013 What We Do 1. Core MarKet foCus Our core business is the delivery of proprietary customer care, billing and meter data management software solutions to the Energy, Telecommunication and Pay TV industries. We couple these offerings with optional full scale outsourcing services. Our business success is based on delivering relevant and current software solutions that meet our customers’ requirements and keep pace with or exceed industry driven change. 2. MarKet Differentiation We compete on the international market with the worlds’ largest software houses. Our competitors commonly target the delivery of full enterprise solutions through systems integrators worldwide. We differentiate ourselves by: – Focusing on selected geographies, either directly or with partners, where we will most readily deliver our solutions on budget and on time. – Specialising in the provision of “best- of-breed” applications that deliver the specific solutions required by our customers. – Taking a hands-on and collaborative approach with our customers to deliver the optimum outcomes for their projects. – Being large enough to provide the highest level of confidence for our customers, while retaining a more flexible product and management accessible approach than our “hands-off” competitors. – Offering most of our customers the option of a fully outsourced facility managed solution service. – Ensuring our technology keeps pace as the demand for complex, flexible, multi-level billing solutions increases. We are positioned in our selected geographies as the flexible alternative provider of best-of-breed solutions in our core business focus areas. 3. energy utilities The Energy industry, from the perspective of our core business, continues to be focused worldwide on initiatives associated with “smart grid” optimisation and the associated roll-out of automated interval/smart meters. Accordingly, the introduction of interval meters continues to be the potential driver of change for billing requirements from the Energy market participants. However, it is still unclear how this technological initiative can be economically viable for electricity retailers. Until the economic and social implications of interval meters are resolved, the rollout of new billing solutions, to manage interval meters, will continue to be slow. Inevitably these issues will be addressed and demand for enhanced billing solutions like HUB, Peaceplus and NirvanaSoft will expand. The Hansen family of complex billing solutions incorporates the flexibility of rating capabilities along with the ability to process larger volumes of metering data that our customers will require to AnnuAl RepoRt 2013 | HAnsen tecHnologies | WHAt We do | 5 What We Do (continueD) roll out “time of use” billing initiatives. We have bench marked our solutions to exceed the anticipated market requirements and we already have a number of implementations of interval meter solutions in operation with existing customers. The acquisition on 1 March 2013 of the Utilisoft suite of proprietary software solutions expanded our software suite for the Energy market to include solutions for real-time Energy market interaction and transaction data management for generators, traders, retailers and other participants in the Australian Energy market. We expect that this capability shall have opportunities internationally as well. Each of the regions in which we focus are at different stages in the evolution of advanced metering processes, but ultimately the requirement of Hansen as the billing solution provider will be similar. Our expanding international positioning in Japan, North America and the UK, coupled with our strong market position in Australia, ensures we are aware of and remain current with the trends impacting the requirements of energy billing solutions. We are constantly engaging with our existing customers to ensure we are addressing their anticipated requirements of these and other industry initiatives as we undertake the continuous development of our product suite. 4. teleCoMMuniCations The provision of software billing solutions to the Telecommunications industry is the historical foundation of the Hansen billing solution suite of products. We have a long history of delivering reliable, market-ready telecommunications solutions and application support services. The mobile phone market continues to be challenged by the issue of customer churn and the constant need to offer ever increasing flexibility in call rating pricing models in order to attract new customers as well as retain existing ones. New market entrants are looking for ways to differentiate their go-to- market strategies. The Telecommunications industry, while being a mature market, is 6 | WHAt We do | HAnsen tecHnologies | AnnuAl RepoRt 2013 serviced by a number of fragmented software solution providers. We are continuing to pursue opportunities for Hansen to acquire alternative telecommunications solution providers which would extend our product range, expand our geographic markets and drive economies of scale benefits. 5. pay tv Hansen’s Customer Care & Billing Solution, ICC (Intelligent Customer Care), integrates billing, customer care and business intelligence to enable Pay TV operators to provide a customised service experience while streamlining back-office activities. Our solution delivers a 360-degree view of the customer relationship, encompassing triple and quad-play services to: – Reduce total cost of ownership and improve customer service. – Provide critical business intelligence to executive management and operations. – Enhance customer loyalty by facilitating targeted promotions and effective up-sell opportunities – Provide a variety of post-pay & pre-pay options, as well as voucher systems, wallets, and quote based billing – Integrate product catalogue, logistics management, and product provisioning features. – Offer full account receivable capabilities. Our extensive knowledge and experience with digital satellite and digital terrestrial distribution, as well as cable networks, coupled with flexible pricing models/ offerings for consumers, businesses, and multiple dwelling units, facilitates a lower cost of deployment when compared with other industry leading CRM and billing platforms. Hansen ICC has proven scalability with customers exceeding 10 million subscribers using our solution. The software can be configured to run multiple territories or countries from a single application for additional economies of scale. The ICC solution is used by operators in highly connected markets like Scandinavia, as well as in emerging territories where bandwidth and infrastructure can be a challenge. A range of modules exist to enable optimization of the system for the prevailing conditions: for example, in India and Africa “dealer web’s” are provided to enable Dealers and Affiliates to provision subscribers themselves over low bandwidth connections. The Pay TV vertical encompasses a wide variety of traditional broadcasters, telco’s, satellite operators, and cable companies. As operators diversify their service offerings to include VOIP telephony, mobile telephony, broadband, and broadcast TV entertainment, the solutions in Hansen’s portfolio will mesh synergistically to provide an end to end solution. We are confident there will be many growth opportunities for us to explore within this broadened solution offering and customer base. 6. superannuation We continue to evolve and develop the CLASSIC superannuation membership administration solution for superannuation fund management. 7. outsourCing With a large internal demand for IT development capacity and with a full service approach offering to our customers, we run and operate a 24/7 IT department, incorporating a first grade data centre with a full “cloud” and facilities management operation. As a natural business progression, we offer a full range of IT services to customers who are in need of varying degrees of outsourced support. This business unit represents a valuable contribution to our company’s market differentiation and is a strong contributor to our overall business performance. the future Fiscal 2013 was an outstanding year in respect to setting our business up for future growth and success. We remain confident that our investment in North America has been well timed and the opportunities we see today will develop into new projects for our business. We are continuing to: – Expand our international presence, operational capacity and delivery infrastructure. – Increase our international marketing and sales activities in line with the growth prospects we see for our solutions in selected geographic markets. – Develop our software solutions in line with market, industry and technology driven change. The speed with which technology change is embraced by the Energy, Telecommunications and Pay TV markets will continue to be the key issue in influencing our customers’ direction and decision-making over the coming years. Our objectives are to be continuously ready at the right times with the right products and solutions to support the needs of our existing customers and to be able to deliver market-ready solutions for implementation into new customers’ businesses. We have been successful in recent tenders for new Energy market solutions in Australia and North America. Our pipeline of prospects has expanded to a very encouraging level. The recent fall in the Australian dollar has had a tangible positive affect during the early months of Fiscal 2014 and should this level continue, we would expect this to contribute to an improvement at the margin from our international operations when reported in Australian dollars. We will continue with our search for suitable international acquisitions to add to our core product suite and expand our geographic activities. With our core market positioning, increased international activities, expanded industry focus, outstanding personnel and strong financial position, we are well positioned to respond to the changes in the markets and advances in technology throughout Fiscal 2014. Our strong balance sheet, existing cash and as yet unutilised banking facilities afford us the capacity to pursue our strategic growth objectives while supporting our product development and organic growth aspirations. We are confident that Fiscal 2014 will be a year of growth incorporating a full year for the recently acquired businesses delivering a sustainable strong return on a revenue stream which we confidently predict will exceed Fiscal 2013 by 20%. Finally, may we record our appreciation for the continued support of our expanding number of shareholders. We remain committed to expanding and improving the business of Hansen Technologies with the sole objective of enhancing shareholder value. David Trude Chairman 27 September 2013 Andrew Hansen Chief Executive Officer 27 September 2013 AnnuAl RepoRt 2013 | HAnsen tecHnologies | WHAt We do | 7 information on Directors anD company secretary Mr DaviD truDe the qualifiCations, experienCe anD speCial responsiBilities of eaCh person who has Been a DireCtor of hansen teChnologies ltD at any tiMe During or sinCe the enD of the finanCial year is proviDeD Below, together with Details of the CoMpany seCretary as at the year enD. No Directors of Hansen Technologies Ltd held any other directorships of listed companies at any time during the three years prior to 30 June 2013. Mr BruCe aDaMs Mr peter Berry Age 53 Non-Executive Director Director since 2000 Chairman of the Remuneration Committee Member of the Audit Committee Bruce has over 20 years experience as a commercial lawyer. He has practiced extensively in the areas of information technology law, mergers and acquisitions and has considerable experience advising listed public companies. In early 2002, after more than ten years as a partner of two Melbourne law firms, Bruce took up a position as general counsel of Club Assist Corporation Pty Ltd, a worldwide motoring club service provider. Bruce holds degrees in law and economics from Monash University. 8 | infoRmAtion on diRectoRs And compAny secRetARy | HAnsen tecHnologies | AnnuAl RepoRt 2013 Age 65 Chairman Chairman since 2011 Non-Executive Director Director since May 2011 David has extensive experience in a variety of financial services roles within the banking and securities industries. He holds a Degree in Commerce from the University of Queensland and is a member of many professional associations including the Society of Investment Professionals, Stockbrokers Association of Australia and the Australian Institute of Company Directors. He is also Chairman of E.L & C. Baillieu, Waterford Retirement Village and East West Line Parks Limited, a Director of CHI-X Australia Limited and a consultant at Credit Suisse Australia. Age 53 Non-Executive Director Director since December 2012 Chairman of the Audit Committee Member of the Remuneration Committee Peter has been an investment banker for in excess of 20 years, specialising in mergers and acquisitions and project financing. Peter’s career has focussed on the energy sector, including sector reform and privatisation, as well as renewable energy, and infrastructure more broadly. He is currently also Chairman of Victorian Clean Technology Fund, a venture capital investor, and an advisor to investors in infrastructure. Previously, Peter practised as a corporate lawyer in both Melbourne and New York and holds Degrees of Bachelor of Laws and Bachelor of Commerce from Melbourne University. Mr anDrew hansen Ms MelinDa osBorne Age 53 Managing Director & CEO Managing Director since 2000 Andrew has over 30 years experience in the IT industry, joining Hansen in 1990. Prior to Hansen he held senior management positions with Amfac- Chemdata, a software provider in the health industry. Andrew is responsible for implementing the Group’s strategic direction and overseeing the everyday affairs of the Hansen Group. Mr DaviD osBorne Mr phillip JaMes Age 64 Non-Executive Director Director since 2006 Member of the Audit and Remuneration Committees David is a Fellow of the Institute of Chartered Accountants, a Fellow of CPA Australia, and a Fellow of the Australian Institute of Company Directors, with over 30 years of financial management, taxation and accounting experience in public practice. David has a long standing association with Hansen, having been a Board member for some years prior to the Company’s listing on the ASX in June 2000. Age 59 Non-Executive Director Director since October 2012 Member of the Audit and Remuneration Committees Melinda is a Fellow of the Institute of Chartered Accountants with over 30 years of experience in executive leadership and financial management roles in the accountancy, stockbroking, and investment banking industries. Melinda was CFO and Company Secretary of Credit Suisse First Boston and First Pacific Stockbrokers. She was also an Executive Director and Company Secretary of the listed Fleet Capital Limited. Age 63 Non-Executive Director Resigned 1 November 2012 Phillip has over 30 years experience in the Australian and New Zealand energy sectors, holding senior executive positions with AGL Energy and NGC Holdings (NZ). Phillip’s extensive career of over 25 years with AGL (Australia’s largest energy retailer) included positions in sales, marketing, operations and senior executive roles, culminating in his appointment in 2005 as Group General Manager Retail, with responsibility for AGL’s energy retail business Australia wide. Mr Kenneth hansen Kenneth founded the business of Hansen in 1971. He was the Chairman for a decade from the date of ASX listing in 2000 up until his decision to step down in August 2011. He remained a Director of the Company up until his death in September 2012. Mr grant lister Age 61 CFO & Company Secretary CFO since 2002 Company Secretary since 2004 Grant is a qualified Chartered Accountant with more than 30 years experience in senior financial management roles and over 15 years experience in such roles within the IT industry in Australia, Asia and the USA. As CFO he has responsibility for all of the financial aspects of the Hansen Group’s operations throughout the world. AnnuAl RepoRt 2013 | HAnsen tecHnologies | infoRmAtion on diRectoRs And compAny secRetARy | 9 Directors’ report The Directors present their report together with the financial report of the consolidated entity consisting of Hansen Technologies Ltd and the entities it controlled, for the financial year ended 30 June 2013 and auditor’s report thereon. This financial report has been prepared in accordance with Australian Accounting Standards. prinCipal aCtivities The principal activities of the consolidated entity during the financial year were the development, integration and support of billing systems software for the utilities (gas and electricity), telecommunications and pay-tv industries. Additional activities undertaken by the consolidated entity include IT outsourcing services and the development of other specific software applications. With the exception of the two acquisitions detailed below there has been no other significant change in the nature of these activities during the financial year. results The consolidated profit after income tax attributable to the members of Hansen Technologies Ltd for the 2013 financial year was $9,132,513 (2012: $12,858,632). review of operations Fiscal 2013 was a year during which we delivered on a number of significant strategic objectives and managed our operations through a quieter than anticipated new business market and a period of sustained high value for the Australian dollar. The Group’s operating performance for the fiscal year to 30 June 2013 was; – Operating revenue of $63.8 million up $7.2 million on the previous year. – Earnings before Tax, Interest, Depreciation and Amortisation (EBITDA) of $15.7 Million, representing a return on operating revenue of 24.6%. – Net Profit after tax of $9.1 million representing earnings of 5.7 cents per share compared with 8.2 cents per share last year. In January 2013 we acquired the ICC Pay TV customer care and billing software business from Irdeto Inc. The ICC billing software suite of products represents a complementary addition to Hansen’s existing billing and customer care business solutions in the Telecommunications market and extends Hansen’s activities into the new industry vertical of the media and entertainment industry. ICC’s customers are located in over 40 locations around the world, with a growing involvement in new emerging markets. With offices in Carlsbad, California and Shanghai, China and personnel strategically located in Argentina, South Africa, India and the Netherlands, ICC represents an extension of Hansen’s geographic areas of influence, representing the potential for Hansen to leverage its broader business activities and products into these new markets. Effective 1 March 2013 we acquired Utilisoft Pty. Ltd., the Australian energy market software solutions subsidiary of the UK-based Utiligroup Ltd. Utilisoft Australia’s proprietary electricity and gas market access technology includes software solutions for real-time energy market interaction and transaction data management for generators, traders, retailers and other participants in the Australian energy market. The acquisition of Utilisoft Australia, its proprietary software solutions and 15 customer’s installations is a logical extension of Hansen’s activities in the Australian energy market. Utilisoft’s software solutions are complimentary with and frequently interface into Hansen’s billing software and therefore represent an extension to Hansen’s billing and customer care product suite for the energy industry in the Australian market. The combined cash cost of these acquisitions amounting to $13.8 million was funded from existing in house cash resources and collectively contributed $11 million to revenue and $0.98 million to after tax profit this year. 10 | diRectoRs’ RepoRt | HAnsen tecHnologies | AnnuAl RepoRt 2013 The first half of Fiscal 2013 was disappointing and the overall result for the year was less than we have been achieving in prior years. However the improved performance in the second half with an EBITDA of $9.3 million gives reason to be confident we are on the right path looking forward. The new billing business contracts won in Fiscal 2013 were closed late in the Fiscal year and had less influence on the year’s operating results than had the project work begun earlier in the year. With more than 50% of our 2013 revenue being designated in currencies other the Australian dollar, the sustained high Australian dollar did result in lower absolute $A revenues and a decline at the margin. All the signs for Fiscal 2014 are suggesting a trend towards improved new project opportunities and a weaker $A which should be positive for next year. We stayed true to our Corporate objectives in Fiscal 2013. We have continued to invest in our core software solutions while expanding our operational capacity and sales/ marketing activities worldwide with particular emphasis for the Energy industry in North America and into the emerging geographies for Pay TV. The acquisition of ICC and the consequent increase in our employee and international customer presence was the catalyst for us to restructure our management team into three world geographic groups. We have reorganised our executive teams accordingly and are continuing to roll out a sales and marketing capacity within this new structure. Our IT services and Facilities Management outsourcing business had a good year with increased revenue and margins delivering on the expectation we had last year that new interest in data centre space as well as “cloud” services would position this business unit for the future. Our long term collaborative relationship with Vision Super has continued throughout the year. We value this long term partnership in which we maintain, develop and manage the operations of the CLASSIC Superannuation administration software for Vision Super. signifiCant Changes in the state of affairs During the reported fiscal year the Company made two strategic acquisitions: – On 1 January 2013 – acquired the ICC Pay TV billing and customer care business. – On 1 March 2013 – acquired Utilisoft Pty Ltd. There have been no other significant changes in the consolidated entity’s state of affairs during the financial year. after BalanCe Date events No matters or circumstances have arisen since the end of the financial year that have significantly affected or may significantly affect the operations of the consolidated entity, the results of those operations, or the state of affairs of the consolidated entity in future financial years. liKely DevelopMents The company will continue to pursue its operating strategy of providing proprietary billing solutions to our targeted industries of energy, telecommunications and pay-tv while pursuing appropriate acquisitions to create shareholder value. As part of normal business activities the company is from time to time in negotiations with customers and third parties over prospective new business opportunities. When these new opportunities are significant in the overall context of our business and the negotiations reach a level where the transaction contemplated is confirmed, then releases are made to the ASX in accordance with the Listing rules on Continuous Disclosure. environMental regulations The consolidated entity’s operations are not subject to any significant environmental Commonwealth or State regulations or laws. DiviDenD paiD, reCoMMenDeD anD DeClareD A 3 cent per share fully franked final dividend was declared on 26 August 2013 with payment to be made on 30 September 2013. The amount declared has not been recognised as a liability in the accounts of Hansen Technologies Ltd as at 30 June 2013. Dividends paid during the year: – 3 cent per share fully franked final dividend paid 28 September 2012, totalling $4,759,264. – 3 cent per share partially franked interim dividend paid 28 March 2013, totalling $4,771, 719. share options Options over shares may be issued to key management personnel as an incentive for motivating/rewarding performance as well as encouraging longevity of employment. The issuing of options is intended to enhance the alignment of key management personnel with the primary shareholder objective of increasing shareholder value. Options over unissued ordinary shares granted by Hansen Technologies Ltd during or since the end of the financial year to the key management personnel as part of their remuneration are as follows: DiRECtORS A Hansen ExECutivES M Benne C Hunter G Lister D Meade S Weir tOtAl Granted Number Grant Date 1,050,000 1 December 2012 75,000 75,000 100,000 100,000 100,000 100,000 75,000 75,000 40,000 2 July 2012 2 July 2013 2 July 2012 2 July 2013 2 July 2012 2 July 2013 2 July 2012 2 July 2013 2 July 2012 70,000 1 December 2012 75,000 1,935,000 2 July 2013 All grants of options are subject to the achievement of performance measurements. The measurements vary for each executive but are commonly subject to the achievement as a whole of the company’s financial objectives for the year of issue and may be balanced with specified key performance indicators related to each executive’s area of responsibility. Subject to continuation of employment, options commonly vest 3 years after issue date. If the continuation of employment vesting criteria is not met, options are prima facie forfeited upon termination. Directors may exercise their discretion to vary the vesting criteria based on the contribution of the executive and/or the circumstances of their termination. Options expire two years after vesting or 28 days after termination of employment. AnnuAl RepoRt 2013 | HAnsen tecHnologies | diRectoRs’ RepoRt | 11 Directors’ report (continueD) inDeMnifiCation anD insuranCe of DireCtors, offiCers anD auDitors Indemnification The Company has agreed to indemnify all of the current and former Directors and Officers of the Company and its controlled entities against all liabilities to another person (other than the Company or a related body corporate) that may arise from their position as Directors and Officers of the Company and its controlled entities, except where the liability arises out of conduct involving a lack of good faith. The agreement stipulates that the Company will meet the full amount of any such liabilities, including costs and expenses. The Company has not entered into any agreement to indemnify its auditors against any claims that might be made by third parties arising from their report on the annual financial report. insurance Since the end of the previous financial year, the Company has paid insurance premiums in respect of Directors’ and Officers’ liability and legal expenses, insurance policies for current and former Directors and Officers, including executive officers of the Company and Directors, executive officers and secretaries of its controlled entities. The Directors have not included details of the nature of the liabilities covered or the amount of the premium paid in respect of the Directors’ and Officers’ liability and legal expenses insurance contracts, as such disclosure is prohibited under the terms of the contract. shares unDer option Unissued ordinary shares of Hansen Technologies Ltd under option at the date of this report are as follows: Grant Date Exercise Date Expiry Date 1 July 2010 1 July 2013 1 July 2015 1 Jan 2011 1 Jan 2014 1 Jan 2016 2 July 2011 2 July 2014 2 July 2016 1 Dec 2011 1 July 2014 1 July 2016 1 Dec 2011 1 July 2014 1 July 2016 1 Dec 2011 1 July 2014 1 July 2016 2 Dec 2011 2 July 2013 2 July 2015 2 Dec 2011 2 July 2014 2 July 2016 2 July 2012 2 July 2015 2 July 2017 1 Dec 2012 2 July 2015 2 July 2017 1 Dec 2012 2 July 2015 2 July 2017 1 Dec 2012 2 July 2015 2 July 2017 1 Dec 2012 2 July 2015 2 July 2017 2 July 2013 2 July 2016 2 July 2018 tOtAl Exercise Price $ No. Options at Date of Report $0.58 $0.75 $0.91 $0.95 $1.00 $1.05 $0.91 $0.91 $0.92 $0.92 $0.97 $1.02 $1.07 $0.92 105,000 75,000 745,000 250,000 250,000 250,000 40,000 40,000 785,000 70,000 350,000 350,000 350,000 895,000 4,550,000 If the Company makes a bonus issue of securities to ordinary shareholders, each unexercised option will, on exercise, entitle its holder to receive the bonus securities as if the option had been exercised before the record date for the bonus issue. shares issueD on exerCise of options The following ordinary shares of Hansen Technologies Ltd were issued during or since the end of the financial year as a result of the exercise of an option: Date issued 31 July 2012 30 August 2012 30 August 2012 9 July 2013 9 July 2013 12 July 2013 30 August 2013 tOtAl Number of Ordinary Shares issued Amount Paid per Share 40,000 115,000 415,000 40,000 250,000 75,000 250,000 1,185,000 $0.41 $0.39 $0.41 $0.41 $0.58 $0.41 $0.58 There are no amounts unpaid on shares issued on exercise of options. 12 | diRectoRs’ RepoRt | HAnsen tecHnologies | AnnuAl RepoRt 2013 DireCtors’ Meetings The number of meetings of the Board of Directors and of each board committee held during the financial year and the numbers of meetings attended by each Director were: Director Board meetings Audit Committee meetings Mr Bruce Adams Mr Peter Berry Mr Andrew Hansen Mr Kenneth Hansen Mr Phillip James Mr David Osborne Ms Melinda Osborne Mr David Trude A 12 7 12 2 4 12 9 12 B 10 7 11 - 3 12 7 12 A 3 1 - - 2 3 1 - B 3 1 - - 2 3 - - Remuneration Committee meetings A B 1 - - - 1 1 - - 1 - - - 1 1 - - A – Number of meetings eligible to attend B – Number of meetings attended DireCtors’ interests in shares or options Directors’ relevant interests in shares of Hansen Technologies Ltd or options over shares in the company are detailed below. Directors B Adams P Berry A Hansen D Osborne M Osborne D Trude Ordinary Shares of Hansen technologies ltd Options over Shares in Hansen technologies ltd 150,000 - 70,163,026 344,781 - 40,000 - - 1,800,000 - - - DireCtors’ interests in ContraCts auDitor’s inDepenDenCe DeClaration Directors’ interests in contracts with the Company are limited to the provision of leased premises on arm’s length terms and are disclosed in note 23 to the financial statements. A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 in relation to the audit for the financial year is provided with this report. non-auDit serviCes Non-audit services are approved by resolution of the audit committee and approval is provided in writing to the Board of Directors. Non-audit services were provided by the auditors of entities in the consolidated entity during the year, namely Pitcher Partners, network firms of Pitcher Partners, and other non-related audit firms, as detailed below. The Directors are satisfied that the provision of the non-audit services during the year by the auditor is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. Consolidated June 2013 $’000 June 2012 $’000 33 30 63 61 21 82 3 4 7 - - - 6 2 8 2 - 2 Amounts paid and payable to Pitcher Partners for non-audit services: – taxation services – advisory services Amounts paid and payable to network firms of Pitcher Partners for non-audit services: – taxation services – advisory services Amounts paid and payable to non-related auditors of group entities for non-audit services: – taxation services – advisory services total auditors’ remuneration for non-audit services 70 92 AnnuAl RepoRt 2013 | HAnsen tecHnologies | diRectoRs’ RepoRt | 13 auDiteD remuneration report reMuneration poliCies The Remuneration Subcommittee of the Board of Directors is responsible for making recommendations to the Board on remuneration policies and packages applicable to the Board members and senior executives of the Company. The Company policy is to ensure the remuneration package properly reflects the person’s duties and responsibilities and that it is market competitive in attracting, retaining and motivating people of the highest quality. The committee uses reports on the remuneration practices of similar ASX listed entities as a basis to ensure executive remuneration remains relevant to the market conditions as well as the size and nature of our business. Periodically the Board will engage third party consultants to evaluate and advise on the remuneration packages of its most senior executives as well as Non-Executive Directors. In commissioning this task from an external consulting firm the Remuneration Committee would seek to obtain assurances that the review would be undertaken independent of and not subject to any undue influence from any Director or member of the key management personnel. No such external review was deemed warranted in respect to remuneration for the Fiscal year ended 30 June 2013, however an external review has recently been commissioned for the purpose of considering the remuneration of the CEO and Non-Executive Directors for Fiscal 2013/2014. reMuneration struCture The remuneration for the Managing Director/CEO and senior executives comprises: – A fixed all inclusive salary package (including superannuation), plus – Performance based incentives in the form of bonuses and share option allocations. The performance based incentives for the senior executives are determined by the Remuneration Committee of the Board and are structured to include both short and longer term components designed to reward management for meeting or exceeding their financial and performance objectives. They are subject to the achievement of key performance indicators (KPI’s) based on a combination of qualitative and quantitative measures which vary from executive to executive but which are chosen with the objective of driving enhanced operating performance and ensuring management are aligned with the Group’s agreed corporate objectives to achieving enhanced shareholder value. The nature and range of key performance indicators and other targets against which the performance of key management personnel are measured are as follows: Financial – The actual worldwide group operational performance compared to budget for revenue and EBITDA (Earnings before Interest, Taxation, Depreciation and Amortisation). The actual parameters applied are dependent upon the roles and responsibilities of each individual executive and their ability to influence the performance outcome. – The financial operating performance of individual business units and geographic regions against budget revenue and EBITDA. – These parameters commonly comprise between 30% and 50% of the performance based compensation available to be earned. Business Management – Improving staff utilisation and delivering software projects in line with budget and time estimates. Customer relationship and business growth – Retention of existing customers and cross-selling of products and services. – Achievement of new licence sales to new strategic customers. 14 | Audited RemuneRAtion RepoRt | HAnsen tecHnologies | AnnuAl RepoRt 2013 Departmental operating efficiency – Enhanced performance of individual departments to achieve specified efficiency improvements. – Training and development of employees. Other – Acquisition and integration of compatible businesses. – Compliance with the Company’s Corporate Governance Principles. At the end of each financial year, in the knowledge of the financial performance of the Group as a whole, the Remuneration Committee assesses the performance of each senior executive in achieving their KPI’s. Based on this assessment, and any discretion applied by the committee, a determination is then made of the appropriate % of each KPI to be awarded based on the performance achieved. The agreed KPI’s and the % subsequently awarded are recommended by the Remuneration Committee to the full Board of Directors for consideration and direction. The combination of these review processes provides the Remuneration Committee and the Board of Directors with a balanced objective assessment of the performance of the senior executive group as a whole as well as executives individually. Share Options issued to select senior management as the longer term component of a motivational performance related package are conditional upon the group achieving agreed financial performance levels for the year of issue and are further subject to continuous employment at the discretion of the Board. Non-executive Directors do not receive any performance related remuneration and are excluded from participating in the Hansen Executive Option Plan. serviCe agreeMents anD ContraCt Details The contract of employment of the Chief Executive Officer includes a mutual minimum termination notice period of 6 months. The conditions of employment for the other key management personnel are not subject to any particular contractual term or significant condition other than those normally applying by law for persons of their remuneration level and position in the company. ConsequenCes of perforManCe on shareholDer wealth In considering the relative performance of the senior executives and the Group as a whole on shareholder value the Remuneration Committee has regard to key financial indicators measured over time including: EBITDA ($A millions) 2013 15.7 2012 19.1 2011 20.5 2010 17.2 2009 14.3 Earnings per share $0.057 $0.082 $0.087 $0.072 $0.053 ASX share price at 30 June Market capitalisation (millions) at 30 June Dividend (cents per share) $0.91 $0.92 $0.90 $0.62 $0.41 $145.3 $145.4 $140.5 $95.9 $62.9 6 6 6 5 5 DireCtors anD Key ManageMent personnel The names and positions of each person who held the position of Director at any time during the financial year is provided on pages 8 and 9 of this report. The names and positions of other key management personnel in the consolidated group for the financial year are: Executives Position M Benne C Hunter G Lister D Meade S Weir General Manager, APAC Chief Operations Officer Chief Financial Officer & Company Secretary Client Services Manager Director Europe, Middle East & Africa AnnuAl RepoRt 2013 | HAnsen tecHnologies | Audited RemuneRAtion RepoRt | 15 auDiteD remuneration report (continueD) DireCtors’ anD exeCutives’ reMuneration DiRECtORS B Adams P Berry A Hansen K Hansen P James D Osborne M Osborne D Trude ExECutivES M Benne C Hunter G Lister D Meade S Weir Salary Fees 2013 $ 51,972 28,185 - - - - 598,670 270,000 90% 9,166 17,324 51,972 37,246 85,046 - - - - - 879,581 270,000 201,835 41,284 252,294 60,000 279,201 60,000 224,771 36,697 178,235 25,707 1,136,336 223,688 2,015,917 493,688 - - - - - 83% 100% 100% 82% 60% Short-term Cash Bonus 2013 $ vested 2013 % Non- monetary 2013 $ Post Employment Share Based Super 2013 $ Options 2013 $ total 2013 $ total Performance Related 2013 % Options as % of total 2013 % - - - - - - - - - - - 4,677 2,536 - - 56,649 30,721 - - - - 25,000 103,284 996,954 37% 10% - 1,559 4,677 3,586 7,654 - - - - - 9,166 18,883 56,649 40,832 92,700 - - - - - - - - - - 49,689 103,284 1,302,554 29% 8% 21,880 11,007 276,006 22,707 14,676 349,677 15,810 25,000 14,676 394,687 - - 15,810 15,810 23,532 11,007 296,007 16,041 13,429 233,412 109,160 64,795 1,549,789 158,849 168,079 2,852,343 19% 21% 19% 16% 17% 19% 23% 4% 4% 4% 4% 6% 4% 6% 16 | Audited RemuneRAtion RepoRt | HAnsen tecHnologies | AnnuAl RepoRt 2013 DireCtors’ anD exeCutives’ reMuneration (ContinueD) Short-term Post Employment Share Based Salary Fees 2012 $ Cash Bonus 2012 $ vested 2012 % Non- monetary 2012 $ Super 2012 $ Options 2012 $ total 2012 $ total Performance Related 2012 % Options as % of total 2012 % DiRECtORS B Adams A Hansen K Hansen P James D Osborne D Trude ExECutivES M Benne C Hunter G Lister D Meade S Weir 50,459 - - 566,972 283,027 100% 59,948 5,000 50,459 78,711 - - - - 811,549 283,027 183,486 36,697 222,859 50,458 274,354 50,458 224,717 41,284 158,386 38,320 1,063,802 217,217 1,875,351 500,244 - - - - 100% 100% 100% 100% 100% - - - - - - - - - 4,541 - 55,000 50,000 116,290 1,016,289 - 50,000 4,541 7,084 - - - - 59,948 55,000 55,000 85,795 - 39% - - - - 116,166 116,290 1,327,032 30% 19,816 12,050 252,049 24,770 16,066 314,153 5,853 29,233 16,066 375,964 - - 5,853 5,853 23,119 12,050 301,170 13,745 6,426 216,877 110,683 62,658 1,460,213 226,849 178,948 2,787,245 19% 21% 18% 18% 21% 19% 24% - 11% - - - - 9% 5% 5% 4% 4% 3% 4% 6% In accordance with the remuneration policy, options granted as remuneration are subject to continuing service with the company. Options granted as remuneration are valued at grant date in accordance with AASB 2 Share-based Payments. No options previously granted as remuneration to key management personnel have lapsed during the year. AnnuAl RepoRt 2013 | HAnsen tecHnologies | Audited RemuneRAtion RepoRt | 17 auDiteD remuneration report (continueD) CoMpensation options: granteD anD vesteD During the finanCial year: During the financial year the Company granted options over unissued ordinary shares to the following key management personnel of the Company as part of their remuneration: Options Granted Grant Date value per option at Grant Date Exercise Price $ vesting Date last Exercise Date terms & Conditions for each Grant DiRECtORS A Hansen SPECiFiED ExECutivES M Benne C Hunter G Lister D Meade S Weir S Weir total Options vested During the Year - - - - 75,000 75,000 75,000 350,000 1 Dec 2012 350,000 1 Dec 2012 350,000 1 Dec 2012 75,000 2 July 2012 100,000 2 July 2012 100,000 2 July 2012 75,000 2 July 2012 40,000 40,000 2 July 2012 - 70,000 1 Dec 2012 265,000 1,510,000 $0.137 $0.131 $0.125 $0.196 $0.196 $0.196 $0.196 $0.196 $0.144 $0.970 2 July 2015 2 July 2017 $1.020 2 July 2015 2 July 2017 $1.070 2 July 2015 2 July 2017 $0.920 2 July 2015 2 July 2017 $0.920 2 July 2015 2 July 2017 $0.920 2 July 2015 2 July 2017 $0.920 2 July 2015 2 July 2017 $0.920 2 July 2015 2 July 2017 $0.920 2 July 2015 2 July 2017 All grants of options are subject to the achievement of performance measurements for the year of issue. Subject to continuation of employment criteria, options commonly vest 3 years after issue date. If the vesting criteria are not met the options may be forfeited at the discretion of the Directors. Options expire two years after vesting. nuMBer of options helD By Key ManageMent personnel: Balance 1 July 2013 Granted as Remuneration Options Exercised Options Forfeited Balance 30 June 2013 vested at 30 June 2013 total Exercisable unexercisable DiRECtORS A Hansen 750,000 1,050,000 SPECiFiED ExECutivES M Benne C Hunter G Lister D Meade S Weir total 150,000 250,000 250,000 225,000 120,000 75,000 100,000 75,000 100,000 75,000 75,000 75,000 110,000 40,000 1,745,000 1,510,000 265,000 - - - - - - - - - 1,800,000 225,000 275,000 275,000 225,000 190,000 2,990,000 - - - - - - - - - - - - - - - - - - - - - 18 | Audited RemuneRAtion RepoRt | HAnsen tecHnologies | AnnuAl RepoRt 2013 value of options granteD as reMuneration that have Been exerCiseD or lapseD During the finanCial year DiRECtORS A Hansen SPECiFiED ExECutivES M Benne C Hunter G Lister D Meade S Weir total rounDing of aMounts Balance 1 July 2012 value Granted value Exercised value lapsed Balance 30 June 2013 116,290 103,284 18,541 32,384 32,384 28,368 15,129 11,007 14,676 14,676 11,007 13,429 243,096 168,079 - - 9,826 9,826 9,826 5,240 34,718 - - - - - - - 219,574 29,548 37,234 37,234 29,549 23,318 376,457 The amounts contained in the report and in the financial report have been rounded to the nearest $1,000 (where rounding is applicable) under the option available to the company under ASIC Class Order 98/0100. The company is an entity to which the Class Order applies. Signed in accordance with a resolution of the Directors: David Trude Director Melbourne 27 September 2013 Andrew Hansen Director Melbourne 27 September 2013 AnnuAl RepoRt 2013 | HAnsen tecHnologies | Audited RemuneRAtion RepoRt | 19 auDitor’s inDepenDence Declaration to the Directors of Hansen technologies ltd. In relation to the independent audit for the year ended 30 June 2013, to the best of my knowledge and belief there have been: (i) No contraventions of the auditor independence requirements of the Corporations Act 2001; and (ii) No contraventions of any applicable code of professional conduct S Schonberg Partner 27 September 2013 Pitcher Partners Melbourne An independent Victorian Partnership ABN 27 975 255 196 Pitcher Partners is an association of independent firms Melbourne | Sydney | Perth | Adelaide | Brisbane An independent member of Baker Tilly International 20 | AuditoR’s independence declARAtion | HAnsen tecHnologies | AnnuAl RepoRt 2013 financial statements 22 Note 7. Dividends 34 Note 21. Directors’ and executives’ equity holdings Note 8. Cash and cash equivalents 35 47 50 51 52 53 55 56 57 Note 22. Auditor’s remuneration Note 23. Related party disclosures Note 24. Parent entity information Note 25. Segment Information Note 26. Subsequent events Directors’ Declaration independent Auditor’s Report Corporate Governance Statement 59 ASx Additional information 68 Contents Financial Statements Consolidated Statement of Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Notes to the Financial Statements Note 1. Statement of significant accounting policies Note 2. Critical accounting estimates and judgements 23 24 25 26 30 Note 3. Financial Risk Management 30 Note 9. Receivables Note 10. Other current assets Note 11. Plant, equipment & leasehold improvements Note 12. Intangibles Note 13. Payables Note 14. Provisions Note 15. Contributed capital Note 16. Reserves and retained earnings Note 4. Revenue Note 5. Profit from continuing operations Note 6. Income tax 32 32 33 Note 17. Cash flow information Note 18. Business combinations Note 19. Commitments Note 20. Earnings per share 35 36 36 37 38 38 39 42 43 44 46 46 AnnuAl RepoRt 2013 | HAnsen tecHnologies | finAnciAl stAtements | 21 consoliDateD statement of comprehensive income for the year enDeD 30 June 2013 Revenue from continuing operations Other revenues total revenues Employee expenses Depreciation expense Amortisation expense Property and operating rental expenses Contractor and consultant expenses Software licence expenses Hardware and software expenses Travel expenses Communication expenses Professional expenses Other expenses total expenses Profit before income tax Income tax expense Note 4 4 5 5 5 5 6(b) Profit after income tax from ongoing operations Other comprehensive income/(expense) Movement in carrying value of foreign entities due to currency translation 16(a) Other comprehensive income/(expense) for the year total comprehensive income for the year attributable to members of the parent Consolidated Entity 2013 $’000 63,780 1,578 65,358 2012 $’000 56,554 1,444 57,998 (35,075) (27,088) (1,597) (2,075) (3,391) (1,565) (424) (3,282) (1,597) (637) (766) (2,280) (52,689) 12,669 (3,536) 9,133 1,590 1,590 10,723 (1,527) (1,651) (2,578) (950) (389) (2,450) (1,443) (653) (758) (1,517) (41,004) 16,994 (4,135) 12,859 (364) (364) 12,495 Basic earnings (cents) per share for continuing operations total basic earnings (cents) per share Diluted earnings (cents) per share for continuing operations total diluted earnings (cents) per share Note 20 20 Consolidated Entity 2013 Cents per share 2012 Cents per share 5.7 5.7 5.6 5.6 8.2 8.2 8.1 8.1 This consolidated statement of comprehensive income is to be read in conjunction with the notes to the financial statements set out on pages 26 to 55. 22 | finAnciAl stAtements | HAnsen tecHnologies | AnnuAl RepoRt 2013 consoliDateD statement of financial position as at 30 June 2013 Consolidated Entity Note 8 9 10 11 12 6 13 6 14 14 15 16(a) 16(b) 16(c) 2013 $’000 9,653 14,671 2,164 26,488 4,699 45,654 823 51,176 77,664 5,489 1,116 6,649 4,367 17,621 176 176 17,797 59,867 43,650 (1,448) 523 17,142 59,867 2012 $’000 23,967 9,208 2,662 35,837 4,554 29,593 535 34,682 70,519 2,397 1,819 5,235 3,397 12,848 244 244 13,092 57,427 42,579 (3,038) 346 17,540 57,427 Current Assets Cash and cash equivalents Receivables Other current assets total Current Assets Non-Current Assets Plant, equipment & leasehold improvements Intangible assets Deferred tax assets total Non-Current Assets total Assets Current Liabilities Payables Current tax payable Provisions Unearned income total Current liabilities Non-Current Liabilities Provisions total Non-Current liabilities total liabilities Net Assets Equity Share capital Foreign currency translation reserve Options granted reserve Retained earnings total Equity This consolidated statement of financial position is to be read in conjunction with the notes to the financial statements set out on pages 26 to 55. AnnuAl RepoRt 2013 | HAnsen tecHnologies | finAnciAl stAtements | 23 consoliDateD statement of changes in equity for the year enDeD 30 June 2013 Balance as at 1 July 2012 Profit for the year Movement in carrying value of foreign entities due to currency translation total comprehensive income for the year Transactions with owners in their capacity as owners: Employee share plan Options exercised Employee share options Equity issued under dividend reinvestment plan Dividends paid total transactions with owners in their capacity as owners Note 16(a) 15 15 15 7 Balance as at 30 June 2013 15 & 16 Contributed Equity $’000 Reserves $’000 42,579 (2,692) - - - 164 231 - 676 - 1,071 43,650 - 1,590 1,590 - - 177 - - 177 (925) Contributed Equity $’000 Note Reserves $’000 49,669 (2,432) Balance as at 1 July 2011 Profit for the year Movement in carrying value of foreign entities due to currency translation total comprehensive income for the year Transactions with owners in their capacity as owners: Capital reduction Employee share plan Options exercised Employee share options Equity issued under dividend reinvestment plan Dividends paid total transactions with owners in their capacity as owners 15 15 15 15 7 Balance as at 30 June 2012 15 & 16 - - - (8,500) 141 194 - 1,075 - (7,090) 42,579 - (364) (364) - - - 104 - - 104 (2,692) Consolidated Entity Retained Earnings $’000 17,540 9,133 - total Equity $’000 57,427 9,133 1,590 9,133 10,723 - - - - 164 231 177 676 (9,531) (9,531) (9,531) 17,142 (8,283) 59,867 Consolidated Entity Retained Earnings $’000 5,604 12,859 - total Equity $’000 52,841 12,859 (364) 12,859 12,495 8,500 - - - - (9,423) (923) 17,540 - 141 194 104 1,075 (9,423) (7,909) 57,427 This consolidated statement of changes in equity is to be read in conjunction with the notes to the financial statements set out on pages 26 to 55. 24 | finAnciAl stAtements | HAnsen tecHnologies | AnnuAl RepoRt 2013 consoliDateD statement of cash floWs for the year enDeD 30 June 2013 Consolidated Entity 2013 $’000 2012 $’000 65,791 (50,609) 611 (4,495) 11,298 4 (13,827) (1,026) (2,303) (17,152) 164 231 (8,855) (8,460) (14,314) 23,967 9,653 60,719 (43,958) 1,011 (3,801) 13,971 4 - (1,215) (2,145) (3,356) 141 194 (8,347) (8,012) 2,603 21,364 23,967 Note 17(a) 15 15 17(b) Cash flows from operating activities Receipts from customers Payments to suppliers and employees Interest received Income tax paid Net cash provided by operating activities Cash flows from investing activities Proceeds from sale of plant and equipment Payment for acquisition of business Payment for plant and equipment Payment for capitalised development Net cash used in investing activities Cash flows from financing activities Proceeds from share issue Proceeds from options exercised Dividends paid net of dividend re-investment Net cash used in financing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of the year This consolidated statement of cash flow is to be read in conjunction with the notes to the financial statements set out on pages 26 to 55. AnnuAl RepoRt 2013 | HAnsen tecHnologies | finAnciAl stAtements | 25 notes to the financial statements 30 June 2013 note 1. stateMent of signifiCant aCCounting poliCies The following is a summary of significant accounting policies adopted by the consolidated entity in the preparation and presentation of the financial report. The accounting policies have been consistently applied, unless otherwise stated. (a) Basis of preparation of the financial report This financial report is a general purpose financial report that has been prepared in accordance with Australian Accounting Standards, Interpretations and other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001. The financial report covers Hansen Technologies Ltd and controlled entities as a consolidated entity. Hansen Technologies Ltd is a company limited by shares, incorporated and domiciled in Australia. The financial report was authorised for issue by the Directors on 27 September 2013. Compliance with IFRS The consolidated financial statements of Hansen Technologies Ltd also comply with the International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). Historical Cost Convention The financial report has been prepared under the historical cost convention. Critical Accounting Estimates The preparation of the financial report requires the use of certain estimates and judgements in applying the entity’s accounting policies. Those estimates and judgements significant to the financial report are disclosed in Note 2. (b) Principles of consolidation The consolidated financial statements are those of the consolidated entity, comprising the financial statements of the parent entity and of all entities, which the parent has the power to control the financial and operating policies of, so as to obtain benefits from its activities. The financial statements of subsidiaries are prepared for the same reporting period as the parent entity, using consistent accounting policies. All inter-company balances and transactions, including any unrealised profits or losses have been eliminated on consolidation. (c) Revenue Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer and the costs incurred, or to be incurred, in respect of the transaction can be measured reliably. Risks and rewards of ownership are considered to have passed to the buyer at the time of delivery of the goods to the customer. Revenue from rendering of services to customers is recognised upon delivery of the service to the customer. Interest revenue is recognised when it becomes receivable on a proportional basis, taking into account the interest rates applicable to the financial assets. All revenue is stated net of the amount of goods and services tax (GST). (d) Cash and cash equivalents Cash and cash equivalents include cash on hand and at banks, and short term deposits with an original maturity of six months or less held at call with financial institutions. (e) Plant, equipment & leasehold improvements Cost and valuation All classes of plant, equipment and leasehold improvements are stated at cost less depreciation. Depreciation The depreciable amounts of all fixed assets are depreciated on a straight- line basis over their estimated useful lives commencing from the time the asset is held ready for use. Leasehold improvements are depreciated over the shorter of either the unexpired period of the lease or the estimated useful lives of the improvements. The useful lives for each class of assets are: 2013 2012 Plant, equipment & leasehold improvements: 2.5 to 12 years 2.5 to 12 years Leased plant and equipment: 2.5 to 12 years 2.5 to 12 years (f) leases Leases are classified at their inception as either operating or finance leases based on the economic substance of the agreement so as to reflect the risks and benefits incidental to ownership. Finance Leases Leases of fixed assets, where substantially all of the risks and benefits incidental to ownership of the asset, but not the legal ownership, are transferred to the consolidated entity are classified as finance leases. Finance leases are capitalised, recording an asset and liability equal to the present value of the minimum lease payments, including any guaranteed residual values. The interest expense is calculated using the interest rate implicit in the lease and is included in finance costs in the statement of comprehensive income. Leased assets are depreciated on a straight line basis over their estimated useful lives where it is likely the consolidated entity will obtain ownership of the asset, or over the term of the lease. Lease payments are allocated between the reduction of the lease liability and the lease interest expense for the period. Operating Leases Lease payments for operating leases are recognised as an expense on a straight line basis over the term of the lease. (g) Business combinations A business combination is a transaction or other event in which an acquirer obtains control of one or more businesses and results in the consolidation of the assets and liabilities acquired. Business combinations are accounted for by applying the acquisition method. 26 | FINANCIAL STATEMENTS | HANSEN TECHNoLogIES | ANNuAL REpoRT 2013 note 1. stateMent of signifiCant aCCounting poliCies (ContinueD) The consideration transferred is determined as the aggregate of fair values of assets given, equity issued and liabilities assumed in exchange for control. Goodwill is recognised initially at the excess over the aggregate of the consideration transferred, the fair value of the non-controlling interest, less the fair value of the identifiable assets acquired and liabilities assumed. Acquisition related costs are expensed as incurred. (h) intangibles Goodwill Goodwill is initially measured as described in Note 1(g). Goodwill is not amortised but is tested annually for impairment, or more frequently if events or changes in circumstances indicate that it might be impaired. Goodwill is carried at cost less accumulated impairment losses. Technology, Trademarks and Customer Contracts Technology, trademarks and customer contracts are recognised at cost and are amortised over their estimated useful lives, which range from 5 to 10 years. Technology, trademarks and customer contracts are carried at cost less accumulated amortisation and any impairment losses. Research and Development Expenditure on research activities is recognised as an expense when incurred. Expenditure on development activities is capitalised only when technical feasibility studies demonstrate that the project will deliver future economic benefits and these benefits can be measured reliably. Capitalised development expenditure is stated at cost less accumulated amortisation. Amortisation is calculated using a straight-line method to allocate the cost of the intangible asset over a five year period (or earlier if the development project is abandoned), commencing when the intangible asset is available for use. Other development expenditure is recognised as an expense when incurred. (i) impairment Assets with an indefinite useful life are not amortised but are tested annually for impairment in accordance with AASB 136. Assets subject to annual depreciation or amortisation are reviewed for impairment whenever events or circumstances arise that indicate that the carrying amount of the asset may be impaired. An impairment loss is recognised where the carrying amount of the asset exceeds its recoverable amount. The recoverable amount of an asset is defined as the higher of its fair value less costs to sell and value in use. (j) income tax Current income tax expense or revenue is the tax payable on the current period’s taxable income based on the applicable income tax rate adjusted by changes in deferred tax assets and liabilities. Deferred tax balances Deferred tax assets and liabilities are recognized for temporary differences at the applicable tax rates when the assets are expected to be recovered or liabilities settled. No deferred tax asset or liability is recognised in relation to temporary differences if they arose in a transaction, other than a business combination, that at the time of the transaction did not affect either accounting profit or taxable profit or loss. Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity. 30 June 2013 Tax Consolidation The parent entity and all eligible Australian controlled entities have formed an income tax consolidated group under the tax consolidation legislation. The parent entity is responsible for recognising the current tax liabilities and the deferred tax assets arising in respect of tax losses, for the tax consolidated group. The tax consolidated group has also entered a tax funding agreement whereby each entity in the tax-consolidated group contributes to the income tax payable in proportion to their contribution to the net profit before tax of the tax consolidated group. (k) Provisions Provisions are recognised when the consolidated entity 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. (l) Employee benefits (i) Short-term employee benefit obligations Liabilities arising in respect of wages and salaries, annual leave, long service leave and any other employee benefits expected to be settled within twelve months of the reporting date are measured at the amounts based on remuneration rates which are expected to be paid when the liability is settled. The expected cost of short-term employee benefits in the form of compensated absences such as annual leave and long service leave is recognised in the provision for employee benefits. All other short term employee benefit obligations are presented as payables. (ii) Long-term employee benefit obligations The provision for employee benefits in respect of long service leave which is not expected to be settled within twelve months of the reporting date is measured at the present value of the estimated future cash outflow to be made in respect of services provided by employees up to the reporting date. 27 AnnuAl RepoRt 2013 | HAnsen tecHnologies | FinAnciAl stAteMents | notes to the financial statements (continueD) 30 June 2013 note 1. stateMent of signifiCant aCCounting poliCies (ContinueD) (iii) Retirement benefit obligations Loans and Receivables Defined contribution superannuation plan The consolidated entity makes contributions to defined contribution superannuation plans in respect of employee services rendered during the year. These superannuation contributions are recognised as an expense in the same period when the employee services are received. (iv) Share-based payments The consolidated entity operates an employee share option plan and an employee share scheme. 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 shares is ascertained as the market bid price at grant date. The number of shares and options 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. (v) Bonus plan The consolidated entity recognises a provision when a bonus is payable in accordance with the employee’s contract of employment or review letter and the amount can be reliably measured. (m) Financial instruments Classification The consolidated entity classifies its financial instruments in the following categories: loans and receivables and financial liabilities. The classification depends on the purpose for which the instruments were acquired. Management determines the classification of its financial instruments at initial recognition. 28 Loans and receivables are measured at fair value at inception and subsequently at amortised cost using the effective interest rate method. Financial Liabilities Financial liabilities include trade payables, other creditors and loans from third parties. (n) Foreign currencies translations and balances Functional and presentation currency The financial statements of each entity within the consolidated group are 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 consolidated entity’s functional and presentation currency. Exchange differences arising on translation of foreign operations are transferred directly to the group’s foreign currency translation reserve as a separate component of equity in the balance sheet. (o) 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 Tax Office. In these circumstances the GST is recognised as part of the 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. Cashflows are presented in the statement of cashflows on a gross basis, except for the GST component of investing and financing activities, which are disclosed as operating cashflows. Transactions and Balances (p) Comparatives Where necessary, comparative information has been reclassified and repositioned for consistency with current year disclosures. (q) Rounding amounts The parent entity and the consolidated entity have applied the relief available under ASIC Class Order CO 98/0100 and accordingly, amounts in the consolidated financial statements and the Directors’ report have been rounded off to the nearest thousand dollars, or in certain cases, to the nearest dollar. (r) Accounting standards and interpretations issued but not operative at 30 June 2013 The following standards and interpretations have been issued at the reporting date but are not yet effective. The directors’ assessment of the impact of these standards and interpretations is set out below. Transactions in foreign currencies of entities within the consolidated group are translated into functional currency at the rate of exchange ruling at the date of the transaction. Foreign currency monetary items that are outstanding at the reporting date (other than monetary items arising under foreign currency contracts where the exchange rate for that monetary item is fixed in the contract) are translated using the spot rate at the end of the financial year. All resulting exchange differences arising on settlement or re-statement are recognised as revenues and expenses for the financial year. Entities that have a functional currency different to the presentation currency are translated as follows: – Assets and liabilities are translated at year-end exchange rates prevailing at that reporting date; – Income and expenses are translated at actual exchange rates or average exchange rates for the period, where appropriate; and – All resulting exchange differences are recognised as a separate component of equity. | FINANCIAL STATEMENTS | HANSEN TECHNoLogIES | ANNuAL REpoRT 2013 note 1. stateMent of signifiCant aCCounting poliCies (ContinueD) (i) AASB 9 Financial Instruments, AASB 2009_11 Amendments to Australian Accounting Standards arising from AASB 9, AASB 2010-7 Amendments to Australian Accounting Standards arising from AASB 9 (December 2010) and AASB 2012-6 Amendments to Australian Accounting Standards – Mandatory Effective Date of AASB 9 and Transition Disclosure (effective from 1 January 2015) AASB 9 Financial Instruments improve and simplify the approach for classification and measurement of financial assets compared with the requirements of AASB 139. AASB 9 only permits the recognition of fair value gains and losses in other comprehensive income for equity investments that are not held for trading. In the current reporting period, the group recognised $0 in other comprehensive income in relation to the movements in the fair value of available for sale financial assets, which are not held for trading. The consolidated entity does not have any financial liabilities that are designated at fair value through profit or loss. Therefore, there will be no impact on the consolidated entity’s accounting for financial liabilities. (ii) AASB 10 Consolidated Financial Statements, AASB 11 Joint Arrangements, AASB 12 Disclosure of Interests in Other Entities, revised AASB 127 Separate Financial Statements and AASB 128 Investments in Associates and Joint Ventures, AASB 2011-7 Amendments to Australian Accounting Standards arising from the Consolidation and Joint Arrangements Standards, and AASB 2012-10 Amendments to Australian Accounting Standards – Transition Guidance and Other Amendments (effective 1 January 2013) AASB 10 replaces all of the guidance on control and consolidation in AASB 127 Consolidated and Separate Financial Statements, and Interpretation 12 Consolidation – Special Purpose Entities. The standard fundamentally changes the way control is defined for the purpose of identifying those entities to be included in the consolidated financial statements. It focuses on the need to have power over the investee, rights or exposure to variable returns and ability to use the power to affect the amount of its returns. Returns must vary and can be positive, negative or both. There is also new guidance on substantive rights versus protective rights and on agent versus principal relationships. The core principle that a consolidated entity presents a parent and its subsidiaries as if they are a single economic entity remains unchanged, as do the accounting for consolidation. AASB 11 does not focus on the legal structure of joint arrangements, but rather on how and what rights and obligations are shared between parties. If the parties share the right to the net assets of the joint arrangement, these parties are parties to a joint venture. A joint venturer accounts for an investment in the arrangement using the equity method, and the choice to proportionately consolidate will no longer be permitted. If the parties share the right to the separate assets and obligations for the liabilities of the joint arrangement, these parties are parties to a joint operation. A joint operator accounts for assets, liabilities and corresponding revenues and expenses arising from the arrangement by recognising their share of interest in each item. The consolidated entity has performed a detailed analysis of the new requirements and has determined AASB 10 and AASB 11 have no impact on the composition of the consolidated group. AASB 12 sets new minimum disclosures requirements for entities reporting under the two new standards, AASB 10 and AASB 11, and replaces the disclosure requirements currently found in AASB 127 and AASB 128. Application of this standard will affect the type of information disclosed in relation to the consolidated entity’s investments as the new standard requires extensive new disclosures regarding the nature of risk associated with the entity’s interests in other entities and the effect of those interest on its financial position, financial performance and cash flows. 30 June 2013 Amendments to AASB 128 provide clarification that an entity continues to apply the equity method and does not remeasure its retained interest if an investment in a joint venture becomes an associate, and vice versa. The amendments also introduce a partial disposal concept. The consolidated entity does not believe it will be impacted by this amendment. The consolidated entity does not expect to adopt the new standards before their operative date. They would therefore be first applied in the financial statements for the annual reporting period ending 30 June 2014. (iii) AASB 13 Fair Value Measurement and AASB 2011-8 Amendments to Australian Accounting Standards arising from AASB 13 (effective 1 January 2013) AASB 13 introduces a fair value framework for all fair value measurements in the full suite of accounting standards. This standard explains how to measure fair value and aims to enhance fair value disclosures. The consolidated entity is currently assessing which, if any of its current measurement techniques will have to change as a result of the new standard. However, it is not yet possible to provide a reliable estimate of the impact, if any, of these new rules on any of the amounts recognised in the financial statements. However, application of the new standard will impact the type of information disclosed in the notes to the financial statements. The consolidated entity does not expect to adopt the new standard before their operative date. They would therefore be first applied in the financial statements for the annual reporting period ending 30 June 2014. Other standards and interpretations have been issued at the reporting date but are not yet effective. When adopted, these standards and interpretations are likely to impact on the financial information presented, however the assessment of impact has not yet been completed. 29 AnnuAl RepoRt 2013 | HAnsen tecHnologies | FinAnciAl stAteMents | notes to the financial statements (continueD) 30 June 2013 note 2. CritiCal aCCounting estiMates anD JuDgeMents The group makes certain estimates and assumptions concerning the future which, by definition, will seldom represent actual results. Estimates and assumptions based on future events have a significant inherent risk and where future events are not as anticipated there could be a material impact on the carrying amounts of the assets and liabilities discussed below. (a) impairment testing of intangible assets The intangible asset of goodwill is subjected to periodic review to assess if its carrying value has been impaired. This assessment compares the carrying book value with the recoverable amount of these assets using value in-use discounted cash flow projection calculations based on management’s determination of budgeted cash flow projections and gross margins, past performance and its expectation for the future. Given the long term income generating nature of the intangible assets, the valuation applies a discounted value to cash flow over a five year period, plus a terminal value at the end of the period. In respect of this fiscal year, a 14.50% weighted cost of capital discount rate has been applied. The growth rates utilised vary by business unit from zero to a maximum of 10% per annum. (b) income tax Income tax benefits are based on the assumption that no adverse change will occur in the income tax legislation and the anticipation that the group will derive sufficient future assessable income to enable the benefit to be realised and comply with the conditions of deductibility imposed by the law. note 3. finanCial risK ManageMent The consolidated entity is exposed to a variety of financial risks comprising: (a) Interest rate risk (b) Credit risk (c) Liquidity and foreign exchange risk (d) Fair values The Board of Directors has overall responsibility for identifying and managing operational and financial risks. (a) interest rate risk Interest rate risk is the risk that the fair value or future cashflows of a financial instrument will fluctuate as a result of changes in market interest rates. The consolidated entity’s exposure to interest rate risks in relation to future cash flows and the effective weighted average interest rates on classes of financial assets and financial liabilities is as follows: Recognition of the carried forward losses is based upon the probable future profits of the group. (c) Research and development Development costs incurred are assessed for each research and development project and a percentage of the expenditure is capitalised when technical feasibility studies demonstrate that the project will deliver future economic benefits and those benefits can be measured reliably. There has been significant expenditure on research and development on the HUB and PEACE billing software in the 2013 year. Returns are expected to be derived from this investment over coming years. 30 | FINANCIAL STATEMENTS | HANSEN TECHNoLogIES | ANNuAL REpoRT 2013 note 3. finanCial risK ManageMent (ContinueD) Financial instruments Note interest Bearing $’000 Non-interest Bearing $’000 total Carrying Amount $’000 Consolidated Entity Weighted Avg. Effective interest Rate % Fixed/ variable Rate 30 June 2013 2013 Financial assets Cash and cash equivalents Receivables Other current assets Financial liabilities Payables 2012 Financial assets Cash and cash equivalents Receivables Other current assets Financial liabilities Payables 3.22% variable 4.59% fixed & variable 8 9 10 13 8 9 10 13 9,653 - - 9,653 - - 23,967 - - 23,967 - - - 14,671 2,164 16,835 5,489 5,489 - 9,208 2,662 11,870 2,397 2,397 9,653 14,671 2,164 26,488 5,489 5,489 23,967 9,208 2,662 35,837 2,397 2,397 No other financial assets or liabilities are expected to be exposed to interest rate risk. (b) Credit risk exposures Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. The maximum exposure to credit risk, excluding the value of any collateral or other security at balance date of recognised financial assets, is the carrying amount of those assets net of any provisions for impairment of those assets, as disclosed in the consolidated statement of financial position and notes to the consolidated financial statements. The consolidated entity does not have any material credit risk exposure to any single debtor or group of debtors under financial instruments entered into by the consolidated entity. The consolidated entity minimises concentrations of credit risk in relation to trade receivables by undertaking transactions with a large number of customers. Concentrations of credit risk on trade and term debtors are: Utilities 32% (2012: 60%), Finance Sector 2% (2012: 0%), Telecommunications 20% (2012: 33%), Pay TV 40% (2012: 0%) and Other 6% (2012: 7%). (c) liquidity and foreign exchange risk Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities. The Hansen Group operates internationally and as such has exposure to foreign currency movements as part of its day to day operational realities. The Group has a substantial surplus of cash assets compared to its nominal third party or foreign currency designated payables. The Group has no third party debt obligations, other than normal operational trade payables which are designated in foreign currency. Accordingly the Group’s liquidity and foreign currency exchange risks are assessed as nominal. (d) Fair values The fair value of financial assets and financial liabilities approximates their carrying amounts as disclosed in the consolidated statement of financial position and notes to the consolidated financial statements. AnnuAl RepoRt 2013 | HAnsen tecHnologies | finAnciAl stAtements | 31 notes to the financial statements (continueD) 30 June 2013 note 4. revenue Revenues from continuing operations Revenue from sale of goods and services Other income: From operating activities Interest received Net foreign exchange gains Other income total other revenues total revenue from continuing operations note 5. profit froM Continuing operations Profit from continuing operations before income tax has been determined after the following specific expenses: Employee benefit expenses Wages and salaries Superannuation costs Share based payments Total employee benefit expenses Depreciation of non-current assets Plant, equipment & leasehold improvements total depreciation of non-current assets Amortisation of non-current assets Technology, trademarks & customer contracts Research and development total amortisation of non-current assets Property and operating rental expenses Rental charges total property and operating rental expenses 32 | finAnciAl stAtements | HAnsen tecHnologies | AnnuAl RepoRt 2013 Consolidated Entity 2013 $’000 63,780 63,780 611 787 180 1,578 65,358 2012 $’000 56,554 56,554 1,043 246 155 1,444 57,998 Consolidated Entity 2013 $’000 2012 $’000 Note 11 12 12 32,509 2,389 177 35,075 1,597 1,597 774 1,301 2,075 3,391 3,391 24,874 2,110 104 27,088 1,527 1,527 394 1,257 1,651 2,578 2,578 note 6. inCoMe tax (a) Components of income tax expense: Current tax Deferred tax Under/(over) provision in prior years total income tax expense (b) Prima facie tax payable 30 June 2013 Consolidated Entity 2013 $’000 3,320 (178) 394 3,536 2012 $’000 4,869 372 (1,106) 4,135 The prima facie tax payable on profit before income tax is reconciled to the income tax expense as follows: Prima facie income tax payable on profit before income tax at 30% 3,801 5,098 Add/(less) tax effect of: Impact of tax rates on foreign subsidiaries Research and development allowances Non-deductible share based payments Losses brought forward Under/(over) provision in prior years Gain on foreign exchange assessable/(non assessable) Other non-allowable items Income tax expense attributable to profit (c) Current tax liability Current tax relates to the following: Current tax liabilities/(assets) Opening balance Liability from acquisition Prior year under/(over) provision Income tax Tax payments (d) Deferred tax Deferred tax relates to the following: Deferred tax assets balance comprises: Difference in depreciation and amortisation of plant and equipment for accounting and income tax purposes Other payables Employee benefits Deferred tax liabilities balance comprises: Research and development expenditure capitalised Other income not yet assessable Net deferred tax (71) (385) 53 - 394 (208) (48) 3,536 1,819 78 394 3,320 (4,495) 1,116 78 488 1,654 2,220 (1,397) - (1,397) 823 - (448) 31 (154) (1,106) 700 14 4,135 1,857 - (1,106) 4,869 (3,801) 1,819 14 259 1,453 1,726 (1,097) (94) (1,191) 535 AnnuAl RepoRt 2013 | HAnsen tecHnologies | finAnciAl stAtements | 33 notes to the financial statements (continueD) 30 June 2013 note 6. inCoMe tax (ContinueD) (e) Deferred income tax (revenue)/expense included in income tax expense comprises: Increase in deferred tax assets Increase in deferred tax liabilities (f) Deferred tax assets not brought to account Tax effect - Capital losses Tax effect - Operating losses note 7. DiviDenDs 2013 Consolidated Entity 2013 $’000 (384) 206 (178) 847 2,015 2,862 2012 $’000 15 358 373 847 2,015 2,862 A 3 cent per share fully franked final dividend was declared on 26 August 2013. The amount declared has not been recognised as a liability in the accounts of Hansen Technologies Ltd as at 30 June 2013. Dividends provided for or paid during the year – 3 cent per share final dividend paid 28 September 2012 – 3 cent per share final dividend paid 27 September 2011 – 3 cent per share interim dividend paid 28 March 2013 – 3 cent per share interim dividend paid 28 March 2012 Proposed dividend not recognised at the end of the year. Dividend franking account 30% franking credits, on a tax paid basis, are available to shareholders of Hansen Technologies Ltd for subsequent financial years. Consolidated Entity 2013 $’000 4,759 4,772 9,531 4,800 2012 $’000 4,701 4,722 9,423 4,759 2,326 2,277 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 any current tax liability; (b) franking debits that will arise from the payment of any dividends recognised as a liability at year-end; (c) franking credits that will arise from the receipt of any dividends recognised as receivables at year-end; (d) franking credits that the entity may be prevented from distributing in subsequent years. The ability to utilise the franking credits is dependent upon there being sufficient available profits to declare dividends. 34 | finAnciAl stAtements | HAnsen tecHnologies | AnnuAl RepoRt 2013 note 8. Cash anD Cash equivalents Current Cash at bank and on hand Interest bearing deposits note 9. reCeivaBles Current Trade receivables Less: provision for impairment Sundry debtors trade and other receivables ageing analysis at 30 June Not past due Past due 31-60 days Past due 61-90 days Past due more than 91 days Gross 2013 $’000 10,511 480 1,891 1,556 14,438 impairment 2013 $’000 - - - 238 238 30 June 2013 Consolidated Entity 2013 $’000 3,143 6,510 9,653 2012 $’000 4,709 19,258 23,967 Consolidated Entity 2013 $’000 14,438 (238) 14,200 471 14,671 Gross 2012 $’000 7,193 809 818 257 9,077 2012 $’000 9,077 (6) 9,071 137 9,208 impairment 2012 $’000 - - - 6 6 AnnuAl RepoRt 2013 | HAnsen tecHnologies | finAnciAl stAtements | 35 notes to the financial statements (continueD) 30 June 2013 note 10. other Current assets Current Prepayments Accrued revenue note 11. plant, equipMent & leaseholD iMproveMents Plant, equipment & leasehold improvements at cost Accumulated depreciation total plant, equipment & leasehold improvements Reconciliation Consolidated Entity 2013 $’000 948 1,216 2,164 2012 $’000 1,125 1,537 2,662 Consolidated Entity 2013 $’000 23,898 (19,199) 4,699 2012 $’000 18,358 (13,804) 4,554 Reconciliation of the carrying amounts of plant, equipment & leasehold improvements at the beginning and end of the current financial year. Plant, equipment & leasehold improvements Carrying amount at 1 July Additions Acquired Disposals Depreciation expense Net foreign currency movements arising from foreign operations Carrying amount at 30 June Consolidated Entity 2013 $’000 4,554 1,026 626 4 (1,597) 86 4,699 2012 $’000 4,857 1,215 - (3) (1,527) 12 4,554 36 | finAnciAl stAtements | HAnsen tecHnologies | AnnuAl RepoRt 2013 note 12. intangiBles Goodwill at cost Accumulated amortisation & impairment Technology, trademarks & customer contracts at cost Accumulated amortisation & impairment Software development at cost Accumulated amortisation total intangible assets Reconciliation of goodwill at cost Carrying amount at 1 July Increase due to acquisition Net foreign currency movements arising from foreign operations Fully amortised write back Carrying amount at 30 June Accumulated amortisation & impairment at beginning of year Fully amortised write back Net foreign currency movements arising from foreign operations Accumulated amortisation & impairment at the end of year Reconciliation of technology, trademarks & customer contracts at cost Carrying amount at 1 July Increase due to acquisition Net foreign currency movements arising from foreign operations Carrying amount at 30 June Accumulated amortisation & impairment at beginning of year Amortisation of technology, trademarks & customer contracts Net foreign currency movements arising from foreign operations Accumulated amortisation & impairment at end of year Reconciliation of software development at cost Carrying amount at 1 July Expenditure capitalised in current period Carrying amount at 30 June Accumulated amortisation at beginning of year Current year charge Accumulated amortisation at end of year 30 June 2013 Consolidated Entity 2013 $’000 37,408 (1,418) 35,990 7,177 (2,170) 5,007 29,705 (25,048) 4,657 45,654 28,848 10,768 949 (3,157) 37,408 (4,646) 3,157 71 (1,418) 3,117 3,626 434 7,177 (1,381) (774) (15) (2,170) 27,402 2,303 29,705 (23,747) (1,301) (25,048) 2012 $’000 28,848 (4,646) 24,202 3,117 (1,381) 1,736 27,402 (23,747) 3,655 29,593 28,848 - - - 28,848 (4,646) - - (4,646) 3,121 - (4) 3,117 (987) (394) - (1,381) 25,257 2,145 27,402 (22,490) (1,257) (23,747) AnnuAl RepoRt 2013 | HAnsen tecHnologies | finAnciAl stAtements | 37 notes to the financial statements (continueD) 30 June 2013 note 13. payaBles Current Trade payables Other payables note 14. provisions Current Employee benefits Onerous lease Other Non-current Employee benefits Other (a) Aggregate employee benefits liability (b) Number of employees at year end RECONCiliAtiONS Movements in provisions other than employee benefits: Provisions Onerous Lease – current Carrying amount at beginning of year Provision taken up on acquisition Provisions released during the year Carrying amount at end of year Other – current Carrying amount at beginning of year Net provisions (payments) made during the year Carrying amount at end of year Other – non-current Carrying amount at beginning of year Foreign exchange adjustment Carrying amount at end of year 38 | finAnciAl stAtements | HAnsen tecHnologies | AnnuAl RepoRt 2013 Consolidated Entity 2013 $’000 1,127 4,362 5,489 2012 $’000 613 1,784 2,397 Consolidated Entity 2013 $’000 6,417 147 85 6,649 152 24 176 6,569 413 - 147 - 147 129 (44) 85 22 2 24 2012 $’000 5,106 - 129 5,235 222 22 244 5,328 267 150 - (150) - 68 61 129 21 1 22 note 15. ContriButeD Capital (a) Issued and paid up capital Ordinary shares, fully paid 30 June 2013 Consolidated Entity 2013 $’000 2012 $’000 43,650 42,579 Consolidated Entity 2013 No of Shares 2013 $’000 2012 No of Shares (b) Movements in shares on issue Balance at beginning of the financial year 158,072,120 42,579 156,197,163 Shares issued under dividend reinvestment plan Shares issued under employee share plan Options exercised Capital reduction 813,722 178,760 570,000 - 676 164 231 - 1,192,677 152,280 530,000 - Balance at the end of the financial year 159,634,602 43,650 158,072,120 2012 $’000 49,669 1,075 141 194 (8,500) 42,579 (c) Rights of each type of share Ordinary shares participate in dividends and the proceeds on winding up of the parent entity in proportion to the number of shares held. At shareholders meetings each ordinary share is entitled to one vote when a poll is called. (d) Share options Employee share option plan The Employee Share Option Plan (the Plan) was approved by shareholders at the Company’s annual general meeting on 9 November 2001 and reaffirmed at the AGM on 24 November 2011. The maximum number of options on issue under the Plan must not at any time exceed 7.5% of the total number of ordinary shares on issue at that time. The Board may issue options under the Plan to any employee of the Company and its subsidiaries, including executive Directors, but excluding non-executive Directors. Options will be issued free of charge, unless the Board determines otherwise. Each option is to subscribe for one ordinary share and, when issued, the shares will rank equally with other shares. The options are not transferable. Quotation of the options on the ASX will not be sought, but the Company will apply to the ASX for official quotation of shares issued on the exercise of options. Options may be granted subject to conditions specified by the Board which must be satisfied before the option can be exercised. Unless the terms on which an option was offered specified otherwise, an option may be exercised at any time after the vesting date. An option may also be exercised in special circumstances, that is, at any time within six months after the employee’s death, total and permanent disablement, retirement or retrenchment. An option lapses 28 days after termination of the employee’s employment with the Company and, unless the terms of the offer of the option specify otherwise, lapses two years after the date upon which it has vested. The Directors have the discretion to vary the terms of the options as deemed appropriate. The exercise price per share for an option will be the amount determined by the Board at the time of the grant of the option. Option holders will not be entitled to participate in any new issue of securities in the Company unless they exercise their options prior to the record date for the determination of entitlements to the new issue. If the Company makes a bonus issue of securities to ordinary shareholders, each unexercised option will, on exercise, entitle its holder to receive the bonus securities as if the option had been exercised before the record date for the bonus issue. If the Company makes a pro-rata rights issue of ordinary shares for cash to its ordinary shareholders, the exercise price of unexercised options may be adjusted to reflect the diluting effect of the issue. If there is any reorganisation of the capital of the Company, the exercise price of the options will be adjusted in accordance with the Listing Rules. Since the end of the financial year 895,000 (2012: 1,905,000) share options have been granted under this scheme. AnnuAl RepoRt 2013 | HAnsen tecHnologies | finAnciAl stAtements | 39 notes to the financial statements (continueD) 30 June 2013 note 15. ContriButeD Capital (ContinueD) Options issued and not yet exercised at 30 June 2013 Grant Date Exercise Date Expiry Date Consolidated 2013 Exercise Price $ No. of options at beg. of year Options Granted Options Exercised or lapsed No. of options at end of year issued vested 1 July 2008 1 July 2011 1 July 2013 1 July 2009 1 July 2012 1 July 2014 $0.39 $0.41 115,000 570,000 1 July 2010 1 July 2013 1 July 2015 $0.58 605,000 1 Jan 2011 1 Jan 2014 1 Jan 2016 2 July 2011 2 July 2014 2 July 2016 1 Dec 2011 1 July 2014 1 July 2016 1 Dec 2011 1 July 2014 1 July 2016 1 Dec 2011 1 July 2014 1 July 2016 2 Dec 2011 2 July 2013 2 July 2015 2 Dec 2011 2 July 2014 2 July 2016 2 July 2012 2 July 2015 2 July 2017 1 Dec 2012 2 July 2015 2 July 2017 1 Dec 2012 2 July 2015 2 July 2017 1 Dec 2012 2 July 2015 2 July 2017 1 Dec 2012 2 July 2015 2 July 2017 $0.75 $0.91 $0.95 $1.00 $1.05 $0.91 $0.91 $0.92 $0.92 $0.97 $1.02 $1.07 75,000 745,000 250,000 250,000 250,000 40,000 40,000 - - - - - 785,000 70,000 350,000 350,000 350,000 115,000 - - 455,000 115,000 115,000 - - - - - - - - - - - - - 605,000 75,000 745,000 250,000 250,000 250,000 40,000 40,000 785,000 70,000 350,000 350,000 350,000 - - - - - - - - - - - - - total 2,940,000 1,905,000 570,000 4,275,000 115,000 Options issued and not yet exercised at 30 June 2012 Grant Date Exercise Date Expiry Date Consolidated 2012 Exercise Price $ No. of options at beg. of year Options Granted Options Exercised or lapsed No. of options at end of year issued vested 1 July 2007 1 July 2010 1 July 2012 1 July 2008 1 July 2011 1 July 2013 1 July 2009 1 July 2012 1 July 2014 $0.27 $0.39 $0.41 105,000 540,000 570,000 1 July 2010 1 July 2013 1 July 2015 $0.58 605,000 1 Jan 2011 1 Jan 2014 1 Jan 2016 2 July 2011 2 July 2014 2 July 2016 1 Dec 2011 1 July 2014 1 July 2016 1 Dec 2011 1 July 2014 1 July 2016 1 Dec 2011 1 July 2014 1 July 2016 2 Dec 2011 2 July 2013 2 July 2015 2 Dec 2011 2 July 2014 2 July 2016 $0.75 $0.91 $0.95 $1.00 $1.05 $0.91 $0.91 75,000 - - - - - - 745,000 250,000 250,000 250,000 40,000 40,000 105,000 - - 425,000 115,000 115,000 - - - - - - - - - 570,000 605,000 75,000 745,000 250,000 250,000 250,000 40,000 40,000 - - - - - - - - - total 1,895,000 1,575,000 530,000 2,940,000 115,000 40 | finAnciAl stAtements | HAnsen tecHnologies | AnnuAl RepoRt 2013 - - - - - - - - - - - - - - - 30 June 2013 note 15. ContriButeD Capital (ContinueD) Employee Share Plan The Employee Share Plan (ESP) was approved by shareholders at the Company’s annual general meeting on 9 November 2001. The ESP is available to all eligible employees to acquire ordinary shares in the Company. Shares to be issued or transferred under the ESP will be valued at the volume weighted average share price of shares traded on the ASX in the ordinary course of trading during the five business days immediately preceding the day the shares are issued or transferred to qualifying employees or participants. The Board has discretion as to how the shares are to be issued or transferred to participants. Such shares may be acquired on or off market or the Company may allot shares or they may be obtained by any combination of the foregoing. On application, employees pay no application monies. The amount of the consideration to be provided by qualifying employees to acquire the shares can be foregone from future remuneration (before tax). To qualify, employees must be full-time or permanent part-time employees of the Company or any subsidiary of the Company and an Australian resident for tax. Shares issued under the ESP will rank equally in all respects with all existing shares from the date of allotment. A participant must not sell, transfer or otherwise dispose of any shares issued or transferred to the participant under the ESP until the earlier of: (a) the end of the period of 3 years (or if a longer period is specified by the Board in the offer, the end of that period) commencing on the date of the issue or transfer of the shares to the participant; and (b) the date on which the participant is no longer employed by the Company or a related body corporate of the Company. Details of the movement in employee shares under the ESP are as follows: Number of shares at beginning of year Number of shares distributed to employees Number of shares transferred to main share registry and/or disposed of Number of shares at year end Consolidated Entity 2013 No of Shares 2012 No of Shares 438,508 178,760 (195,584) 421,684 598,273 152,280 (312,045) 438,508 The consideration for the shares issued on 15 May 2013 was $0.917 (16 May 2012: $0.925) The amounts recognised in the financial statements of the consolidated entity and the Company in relation to the ESP during the year were: Current receivables Issued ordinary share capital Consolidated Entity 2013 $’000 40 164 2012 $’000 35 141 The market value of ordinary Hansen Technologies Ltd shares closed at $0.91 on 30 June 2013 ($0.92 on 30 June 2012). AnnuAl RepoRt 2013 | HAnsen tecHnologies | finAnciAl stAtements | 41 notes to the financial statements (continueD) 30 June 2013 note 16. reserves anD retaineD earnings Foreign currency translation reserve Options granted reserve Retained earnings (a) Foreign currency translation reserve Note 16 (a) 16 (b) 16 (c) Consolidated Entity 2013 $’000 (1,448) 523 17,142 2012 $’000 (3,038) 346 17,540 This reserve is used to record the exchange differences arising on translation of a foreign entity. Movements in reserve Balance at beginning of year Adjustment to carrying value of overseas interests due to currency fluctuation Balance at end of year (b) Options granted reserve This reserve is used to record the fair value of options issued to employees as part of their remuneration. Movements in reserve Balance at beginning of year Value of options granted during the year Balance at end of year (c) Retained earnings Balance at the beginning of year Dividends paid during the year Capital reduction Net profit attributable to members of Hansen Technologies Ltd Balance at end of year 15 (b) (3,038) 1,590 (1,448) (2,674) (364) (3,038) 346 177 523 17,540 (9,531) - 9,133 17,142 242 104 346 5,604 (9,423) 8,500 12,859 17,540 42 | finAnciAl stAtements | HAnsen tecHnologies | AnnuAl RepoRt 2013 note 17. Cash flow inforMation 30 June 2013 Consolidated Entity 2013 $’000 2012 $’000 (a) Reconciliation of the net profit after tax to net cash flows from operations Net profit from ordinary activities after income tax 9,133 12,859 Add/(less) items classified as investing/financing activities: Profit on sale of non-current assets Add/(less) non-cash items: Amortisation and depreciation Unrealised foreign exchange Net cash provided by operating activities before change in assets and liabilities Changes in assets and liabilities adjusted for effects of purchase of controlled entities during the year: (Increase)/decrease in trade receivables (Increase)/decrease in sundry debtors and other assets Increase/(decrease) in trade payables Increase/(decrease) in other creditors and accruals Increase/(decrease) in provisions (Increase)/decrease in deferred taxes Increase/(decrease) in income tax payable Increase/(decrease) in reserves Net cash provided by operating activities (b) Reconciliation of cash Cash at Bank (c) Loan facilities Loan facility Amount utilised unused loan facility (4) (4) 3,672 (717) 12,084 (2,944) (1,348) 1,101 1,259 339 (178) (782) 1,767 11,298 3,178 (226) 15,807 (1,644) 323 (566) (411) 387 373 (38) (260) 13,971 9,653 23,967 10,000 - 10,000 - - - A $10million working capital facility was established throughout the financial year and is available for draw down, but at this point is yet to be utilised. AnnuAl RepoRt 2013 | HAnsen tecHnologies | finAnciAl stAtements | 43 notes to the financial statements (continueD) 30 June 2013 note 18. Business CoMBinations (a) Hansen iCC, llC and Hansen technologies (Shanghai) Company ltd (i) Hansen ICC, LLC was incorporated in December 2012 to acquire the assets of the ICC business unit from Irdeto Inc. with effect on 1 January 2013. Hansen Technologies (Shanghai) Company Ltd is a Wholly Owned Foreign Entity registered in China that was also acquired 1 January 2013 as a part of the acquisition of the assets of the ICC business unit from Irdeto Inc. Consideration Cash Paid Cash Payable total Acquisition Cost Less Cash Acquired Payment for Acquisition of Business Net Assets Acquired Assets Cash Trade and other receivables Plant and equipment total Assets Acquired Liabilities Trade and other payables Provisions total liabilities Acquired Net Assets Acquired total Acquisition Cost Adjusted for Net Assets Acquired Technology Goodwill Net intangibles Consolidated Entity 2012 $’000 - - - - - Carrying Amount on Acquisition 2013 $’000 130 2,449 569 3,148 1,614 552 2,166 982 2013 $’000 11,967 - 11,967 (130) 11,837 Fair value 2013 $’000 130 2,449 569 3,148 1,614 552 2,166 982 10,985 3,172 7,813 10,985 Goodwill arose on the acquisition of the ICC group due to the combination of the consideration paid for the business and the net assets acquired, less values attributed to other intangibles in the form of software and technology. The value of goodwill represents the future benefit arising from the expected future earnings, synergies and personnel assumed via the acquisition. (ii) Revenue and profit of the ICC group included in consolidated results of the group since acquisition Total revenue Profit after income tax 2013 $’000 9,673 903 2012 $’000 - - (iii) Results of the combined entity for the period as though the date for the acquisition of ICC group occurred at 1 July 2012. It is impracticable to disclose this detail as the ICC business units in both the US and China were integrated within the larger parent entity of the seller and accordingly audited financials are not available for the business units acquired. 44 | finAnciAl stAtements | HAnsen tecHnologies | AnnuAl RepoRt 2013 note 18. Business CoMBinations (ContinueD) (b) utilisoft Pty ltd (i) The company acquired 100% of the share capital of Utilisoft Pty Ltd, with the effective date being 1 March 2013. 30 June 2013 Consideration Cash Paid Cash Payable total Acquisition Cost Less Cash Acquired Payment for Acquisition of Business Net Assets Acquired Assets Cash Trade and other receivables Plant and equipment Software capitalised Deferred tax asset total Assets Acquired Liabilities Trade and other payables Provisions total liabilities Acquired Net Assets Acquired total Acquisition Cost Adjusted for Net Assets Acquired Technology Customer contracts Goodwill Net intangibles Consolidated Entity 2013 $’000 3,250 - 3,250 (1,260) 1,990 2012 $’000 - - - - - Fair value 2013 $’000 Carrying Amount on Acquisition 2013 $’000 1,260 1,260 586 107 - 110 586 107 779 110 2,063 2,842 1,766 308 2,074 768 1,766 456 2,222 (159) 3,409 269 185 2,955 3,409 Goodwill arose on the acquisition of Utilisoft Pty Ltd due to the combination of the consideration paid for the business and the negative net assets acquired, less values attributed to other intangibles in the form of technology and customer contracts. The value of goodwill represents the future benefit arising from the expected future earnings, synergies and personnel assumed via the acquisition. (ii) Revenue and profit of Utilisoft Pty Ltd included in consolidated results of the group since acquisition Total revenue Profit after income tax 2013 $’000 1,347 80 2012 $’000 - - (iii) Results of the combined entity for the period as though the date for the acquisition of Utilisoft Pty Ltd occurred at 1 July 2012. It is impracticable to disclose this detail as Utilisoft Pty Ltd previously reported against a different financial year and shared costs with its larger parent entity. AnnuAl RepoRt 2013 | HAnsen tecHnologies | finAnciAl stAtements | 45 notes to the financial statements (continueD) 30 June 2013 note 19. CoMMitMents Lease expenditure commitments Operating leases (non-cancellable): Not later than one year Later than one year and not later than five years Later than five years Aggregate lease expenditure contracted for at reporting date Consolidated Entity 2013 $’000 2012 $’000 2,272 1,985 - 4,257 1,474 1,651 - 3,125 Operating leases (non-cancellable) The consolidated entity leases property under non-cancellable operating leases expiring from one to five years. Leases generally provide the consolidated entity with a right of renewal at which time all terms are renegotiated. Contingent rental provisions within the lease agreements commonly require the minimum lease payments to be increased by CPI per annum. note 20. earnings per share Reconciliation of earnings used in calculating earnings per share: Basic earnings – ordinary shares Diluted earnings – ordinary shares Weighted average number of ordinary shares used in calculating basic earnings per share: Number for basic earnings per share – ordinary shares Number for diluted earnings per share – ordinary shares Basic earnings (cents) per share from continuing operations Total basic earnings (cents) per share Diluted earnings (cents) per share from continuing operations Total diluted earnings (cents) per share Consolidated Entity 2013 $’000 9,133 9,133 2012 $’000 12,859 12,859 2013 no. shares 2012 no. shares 158,989,963 157,250,861 162,788,114 159,837,337 2013 Cents per share 2012 Cents per share 5.7 5.7 5.6 5.6 8.2 8.2 8.1 8.1 Classification of securities as potential ordinary shares The securities that have been classified as potential ordinary shares and included in diluted earnings per share only, are options outstanding under the Employee Share Option Plan. 46 | finAnciAl stAtements | HAnsen tecHnologies | AnnuAl RepoRt 2013 note 21. DireCtors’ anD exeCutives’ equity holDings (a) Compensation Options: granted and vested during the year: During the financial year the Company granted options over unissued ordinary shares to the managing director and the five key management personnel of the Company as part of their remuneration: 30 June 2013 vested During the Year SPECiFiED ExECutivES 2013 DiRECtORS A Hansen M Benne C Hunter G Lister D Meade S Weir S Weir total 2012 DiRECtORS A Hansen - - - - 75,000 75,000 75,000 40,000 - - - - - 75,000 75,000 75,000 40,000 SPECiFiED ExECutivES M Benne C Hunter G Lister D Meade S Weir total 265,000 1,510,000 vested During the Year terms & Conditions for each Grant Granted During the Year 350,000 350,000 350,000 75,000 100,000 100,000 75,000 40,000 70,000 Grant Date value per Option at Grant Date Exercise Price $ 1 Dec 12 1 Dec 12 1 Dec 12 2 July 12 2 July 12 2 July 12 2 July 12 1 July 12 1 Dec 12 $0.137 $0.131 $0.125 $0.196 $0.196 $0.196 $0.196 $0.196 $0.144 $0.97 $1.02 $1.07 $0.92 $0.92 $0.92 $0.92 $0.92 $0.92 vesting Date 2 July 15 2 July 15 2 July 15 2 July 15 2 July 15 2 July 15 2 July 15 2 July 15 2 July 15 last Exercise Date 2 July 17 2 July 17 2 July 17 2 July 17 2 July 17 2 July 17 2 July 17 2 July 17 2 July 17 terms & Conditions for each Grant Granted During the Year 250,000 250,000 250,000 75,000 100,000 100,000 75,000 40,000 Grant Date value per Option at Grant Date Exercise Price $ 1 Dec 11 1 Dec 11 1 Dec 11 2 July 11 2 July 11 2 July 11 2 July 11 2 July 11 $0.212 $0.207 $0.201 $0.214 $0.214 $0.214 $0.214 $0.214 $0.95 $1.00 $1.05 $0.91 $0.91 $0.91 $0.91 $0.91 vesting Date 1 July 14 1 July 14 1 July 14 2 July 14 2 July 14 2 July 14 2 July 14 2 July 14 last Exercise Date 1 July 16 1 July 16 1 July 16 2 July 16 2 July 16 2 July 16 2 July 16 2 July 16 265,000 1,140,000 AnnuAl RepoRt 2013 | HAnsen tecHnologies | finAnciAl stAtements | 47 notes to the financial statements (continueD) 30 June 2013 note 21. DireCtors’ anD exeCutives’ equity holDings (ContinueD) (b) Number of options held by key management personnel: Balance 30 June 2012 Granted as Remuneration Options Exercised Options Forfeited Balance 30 June 2013 vested at 30 June 2013 total Exercisable unexercisable 2013 DiRECtORS A Hansen 750,000 1,050,000 SPECiFiED ExECutivES 150,000 250,000 250,000 225,000 120,000 75,000 100,000 75,000 100,000 75,000 75,000 75,000 110,000 40,000 1,745,000 1,510,000 265,000 - - - - - - - 1,800,000 225,000 275,000 275,000 225,000 190,000 2,990,000 - - - - - - - - - - - - - - - - - - - - - Balance 30 June 2011 Granted as Remuneration Options Exercised Options Forfeited Balance 30 June 2012 vested at 30 June 2012 total Exercisable unexercisable SPECiFiED ExECutivES - 750,000 75,000 225,000 225,000 300,000 120,000 75,000 100,000 75,000 100,000 75,000 75,000 150,000 40,000 40,000 945,000 1,140,000 340,000 - - - - - - - 750,000 150,000 250,000 250,000 225,000 120,000 1,745,000 - - - - - - - - - - - - - - - - - - - - - M Benne C Hunter G Lister D Meade S Weir total 2012 DiRECtORS A Hansen M Benne C Hunter G Lister D Meade S Weir total - - - - Any options not exercised are forfeited if not exercised within 28 days of termination of employment. Share based payments represent a value attributed to options over ordinary shares issued to executives. They expire during the period up to 2 July 2017. Each option entitles the holder to purchase one ordinary share in the Company. The share based payment value disclosed above is calculated at the date of grant using the Black-Scholes model. For those options issued to key management personnel this year the Black Scholes model applied a: – share price volatility factor in respect of the company’s historical share price movement compared with the industry average, for a period equal to the term of the option vesting period of 35%, – a continuously compounding risk free interest rate of 5.58%, – a probability factor for the likelihood of the options being exercised based on historical trends of 75%, and – compared the issue price ($0.92 cents per share) with the market price on day of issue ($0.92 cents per share), to determine a weighted average fair value for the options issued as at grant date of $0.196 cents per option. 48 | finAnciAl stAtements | HAnsen tecHnologies | AnnuAl RepoRt 2013 note 21. DireCtors’ anD exeCutives’ equity holDings (ContinueD) (c) Number of shares held, or over which control may be influenced, by key management personnel: 30 June 2013 2013 SPECiFiED DiRECtORS B Adams P Berry A Hansen D Osborne M Osborne D Trude SPECiFiED ExECutivES M Benne C Hunter G Lister D Meade S Weir total 2012 SPECiFiED DiRECtORS B Adams A Hansen K Hansen P James D Osborne D Trude SPECiFiED ExECutivES M Benne C Hunter G Lister D Meade S Weir total Balance 30 June 2012 Received as Remuneration Options Exercised Net Change Other Balance 30 June 2013 150,000 - 2,777 332,890 - 40,000 15,683 583,109 1,209,949 3,853 41,214 2,379,475 - - - - - - - - - - - - - - - - - - - 75,000 75,000 75,000 40,000 265,000 - - 150,000 - 70,160,249 70,163,026 11,891 344,781 - - (8,770) (29,531) 54,408 (73,910) 5,825 - 40,000 6,913 628,578 1,339,357 4,943 87,039 70,120,162 72,764,637 Balance 30 June 2011 Received as Remuneration Options Exercised Net Change Other Balance 30 June 2012 150,000 2,777 92,610,336 - 311,754 - 14,603 505,332 1,134,949 2,773 - 94,732,524 - - - - - - - - - - - - - - - - - - - 75,000 75,000 150,000 40,000 340,000 - - 4,975 - 21,136 40,000 1,080 2,777 - (148,920) 1,214 150,000 2,777 92,615,311 - 332,890 40,000 15,683 583,109 1,209,949 3,853 41,214 (77,738) 94,994,786 AnnuAl RepoRt 2013 | HAnsen tecHnologies | finAnciAl stAtements | 49 notes to the financial statements (continueD) 30 June 2013 note 22. auDitor’s reMuneration (a) Amounts paid and payable to Pitcher Partners for: (i) Audit and other assurance services – an audit and/or review of the financial report of the entity and any other entity in the consolidated entity (ii) Other non-audit services – taxation services – advisory services total remuneration of Pitcher Partners (b) Amounts paid and payable to network firms of Pitcher Partners for: (i) Audit and other assurance services – an audit and/or review of the financial report of other entities in the consolidated entity (ii) Other non-audit services – taxation services – advisory services Total remuneration of network firms of Pitcher Partners (c) Amounts paid and payable to non-related auditors of group entities for: (i) Audit and other assurance services – an audit and/or review of the financial report of other entities in the consolidated entity (ii) Other non-audit services – taxation services – advisory services total remuneration of non-related auditors of group entities total auditors remuneration Consolidated Entity 2013 $’000 2012 $’000 226 33 30 63 289 31 3 4 7 38 5 - - - 5 265 61 21 82 347 25 6 2 8 33 4 2 - 2 6 332 386 50 | finAnciAl stAtements | HAnsen tecHnologies | AnnuAl RepoRt 2013 note 23. relateD party DisClosures (a) The consolidated financial statements include the financial statements of Hansen Technologies Ltd and its controlled entities listed below: 30 June 2013 Note Country of incorporation Ordinary share consolidated entity interest 2013 % 2012 % Name PARENt ENtit Y Hansen Technologies Ltd SuBSiDiARiES OF HANSEN tECHNOl OGiES ltD Hansen Corporation Investments Pty Ltd Hansen Corporation Pty Ltd Hansen Holdings (Asia) Pty Ltd Hansen Research & Development Pty Ltd Peace Software Australia Pty Ltd Utilisoft Pty Ltd Peace Software Canada Inc. Australia Australia Australia Australia Australia Australia (iii) Australia Canada Hansen Technologies (Shanghai) Company Limited (ii) China Hansen Corporation Asia Limited Hansen New Zealand Limited Hansen Corporation Europe Limited Hong Kong New Zealand United Kingdom Hansen ICC, LLC (i) United States of America Hansen Technologies North America, Inc. NirvanaSoft LLC Peace Software Inc. United States of America United States of America United States of America Notes: (i) Company formed to acquire the assets of ICC upon acquisition from Irdeto USA Inc. on 1 January 2013. (ii) Equity purchase as part of the ICC acquisition on 1 January 2013. (iii) Acquired on 1 March 2013 via an equity purchase. 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 - 100 - 100 100 100 - 100 100 100 (b) transactions with key management personnel of the entity or its parent and their personally related entities The terms and conditions of the transactions with Directors and their Director-related entities were no more favourable than those available, or which might reasonably be expected to be available, on similar transactions to non-Director related entities on an arm’s length basis. The following table provides the total amount of transactions that were entered into with related parties in respect of leased premises for the relevant financial year: K Hansen and A Hansen – Lease Rental Payments Consolidated Entity 2013 $ 2012 $ 924,004 899,952 AnnuAl RepoRt 2013 | HAnsen tecHnologies | finAnciAl stAtements | 51 notes to the financial statements (continueD) 30 June 2013 note 24. parent entity inforMation Summarised presentation of the parent entity, Hansen Technologies Ltd, financial statements: (a) Summarised statement of financial position Assets Current assets Non-current assets total assets liabilities Current liabilities Non-current liabilities total liabilities Net assets Equity Share capital Accumulated profits Share based payments reserve total equity (b) Summarised statement of comprehensive income Profit for the year total comprehensive income for the year (c) Parent entity guarantees Parent Entity 2013 $ 2012 $ 151 65,335 65,486 1,844 4,181 6,025 59,461 43,650 15,288 523 59,461 10,033 10,033 124 64,766 64,890 2,999 4,181 7,180 57,710 42,579 14,786 345 57,710 25,007 25,007 Hansen Technologies Ltd, being the parent entity, has not entered into any guarantees in relation to debts of its subsidiaries. 52 | finAnciAl stAtements | HAnsen tecHnologies | AnnuAl RepoRt 2013 note 25. segMent inforMation (a) Description of segments Inter-segment pricing is determined on an arm’s length basis. Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. (b) Segment information 2013 Segment revenue Total segment revenue Segment revenue from external source Segment result Total segment result Segment result from external source total segment assets total segment liabilities 2012 Segment revenue Total segment revenue Segment revenue from external source Segment result Total segment result Segment result from external source total segment assets total segment liabilities 30 June 2013 Business segments Geographical segments The consolidated entity comprises the following main business segments, based on the consolidated entity’s management reporting system: Billing: Represents the sale of billing applications and the provision of consulting services in regard to billing systems. IT Outsourcing: Represents the provision of various IT outsourced services covering facilities management, systems and operations support, network services and business continuity support. Other: Represents software and service provision in superannuation administration. In presenting information on the basis of geographical segments, segment revenue is based on the geographical location of customers. Segment assets are based on the geographical location of the assets. The consolidated entity’s business segments operate geographically as follows: APAC: Sales and services throughout Australia and Asia Americas: Sales and services throughout the Americas EMEA: Sales and services throughout Europe, the Middle East and Africa 2013 Financial Year Billing $’000 Outsourcing $’000 51,729 51,729 9,908 9,908 53,940 13,333 8,555 8,555 3,390 3,390 3,198 2,427 2012 Financial Year Billing $’000 Outsourcing $’000 46,317 46,317 14,329 14,329 31,205 7,635 6,908 6,908 2,883 2,883 2,662 1,860 Other $’000 3,496 3,496 1,062 1,062 1,307 991 Other $’000 3,329 3,329 871 871 1,283 896 total $’000 63,780 63,780 14,360 14,360 58,445 16,751 total $’000 56,554 56,554 18,083 18,083 35,150 10,391 AnnuAl RepoRt 2013 | HAnsen tecHnologies | finAnciAl stAtements | 53 notes to the financial statements (continueD) 30 June 2013 note 25. segMent inforMation (ContinueD) (i) Reconciliation of segment revenue from external source to the consolidated statement of comprehensive income Segment revenue from external source Other revenue Interest revenue total revenue Revenue from external customers attributed to individual countries is detailed as follows: APAC Americas EMEA total revenue 2013 $’000 63,780 967 611 65,358 2013 $’000 31,842 12,113 19,825 63,780 (ii) Reconciliation of segment result from the external source to the consolidated statement of comprehensive income Segment result from external source Interest revenue Interest expense Depreciation & amortisation Adjustment to carrying value of overseas interests due to currency fluctuation Other expense Total profit before income tax 2013 $’000 14,360 611 (1) (631) (1,590) (80) 12,669 2012 $’000 56,554 401 1,043 57,998 2012 $’000 32,046 11,618 12,890 56,554 2012 $’000 18,083 1,043 (32) (712) 364 (1,752) 16,994 54 | finAnciAl stAtements | HAnsen tecHnologies | AnnuAl RepoRt 2013 note 25. segMent inforMation (ContinueD) (iii) Reconciliation of segment assets to the consolidated statement of financial position Segment assets Unallocated assets Cash Intangibles Other total unallocated assets total assets Non-current assets attributed to individual countries is detailed as follows: APAC Americas EMEA total assets 2013 $’000 58,445 7,134 11,000 1,085 19,219 77,664 2013 $’000 50,182 22,939 4,543 77,664 (iv) Reconciliation of segment liabilities to the consolidated statement of financial position Segment liabilities Unallocated liabilities total liabilities note 26. suBsequent events 2013 $’000 16,751 1,046 17,797 There has been no matter or circumstance, which has arisen since 30 June 2013 that has significantly affected or may significantly affect: (a) the operations, in financial years subsequent to 30 June 2013, of the consolidated entity, or (b) the results of those operations, or (c) the state of affairs, in financial years subsequent to 30 June 2013, of the consolidated entity. 30 June 2013 2012 $’000 35,150 22,664 11,000 1,705 35,369 70,519 2012 $’000 60,680 5,237 4,602 70,519 2012 $’000 10,391 2,701 13,092 AnnuAl RepoRt 2013 | HAnsen tecHnologies | finAnciAl stAtements | 55 Directors’ Declaration The Directors declare that the financial statements and notes set out on pages 22 to 55 in accordance with the Corporations Act 2001: (a) Comply with Accounting Standards and the Corporations Regulations 2001, and other mandatory professional reporting requirements; (b) As stated in Note 1 (a), the consolidated financial statements also comply with International Financial Reporting Standards; and (c) Give a true and fair view of the financial position of the consolidated entity as at 30 June 2013 and of its performance for the year ended on that date. In the Directors’ opinion there are reasonable grounds to believe that Hansen Technologies Ltd will be able to pay its debts as and when they become due and payable. This declaration has been made after receiving the declarations required to be made by the Chief Executive Officer and Chief Financial Officer to the Directors in accordance with sections 295A of the Corporations Act 2001 for the financial year ending 30 June 2013. This declaration is made in accordance with a resolution of the Directors. David Trude Director Melbourne 27 September 2013 Andrew Hansen Director Melbourne 27 September 2013 56 | diRectoRs’ declARAtion | HAnsen tecHnologies | AnnuAl RepoRt 2013 inDepenDent auDitor’s report to the members of hansen technologies ltD We have audited the accompanying financial report of Hansen Technologies Ltd and controlled entities, which comprises the consolidated statement of financial position as at 30 June 2013, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, notes comprising a summary of significant accounting policies and other explanatory information, and the directors’ declaration of the consolidated entity comprising the company and the entities it controlled at the year’s end or from time to time during the financial year. Directors’ Responsibility for the Financial Report The directors of the company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001, and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In Note 1, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that the financial statements comply with International Financial Reporting Standards. Auditor’s Responsibility Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. Those standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance about whether the financial report is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement in the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the company’s preparation of the financial report that gives a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. independence In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. Auditor’s Opinion In our opinion, (a) the financial report of Hansen Technologies Ltd is in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2013 and of its performance for the year ended on that date; and (ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and (b) the consolidated financial report also complies with International Financial Reporting Standards as disclosed in Note 1. AnnuAl RepoRt 2013 | HAnsen tecHnologies | independent AuditoR’s RepoRt | 57 inDepenDent auDitor’s report (continueD) Report on the Remuneration Report We have audited the remuneration report included on pages 14 to 19 of the directors’ report for the year ended 30 June 2013. The directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility it to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. Opinion In our opinion the Remuneration Report of Hansen Technologies Ltd and controlled entities for the year ended 30 June 2013 complies with section 300A of the Corporations Act 2001. S Schonberg Partner Pitcher Partners Melbourne 27 September 2013 An independent Victorian Partnership ABN 27 975 255 196 Pitcher Partners is an association of independent firms Melbourne | Sydney | Perth | Adelaide | Brisbane An independent member of Baker Tilly International 58 | independent AuditoR’s RepoRt | HAnsen tecHnologies | AnnuAl RepoRt 2013 corporate governance statement The Corporate Governance principles and related Charters and Policies for the management and operation of the Hansen Group of Companies are available for review on the corporate website: www.hsntech.com 1. the Board 2. Ethics and Responsibilities 3. Risk Management 4. Remuneration approaCh to governanCe The Hansen Corporate Governance principles provide direction to the business to help meet our responsibilities to shareholders, customers, employees and community. In relation to Corporate Governance, the Board aims to: – Embrace best practice in Corporate Governance. – Remain mindful of operating practices in the international jurisdictions in which we operate. – Recognise and comply with the principles of the ASX Corporate Governance Council. – Ensure Directors, Executives, Management, and staff are cognisant of the Hansen Governance principles. 1. the BoarD The primary role of the Board of Directors is to provide effective governance over the performance and affairs of the Hansen Technologies Group. In carrying out its responsibilities, the Board undertakes to serve the interest of shareholders, employees, customers and the broader community honestly, fairly, diligently and in accordance with applicable laws. Duties and Responsibilities The specific functions established and reserved for the Board are: – Providing strategic direction and approving corporate strategies. – Selecting and appointing the Chief Executive, determining conditions of service and monitoring performance against established objectives. If necessary removing the CEO from office. – Monitoring financial performance Meetings against budgeted objectives. – Ensuring adequate risk management controls and reporting mechanisms are maintained. – Approving and monitoring progress of major capital expenditure, capital management, acquisitions and divestments. – Ensuring that continuous disclosure requirements are met. – Ensuring responsible corporate governance is understood and observed at Management, Executive, and Board level. The Board shall have full and free access to Executives and other employees of the Group. Collectively or individually, the Board may take independent advice considered necessary to fulfil their relevant duties and responsibilities at the Group’s expense. Individual Board members seeking such advice must obtain the approval of the Chairman, which will not be unreasonably withheld, and the advice will be made available to all Board members as appropriate. Delegation of Responsibility The Board has delegated to the Chief Executive Officer the authority and responsibility for implementing the Group’s strategic direction and overseeing the everyday affairs of the Hansen Group. The Chief Executive Officer’s specific responsibilities include ensuring business activities are in accordance with the Group’s overall business strategy, ensuring the Group conducts its affairs within the law and the principles outlined in Hansen’s Corporate Governance policies, keeping the Board informed of all major developments and approving expenditure and setting remuneration levels of personnel within the normal course of business. The Chief Executive consults with the Chairman of the Board and respective Committees on matters that are sensitive, extraordinary or of a strategic nature. Through the Chief Executive Officer, the Board has delegated authority and responsibility to other Executives and Management for their respective business functions. The Board will meet as often as deemed necessary by the Directors in order to fulfil their duties and responsibilities as Directors, and as dictated by the needs of the business. As a matter of practice the Board schedules to meet once each month. Composition The Board determines the Board’s size and composition, subject to limits imposed by the Company’s Constitution. The Constitution determines the basis for the election and appointment of Directors and specifies a minimum of three Directors and a maximum of ten. Currently, the Board comprises the Chairman, David Trude, four other Non-Executive Directors, and one Executive Director, the CEO Andrew Hansen. The skills, tenure of office, experience and expertise relevant to the position of Director held by each Director is detailed in the Annual Report. In identifying suitable persons to become Directors, the Board will look to achieve an appropriate balance of relevant legal and financial management skills plus financial markets experience as well as expertise specific to the industries in which our Company operates. In pursuing this objective the Board will be cognisant of its policy to pursue a balance of gender diversity at all levels of the company’s management. independence The Board’s definition of an independent Director is one who is unaffiliated with the Executive and free from any business, significant shareholding, or other relationship that could materially interfere with the exercise of independent judgement. It is the Board’s objective to strive for a majority of independent Directors. The Board currently has four independent Directors, David Trude, Bruce Adams, Melinda Osborne and Peter Berry, representing 66% of the Board’s total membership. AnnuAl RepoRt 2013 | HAnsen tecHnologies | coRpoRAte goveRnAnce stAtement | 59 corporate governance statement (continueD) Where potential for conflict is identified the Board appoints a Sub-Committee specifically structured, authorised and tasked to determine the appropriate actions or responses so as to eliminate any potential for conflicts. Performance Board members may periodically review and evaluate the Board’s performance and that of the Board Committees. Given the limited size of the Board and its Committees an annual formal review is not deemed warranted. However there is an ongoing and constant provision for each Director to contribute judgements and observations at any time. The performance evaluation process is as follows: – Each Director, as they see fit, may periodically evaluate the effectiveness of the Board and its Committees and submit observations to the Chairman. – The Chairman of the Board will make a presentation incorporating his assessment of such observations to enable the Board to assess and, if necessary, take action. – The Board will agree and develop actions that may be required to improve performance. – Outcomes and actions will be minuted. – The Chairman will assess the progress of the actions to be achieved. This process aims to ensure that individual Directors have an unlimited opportunity to assess and comment on the performance of the Board and its Committees with the objective of enhancing the Board’s effectiveness in achieving its duties and responsibilities. Periodically the Chairman may propose a formal performance evaluation review and he may commission a third party to assist in such a review if deemed desirable. No such formal review was conducted during this reporting period. Committees To assist it in carrying out its responsibilities, the Board has established two standing Committees comprising some or all of its members: the Audit Committee, and the Remuneration Committee. Considering the level of operations of the Group and the current number of Board members, the appointment of a formal Nominations Committee is not deemed necessary. Nominations for positions on the Board are considered during a meeting with all Board members present. Other Committees of the Board may be established to undertake specific tasks if deemed appropriate. Audit Committee Membership The Audit Committee was formed in May 2000. The members are appointed by the Board of Directors and shall preferably comprise at least three Directors that have diverse and complementary backgrounds with a majority of independent members. The Committee Chairman shall be independent, possess leadership experience and a sound finance or business background. All Committee members must be financially literate. Such qualification is interpreted by the Board in its business judgement. Furthermore, at least one member shall have accounting or related financial management expertise. The members of the Committee as at 30 June 2013 were Non-Executive Directors David Osborne, Bruce Adams, Melinda Osborne and the Chairman of the Committee, Peter Berry, with 75% of the membership being deemed independent. The skills, tenure of office, experience and expertise relevant to the positions of the members of the Audit Committee is detailed in the Annual Report. Meetings The Committee shall meet as required, but no less than twice each year. The purpose of these meetings shall be to: – Review and approve the half-year financial report. – Review and approve the annual financial report. – Review the external audit reports. – Perform the general responsibilities of the Committee. Purpose The Audit Committee shall provide assistance to the Board of Directors in fulfilling its Corporate Governance and oversight responsibilities in relation to the Group’s financial reporting, internal control structure, risk management systems, and external audit functions. In doing so, it is the responsibility of the Committee to maintain free and open communication between the Committee, external auditors, and the Hansen Executive team. In discharging its oversight role, the Committee is empowered to investigate any matter brought to its attention with full access to all books, records, facilities, and personnel of the Hansen Group. The Committee has the authority to engage independent counsel and other advisers as it determines necessary to carry out its duties. Duties and Responsibilities The following shall be the principal duties and responsibilities of the Audit Committee. These are set forth as a guide with the understanding that the Committee may supplement them as appropriate. Understanding the Business The Committee shall ensure it understands the Group’s structure, controls, and types of transactions in order to adequately assess the significant risks faced by the Group in the current economic environment. Financial Reporting The primary responsibility of the Audit Committee is to oversee the Group’s financial reporting process on behalf of the Board and report the results of its activities to the Board. The external auditors are responsible for auditing the Group’s financial reports and for reviewing the Group’s interim financial reports. The Board of Directors is ultimately responsible for the Group’s financial reports including the appropriateness of the accounting policies and principles that are used by the Group. The Committee, in carrying out its responsibilities, believes its policies and procedures should remain flexible, in order to best react to changing conditions and circumstances. 60 | coRpoRAte goveRnAnce stAtement | HAnsen tecHnologies | AnnuAl RepoRt 2013 The Committee will take appropriate actions to guide corporate philosophies for quality financial reporting, sound business risk practices, and ethical behaviour. Assessment of Accounting, Financial and Internal Controls The Committee shall discuss with the Senior Executives and the external auditors, the adequacy and effectiveness of the accounting and financial controls, including the Group’s policies and procedures to assess, monitor, and manage business risk, as well as legal and ethical compliance programs (including the Group’s Code of Conduct). The Committee shall receive periodic reports from the external auditor on the critical policies and practices of the Group as well as compliance with generally accepted accounting principles. Any opinion obtained from the external auditors on the Group’s choice of accounting policies or methods should include an opinion on both appropriateness and acceptability of that choice or method. Periodically, the Committee shall meet separately with the Senior Executive and the external auditors to discuss issues and concerns warranting Committee attention, including but not limited to their assessments of the effectiveness of internal controls and the process for improvement. The Committee shall provide sufficient opportunity for the external auditors to meet privately with the members of the Committee. The Committee shall review with the external auditor any audit observations and the Senior Executive’s responses. Appointment of External Auditors The Committee shall be directly responsible for making recommendations to the Board of Directors on the appointment, reappointment or replacement (subject, if applicable, to shareholder ratification), remuneration, monitoring of the effectiveness, and independence of the external auditors, including resolution of disagreements between the Senior Executives and the auditors regarding financial reporting. The Committee shall approve all audit and non-audit services provided by the external auditors and shall not engage the external auditors to perform any non-audit or assurance services that may impair the external auditor’s judgment or independence in respect of the Hansen Group. Assessment of External Audit The Committee, at least on an annual basis, shall meet and discuss with the external auditors: – Any material issues raised by any control review, or peer review, of the audit firm, or by any inquiry or investigation by governmental or professional authorities, respecting one or more independent audits carried out by the firm, and any steps taken to deal with any such issues. – All relationships between the external auditor and the Group (to assess the auditor’s independence). Scope of External Audit The Committee shall discuss with the external auditors the overall scope of the external audit, including identified risk areas and any additional agreed- upon procedures. In addition, the Committee shall also review the external auditor’s compensation to ensure that an effective, comprehensive and complete audit can be conducted for the agreed compensation level. Independence of External Auditors The Committee shall review and assess the independence of the external auditor, including but not limited to any relationships with the Group or any other entity that may impair, or appear to impair, the external auditor’s judgment or independence in respect of the Group. The Committee shall give clear direction in hiring policies for employees, or former employees, of the external auditor in order to prevent the impairment or perceived impairment of the external auditor’s judgment or independence in respect of the Hansen Group. Furthermore, the Committee shall include in the Group’s annual report a statement that the Committee is satisfied the provision of non-audit services has not impacted the external auditors independence. Remuneration Committee Membership The Remuneration Committee currently consists of David Osborne plus independent Non–Executive Directors, Peter Berry, Melinda Osborne and the Chairman Bruce Adams. Meetings The Committee will meet at least annually to assess annual remuneration changes, and will hold additional meetings where required. A performance evaluation of the CEO and Senior Executives was undertaken during the reporting period in accordance with this Remuneration Policy. The Remuneration Committee met one time during the financial year and all members of the Remuneration Committee at the time were present. External Advice As and when deemed appropriate, but no less than every three years, the Remuneration Committee shall engage an external consultant to undertake a review of the CEO’s remuneration and that of the Directors and Chairman to determine the appropriateness and market competitiveness of their remuneration and related package and make appropriate recommendations for consideration by the Committee. The Remuneration Committee is not obliged to adopt the recommendation of the consultant but it shall consider the findings and recommendations in making its determination of an appropriate remuneration package for the CEO and Board members. Purpose, Duties and Responsibilities The responsibilities of the Committee are to: – Advise on remuneration policies and practices generally. – Provide specific recommendations on remuneration packages and other terms of employment for Executive Directors and Non-Executive Directors. – Evaluate the performance of and determine an appropriate remuneration base and structure AnnuAl RepoRt 2013 | HAnsen tecHnologies | coRpoRAte goveRnAnce stAtement | 61 corporate governance statement (continueD) for the CEO in accordance with specified key performance indicators and budgeted financial performance expectations. responsibly and indicates we have received and understood the document being signed. We are not to act outside our authority. – Breaches of any law should be notified to a senior executive. Communications Hansen has established communication mechanisms to provide shareholders with information about the Group and to enable them to exercise their rights as shareholders in an informed manner. Behave as a good corporate citizen: Communication Methods Whilst pursuing our business objectives we should aim to contribute to the communities we operate within and should consider the impact of decisions on our colleagues, customers and community. Respect confidentiality: We respect the confidential nature of the Hansen Group’s business affairs and those of our customers and colleagues. As a part of our employment contract with the Hansen Group, we commit to keeping confidential any information we obtain in the course of our employment. Confidential information is to be used only for authorised work- related tasks, and never for personal gain, or for the gain of others. Value professionalism: A cornerstone of the Hansen business is the professionalism and conduct of individuals and of the Hansen Group. In addition to conducting ourselves ethically, we should continually aim for excellence in all our business activities. Act to avoid conflicts of interest: A conflict of interest occurs where an employee has a personal or professional interest sufficient to influence, or appear to influence, the objective performance of their duties and responsibilities to the Hansen Group. No employee of the Group should allow themselves to be placed in a position where they have a conflict with their duties and responsibilities to the Hansen Group or which are prejudicial to the Group. Employees should speak to their manager where they have concerns regarding a potential conflict of interest. Breaches of the Code of Conduct Employees who breach this Code may face disciplinary action, which could result in changes to their employment. Information is communicated to shareholders through: – Website: Hansen encourages the use of electronic communications by providing up-to-date information on the Group web site, www.hsntech.com. The “Investors” section of the website contains a range of information relevant to shareholders including: – ASX announcements. – Annual Reports and presentations. – Financial results. – Corporate Governance. – Key dates. – Share registry contact details and links. – Contact link for more shareholder information. – Annual Report: distributed either over the web or by post. – Notice of Annual General Meeting by mail. – Mail or upload to the web site whenever there are other significant developments to report. The Annual General Meeting is seen as an important communication forum. In preparing notices of meeting and related explanatory information, Hansen aims to provide all information that is relevant to shareholders in making a decision on the matter to be voted on by shareholders in a clear and concise format. During the meeting, time is dedicated to accommodating shareholders questions and the external Auditors are in attendance to respond to any relevant questions. Following the meeting, Directors and shareholders are able to further communicate informally. Hansen is committed to continuing to improve communication with shareholders. – Assess the reasonableness of and approve the remuneration proposals put forward by the CEO for the Executive team, including the performance objectives specified for each Executive. 2. ethiCs anD responsiBility Code of Conduct At Hansen Technologies we recognise that our Company is made up of the individual employees representing our operations globally. Each person has an individual responsibility for their own behaviour and should take accountability for their actions and choices. The Hansen Technologies Code of Conduct has been established to assist all Hansen representatives to make considered choices with regard to their behaviour. The Code of Conduct reflects the Hansen Group’s primary values of ethical behaviour, compliance with legal obligations, and respecting the expectations of all stakeholders. Our Code To respect the law and act accordingly, including the following: – Hansen employees operate in numerous countries and it is essential that the laws of each jurisdiction are observed and followed. It is important to note that the observance of the laws is not simply because they exist; it is because it is right to do so. Breaching laws and regulations can result in serious consequences for the Hansen Group and the individual involved. – We should respect customs and business practices of countries in which we operate, whilst always observing the primary principles of this code. – Where we believe our product or service provision would be used in relation to illegal activities, we shall withdraw from involvement. – Discharging of authority to sign documents on behalf of the Hansen Group should be performed 62 | coRpoRAte goveRnAnce stAtement | HAnsen tecHnologies | AnnuAl RepoRt 2013 Communication mechanisms will be reviewed regularly to ensure they provide the optimum information flow to Shareholders and potential investors, enabling them to make decisions in an informed manner. Continuous Disclosure The Hansen Continuous Disclosure and Communication Policy has been developed to provide clear guidelines for the operations of the Hansen business and establishes appropriate processes and criteria for continuous disclosure to ensure compliance with the requirements of the ASX and other securities and corporations legislation. The Policy’s primary objective is the promotion of effective communication with Shareholders and related stakeholders. The key principles of the Policy are: – Material Company information is issued to shareholders and the market in a timely manner and in accordance with our obligations to the market. – Such information is communicated in a way that allows for all interested parties to have equal and timely access. – Communication is presented in a clear, factual and balanced manner. – ASX reporting obligations are met. Communications Representative Hansen has appointed the Company Secretary as the Communications Representative. The Communications Representative has responsibility for: – Coordinating and controlling disclosure of information to ASX, shareholders, analysts, brokers, the media and the public. – Ensuring complete records are maintained of all disclosures of information by Hansen and the related authorisations. – Reporting and making recommendations to the Board on information potentially warranting disclosure. – Developing and maintaining relevant guidelines to help employees understand what information is price sensitive. – Educating Hansen staff, Management, Executives, and Directors on disclosure guidelines and raising awareness of the principles underlying continuous disclosure. – Supporting the Directors and Executives in ensuring that Hansen complies with continuous disclosure requirements. The Board has nominated a limited number of individuals that are authorised as spokespersons for Hansen as follows: – The Chairman. – The Chief Executive Officer. – Company Secretary. – The Chief Financial Officer. Other Executives may become spokespersons for specific areas under their control, however any comments are to be limited to their area of expertise. Directors and Executives responsibilities Directors and Senior Executives are primarily responsible for the compliance with continuous disclosure guidelines. The appointment of the Communications Representative is to facilitate overall awareness and the ability of Hansen to comply with disclosure guidelines. Directors and Executives are responsible for communicating to the Communications Representative: – Any price sensitive information of which they become aware of which they believe the Communications Representative will not be aware. If individuals are uncertain as to whether an issue could be sensitive, they should report the matter for the Board to consider. – Disclosures of any information from Hansen that they believe the Communications Representative may not be aware. – If they undertake any dealings in securities of Hansen. – Their comments and ultimate approval of draft announcements, presentations and general communications to shareholders, ASX and the market. – All information, as specified by ASX and ASIC, that requires market announcements. Communications for Disclosure Hansen will make market disclosures on any event that is deemed to have possible material effect on the price of Hansen securities. Events warranting disclosure include: – Financial performance and significant changes in financial performance. – Changes in Board Directors and Senior Executives. – Mergers, acquisitions, divestments, joint ventures or changes in assets. – Significant developments in regard to new projects or ventures. – Events regarding an entity’s shares or securities. – Major new contracts, orders, or changes in suppliers or customers. – Significant changes in products, product lines, supplies or inventory. – Industry issues that may have a material impact on the Group. – Major litigation. – Decisions on significant issues affecting the entity by regulatory bodies in Australia such as the Australian Foreign Investment Review Board, Australian Takeovers Panel, Australian Competition and Consumer Commission. If there is any uncertainty, Hansen Directors and Senior Executives will discuss the matter, seek legal advice if necessary, and if considered appropriate, approach the ASX to seek its position on whether the information should be disclosed to the market. Hansen is aware that outside of statutory and listing rule requirements, communication with the market will occur in other forms. Communication channels include: – Investor briefings and presentations. – One-on-one meetings with stockbroking analysts or institution fund managers. – Industry forums. – Company literature. – Media interviews. AnnuAl RepoRt 2013 | HAnsen tecHnologies | coRpoRAte goveRnAnce stAtement | 63 corporate governance statement (continueD) In participating in such communications Hansen will act to avoid against unintended disclosure of material information to selected market participants. Communications Procedures A representative of Hansen, the Directors or the Senior Executives, may not release any information that is required to be disclosed to the ASX under the continuous disclosure rules to any person before: – The information has been given to the Communications Representative and the approval and sign-off process for disclosure has been effected. – The information has been given to ASX. – An acknowledgement of the receipt of that information has been received from ASX. Diversity Policy The Board recognizes that a diverse and inclusive workforce is not only good for our employees but also good for our business. It helps Hansen attract and retain talented people, create more innovative solutions, and be more flexible and responsive to our customers’ and shareholders’ needs. Across the Company, there is increasing momentum on diversity with a particular focus on gender and age, as well as greater work and career flexibility. Diversity Diversity within the Company refers to all the characteristics that make individuals different from each other. It includes characteristics or factors such as religion, race, ethnicity, language, gender, sexual orientation, disability, age or any other area of potential difference. Diversity is about the commitment to equality and treating all individuals with respect. Gender Hansen is committed to being an equal opportunity employer, with a practice of making decisions based on merit for recruitment, internal promotion, leadership development and flexible work arrangements without regard to any form of gender bias. However the Board recognises that pursuing a balance of diversity is also an appropriate objective in maintaining a balanced work environment. Accordingly as Hansen grows, the Board has the objective that all persons be conscious of striving for a balance of gender diversity in the work place and when appropriate encouraging actions which recognise the value of increasing the representation of females at all levels of the organisation. This focus on diversity at all levels of the business is intended to reinforce the importance of equality in the workplace and is a logical extension of Hansen’s active participation in the “Workplace Gender Equality” initiatives of the Australian Government’s Workplace Gender Equality Agency. A copy of Hansen’s most recent report to the Agency may be found in the Corporate Governance Section of Hansen’s website. With respect to gender diversity, management will: (a) Develop, for approval by the Board or the Remuneration Committee of the Board, as appropriate: (i) measurable objectives concerning the strategies, initiatives and programs for pursuing gender diversity; (ii) targets to verify progress towards attainment of those measurable objectives. (b) Measure performance against those targets on no less than an annual basis; and (c) Report from time to time on the progress of the matters referred to in (a) and (b) above. The table below shows the gender diversity of the Group as at 30 June 2013 Board Senior Management Hansen Group % Female % Male 17 13 26 83 87 74 Mature Age It is important for the Company to attract and retain mature age workers as these individuals have accumulated knowledge, skills, wisdom and experience which will only benefit the company. Over the next decade, organisational growth and sustainability will be tested by the retirement of key labour and talent. The loss of certain individuals (45 + years) brings with it the loss of significant experience, leadership strength and valuable know-how at times of critical importance. Hansen is committed to assist in the attraction and retention of mature age workers and provide mature age workers with the transition to retirement and ability to adopt various work style options such as flexible work conditions. Providing employees with flexible work practices The Board acknowledges that individuals have varying home life demands and by providing flexible working conditions, we are able to give our people real choices in managing the balance between work and personal life over the course of their career. Flexible work options can assist people with balancing their personal commitments and interests, whether that is family care, study, travel or transitioning to retirement. There are a number of flexible work options available which include both formal and informal options such as the ability to work part time, job share, working from home, flexible start and finish times and leave of absence. By being flexible in our work practices, we will not only deliver on our business objectives but it also enables us to retain our best people and attract talent from the broader market. Measurable Objectives – Foster Hansen’s equal opportunity culture to ensure genuine belief amongst employee’s that women and men are equally able to demonstrate their skills, talent, commitment and results. Review periodically with senior management (annually) to ensure that the emphasis on an equal opportunity culture is present and actively encouraged. 64 | coRpoRAte goveRnAnce stAtement | HAnsen tecHnologies | AnnuAl RepoRt 2013 – Identify mentoring and/or networking opportunities to develop high potential women for career progression within Hansen with progress being reviewed by the CEO periodically (annually). – Identify and implement programs that provide support for pregnant women within Hansen, and for women commencing on or returning from maternity leave with the objective of achieving a return to work following pregnancy ratio of 80%. – Flexible working initiatives are supported by management where appropriate and made available to employees to achieve improved business outcomes and support work/life balance. Create a constant feedback loop into senior management on initiatives, their usage and effectiveness. Share trading Policy Directors, Officers, employees and their associates must not engage in insider trading, or the disclosure of inside information to third parties. Insider trading means the buying and selling of shares on the basis of price-sensitive information that is not generally available to others. This includes procuring another person to purchase or sell shares on the basis of insider information. Rules for Employees, Directors and Officers Employees, Directors, Key Management Personnel and their respective associates who have price-sensitive information about Hansen shares, or other securities, which is not generally available to others: – Must not subscribe for, buy or sell shares, other securities of the Group, or other price sensitive products to which the inside information relates, either for themselves, or for others. – Must not get another person (whether a family member, friend, associate, colleague, or your broker, investment adviser, private Company or trust) to subscribe for, buy or sell the affected shares or other securities or other price sensitive products for the employee, for another person or for themselves. – Must not, either directly or indirectly, give the inside information, or allow it to be given to another person who they know, or should know, would be likely to do any of the prohibited things described above. – Must not communicate inside information to anybody who works for the Hansen Group except on a “need to know” basis and in accordance with the rules and policies of the relevant business division. As a general rule, Directors, Executives and their respective associates are only permitted to trade Hansen shares in the 30-day period commencing two days after: – the release of Hansen’s half yearly results. – the release of Hansen’s yearly results. – Hansen’s Annual General Meeting – A “special circumstance”, that will be notified on a case-by-case basis by the Chairman or Chief Executive Officer (example being the release of a trading update to the ASX or the issue of a prospectus). Unless a member of the Key Management Personnel is subject to severe financial hardship or there are other exceptional circumstances, Key Management Personnel may not deal in Securities at any time during the following periods (blackout periods): (a) 31 days immediately before the release of Hansen’s half yearly results and the two days immediately following such release; (b) 31 days immediately before the release of the Hansen’s full year results and the two days immediately following such release; and (c) 14 days immediately before Hansen’s Annual General Meeting and the two days immediately following such Annual General Meeting. Where Directors or Executives want to trade outside of these specified periods, they are required to discuss the matter with the Chairman and Chief Executive Officer, (or in respect to trading related to the Chairman and CEO, the Company Secretary’s approval is also required), who will only consider approval if it is determined that there is no price- sensitive information held that is not available to the market. Additionally approval will only be given for trading during “blackout periods” if it is determined that the person is subject to severe financial hardship or there are other exceptional circumstances. In this regard, approval will be assessed having regard to those circumstances set out in the ASX listing rules and Guidance notes. Any dealing in Hansen’s Securities by Key Management Personnel pursuant to a margin lending arrangement must be approved by the Chairman and CEO, (or in respect to schemes related to the CEO and Chairman the Company Secretary’s approval is also required). Should approval be given for entry into a margin lending arrangement, Hansen may where appropriate or required by law, disclose to the ASX the fact and nature of the margin lending arrangement. The Corporations Act The Corporations Act 2001 section 1002G deals with insider trading. Contravention of the insider trading provisions of the Corporations Act constitutes an offence that is punishable by a maximum penalty of $200,000 or imprisonment for five years, or both. Where individuals are concerned about breaching the insider trading provisions of the Corporations Act they should immediately obtain independent legal advice. 3. risK ManageMent Hansen recognises that the daily activities and existence of its business is subject to various elements that can create uncertainty and the challenge is to balance and manage this process while striving to grow our stakeholder value. Hansen recognises that such uncertainty brings with it potential risk and opportunity. At Hansen all members of the Group aim to promote culture, internal controls and reporting which will empower all employees to manage risk as and when it occurs, with the aim of achieving the stated goals and strategic objectives. AnnuAl RepoRt 2013 | HAnsen tecHnologies | coRpoRAte goveRnAnce stAtement | 65 corporate governance statement (continueD) With contribution from all layers of management and the Board, a Register of Risks has been developed and will be maintained. Each risk is assessed for the likelihood and consequence of a risk eventuating and a combined inherent risk rating developed. Risk management practices to mitigate and manage the identified risks are then specified and put into action. It is the intention that the Risk Register be regularly reviewed and updated on a case by case basis as new risks are identified or the situation surrounding previously identified risks are varied. Roles and Responsibilities The Board of Directors is responsible for approving and reviewing Hansen’s Risk Management Policy and overseeing all aspects of internal control including compliance activities, the appropriateness of accounting policies and the adequacy of financial reporting. It delegates daily management responsibility to the CEO. The Executive Team is responsible for implementing the Board approved Risk Management Policy, maintaining the currency of the Risk Register and developing operational policies, internal controls, processes and procedures for identifying and managing risks in all of Hansen’s activities. Management must also periodically report to the Board on the maintenance of the Risk Register and the effectiveness of the risk management process. Independent Review will be conducted including: – External audit being an overall independent evaluation of the adequacy and effectiveness of management’s control of operational risk. – Quality Assurance audits verifying that systems are operating as planned. – Independent reviews that may be conducted for special assessment as required. Key Risk Categories Operational Risk Operational risk is the risk of loss resulting from inadequate or failed internal processes or systems, decisions of employees or from external events. Hansen operates under a corporate governance framework that is approved by the Board. Implementation and accountability is the responsibility of management with effectiveness being subject to external audit review. Each individual business unit is responsible for the identification, measurement, monitoring and mitigation of operational risk. This is supported by input from corporate level functions such as the office of Chief Operating Officer, Risk Management Group, Legal and Finance Departments. The internal control system is an integral part of Hansen’s operations and involves all levels of personnel. The controls are preventative and detective in nature and are reviewed regularly for relevance and effectiveness. Key elements to the internal control system are Change Management, Finance Procedures, Delegation of Authority, Segregation of Duties, Access Security, Reconciliation, Documentation and Reporting. This is further supported by Contingency Planning and Continual Improvement activities. Credit Risk Credit risk is the potential for financial loss where customers or business associates fail to meet their financial obligations to Hansen. The foundation control is that individuals throughout the Hansen Group are aware of credit risk and act to identify, report and manage situations that arise. Specific policies and procedures are in place to deal with credit risk, the critical element of these policies being segregation of duties and delegation of authority. Throughout the course of the credit cycle each phase is assessed by the relevant specialist group. Each group is trained and independent in the cycle. Market Risk Market risk is the potential for financial loss arising from Hansen’s activities in the information technology market across all regions. The components of the market risk framework Hansen operates in are: Origination Target markets Know your customers Know your vendors Product planning and management Pricing models Resource planning Environment Assess the market and region Assess the product for the region Global Hansen policies to be observed Manage segregation of duties Monitoring and reporting Transparency and communication Change management Central reporting on product, financials, operations, legal and risk management Authorities Delegation of authority Central authorities Supports segregation of duties operations, legal and operations, legal and risk management Assurances The integrity of the Group’s financial reporting depends upon the existence of a sound system of risk oversight and management and internal control. The Board receives regular reports about the financial condition and operational results. The CEO and the CFO annually provide a formal statement to the Board in all material respects. The financial records of the Group for the financial year have been properly maintained in that they: – Accurately record and explain its financial position and performance. – Enable true and fair financial statements to be prepared and audited. – The financial statements and notes required by the accounting standards for the financial year comply with the accounting standards. – The risk management and internal compliance and control systems are sound, appropriate and operating efficiently and effectively. 66 | coRpoRAte goveRnAnce stAtement | HAnsen tecHnologies | AnnuAl RepoRt 2013 Guarantee Scheme. In addition to this, executives and staff can contribute additional superannuation from their remuneration package. Non-Executive Directors The Remuneration Committee recommends the remuneration of Non-Executive Directors to the Board for consideration and approval. Remuneration for Non-Executive Directors consists of a base pay and related superannuation to meet the requirements of the Superannuation Guarantee Scheme. Non-Executive Directors are excluded from participation in the Company’s share and option plans. The maximum collective amount payable to Non-Executive Directors, in their capacity as Directors, is established by resolution passed by a majority of Shareholders. Any increase in the maximum amount is required to be submitted to shareholders for approval. No separate or additional retirement benefits are provided for Non- Executive Directors. Such a statement has been provided in respect of the current financial year. Overall Risk Treatment Hansen relies on the internal control systems and the ability and culture of staff and management to identify, report and manage risk. All risks are to be reported to the appropriate line manager, registered in the Risk Register and raised to the attention of the Executive team which will develop and document the steps which are required to manage the risk. Where Hansen identifies risk, the risk will be managed with the aim of minimising the likelihood of an adverse event occurring, maximising the likelihood of a positive outcome and reducing the impact of the risk. 4. reMuneration The Group’s aim in remunerating the CEO and other Executives is to provide base pay plus rewards and other benefits that will attract, motivate and retain key executives while aligning their financial interests with those of our shareholders. Our policy is to provide individual Executives with a level of income that: – Recognises the market value of each position in a competitive market. – Rewards the individual’s capabilities and experience. – Recognises the performance of individuals. – Assists in Executive retention. – The structure provides a mix of fixed and variable pay, and a blend of short and long-term incentives. CEO and Executives The Remuneration Committee sets the remuneration package for the CEO and engages with external third party consultants from time to time to verify the appropriateness and market competitiveness of the CEO’s remuneration package. The CEO establishes employment arrangements and remuneration packages for the Executives. Each year performance based incentives, at the discretion of the Directors, are set for the CEO and the Executives, incorporating objectives designed around Group, business unit and individual goals, with agreed short and long-term performance incentives. The CEO submits the proposed annual executive package to the Remuneration Committee where it is assessed for reasonableness. The structure of Hansen Executive pay and reward is made up of four parts: base pay, short-term performance incentives, long-term performance incentives and other compensation being superannuation. The combination of these comprises the Executive’s total compensation. Details of the pay and rewards for Hansen’s top five key management personnel and their total remuneration are set out in the Annual Report each year. Base Pay Senior Executives are offered a competitive base pay that reflects the market for each position. It is generally revised annually to recognise inflationary impacts, job responsibility changes or if there has been a marked structural shift in market rates. Short-term Performance Incentives Each year the performance of the executives is reviewed by the CEO and future performance objectives are set and relative potential bonuses linked to the achievement of the objective. If individual performance objectives are met, a short-term incentive in the form of a bonus may be paid. Long-term Performance Incentive Long-term incentives for the CEO and senior executives are designed to align their financial interests with those of our shareholders. Long-term performance incentives can be represented by the issue of share options to the CEO and senior executives. The issue of options would be based at the absolute discretion of the Directors and in accordance with the Employee Share Option Plan. Other Benefits – Superannuation All executives and staff are required to be members of one of the superannuation funds that are made available to all Hansen staff. Hansen contributes superannuation for executives and staff from their remuneration package to a level that complies with the Superannuation AnnuAl RepoRt 2013 | HAnsen tecHnologies | coRpoRAte goveRnAnce stAtement | 67 asx aDDitional information as at 26 september 2013 Additional information required by the Australian Stock Exchange Limited Listing Rules and not disclosed elsewhere in this report is set out below: suBstantial shareholDers The number of shares held by substantial shareholders is set out below: Shareholder Number of Ordinary Shares Percentage Held Othonna Pty Ltd – including associates 70,160,249 43.78% voting rights Ordinary shares and Options - refer Note 15 DistriBution of equity seCurity holDers Category 1 to 1,000 1,001 to 5,000 5,001 to 10,000 10,001 to 100,000 100,001 and Over Number of Equity Security Holders Ordinary Shares Options 387 1,321 739 1,157 75 – – – 1 14 The number of shareholders holding less than a marketable parcel of ordinary shares is 110. twenty largest shareholDers Name Othonna Pty Ltd HSBC Custody Nominees (Australia) Limited RBC Investor Services Australia Nominees Pty Limited National Nominees Limited Citicorp Nominees Pty Limited J P Morgan Nominees Australia Limited Rubi Holdings Pty Ltd BNP Paribas Noms Pty Ltd Mrs Yvonne Irene Hansen Citicorp Nominees Pty Limited Mr James Lucas & Ms Lesley Dormer Ozcun Pty Ltd Mr Cameron Hunter Mr Grant Lister Bond Street Custodians Limited Mr Kean Hua Yeoh Mr Brian Gregory Wright & Mrs Patricia Gladys Wright Mr Stephen Cocker & Mrs Denise Cocker Mr John Henry Waterhouse & Mrs Carol Evelyn Waterhouse Mr Francis George Heppingstone & Mrs Danielle Georgette Heppingstone total 68 | Asx AdditionAl infoRmAtion | HAnsen tecHnologies | AnnuAl RepoRt 2013 Number of Ordinary Shares Held Percentage of issued Capital 70,160,249 6,681,770 6,144,934 5,319,278 5,217,624 3,337,257 2,000,000 1,837,452 1,187,714 1,107,201 840,636 793,562 703,578 600,000 450,000 425,000 410,000 400,000 400,000 370,000 43.78% 4.17% 3.83% 3.32% 3.26% 2.08% 1.25% 1.15% 0.74% 0.69% 0.52% 0.50% 0.44% 0.37% 0.28% 0.27% 0.26% 0.25% 0.25% 0.23% 108,386,255 67.64% DIRECTORS DIRECTORS David Trude, Chairman David Trude, Chairman Andrew Hansen, Managing Director & Chief Executive Andrew Hansen, Managing Director & Chief Executive Bruce Adams, Non-Executive Bruce Adams, Non-Executive Kenneth Hansen, Non-Executive David Osborne, Non-Executive Phillip James, Non-Executive Peter Berry, Non-Executive David Osborne, Non-Executive Melinda Osborne, Non-Executive COMPANY SECRETARY COMPANY SECRETARY Grant Lister Grant Lister PRINCIPAl REgISTERED OffICE PRINCIPAl REgISTERED OffICE 2 Frederick Street, Doncastor VIC 3108 2 Frederick Street, Doncaster VIC 3108 T (03) 9840 3000 T (03) 9840 3000 f (03) 9840 3099 F (03) 9840 3099 SHARE REgISTRY SHARE REgISTRY Link Market Services Link Market Services Level 1, 333 Collins Street Level 1, 333 Collins Street Melbourne VIC 3000 Melbourne VIC 3000 T (02) 8280 7761 or 1300 554 474 f (02) 9287 0309 – Proxy forms T (02) 8280 7761 or 1300 554 474 f (02) 9287 0303 – General F (02) 9287 0309 – Proxy forms F (02) 9287 0303 – General STOCK EXCHANgE The Company is listed on the STOCK EXCHANgE Australian Stock Exchange The Company in listed on the ASX Code: HSN Australian Stock Exchange AUDITORS ASX Code: HSN Pitcher Partners Level 19, 15 William Street AUDITORS Melbourne VIC 3000 Pitcher Partners Level 19, 15 William Street SOlICITORS Melbourne VIC 3000 TressCox Level 9, 469 La Trobe Street Melbourne VIC 3000 SOlICITORS TressCox OTHER INfORMATION Level 9, 469 La Trobe Street Hansen Technologies Limited ABN 90 090 996 455, incorporated and Melbourne VIC 3000 domiciled in Australia, is a publicly listed Company limited by shares. OTHER INfORMATION Hansen Technologies Limited, incorporated and domiciled in Australia, is a publicly listed Company limited by shares. design and production www.magneticdesign.com.au design and production www.magneticdesign.com.au 2 frederick Street Doncaster Victoria 3108 T. +61 3 9840 3000 f. +61 3 9840 3099 E. info@hsntech.com www.hsntech.com