Innovative Solutions ANNUAL REPORT 2014 CONTENTS COMPANY PROFILE Highlights Chairman and Chief Executive Officer Joint Report Information on Directors and Company Secretary Directors’ Report Audited Remuneration Report Auditor’s Independence Declaration Corporate Governance Statement Financial Report 1 3 12 14 19 27 28 32 Consolidated Statement of Comprehensive Income 33 Consolidated Statement of Financial Position Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Notes to the Financial Statements Directors’ Declaration Independent Auditor’s Report ASX Additional Information Corporate Directory 34 35 36 37 74 75 76 77 About Hansen Technologies Limited Hansen Technologies (ASX: HSN) is a global provider of customer care and billing, and meter data management software solutions for utilities (electricity, gas and water), Pay TV and telecommunications companies. The Hansen family of products, which has grown since 1971, includes: HUB, ICC, NirvanaSoft, Peace, Banner and Utilisoft. Hansen’s unique approach to best-fit solutions leverages its proprietary product sets to develop, deliver, and support high-value solutions for clients in over 40 countries. In addition Hansen also offers outsourcing and facilities management services from purpose built facilities globally. Hansen has offices in Australia, United States of America, New Zealand, China, Argentina and the United Kingdom. Hansen is recognised by the relevance of its technology and the people who support it. Our innovative solutions are constantly evolving alongside their respective industries to accommodate business, market and technology changes, and our experienced implementation team has an impeccable record of delivering solutions through flexible engagement approaches. For more information, please visit www.hsntech.com New York Atlanta Houston Shanghai Carlsbad Key Offices Branches Customer locations London Johannesburg Notice of Annual General Meeting The Annual General Meeting of the Company is to be held on Wednesday 26 November 2014 at 11am at 2 Frederick Street, Doncaster Victoria 3108. Buenos Aires Melbourne Auckland HIGHLIGHTS $86 million Operating revenue 35% $24.1 million EBITDA 53% $14.8 million After tax profit 62% 9.2 cents Earnings per share 61% Carlsbad New York Atlanta Houston London Johannesburg Shanghai Buenos Aires Melbourne Auckland 1 Annual Report 2014 | Hansen Technologies We see great opportunity for convergence within the Telecoms and Pay TV space, which aligns very well with our solutions and industry expertise. 2 Annual Report 2014 | Hansen Technologies CHAIRMAN AND CHIEF EXECUTIVE OFFICER JOINT REPORT Fiscal 2014 was a very good year for Hansen. We delivered an impressive level of profitable growth, culminating in a record financial performance. At the same time we have continued to build upon the foundation of our business with further international expansion and the strategic acquisition of a well aligned and compatible billing business, servicing the North American utility market. closed, delivery is performing to targeted expectations and we have a customer prospect list which is expanding. 2013–14 Financial performance Operating revenue of $86 million for the year was up 35% on the previous year and 52% on Fiscal 2012. Earnings before Interest, Tax, Depreciation and Amortisation (EBITDA) of $24.1 million, represents an increase of 53% over Fiscal 2013 and represents a return on Operating Revenue of 28%. Net profit after tax (NPAT) of $14.8 million represents a return of 9.2 cents per share compared with $9.1 million and 5.7 cents per share last 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 2014 to those shareholders on record as at 9 September 2014. When combined with the 3 cents per share interim dividend, the total distribution of 6 cents per share is consistent with the previous year. Over the past two years our business has continued to grow, with each half year’s performance better than the preceding half year. This level of compounding profitable growth is an achievement to be proud of and we wish to congratulate and thank all of our 400 plus employees across 12 countries on their contribution and commitment over this past year. The acquisition of the Banner business in May 2014 increased our commitment to and presence in North America, extended our product offerings, and opened up new markets for Hansen. We are delighted by the way the Banner staff have responded to joining the Hansen team. Their level of commitment and support throughout the transition phase has been excellent and we look forward to the prospects for growth that the Banner business represents. We have expanded our market presence significantly, growing our utilities billing business to include electricity, gas and water for major industry leaders as well as municipalities and smaller emerging players. We are now expanding into areas that operate in parallel and adjacent to our billing products and which service these same industries. Our lengthy history of solutions for the telecommunications industry is ongoing. We are a major supplier of billing applications to the Digital Pay TV industry with a product offering targeted at the industry’s highest growth opportunity – satellite-delivered Digital Pay TV in emerging markets and geographies. All of these solutions are now being delivered globally by a growing team of skilled industry experts. We have significantly increased our physical presence around the world over the past two years and we now have a substantial international infrastructure and capacity upon which to build and continue to expand. Other highlights for Fiscal 2014: • completed the integration and alignment of the ICC Pay TV and Utilisoft businesses, acquired during the previous year, and consolidated their key customer relationships; – more recently we have signed a significant seven year contract with Direct TV for our ICC Pay TV solutions across nine countries in South America; • completed the restructuring of our management team into a geographical regional structure; • undertook the merging of our worldwide development and product delivery teams under a single management structure and progressed strongly with cross skilling of the IT resources in the various geographic centres within which we operate; • established branch offices in Argentina (Buenos Aires) to support the South American market and South Africa (Johannesburg) for the African market; • implemented a new CRM solution for managing our customer relationships and rolled this out worldwide; • implemented a new management reporting solution to provide more widely distributed and timely financial performance information across the Group; and • relocated both the New York and California offices when the original leases, assumed as a result of acquisitions, expired. Operationally it was a year of solid performance supported by marginally lower average exchange rates for the Australian dollar across the year. Our investment over the past two years in sales and marketing, expansion in North America and enhanced delivery capacity are now paying off. New deals are being 3 Annual Report 2014 | Hansen Technologies CHAIRMAN AND CHIEF EXECUTIVE OFFICER JOINT REPORT continued Half-on-half comparison (A$m) The six months to June 2014 has shown continued growth over the half year ending December 2013, which had benefited from a full six month contribution from both the ICC and Utilisoft acquisitions. Revenue EBITDA NPAT 9% . 8 4 4 11% . 2 1 4 38% . 0 7 3 . 8 6 2 16% 9 . 2 1 19% . 2 1 1 46% 3 9 . 4 6 . 36% 6% 2 . 7 6 . 7 39% 3 . 5 8 3 . Dec 12 Jun 13 Dec 13 Jun 14 Dec 12 Jun 13 Dec 13 Jun 14 Dec 12 Jun 13 Dec 13 Jun 14 Hansen people May we record our appreciation for the achievements over this past year of the Hansen team members worldwide. The quality and commitment of our people are the foundation of our business and we are fortunate to have such a large number of industry experts dedicated to the success of our business. Of the Hansen staff around the world, approximately half of these are located outside of Australia, with the larger international offices being located in China, the United States, United Kingdom and New Zealand. Our personnel are now more widely distributed than ever before and our international expansion aspirations suggest the breadth of this distribution is likely to continue. As we grow we have to acknowledge and accept the challenge of ensuring every staff member of Hansen, no matter where located, is and feels part of our international team. and their management. Restructuring our management along geographic lines has required all three geographic regions to become knowledgeable of, and active contributors to, our customer and product management. Wherever relevant we will continue to strive to grow as an integrated business with each region providing support and active contribution across all areas of relevant focus. The successful integration of the ICC and Utilisoft business personnel, and more recently the Banner personnel into the Hansen team has been a credit to them Thank you also to the Board who have diligently overseen and supported the strategies presented by the management team. 4 Annual Report 2014 | Hansen Technologies Who We Are The Hansen business comprises multiple independent but compatible software solutions applied across four 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. Strategic matrix – products and industries Electricity, Gas and Water Pay TV and Telco Energy and Telecommunications Energy – large retailers and distribution companies Energy – complex billing and smart grid Energy – market data management Energy and Water – municipal market Pay TV 5 Annual Report 2014 | Hansen Technologies CHAIRMAN AND CHIEF EXECUTIVE OFFICER JOINT REPORT continued Where We Are Asia Pacific – APAC The past 12 months has seen a number of large projects operating in each of our industry verticals. These projects consolidated our presence with existing customers as well as positioned Hansen solutions to new opportunities. The energy sector continues to undergo significant change with retailers constantly looking to leverage their existing solutions to maximise their market opportunities and the distributors having to respond to government mandated change. With Hansen solutions deployed across these sectors, and with the inclusion of the Utilisoft suite of products, we have experienced significant increase in project related activity and opportunity. Similarly Pay TV is a sector which is presenting significant opportunity in the region. Our existing customers continually look to leverage their Hansen solution to increase market share and with technological advancement being a great driver of change, we have seen higher demand for project and services than originally expected. The next 12 months of activity in the APAC region will continue to be influenced by continued market change and industry consolidation. With the NSW and QLD governments making significant decisions with regards to their utility assets we are actively involved in helping both existing and new customers adapt to these government mandated changes. Having already embarked on some major projects associated with the market changes we are seeing strong demand for our expertise and products. Further to this, the Pay TV industry is seeing unprecedented change in the APAC region that we see as presenting great opportunity to us. The move to digital technology is occurring in a number of our key target markets and the continued strong growth of the Direct to Home (DTH) delivery of Pay TV ideally places our ICC solution as a prime solution in this region. Having invested in pre-sales efforts focusing on Pay TV over the last 12 months, we have an expectation that next year should present us with a number of opportunities to gain new customers in this dynamic sector. Europe, the Middle East and Africa – EMEA This has been a great year for Hansen within the EMEA region during which we have had significant client engagement on many new initiatives. We have a major Pay TV project in Africa that has progressed into the implementation stage, setting up 2014 –15 as an exciting new phase for our client. We have experienced demand for engagement of our staff to be deployed onsite with our clients, driving closer engagement and mutual benefits. We have also witnessed an increased appetite for change across our existing client base in Europe which has driven a large volume of enhancements in our software. With our high-touch account management and flexibility towards clients’ requirements and timing we expect this trend to continue in the year ahead. There have been a number of mergers within our client base, a common trend as market consolidation and convergence builds. Our wide range of solutions allows us to support the rapid and diverse changes amongst our clients so that we are well placed to assist our clients in their journey of convergence. We see an increasing level of interest from our existing clients who are considering expanding their businesses into new markets/sectors. We have a number of prospects that have advanced this year with the potential to develop further in the year ahead. The UK energy market is currently going through massive change due to the introduction of smart metering which brings reforms to every part of the UK energy industry. Our acquisition of Utilisoft has positioned us well to engage with energy distribution companies who need to connect to the new market hub along with energy retailers who will also need a similar solution. We also have new opportunities within the EMEA region due to a number of new Pay TV content business providers coming into the market, for which our ICC solution is very well suited. Changes in the broadcast model in several countries within the EMEA region, with the transition from analogue to digital technology, is also allowing new business to enter markets that were previously unavailable. The Americas FY2013–14 has been an important year in the growth and development of Hansen’s positioning in the Americas. The worldwide trend of consolidation of market participants is evident in our market space and client base opening up both opportunities as well as challenges for Hansen. During the year we have expanded our presence throughout both North and South America. In the energy sector we completed a major long term project for a key energy company in North America. We installed and went live with new implementations of Hansen’s Nirvanasoft CIS software solution with Agway Energy Services, LLC of New York (a subsidiary of Suburban Propane, LP) and EDF Trading, a leader in the international wholesale energy market and a subsidiary of Electricité de France, Europe’s leading electricity producer. The acquisition of the Banner CIS utilities billing and customer care business in May 2014 has expanded our presence in the North American market. The 50 plus Banner customers located throughout the United States, Canada and the Caribbean added a significant water supply and municipality presence to our well established gas and electricity markets. Banner’s existing and target markets fit synergistically with our existing ICC Pay TV, Peace and Nirvanasoft solutions. The recent signing of a long term ICC licensing and support arrangement with DIRECTV for its Pan Americana division in Latin America includes operational products in Argentina, Columbia, Chile, Ecuador, Peru, Puerto Rico, Venezuela, the Caribbean and Uruguay. This agreement will allow us to further develop within the region by leveraging our Argentina-based consulting, services and support team. We are well positioned for the emerging business activities in both North and South America and are excited by the prospect of integrating Banner into our existing business. 6 Annual Report 2014 | Hansen Technologies With a number of significant projects already underway, we see the energy market as being one of continued and significant opportunity over the coming years. Annual Report 2014 | Hansen Technologies 7 CHAIRMAN AND CHIEF EXECUTIVE OFFICER JOINT REPORT continued 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, water 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 world’s 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; and • 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 and water utilities (a) Energy billing and customer information systems The energy industry remains a sector that is undergoing continual change. A number of initiatives that had been on hold during the recent global economic downturn have now been restarted and these, coupled with the regulatory changes, the embracing of the ‘smart grid’ and specific regional and competitive drivers, continue to make this a very attractive vertical for Hansen and our products. The evolution of the ‘smart grid’ has been an interesting one to observe. While the benefits of the ‘Smart Grid’ are clear in terms of smoothing energy peaks, managing demand response and ultimately creating a more efficient system for the delivery and consumption of energy, the challenge for industry participants has been the rollout and take up of the integrated technologies required to deliver these benefits. Coupled with the economic downturn and other specific market drivers, this had slowed the embracing of the ‘smart grid’ until recent times. With a number of major global initiatives now starting we are beginning to see a greater degree of interest and opportunity in this market. In the United Kingdom, the Department of Energy and Climate Change has created an implementation program for electricity and gas smart meters, that is targeting to have all domestic and non-domestic properties supplied with smart meters by 2020. In Japan, the government has mandated the rollout of smart meters as a means by which they can have greater control over energy demands post Fukushima. In Australia the Australian Energy Market Commission (AEMC) is looking to introduce the Power of Choice whereby energy retailers, rather than government mandate, can determine where they wish to deploy smart meters. In the United States, a number of the initiatives that were established with the ‘Obama funding’ are now at the point where solutions are required to ensure that the customers benefit from the investment that has been made. In response to this challenge, Hansen has developed a ‘Smart Grid Bridge’, being a scalable, plug-in front-end to an existing CIS to support the requirements of the introduction of a smart grid initiative without the cost and commitment of a full-scale system implementation or upgrade. Simultaneous to this evolution we are also seeing the impact of regulatory mandates and the continued maturing of various energy markets. These impacts are always significant drivers of change and innovation, and we are seeing a continuation of this trend in a number of our significant markets. The Japanese market place is moving towards full retail contestability in April 2016, the QLD and NSW governments in Australia continue to make structural changes that impact on the energy market participants and the United Kingdom and the United States markets are continuing in the same vein. With Hansen operating in each of these markets and coupled with the strategic acquisition of Utilisoft we have established a global footprint in the world’s most dynamic energy markets, which positions us to not only leverage our current deployments and relationships, but also allows us to provide further strategic and complimentary products into these markets. With a number of significant projects already underway we see the energy market as being one of continued and significant opportunity over the coming years. (b) Utilisoft Utilisoft functionality is tied strongly to market-mandated requirements and with ongoing market changes impacting our customer base, often twice per year, we are consistently updating and refreshing our product set. This activity keeps our off-the-shelf products compliant with market requirements and relevant to the continuing business needs of our customers. With continuing change in the Australian electricity and gas markets we can expect to see more change driven by both mandatory market specification and industry growth resulting in new requirements for our existing customer base. Substantial reforms to the National Electricity Market (NEM) in Australia are currently underway following recommendations to Commonwealth and State governments made by the AEMC ‘Power of Choice’ review in November 2012, which will give consumers more 8 Annual Report 2014 | Hansen Technologies options in the way they use electricity. These reforms will allow customers to have more access to information about their electricity consumption and will also expand competition in metering and related services, opening the doors for more participants in the smart meter space. Both of these developments will drive further market change and pose challenges to participants which Hansen is well placed to offer assistance with. Our expertise in the Australian deregulated energy market puts us in a strong position to consider the move into other developing markets around the world. For example, Japan and the United Kingdom are beginning to implement market changes which will require gateway functionality similar to that already provided by the Utilisoft suite of products. Additional resources along with the roll out of the future product roadmap in October will generate additional upgrade opportunities as well as possible new customer acquisitions in the coming year. The acquisition by Hansen was viewed as a positive move by both the customers as well as the impacted employees. The integration of the Banner team into the different functional areas of Hansen affords access to a broader resource pool, development and delivery capabilities, as well as implementation expertise. The Hansen philosophy of account management will help to align the future of the Banner products with the requirements of customers and will engender confidence in the customer base for the long term future of the Banner products. Energy markets will continue to grow and expand in complexity as the demand for renewable energy, consumer awareness, smart grids and energy efficiency drives change in our customer base. Our critical role in the value chain for energy market data for our clients will guarantee interesting new projects and challenges for our teams to solve. (c) Banner The Banner solution is a full-featured, functionally rich CIS for utility billing and brings to the Hansen stable of products strong reference ability in water billing and application in the North American municipal market. The product is applicable for some of the largest utilities in the United States as well as smaller municipalities. This allows for a significant addressable market of a product with a proven track record and an established customer base. With the acquisition of Banner CIS by Hansen new opportunities are beginning to surface. Banner has a long history of success and a loyal customer base that is being re-energised by this change. Historical customers have reached out to Hansen to learn more about our future plans for the product. Opportunities have been identified to bring customers back to the ‘Banner family’. With the initial shifting of existing Hansen resources over to the Banner CIS product, a clear message of investment and a long term commitment has been sent to existing customers as well as the market. 4. Telecommunications Hansen has a long pedigree in dealing with tier 1 international telecoms providers and has delivered success by implementing our HUB telecoms solution to support the ever changing backdrop of change in the industry. With the evolution of new technology, network providers are investing heavily to meet the expanse of new ways that customers are driving a constantly connected world. With the proliferation of smartphones, tablets and connected devices, consumers have more choice than ever and customer churn has become more prevalent due to the regular annual technology updates by major device companies. Hansen has worked with our Telecoms clients to implement innovative solutions that help operators leverage their customer insight to offer strong product offerings that give their customers great value, in turn building stronger loyalty. Our telecoms solution provides flexibility and speed to market, matched with strong product bundling and shared allowance management, allowing our clients to take a lead when they take new propositions to market. The level of maturity in the Telecoms industry internationally does mean the number of opportunities within this space is limited. Our focus has been in exploring developing markets where, though deregulation and market reform, new network operators and virtual operators are forming. There is a large level of growth occurring in the Telecoms space across Africa due to the introduction of fourth generation mobile technology, where many parts of Africa will benefit from moving from GSM to 4G/LTE/WiMax. With many parts of Africa going through economic growth, matched with the size of its population, international telecoms firms are investing in licences and infrastructure. With our expanded footprint in Africa, we are well placed to take advantage of future telecoms opportunities within this region. We see great opportunity for convergence within the Telecoms and Pay TV space, which aligns very well with our solutions and industry expertise. There have already been high profile joint ventures and mergers between content delivery players and traditional telecoms companies as they scramble to keep pace with the rate of market change. We are working with our clients that have already started down this path by bundling content over their cable or mobile networks. Clients have also expressed interest in bringing more complex product offerings to market that expand on the triple and quad-play concepts, which works well with our modular solution approach. We expect that this trend will continue over the coming years and the only constant will be the level of change within the Telecoms industry. 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: • Improve customer service and enhance customer loyalty with targeted promotions. • Provide critical business intelligence to operators together with a reduced total cost of ownership. • Provide a variety of post-pay and pre-pay options, as well as voucher systems, wallets, and quote based billing. • Offer full account receivable capabilities. Our extensive knowledge and experience with digital satellite and digital terrestrial distribution, as well as cable networks, 9 Annual Report 2014 | Hansen Technologies CHAIRMAN AND CHIEF EXECUTIVE OFFICER JOINT REPORT continued What We Do continued 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. The software can be configured to run multiple territories or countries from a single schema for additional economies of scale. Throughout Asia, the Middle East, Africa and South America the consumer interest in the provision of digitally delivered Pay TV is expanding. Existing providers are experiencing strong growth and new content providers are entering those geographic markets which are in their infancy or not as yet fully mature. Hansen’s ICC solution is in use by a number of customers in these regions. The opportunity of growth with existing customers as well as new entrants offers genuine upside for Hansen over the coming years. 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 telephony, mobile telephony, broadband, and broadcast TV entertainment, the solutions in Hansen’s portfolio will mesh synergistically. 6. 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. Cloud computing continues to grow in popularity in the market. Our solution has expanded to include a Virtual Data Centre offering in partnership with Managed Service Providers. A ‘Backup as a Service’ solution has also been launched to meet growing interest in this area. This business unit provides market differentiation adding significant value to the Company’s software business through the ability to provide a full range of IT services to customers. 7. Superannuation Our long term relationship with the CLASSIC superannuation membership administration solution has been taken to a new level this year. This year we completed the customisation of CLASSIC to fully comply with the new initiative of the Australian Government with the implementation of the ‘SuperStream’ Standards. This achievement placed our long term customer, Vision Super, at the forefront of the Superannuation industry by providing a fully compliant SuperStream solution to employers. Hansen, using Visions Super’s CLASSIC solution, was chosen by the ATO as the very first employer in Australia to apply SuperStream. The whole of the Australian Superannuation industry watched the success of the implementation which was a very pleasing result for both Vision Super and Hansen. The Future We will continue with a disciplined approach to the pursuit of strategic growth and balanced diversification through acquisition. Our focus remains with businesses which are compatible with our existing business, which build upon our focused markets and expand our geographic and industry reach, while maintaining the key elements of our financial model underpinned by sustainable annuity revenue streams derived from proprietary software solutions. The opportunity for organic growth is expanding. Our increased sales and marketing effort is delivering new business and prospects into the delivery funnel. We have a high degree of new project activity underway as well as a healthy pipeline of future projects lining up for next year and beyond. The advanced investment we made in delivery capacity was well timed as the demands upon our people to deliver projects into the coming years looks to be considerable. We are proud of our business achievements and the enhanced value we are delivering to our shareholders through sustainable growth. Since listing on the ASX in 2000 Hansen has returned a combined total of $71 million to its shareholders by way of capital distribution and dividend payments. We look forward to continuing to deliver on our growth aspirations with minimal risk to our core business, while striving to deliver on the dividend return aspirations of shareholders. The outlook for growth next year and beyond is bright. With revenue from international customers increasing, we expect to see our revenues trending towards being every spread across our three geographic management regions. We are confident that we will continue to be able to deliver sustainable growth and expect revenues next year to exceed $95 million, resulting in an increased operating performance exceeding this year’s record performance. Finally, may we record our appreciation for the continued strong support we receive from shareholders. Our shareholder base has now grown to in excess of 4,100. This year there have been a number of institutional shareholders, both Australian and International funds, introduced to the Hansen share register. Correspondingly the Hansen family interest has reduced to 24% providing the opportunity for wider and more diverse shareholding as well as the improved liquidity evidenced by the increased average daily trading of our shares over the past year. We welcome all the new shareholders who have joined our register in this past year and affirm our commitment to expanding and improving the business of Hansen Technologies with the consistent and sole objective of enhancing shareholder value. David Trude Chairman Andrew Hansen Chief Executive Officer 30 September 2014 10 Annual Report 2014 | Hansen Technologies The quality and commitment of our people is the foundation of our business and we are fortunate to have such a large number of industry experts dedicated to the success of our business. Annual Report 2014 | Hansen Technologies 11 INFORMATION ON DIRECTORS AND COMPANY SECRETARY 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 are provided below, together with details of the Company Secretary as at the year end. Mr Andrew Hansen Managing Director and CEO Managing Director since 2000 Age 54 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 Bruce Adams Non-Executive Director Director since 2000 Member of the Remuneration Committee Age 54 Bruce has over 20 years’ experience as a commercial lawyer. He has practised 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 10 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. Mr David Trude Non-Executive Director Chairman since 2011 Director since May 2011 Age 66 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. On 27 February 2014 David was appointed Non-Executive Director of Acorn Capital Investment Fund Limited an ASX listed entity. 12 Annual Report 2014 | Hansen Technologies Mr Peter Berry Non-Executive Director Director since 2012 Chairman of the Audit and Remuneration Committees Age 54 Mr David Osborne Non-Executive Director Director since 2006 Member of the Audit Committee Age 65 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. Peter has been an investment banker in excess of 20 years, specialising in mergers and acquisitions and project financing. Peter’s career has focused 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 a Director of Metgasco Ltd. Previously Peter practised as a corporate lawyer in both Melbourne and New York, and holds Degrees in Bachelor of Laws and Bachelor of Commerce from Melbourne University. Ms Melinda Osborne Non-Executive Director Director since 2012 Resigned 22 August 2014 Age 59 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. Mr Grant Lister CFO and Company Secretary CFO since 2002 Company Secretary since 2004 Age 62 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 United States. As Chief Financial Officer he has responsibility for all of the financial aspects of the Hansen Group’s operations throughout the world. Other than as disclosed no Director of Hansen Technologies Ltd held any other Directorships of listed companies at any time during the three years prior to 30 June 2014. 13 Annual Report 2014 | Hansen Technologies 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 2014 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, Pay TV, water and wastewater 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 acquisition 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 2014 financial year was $14,800,849 (2013: $9,132,513). Review of operations The Fiscal year 2013–14 has been a very successful year for our Company with the second half of the year being the fourth consecutive half year of compounding growth over the preceding half year. We delivered on all of our key objectives and produced a financial result which represents considerable growth on the previous year and record revenues, profits and earnings per share. The Group’s operating performance for the fiscal year to June 2014 and its comparison with the previous year was: • Operating Revenue of $86 million up 35% or $22 million on the previous year; • Earnings before Interest, Tax, Depreciation and Amortisation at $24.1 million is up 53% on the previous year and represents a return on Operating Revenue of 28%; and • Net Profit After Tax of $14.8 million representing earnings of 9.2 cents per share compared with 5.7 cents per share in the previous year. During 2014 we completed the integration of the two businesses acquired during the previous year, ICC Pay TV and Utilisoft, and gained significant traction in their respective markets and geographies. Both acquisitions have been a success and are performing above expectations. We completed the roll out of our revised geographic management structure and more significantly completed the merging, under a single management structure, of all development and delivery teams across all software products and geographic regions. We also achieved considerable advances in cross skilling our various development teams around the world into products and solutions previously delivered from single product focused geographic development centres. In addition, we focused the role of a Chief Technology Officer on the management of our Group’s product direction across all applications and markets. Our organic growth has been positive with new energy billing deals being closed and delivered, plus increased activity with existing customers across the board, as well as expansion of our presence and customer base in the emerging markets for Pay TV in South America and Africa. The acquisition of the Banner software business in May 2014 further increased our presence and commitment to North America. The Banner business increased our customer base in North America by more than 50, added complementary software solutions to our product suite and expanded our market reach to include water and municipality billing. In support of our expanding business in Latin America, we established a branch office in Argentina to complement a similar structure created in South Africa last year. We relocated our San Diego (Carlsbad) and New York offices at the expiration of the leases we inherited through earlier acquisitions. Our IT services and Facility Management (FM) outsourcing business is experiencing increased competition from new facilities opening primarily in Melbourne and revenue from FM is down as a result. However, the provision of IT services, support and hosting representing a full service turnkey offering to our core billing customers remains a key element of differentiation for Hansen. During the year, two new hosted solutions were implemented for energy customers. A key focus of the Superannuation industry in 2014 has been the implementation of the government’s new SuperStream standards. We have worked closely with Vision Super to place them at the forefront of this initiative. We are pleased to note that Hansen Technologies Limited was acknowledged by the ATO as the first company to implement the SuperStream payment process and in so doing continued our commitment to the support of our long term collaborative relationship with Vision Super. Please refer to the Chairman’s and CEO’s report on pages 3 to 11 for further detail on the operations of the company. Significant changes in the state of affairs On 1 May 2014 the Company made the strategic decision to acquire the Banner Customer Suite Water and Wastewater billing business. For further details refer to note 19(a). 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. 14 Annual Report 2014 | Hansen Technologies Dividends paid during the year: • 3 cent per share fully franked final dividend paid 30 September 2013, totalling $4,807,488; and • 3 cent per share partially franked interim dividend paid 28 March 2014, totalling $4,817,174. Likely developments The Company will continue to pursue its operating strategy of providing proprietary billing solutions to our targeted industries while pursuing appropriate acquisitions to create shareholder value. Environmental regulations The consolidated entity’s operations are not subject to any significant environmental Commonwealth or State regulations or laws. 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. Dividend paid, recommended and declared A 3 cent per share fully franked final dividend was announced to the market on 26 August 2014 with payment to be made on 30 September 2014. The amount declared has not been recognised as a liability in the accounts of Hansen Technologies Ltd as at 30 June 2014. 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: Number Granted Grant Date Directors A Hansen Specified executives M Benne C Hunter G Lister D Meade S Weir Total 1,050,000 75,000 75,000 100,000 100,000 100,000 100,000 75,000 75,000 75,000 75,000 1,900,000 12 December 2013 2 July 2013 2 July 2014 2 July 2013 2 July 2014 2 July 2013 2 July 2014 2 July 2013 2 July 2014 2 July 2013 2 July 2014 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 three 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. 15 Annual Report 2014 | Hansen Technologies DIRECTORS’ REPORT continued Shares under option Unissued ordinary shares of Hansen Technologies Ltd under option at the date of this report are as follows: Grant Date 1 Jan 2011 2 July 2011 2 Dec 2011 2 July 2012 1 Dec 2012 1 Dec 2012 1 Dec 2012 1 Dec 2012 2 July 2013 12 Dec 2013 12 Dec 2013 12 Dec 2013 2 July 2014 Total Exercise Date 1 Jan 2014 2 July 2014 2 July 2014 2 July 2015 2 July 2015 2 July 2015 2 July 2015 2 July 2015 2 July 2016 2 July 2016 2 July 2016 2 July 2016 2 July 2017 Expiry Date 1 Jan 2016 2 July 2016 2 July 2016 2 July 2017 2 July 2017 2 July 2017 2 July 2017 2 July 2017 2 July 2018 2 July 2018 2 July 2018 2 July 2018 2 July 2019 Exercise Price $0.75 $0.91 $0.91 $0.92 $0.92 $0.97 $1.02 $1.07 $0.92 $1.06 $1.11 $1.16 $1.30 Number of Options at Date of Report 75,000 370,000 40,000 785,000 70,000 350,000 350,000 350,000 895,000 350,000 350,000 350,000 1,115,000 5,450,000 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 9 July 2013 9 July 2013 12 July 2013 30 August 2013 2 July 2014 8 July 2014 8 July 2014 8 July 2014 24 July 2014 5 August 2014 29 August 2014 29 August 2014 Total Number of Ordinary Shares Issued 40,000 250,000 75,000 250,000 100,000 250,000 250,000 250,000 60,000 75,000 255,000 30,000 1,885,000 Amount Paid Per Share $0.41 $0.58 $0.41 $0.58 $0.91 $0.95 $1.00 $1.05 $0.91 $0.58 $0.91 $0.58 There are no amounts unpaid on shares issued on exercise of options. 16 Annual Report 2014 | Hansen Technologies 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. No insurance premium is paid in relation to the auditors. 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: Board Meetings Director Mr Bruce Adams Mr Peter Berry Mr Andrew Hansen Mr David Osborne Ms Melinda Osborne Mr David Trude Eligible 12 12 12 12 12 12 Attended 12 12 12 12 11 12 Audit Committee Meetings Attended Eligible 3 3 3 3 - - 3 3 2 3 - - Remuneration Committee Meetings Eligible 4 4 - 4 4 - Attended 4 4 - 4 3 - Directors’ interests in shares or options Directors’ relevant interests in shares of Hansen Technologies Ltd or options over shares in the Company at the date of this report are detailed below. Directors’ Relevant Interests in: B Adams Ordinary Shares of Hansen Technologies Ltd 150,000 Options over Shares in Hansen Technologies Ltd - P Berry A Hansen D Osborne M Osborne D Trude 13,000 38,741,890 362,653 54,000 100,000 - 2,100,000 - - - Directors’ interests in contracts 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. Auditor’s Independence Declaration 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. 17 Annual Report 2014 | Hansen Technologies DIRECTORS’ REPORT continued Non-audit services The provision of non-audit services are approved by the Audit Committee and approval is provided to the Board of Directors. Non-audit services were provided by the auditors of entities in the consolidated Group during the year, namely Pitcher Partners Melbourne, 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. Amounts paid and payable to Pitcher Partners Melbourne for non-audit services: – taxation services – compliance services Amounts paid and payable to network firms of Pitcher Partners for non-audit services: – taxation services – compliance services Amounts paid and payable to non-related auditors of Group entities for non-audit services: – taxation services – compliance services Total auditors’ remuneration for non-audit services Consolidated June 2014 $’000 June 2013 $’000 46 12 58 12 64 76 20 2 22 156 33 30 63 3 4 7 9 3 12 82 18 Annual Report 2014 | Hansen Technologies AUDITED REMUNERATION REPORT The Directors present the consolidated entity’s 2014 Remuneration Report. This report outlines the remuneration arrangements in place for the key management personnel (KMP) being those persons having authority and responsibility for planning, directing and controlling the major activities of the Company and the Group, directly or indirectly, including any Director (whether executive or otherwise) of the Company. This Remuneration Report section of the Directors’ Report is subject to external audit and is required to disclose at a minimum such detail as specified by section 300A of the Corporations Act 2001. The Auditor’s Report and opinion on this Remuneration Report may be found on page 75 of this Annual Report. At the Company’s most recent AGM in November 2013, over 25% of the qualifying votes cast were not supportive of the adoption of the Remuneration Report resolution for the year ended 30 June 2013. Following the failure of the resolution the Remuneration Committee, Board of Directors and management have made contact with dissenting shareholders to identify their concerns. The Board takes the receiving of its ‘first strike’ seriously and has obtained advice on the issues identified. Key management personnel details (KMP) The names of the KMP, together with their title/function within the Consolidated Group for the financial year are: (i) Non-Executive Directors D Trude B Adams P Berry D Osborne M Osborne (ii) Executive Director A Hansen (iii) Other executive KMP C Hunter G Lister M Benne S Weir D Meade Chairman Director Director Director Director (resigned August 2014) Managing Director and Chief Executive Officer Chief Operating Officer Chief Financial Officer and Company Secretary Global Sales and Marketing Director, General Manager, APAC Director, EMEA Group Client Services and Delivery Manager There have been no changes other than that noted above to the KMP after the reporting date and before the date the Financial Report was authorised for issue. 19 Annual Report 2014 | Hansen Technologies AUDITED REMUNERATION REPORT continued Remuneration governance The Board has delegated to the Remuneration Committee the responsibility to make recommendations to the Board for determining and reviewing compensation arrangements for the Directors, executive KMP and the balance of the CEO’s direct reports. As at 30 June 2014 the Remuneration Committee was made up of three Non-Executive Directors, Bruce Adams, Melinda Osborne and the Chairman Peter Berry. The CEO and other Directors attend meetings as required at the invitation of the Committee Chairman. team. In doing so it uses reports on the remuneration practices of similar ASX listed entities as a basis to ensure remuneration remains relevant to the market conditions as well as the size and nature of our business. Recommendations to provide equity/ option based remuneration to the Managing Director or any other Director are required to be approved by resolution at a General Meeting of shareholders. A Director or any associate of a Director is excluded from voting on a resolution to approve the issue of equity-based remuneration to a Director. The Remuneration Committee assesses the appropriateness of both the nature and amount of the remuneration of the KMP on an annual basis, by reference to relevant employment market conditions, with the overall objective of ensuring maximum stakeholder benefit for the retention of a quality Board and executive Independent advice To ensure it is fully informed when making decisions in relation to remuneration, the Remuneration Committee seeks advice from specialist external remuneration consultants as well as the Company’s CEO and Company Secretary. The Remuneration Committee sought and received advice from the Godfrey Remuneration Group and the Remuneration and Strategies Group during the year on the issues of benchmarking the remuneration of the CEO and Non-Executive Directors against other listed entities as well as the nature, size and structure of short and long term incentive arrangements. The fees paid to consultants for remuneration related advice this year was a total of $21,500. The Remuneration Committee is satisfied that the advice received from both consultants was free from undue influence from the KMP to whom the recommendations may relate as they were engaged by, and reported directly to, the Chairman of the Remuneration Committee. Details of key management personnel remuneration Directors’ and executives’ remuneration Short term Employment Share-based Post Salary Fees 2014 $ Cash Bonus 2014 $ Maximum Bonus Paid 2014 % Non- monetary 2014 $ Directors B Adams P Berry A Hansen D Osborne M Osborne D Trude 54,137 54,137 - - 618,941 248,000 - - - 924,079 248,000 54,137 54,137 88,590 Specified executives M Benne C Hunter G Lister D Meade S Weir 216,480 285,632 295,238 234,415 194,767 46,000 60,000 56,000 45,500 44,333 1,226,532 251,833 2,150,611 499,833 20 - - 80 - - - 90 100 90 91 100 - - - - - - - - - 13,367 - - 13,367 13,367 Super 2014 $ 5,007 5,007 25,000 5,007 5,007 8,194 53,222 20,024 24,999 30,257 21,146 17,689 114,115 167,337 Options 2014 $ Total 2014 $ Total Performance Related 2014 % Options as % of Total 2014 % - - 59,144 59,144 123,831 1,015,772 59,144 59,144 96,784 123,831 1,349,132 - - - 7,185 9,580 9,580 7,185 7,185 289,689 380,211 404,442 308,246 263,974 40,715 1,646,562 164,546 2,995,694 - - 37 - - - 28 18 18 16 17 20 18 22 - - 12 - - - 9 2 3 2 2 3 2 5 Annual Report 2014 | Hansen Technologies Directors’ and executives’ remuneration continued Short term Maximum Bonus Paid 2013 % Cash Bonus 2013 $ Non- monetary 2013 $ Salary Fees 2013 $ Directors B Adams P Berry A Hansen K Hansen P James D Osborne M Osborne D Trude 51,972 28,185 - - 598,670 270,000 - - - - - 879,581 270,000 9,166 17,324 51,972 37,246 85,046 Specified executives M Benne C Hunter G Lister D Meade S Weir 201,835 252,294 279,201 224,771 178,235 41,284 60,000 60,000 36,697 25,707 1,136,336 223,688 2,015,917 493,688 - - 90 - - - - - 83 100 100 82 60 - - - - - - - - - - - 15,810 - - 15,810 15,810 Post Employment Share-based Super 2013 $ 4,677 2,536 25,000 - 1,559 4,677 3,586 7,654 49,689 21,880 22,707 25,000 23,532 16,041 109,160 158,849 Options 2013 $ Total 2013 $ - - 103,284 - - - - - 56,649 30,721 996,954 9,166 18,883 56,649 40,832 92,700 103,284 1,302,554 276,006 11,007 349,677 14,676 394,687 14,676 296,007 11,007 13,429 233,412 64,795 1,549,789 168,079 2,852,343 Total Performance Related 2013 % Options as % of Total 2013 % - - 37 - - - - - 29 19 21 19 16 17 19 23 - - 10 - - - - - 8 4 4 4 4 6 4 6 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. Remuneration Policy The Company policy is to ensure that the remuneration package for KMP properly reflects each employee’s duties and responsibilities and that it is market competitive in attracting, retaining and motivating people of the highest quality. The Board links the nature and amount of remuneration for executive KMP and other senior executives’ remuneration to the Company’s financial and operational performance and, when appropriate, specific individual key performance indicators within the direct control of the relevant executive. Remuneration paid to the Company’s Directors and executives is also determined with reference to the market level of remuneration for other similar ASX listed entities in Australia. This assessment is undertaken with reference to published information provided by various remuneration support and advisory organisations operating in the sector. Remuneration for the KMP is based around a Fixed Remuneration component plus, for the executives and senior management, performance-linked elements. The targeted levels of performance-linked elements are determined each year by the Board and ratios vary between the individual executives and from year to year. The relativities in recent years between fixed and targeted performance-linked remuneration have been broadly: • Chief Executive Officer: – base salary comprising between 50% and 60% of total remuneration; – plus performance linked; – targeted short term cash incentive, 50% of base salary; – of which not less than half is related to the achievement of key financial performance criteria including revenue and EBITDA; – with the balance relating to specific targeted activities and focused objectives as established by the Board from year to year; and – targeted long term incentive approximately 25% of base salary. 21 Annual Report 2014 | Hansen Technologies AUDITED REMUNERATION REPORT continued Remuneration Policy continued • Other Executive KMP: – base salary comprising between 70% and 75% of total remuneration; – plus performance linked; – targeted short term cash incentive, 15% to 25% of base salary; – of which between 30% and 50% is related to the achievement of key financial performance criteria including revenue and EBITDA; – with the balance relating to specific targeted activities and focused objectives as set by the CEO and Board from year to year; and – targeted long term incentive, 5% to 10 % of base salary. A. Fixed remuneration i. Executive KMP Fixed remuneration generally comprises a base salary plus employer contributions to superannuation funds at the legislated Superannuation Guarantee Contribution rate. Fixed remuneration levels for executive KMP and other senior executives are reviewed annually by the Board through a process that considers each employee’s personal development, qualifications, changes in job descriptions and responsibilities, industry benchmarks and CPI data. ii. Non-Executive Directors Non-Executive Directors receive a base salary reviewed annually (inclusive of superannuation guarantee contribution as required by government regulation). Non-Executive Directors do not receive any performance-related remuneration or retirement benefits and are excluded from participation in the Hansen Executive Option and Share Plans. The maximum remuneration payable for Non-Executive Directors as a collective group is determined by resolution of shareholders. The maximum available aggregate cash remuneration approved for Non-Executive Directors at the 2013 Annual General Meeting is $430,000. B. Incentive elements of remuneration The performance-based incentives for the CEO and senior executives are structured to include a mixture of both short and longer term components which are designed to reward management for meeting or exceeding their financial and performance objectives. The Board is cognisant of the need to achieve a balance between short term and longer term incentives to ensure the continued focus on driving the Company’s performance in a balanced way over time and thus enhancing shareholder confidence. The Remuneration Committee and the Board, after due consideration of the characteristics of our business, its aspirations and growth objectives, and having considered the advice from third parties, currently considers a combination of cash bonuses and share option allocations to be the appropriate elements of a short and long term incentive package. This structure is regularly reviewed to ensure it remains relevant to the best interest of our business and represents optimum incentive to the executives for both operational performance as well as employee retention. i. Short term performance- linked remuneration Each year when the KMP remuneration is reviewed, the Remuneration Committee, in consultation where appropriate with the CEO, establishes a performance dependent bonus that may be payable to each senior executive. Although the ultimate payment of any bonus is at the discretion of the Remuneration Committee and the Board, Key Performance Indicators (KPIs), comprising a combination of qualitative and quantitative measures, are established and individually tailored for each senior executive to ensure their operational performance is aligned with the Groups strategic objectives, targeted improvements in operating performance and the overall Corporate objective of creating enhanced shareholder value for that year. The nature and range of KPI’s and other targets against which the individual performance of KMP may be measured is described below. These measures are chosen as they represent the key drivers for the short term success of the business and provide a framework for delivering long term value: Financial: • the actual worldwide Group operational performance compared to budget for revenue and EBITDA (Earnings before Interest, Tax, Depreciation and Amortisation). The actual parameters applied may be dependent upon the roles and responsibilities of each individual executive and their ability to influence the performance outcome; and • 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; and • achievement of new licence sales to new and existing strategic customers. Departmental operating efficiency: • enhanced performance of individual departments to achieve specified efficiency improvements; and • training and development of employees. Other: • acquisition and integration of compatible businesses; and • compliance with the Company’s corporate governance principles. 22 Annual Report 2014 | Hansen Technologies At the end of each financial year, in the knowledge of the financial performance of the Company as a whole, each individual executive’s performance in general, and specifically against their targeted objectives throughout the year, is evaluated and recommended by the CEO to the Remuneration Committee which assesses the performance of each senior executive, including the CEO, in achieving their KPIs. Based on this assessment and discretion applied by the Remuneration Committee for non-quantifiable measures and any other relevant factors, a determination is then made of the appropriate percentage of each KPI to be awarded based on the performance achieved. The performance bonus recommended by the Remuneration Committee is provided to the full Board for consideration and approval. The combination of these review processes provides the Remuneration Committee and the Board with a balanced assessment of the performance of the senior executive group as well as executives generally. In 2014, two of the KMP received remuneration increases that were above the general trend of salary increases. The reasons for these increases are summarised as follows: • Cameron Hunter – Chief Operating Officer – increase in total remuneration of 9%: – The acquisitions over the past two years have increased the complexity of this role with a significant increase in the international elements of the Group, and a one third plus increase in personnel under management. – The function of integrating the acquisitions largely falls to the COO and this task required substantial increased commitment to residing overseas during Fiscal 2014. – The COO assumed responsibility for the direct management and mentoring of the regional managers. – In summary, the remuneration increase was a reflection of the increase in the growth of business under management and the expanded internationalisation as well. • Scott Weir – Director EMEA – increase in total remuneration of 13%: – Function was previously restricted to Europe, and has been expanded to include the Middle East and Africa as part of the regional management restructure. – This realignment more than doubled the number of customers and revenue generated under his management. – In summary, the remuneration increase was a reflection of an expanded level of responsibility and accountability. ii. Long term incentives The Company’s long term incentive component of KMP remuneration generally comprises the issue of options in accordance with the Company’s Executive Option Plan as approved at the 2011 Annual General Meeting of shareholders. While options may be granted as part of compensation, the exercising of vested options does require payment by the applicable executive to the Company of the predetermined exercise price of the options, being based on the market share price on the deemed effective date of the granting of the options. Executives receiving options are also subject to taxation on gains arising from any increase in the price per share over the vesting/qualifying period of the option, effectively increasing their cost of acquisition. The fundamental principle behind the use of options as a long term incentive is the alignment of any benefit from the incentive to the KMP with the overriding objective of enhanced shareholder value delivered, in this instance, by way of increased share prices over the period of the option term. Options offer the additional incentive of enhancing the prospect for retention of KMP as the benefit to the employee is derived over time subject to the qualifying period of the option. Significant changes in the taxing of options as well as growth in the Company’s internationalisation have occurred over recent years which collectively may be eroding the value to the KMP as well as the Company of options as incentives going forward. With this knowledge the Remuneration Committee is reviewing alternative long term incentive structures, including cash bonuses with payments deferred over successive years subject to continued employment. Once alternative structures are identified which, in the opinion of the Directors would be more effective in achieving the Company’s objectives, then appropriate guidance would be obtained and the incentive structures modified accordingly. Options are issued to the KMP in accordance with the shareholder approved Executive Option Plan. The fundamental elements of the practical application of the Plan may be summarised as follows: • Options are issued with: – a long term vesting/qualifying period, commonly three years; – are conditional upon continued employment throughout the vesting period; – may not be exercised until the end of the vesting period; and – must be exercised within two years of when they vest. • They are conditionally issued in respect of the operating performance for the initial financial year and are subject to achieving specified financial performance targets for that year as determined by the Board, typically the achievement of the budgeted objectives of the Group as a whole for the initial year. – At the end of the year the Directors assess the Group’s performance against the agreed targets; and – determine whether to confirm, vary or cancel the options previously issued. 23 Annual Report 2014 | Hansen Technologies AUDITED REMUNERATION REPORT continued ii. Long term incentives continued • The price payable to convert the options to shares is specified at the original date of issue as being a price per share not less than the volume weighted average price (VWAP) at the date on which the options were originally issued, or in the case of the CEO, the VWAP on the date the intention to issue the options is announced plus a graduated premium: – The benefit to the employee arises where the pre specified exercise price is less than the market price when the options vest at the end of the vesting/qualifying period. • Once an option has vested at the end of the qualifying period the employee may elect to exercise the option in which event: – The employee must pay in cash to the Company the previously specified exercise price multiplied by the number of options received; – e.g. For 100,000 options with an exercise price of $0.91 per share the employee will be required to pay the Company $91,000 to convert the options to shares; – In addition, and regardless of whether the employee has exercised the options or not, the employee will be required to declare for tax purposes a taxable revenue gain to the extent the VWAP at the vesting date exceeds the exercise price and pay tax to the relevant tax authority on this gain as if it was normal personal income, – e.g. for 100,000 options with an exercise price of $0.91 per share and a VWAP at the date of vesting of say $1.30, the employee would be required to declare as income for tax purposes $39,000 and pay to the tax authority the applicable tax on this income. Options issued to executives are not able to be traded on the ASX. They do not qualify for receipt of dividends nor have any voting rights until they have been exercised and converted to shares by the employee paying the required exercise price to the Company. The Company prohibits KMP from entering into arrangements to protect the value of unvested equity awards. The prohibition includes entering into contracts to hedge their exposure to options awarded as part of their remuneration package. The Company does not provide loans or financial support to executives to assist them in the funding of the amount required to exercise options. Details of compensation options 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 Vested During the Year - - - 75,000 75,000 75,000 75,000 40,000 340,000 Options Granted 350,000 350,000 350,000 75,000 100,000 100,000 75,000 75,000 1,475,000 Directors A Hansen Specified executives M Benne C Hunter G Lister D Meade S Weir Total Terms and Conditions for Each Grant Grant Date Value Per Option at Grant Date Exercise Price $ Vesting Date Last Exercise Date 12 Dec 13 12 Dec 13 12 Dec 13 2 July 13 2 July 13 2 July 13 2 July 13 2 July 13 $0.139 $0.131 $0.123 $0.128 $0.128 $0.128 $0.128 $0.128 $1.060 $1.110 $1.160 $0.920 $0.920 $0.920 $0.920 $0.920 2 July 16 2 July 16 2 July 16 2 July 18 2 July 18 2 July 18 2 July 16 2 July 16 2 July 16 2 July 16 2 July 16 2 July 18 2 July 18 2 July 18 2 July 18 2 July 18 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 three 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. 24 Annual Report 2014 | Hansen Technologies Key management personnel’s equity holdings Number of options held by key management personnel Balance 1 July 2013 Granted as Remuneration Options Exercised Options Forfeited Balance 30 June 2014 Total Exer- cisable Unexer- cisable Vested at 30 June 2014 Directors A Hansen Specified executives M Benne C Hunter G Lister D Meade S Weir Total 1,800,000 1,050,000 - 225,000 275,000 275,000 225,000 190,000 2,990,000 75,000 100,000 100,000 75,000 75,000 1,475,000 75,000 75,000 75,000 75,000 40,000 340,000 - - - - - - - 2,850,000 225,000 300,000 300,000 225,000 225,000 4,125,000 - - - - - - - - - - - - - - - - - - - - - Number of shares held by key management personnel Balance 30 June 2013 Received as Remuneration Options Exercised Net Change Other Balance 30 June 2014 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 150,000 - 70,163,026 344,781 - 40,000 6,913 628,578 1,339,357 4,943 87,039 72,764,637 - - - - - - - - - - - - - - - - - - 75,000 75,000 75,000 75,000 40,000 340,000 - - (17,171,136) 17,872 54,000 60,000 (40,429) - 14,635 (75,823) 6,506 (17,134,375) 150,000 - 52,991,890 362,653 54,000 100,000 41,484 703,578 1,428,992 4,120 133,545 55,970,262 25 Annual Report 2014 | Hansen Technologies AUDITED REMUNERATION REPORT continued Service agreements and contract details The contract of employment of the CEO includes a mutual minimum termination notice period of six months. The conditions of employment for the other KMP are not subject to any particular term or significant condition other than those normally applying by law for persons of their remuneration level and position in the Company. As shown in note 23 to the accompanying financial statements, the CEO is a Director of a Trust from whom the Company leases premises in Melbourne. The terms and conditions of the lease arrangements are no more favourable than those available, or which might reasonably be expected to be available, from others on an arm’s length basis. Measurements of performance on shareholder value In assessing the relative performance of the senior executives and the Group as a whole on the primary corporate objective of enhancing shareholder value, the Remuneration Committee and the Board have regard to key financial indicators measured over time, including: EBITDA ($A millions) Earnings per share ASX share price at 30 June Market capitalisation (millions) at 30 June Dividend (cents per share) 2014 24.1 $0.092 $1.27 $203.9 6 2013 15.7 $0.057 $0.91 $145.3 6 2012 19.1 $0.082 $0.92 $145.4 6 2011 20.5 $0.087 $0.90 $140.5 6 2010 17.2 $0.072 $0.62 $95.9 5 2009 14.3 $0.053 $0.41 $62.9 5 Rounding of amounts 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 30 September 2014 Andrew Hansen Director 26 Annual Report 2014 | Hansen Technologies AUDITOR’S INDEPENDENCE DECLARATION To the Directors of Hansen Technologies Ltd. In relation to the independent audit for the year ended 30 June 2014, 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 D Whitchurch Partner 30 September 2014 Pitcher Partners Melbourne An independent Victorian Partnership ABN 27 975 255 196 Liability limited by a scheme approved under Professional Standards Legislation. Pitcher Partners is an association of independent firms Melbourne | Sydney | Perth | Adelaide | Brisbane | Newcastle An independent member of Baker Tilly International 27 Annual Report 2014 | Hansen Technologies CORPORATE GOVERNANCE STATEMENT For the Year Ended 30 June 2014 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 Hansen Technologies Limited (Hansen or The Company) regularly reviews its principles, policies and charters to ensure they remain consistent with the Board’s objectives, current laws and best practice. 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; and • ensure Directors, executives, management, and staff are cognisant of the Hansen Governance principles. In accordance with the most recent edition of the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations (3rd edition) (the Principles), the Corporate Governance statement contains specific information and also reports on the Company’s adoption of the Council’s good practice recommendations on an exception basis, whereby disclosure is required of any recommendations that have not been adopted by the Company and why. The Company’s corporate governance principles and policies are therefore structured with reference to the Principles. Principle 1: Lay solid foundations for management and oversight 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. The specific functions established and reserved for the Board are: • providing strategic direction and approving corporate strategies; • selecting and appointing the Chief Executive Officer (CEO), determining conditions of service and monitoring performance against established objectives. If necessary removing the CEO from office; • monitoring financial performance 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; and • ensuring responsible corporate governance is understood and observed at management, executive, and Board level. The Board has delegated to the CEO the authority and responsibility for implementing the Group’s strategic direction and overseeing the everyday affairs of the Hansen Group. The CEO’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 CEO consults with the Chairman of the Board and respective Committees on matters that are sensitive, extraordinary or of a strategic nature. Through the CEO, the Board has delegated authority and responsibility to other executives and management for their respective business functions. In identifying suitable persons to become Directors, after undertaking appropriate background checks, the Board will look to achieve an appropriate balance of relevant legal, commercial and financial management skills 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. Additionally, Hansen will provide shareholders with all material information in its possession relevant to a decision on whether or not to elect or re-elect a Director. All Directors and senior executives are engaged under a contract of service which clearly specifies roles, responsibilities and any terms of employment. The Company Secretary The Company Secretary is accountable through the Chairman to the Board for the proper functioning of the Board. The Company Secretary also advises the Board on Corporate Governance issues as well as monitoring the activities of Committees for compliance with policy and procedures. Diversity The Board recognises that a diverse and inclusive workforce is not only good for our employees but also good for the business. The Diversity Policy can be found in the Ethics and Responsibilities document in the Corporate Governance section of the Company’s website. 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 the public report submitted by Hansen may be found on the Workplace Gender Equality Agency’s website: www.wgea.gov.au The table below shows the gender diversity of the Group as at 30 June 2014 Board Senior management Hansen Group Female % 17 13 26 Male % 83 87 74 For this purpose senior management is defined as the corporate leadership team reporting directly to the CEO. 28 Annual Report 2014 | Hansen Technologies Performance of the Board 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, will 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; and • 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. Performance of senior executives The Company has a defined process for periodically evaluating the performance of its senior executives as set out in the Remuneration Policy available in the ‘Board’ document on the Corporate Governance section of the Company’s website. A performance evaluation of the CEO and senior executives was undertaken during the reporting period in accordance with this Remuneration Policy. Principle 2: Structure the Board to add value 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. 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 10. Currently, the Board comprises five Directors, four of whom are Non-Executive Directors: the Chairman, David Trude, three other Non-Executive Directors, being Bruce Adams, Peter Berry and David Osborne, and one Executive Director, the CEO Andrew Hansen. (Note: Melinda Osborne resigned as a Director on 22 August 2014.) The skills, tenure of office, experience and expertise relevant to the position of Director held by each Director is detailed in the Annual Report. Director independence It is the Board’s objective to strive for a majority of independent Directors and has for a number of years been successful in this endeavour. The Chair of the Board, Mr David Trude is an independent Director. Mr Bruce Adams, a Director of the Company since its listing in 2000, has a continuous term as a Director exceeding 10 years. For reasons associated with his extensive length of service Mr Adams has assessed, and the Board has agreed, that he should no longer be considered independent. Following the resignation of Melinda Osborne on 22 August and Mr Adams reclassification, the Board’s number of independent Director’s was reduced to two, David Trude, and Peter Berry, representing 40% of the Board’s total membership. The Board is actively looking to identify and appoint a replacement for the vacancy left by Melinda Osborne’s resignation and has the very clear requirement that any such appointment would be an independent person. Director induction training and continuing education All incoming Directors are required to undertake the standard company induction programme so as to become informed of the Company’s business activities and policies. Directors are encouraged to pursue professional development opportunities and the Company will provide information and advice that may be of relevance to allow Directors to maintain the skills and knowledge required to perform their role within the business. Principle 3: Act ethically and responsibly At Hansen 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. The Code of Conduct outlines how the Company expects Directors, senior executives and staff to behave and conduct business in a range of circumstances. Directors, management and staff are expected to act ethically and responsibly. All Board members are qualified professionals within their respective industries and accordingly conduct themselves in a professional and ethical manner in both their normal commercial activities and the discharge of their responsibilities as Directors. The Company’s Code of Conduct is posted on the Corporate Governance section of its website. Employees who breach this Code may face disciplinary action, which could result in changes to their employment. 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. 29 Annual Report 2014 | Hansen Technologies CORPORATE GOVERNANCE STATEMENT continued For the Year Ended 30 June 2014 Principle 4: Safeguard integrity in corporate reporting Audit Committee The Board has established an Audit Committee. The Audit Committee monitors and reviews the effectiveness of the Company’s controls in the areas of operational reporting. The Audit Committee makes an assessment of external auditor performance and makes recommendations in respect of the external auditor’s appointment and remuneration. The Audit Committee has a formal charter which is contained in the ‘The Board’ document which is available in the Corporate Governance section of the Company’s website. The members of the Committee as at 30 June 2014 were Non-Executive Directors, David Osborne, Peter Berry, and the Chairman of the Committee Melinda Osborne, with 67% of the membership being deemed independent. Upon the resignation of Melinda Osborne on 22 August 2014, Mr Peter Berry was appointed as the independent Chairman of the Audit Committee. The Board is actively looking to recruit a new independent Director who would also become a member of the Audit Committee, with the objective of returning the Audit Committee to its minimum of three members with a majority of independent Directors as soon as practical. The skills, tenure of office, experience and expertise relevant to the positions of the members of the Audit Committee are detailed in the Annual Report. The Committee shall meet as required, but no less than twice each year. In the relevant reporting period the Committee met three times and the attendances at these meetings are detailed with the Directors Report which forms part of the Annual Report. Declarations from CEO and CFO 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 declaration to the Board that 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; Principle 6: Respect the rights of security holders Hansen encourages the use of electronic communications by providing up-to-date information on the Group website, www.hsntech.com. The ‘Investors’ section of the website contains a range of information relevant to shareholders. In particular: • the financial statements and notes • the Annual Report is distributed either required by the accounting standards for the financial year comply with the accounting standards; and • the risk management and internal compliance and control systems are sound, appropriate and operating efficiently and effectively. Such a statement has been provided in respect of the financial year ending 30 June 2014. External auditor The external auditor attends the Annual General Meeting (AGM) and is available to answer questions from security holders relevant to the audit. Principle 5: Make timely and balanced 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. A summary of the policy is included in the ‘Ethics and Responsibilities’ document on the Company’s website. 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; and • ASX reporting obligations are met. over the web or by post; • notice of Annual General Meeting is distributed by mail or, where a shareholder has requested, by email; and • whenever there are other significant developments to report, these are communicated via the Company’s website or direct communication to shareholders. Hansen is committed to continuing to improve communication with shareholders. The AGM 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. Following the meeting, Directors and shareholders are able to further communicate informally. 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. The Company gives security holders the option to receive and send communications to the entity and its security registry electronically. Principle 7: Recognise and manage risk The Company has established a Risk Management policy for the oversight and management of material business risks. The policy is available from the Corporate Governance section of the Company’s website. The Board of Directors is responsible for overseeing the Company’s risk management framework. The Board does not have a separate committee to oversee risk. 30 Annual Report 2014 | Hansen Technologies The Board reviews the Company’s risk management framework regularly to satisfy itself that it continues to be sound. Following the recent business acquisitions a risk review was undertaken this year on the extended business. The risk register and related actions were updated. Remuneration policies and practices The Remuneration Report contained in this Annual Report sets out the remuneration details and structures for the specified key management personnel including all Non-Executive Directors. At this stage of the Company’s development it is deemed that a formal internal audit function is not warranted. However the Company does acknowledge the risk represented by its decentralised infrastructure and has put in place a number of internal controls which are regularly tested by internal review tasks to ensure they are operating satisfactorily. The key risk categories to which the Company is exposed, and how it manages or intends to manage those risks, is set out in the Risk Management policy. Principle 8: Remunerate fairly and responsibly Remuneration Committee The Remuneration Committee members as at 30 June 2014 were Bruce Adams plus independent Non–Executive Directors, Melinda Osborne and the Chairman Peter Berry. The resignation of Melinda Osborne on 22 August 2014 reduced the membership of this Committee to just two members only one of whom is considered independent. The Board is actively looking to recruit a new independent Director who would also become a member of the Remuneration Committee with the objective of returning the Remuneration Committee to its minimum of three members with a majority of independent Directors as soon as practical. The Committee meets at least annually to assess annual remuneration changes, and will hold additional meetings where required. The Remuneration Committee charter is set out in the ‘The Board’ document posted in the Corporate Governance section of the Company’s website. The Company has Share and Option plans for its employees. The Company’s Employee Option Plan was approved by shareholders at the 2011 Annual General Meeting. 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; and • is structured to provide a mix of fixed and variable pay, and a blend of short and long-term incentives. 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 Remuneration Committee then makes its recommendations in respect of the CEO, and executives to the Board for approval. The structure of Hansen executive pay and reward is made up of three parts: a base salary package (inclusive of superannuation), short term performance incentives and long term performance incentives. 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. 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 salary package, inclusive of superannuation contribution as required by 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 at an Annual General meeting of the Company. 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. Share trading policy The Company has a Share Trading Policy which can be found in the Ethics and Responsibilities document posted in the Corporate Governance section of the Company’s website. The Corporations Act prohibits the key management personnel of an ASX listed company established in Australia, or a closely related party of such personnel, from entering into an arrangement that would have the effect of limiting their exposure to risk relating to an element of their remuneration that either has not vested or has vested but remains subject to a holding lock. 31 Annual Report 2014 | Hansen Technologies FINANCIAL REPORT 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 Note 3. Financial Risk Management Note 4. Revenue and Other Income Note 5. Profit from Continuing Operations Note 6. Income Tax Note 7. Dividends Note 8. Cash and Cash Equivalents Note 9. Receivables Note 10. Other Current Assets Note 11. Plant, Equipment and Leasehold Improvements Note 12. Intangible Assets Note 13. Payables Note 14. Borrowings Note 15. Provisions Note 16. Contributed Capital Note 17. Reserves and Retained Earnings Note 18. Cash Flow Information Note 19. Business Combinations Note 20. Commitments Note 21. Earnings Per Share Note 22. Directors’ and Executives’ Equity Holdings Note 23. Related Party Disclosures Note 24. Auditors’ Remuneration Note 25. Parent Entity Information Note 26. Segment Information Note 27. Subsequent Events 32 33 34 35 36 37 37 43 43 45 46 47 49 49 50 50 51 51 53 53 54 54 58 59 60 63 63 64 67 68 69 70 73 Annual Report 2014 | Hansen Technologies CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME For the Year Ended 30 June 2014 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 Consolidated Entity 2013 2014 $’000 $’000 63,780 86,021 1,578 436 65,358 86,457 (46,425) (1,588) (3,130) (3,993) (1,779) (443) (2,741) (2,317) (808) (1,022) (2,753) (66,999) 19,458 (4,657) (35,075) (1,597) (2,075) (3,391) (1,565) (424) (3,282) (1,597) (637) (766) (2,280) (52,689) 12,669 (3,536) Note 4 4 5 5 5 5 6(b) Profit after income tax from ongoing operations 14,801 9,133 Other comprehensive income/(expense) Items that may be reclassified subsequently to profit and loss Movement in carrying value of foreign entities due to currency translation 17(a) (658) 1,590 Other comprehensive income/(expense) for the year (658) 1,590 Total comprehensive income for the year attributable to members of the parent 14,143 10,723 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 21 21 9.2 9.2 9.0 9.0 5.7 5.7 5.6 5.6 The consolidated statement of comprehensive income is to be read in conjunction with the notes to the financial statements set out on pages 37 to 73. 33 Annual Report 2014 | Hansen Technologies CONSOLIDATED STATEMENT OF FINANCIAL POSITION As at 30 June 2014 Current assets Cash and cash equivalents Receivables Other current assets Total current assets Non-current assets Plant, equipment and leasehold improvements Intangible assets Deferred tax assets Total non-current assets Total assets Current liabilities Payables Borrowings 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 Consolidated Entity 2013 2014 $’000 $’000 Note 8 9 10 11 12 6 13 14 6 15 15 3,829 14,701 5,309 23,839 4,376 68,774 448 73,598 9,653 14,671 2,164 26,488 4,699 45,654 823 51,176 97,437 77,664 5,006 10,055 1,061 6,973 8,133 31,228 5,489 - 1,116 6,649 4,367 17,621 123 123 176 176 31,351 17,797 66,086 59,867 16 17(a) 17(b) 17(c) 45,126 (2,106) 748 22,318 66,086 43,650 (1,448) 523 17,142 59,867 The consolidated statement of financial position is to be read in conjunction with the notes to the financial statements set out on pages 37 to 73. 34 Annual Report 2014 | Hansen Technologies CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the Year Ended 30 June 2014 Consolidated entity Balance as at 1 July 2013 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 17(a) 16 16 17(b) 16 7 Consolidated Entity Contributed Equity $’000 43,650 Reserves $’000 (925) Retained Earnings $’000 17,142 Total Equity $’000 59,867 - - - 160 337 - 979 - 1,476 - 14,801 14,801 (658) (658) - 14,801 (658) 14,143 - - 225 - - 225 - - - - (9,625) 160 337 225 979 (9,625) (9,625) (7,924) Balance as at 30 June 2014 16 and 17 45,126 (1,358) 22,318 66,086 Consolidated entity 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 17(a) 16 16 17(b) 16 7 Consolidated Entity Contributed Equity $’000 42,579 Reserves $’000 (2,692) Retained Earnings $’000 17,540 Total Equity $’000 57,427 - - - 164 231 - 676 - 1,071 - 9,133 9,133 1,590 1,590 - 9,133 1,590 10,723 - - 177 - - 177 - - - - (9,531) 164 231 177 676 (9,531) (9,531) (8,283) Balance as at 30 June 2013 16 and 17 43,650 (925) 17,142 59,867 The consolidated statement of changes in equity is to be read in conjunction with the notes to the financial statements set out on pages 37 to 73. 35 Annual Report 2014 | Hansen Technologies CONSOLIDATED STATEMENT OF CASH FLOWS For the Year Ended 30 June 2014 Cash flows from operating activities Receipts from customers Payments to suppliers and employees Interest received Finance costs 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 Proceeds from borrowings Dividends paid net of dividend re-investment Net cash provided by (used in) financing activities Net decrease in cash and cash equivalents Cash and cash equivalents at beginning of year Note 18(a) 19 11 12 16 16 14 Consolidated Entity 2013 2014 $’000 $’000 93,440 (70,314) 149 (58) (4,339) 18,878 - (21,812) (1,244) (3,553) (26,609) 160 337 10,055 (8,645) 1,907 65,791 (50,609) 611 - (4,495) 11,298 4 (13,827) (1,026) (2,303) (17,152) 164 231 - (8,855) (8,460) (5,824) (14,314) 9,653 23,967 Cash and cash equivalents at end of the year 18(b) 3,829 9,653 The consolidated statement of cash flows is to be read in conjunction with the notes to the financial statements set out on pages 37 to 73. 36 Annual Report 2014 | Hansen Technologies NOTES TO THE FINANCIAL STATEMENTS 30 June 2014 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. Hansen Technologies Ltd is a for-profit consolidated entity for the purpose of preparing the financial statements. The Financial Report was authorised for issue by the Directors on 30 September 2014. 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, as modified by revaluations to fair value for certain classes of assets as described in the accounting policies. Critical accounting estimates The preparation of the Financial Report requires the use of certain estimates and judgements in applying the consolidated 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 consolidated entity, Hansen Technologies Ltd, and of all entities, which the parent controls. The consolidated entity controls an entity when it is exposed, or has rights, to variable returns from its involvement with the consolidated entity and has the ability to affect those returns through its power over the consolidated entity. The financial statements of subsidiaries are prepared for the same reporting period as the parent consolidated entity, using consistent accounting policies. Adjustments are made to bring into line any dissimilar accounting policies, which may exist. All inter-company balances and transactions, including any unrealised profits or losses have been eliminated on consolidation. Subsidiaries are consolidated from the date on which control is established. (c) Revenue Revenue from the provision of services to customers is recognised upon delivery of the service to the customer. Maintenance revenue when invoiced in advance is initially recognised as a liability until the service is performed. Accrued revenue is recognised on a percentage of completion basis in order to match revenues against incurred effort and expense. 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. 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, short term deposits with an original maturity of six months or less held at call with financial institutions and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the statement of financial position. 37 Annual Report 2014 | Hansen Technologies NOTES TO THE FINANCIAL STATEMENTS continued 30 June 2014 1. Statement of significant accounting policies continued (e) Plant, equipment and 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: Plant, equipment and leasehold improvements Leased plant and equipment 2014 2.5 to 12 years 2.5 to 12 years 2013 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. 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 as 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 the term of the contract or five to ten years. Technology, trademarks and customer contracts are carried at cost less accumulated amortisation and any impairment losses. 38 Annual Report 2014 | Hansen Technologies 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 recognised 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. Tax consolidation The parent consolidated entity and all eligible Australian controlled entities have formed an income tax consolidated entity under the tax consolidation legislation. The tax consolidated entity has entered a tax funding agreement whereby each consolidated entity in the tax consolidated entity recognises the assets, liabilities, expenses and revenues in relation to its own transactions, events and balances only. This means that: • the parent consolidated entity recognises all current and deferred tax amounts relating to its own transactions, events and balances only; • the subsidiaries recognise current or deferred tax amounts arising in respect of their own transactions, events and balances; • the current tax liabilities and deferred tax assets arising in respect of tax losses, are transferred from the subsidiary to the head consolidated entity as inter-company payables or receivables. The tax consolidated entity also has a tax sharing agreement in place to limit the liability of subsidiaries in the tax consolidated entity arising under the joint and several liability requirements of the tax consolidation system, in the event of default by the parent consolidated entity to meet its payment obligations. This means that under the tax sharing agreement, the subsidiaries are legally liable to the income tax payable in proportion to their contribution to the net profit before tax of the tax consolidated entity. (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. 39 Annual Report 2014 | Hansen Technologies NOTES TO THE FINANCIAL STATEMENTS continued 30 June 2014 1. Statement of significant accounting policies continued (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 12 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 and annual leave which is not expected to be settled within 12 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. (iii) Retirement benefit obligations Defined contribution superannuation plan The consolidated entity makes contributions to defined 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 share-based payment employee share and option schemes. 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 measured at the market bid price at grant date. In respect of share-based payments that are dependent on the satisfaction of performance conditions, the number of shares and options expected to vest is reviewed and adjusted at each reporting date. The amount recognised for services received as consideration for these equity instruments granted is adjusted to reflect the best estimate of 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. (vi) Termination benefits Termination benefits are payable when employment of an employee or consolidated entity of employees is terminated before the normal retirement date. The consolidated entity recognises a provision for termination benefits when the consolidated entity can no longer withdraw the offer of those benefits, or if earlier, when the termination benefits are included in a formal restructuring plan that has been announced to those affected by it. (m) Borrowing costs Borrowing costs can include interest expense calculated using the effective interest method, finance charges in respect of finance leases. Borrowing costs are expensed as incurred. (n) 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. Loans and receivables 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. Financial liabilities are classified as current liabilities unless the consolidated entity has an unconditional right to defer settlement of the liability for at least 12 months after the reporting date. 40 Annual Report 2014 | Hansen Technologies (o) Foreign currencies translations and balances Functional and presentation currency The financial statements of each entity within the consolidated entity 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. Transactions and balances Transactions in foreign currencies of entities within the consolidated entity 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. Exchange differences arising on translation of foreign operations are transferred directly to the consolidated entity’s foreign currency translation reserve as a separate component of equity in the balance sheet. (p) 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. Cash flows are presented in the statement of cash flows on a gross basis, except for the GST component of investing and financing activities, which are disclosed as operating cash flows. (q) Comparatives Where necessary, comparative information has been reclassified and repositioned for consistency with current year disclosures. (r) Rounding amounts The parent consolidated 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. (s) Going concern The financial report has been prepared on a going concern basis. (t) Adoption of new and amended accounting standards that are first operative at 30 June 2014 (a) AASB 10: Consolidated Financial Statements The consolidated financial statements are those of the consolidated entity, comprising the financial statements of the parent consolidated entity and of all entities which the parent controls. The consolidated entity controls an entity when it is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The consolidated entity concluded that the adoption of AASB 10 did not change the consolidation status of its subsidiaries. Therefore, no adjustments to any of the carrying amounts were required. 41 Annual Report 2014 | Hansen Technologies NOTES TO THE FINANCIAL STATEMENTS continued 30 June 2014 1. Statement of significant accounting policies continued (b) AASB 11: Joint arrangements Under AASB 11, investments in joint arrangements are classified as either joint operations or joint ventures depending on the rights and obligations of the parties to the arrangement, rather than the legal structure of the joint arrangements. 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 11 has no impact on the composition or performance of the consolidated entity. (c) AASB 12: Disclosure of interests in other entities AASB 12 sets new minimum disclosures requirements for interest in subsidiaries, joint arrangements, associates and unconsolidated structured entities, however, it was determined that these new requirements had no impact on the consolidated entity. (d) AASB 13: Fair value measurement AASB 13 introduces a fair value framework for all fair value measurements as well as the enhanced disclosure requirements. Application of AASB 13 does not materially change the Company’s fair value measurements. (e) AASB 119: Employee benefits The amendments to AASB 119 revise the definitions of short term and long term employee benefits, placing the emphasis on when the benefit is expected to be settled rather than when it is due to be settled. The consolidated entity has assessed its impact and concludes that the adoption of AASB 119 has no material effect on the amounts recognised in current or prior years. No other new and amended accounting standards effective for the financial year beginning 1 July 2013 affected any amounts recorded in the current or prior year. (u) Accounting standards and interpretations issued but not operative at 30 June 2014 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. 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), AASB 2012-6 Amendments to Australian Accounting Standards – Mandatory Effective Date of AASB 9 and Transition Disclosure and AASB 2013-9 Amendments to Australian Accounting Standards – Conceptual Framework, Materiality and Financial Instruments (effective from 1 January 2017) AASB 9 Financial Instruments improve and simplify the approach for classification and measurement of financial assets compared with the requirements of AASB 139. When adopted, the standard could change the classification and measurement of financial assets. 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 consolidated entity 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. 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. 42 Annual Report 2014 | Hansen Technologies 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 ad gross margins, past performance and its expectation for the future. The valuation utilises the billing business segment of the Board approved budget for the subsequent fiscal year (being the business segment to which the goodwill applies), and • provides for a constant 3% growth rate for the remainder of the forecast period, and • utilises a 14.5% weighted cost of capital discount rate, to • determine the discounted value of the resultant cash flow over a 5 year period, plus a terminal value using a terminal growth rate of 3% at the end of the period. (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. Recognition of 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 research and development expenditure incurred in relation to the HUB, Peace and ICC billing software in the 2014 year. Returns are expected to be derived from this investment over coming years. 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 cash flows of a financial instrument will fluctuate as a result of changes in market interest rates. The consolidated entity’s exposure to interest rate risk in relation to future cash flows and the effective weighted average interest rates on classes of financial assets and financial liabilities is as follows: 43 Annual Report 2014 | Hansen Technologies NOTES TO THE FINANCIAL STATEMENTS continued 30 June 2014 3. Financial risk management continued Financial Instruments 2014 Financial assets Cash and cash equivalents Receivables Other current assets Financial liabilities Payables Borrowings 2013 Financial assets Cash and cash equivalents Receivables Other current assets Financial liabilities Payables Consolidated Entity Interest Bearing $’000 Non-interest Bearing $’000 Note Total Carrying Amount $’000 Weighted Avg. Effective Interest Rate % Fixed/ Variable Rate 8 9 10 13 14 8 9 10 13 3,829 - - 3,829 - 10,055 10,055 9,653 - - 9,653 - - - 14,701 5,309 20,010 5,006 - 5,006 - 14,671 2,164 16,835 5,489 5,489 3,829 14,701 5,309 23,839 5,006 10,055 15,061 9,653 14,671 2,164 26,488 5,489 5,489 2.25 variable 4.06 variable 3.22 variable Management are comfortable with the risk associated with using variable interest rates due to the current level of borrowings. No other financial assets or liabilities are expected to be exposed to interest rate risk. (b) Credit risk 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, performing credit checks, invoicing progressively upon milestones and where possible invoicing maintenance in advance. Concentrations of credit risk on trade debtors: Utilities 37% (2013: 32%), Finance Sector 4% (2013: 2%), Telecommunications 18% (2013: 20%), Pay TV 35% (2013: 40%) and Other 6% (2013: 6%). 44 Annual Report 2014 | Hansen Technologies (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 Group has historically been able to generate and retain strong positive cash flows and in addition a multi-currency line of credit has been established with the Company’s bankers to provide increased capacity for strategic growth objectives. 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 expanded its international operations substantially in recent years to the extent that in excess of 60% of its revenue is now earned in foreign currency designated transactions. The group has a number of offices located internationally and more than 50% of its work force are located overseas and paid in foreign currencies. Accordingly the group has an in built natural hedge against major currency fluctuation and with the exception of significant sudden change, is protected in part by its corporate structure against currency movements so that the impact is largely limited to the margin. The Group’s borrowings are due for repayment in April 2017 in line with the $20 million multi-currency term facility. Management however believe this will be repaid much earlier and have treated the entire borrowings as current to reflect its intended repayment. Trade creditors are due for repayment within six months. (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. No assets or liabilities are carried at fair value on a recurring basis. 4. Revenue and other income 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 Consolidated Entity 2013 2014 $’000 $’000 86,021 86,021 63,780 63,780 149 43 244 611 787 180 436 86,457 1,578 65,358 45 Annual Report 2014 | Hansen Technologies NOTES TO THE FINANCIAL STATEMENTS continued 30 June 2014 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 and leasehold improvements Total depreciation of non-current assets Amortisation of non-current assets Technology, trademarks and customer contracts Research and development Total amortisation of non-current assets Property and operating rental expenses Rental charges Total property and operating rental expenses Consolidated Entity 2013 2014 $’000 $’000 Note 11 12 12 43,016 3,184 225 46,425 1,588 1,588 1,627 1,503 3,130 3,993 3,993 32,509 2,389 177 35,075 1,597 1,597 774 1,301 2,075 3,391 3,391 46 Annual Report 2014 | Hansen Technologies 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 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% Add/(less) tax effect of: Impact of tax rates on foreign subsidiaries Research and development allowances Non-deductible share-based payments Under/(over) provision in prior years Previous year losses not brought to account utilised Gain on foreign exchange assessable/(non assessable) Other non-allowable items Consolidated Entity 2013 2014 $’000 $’000 4,326 375 (44) 4,657 3,320 (178) 394 3,536 5,838 3,801 108 (362) 68 (44) (958) (16) 23 (71) (385) 53 394 - (208) (48) Income tax expense attributable to profit 4,657 3,536 (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 Other 1,116 - (44) 4,326 (4,339) 2 1,061 1,819 78 394 3,320 (4,495) - 1,116 47 Annual Report 2014 | Hansen Technologies NOTES TO THE FINANCIAL STATEMENTS continued 30 June 2014 6. Income tax continued (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 Consolidated Entity 2013 2014 $’000 $’000 256 620 1,702 2,578 (2,066) (64) (2,130) 78 488 1,654 2,220 (1,397) - (1,397) Net deferred tax 448 823 (e) Deferred income tax (revenue)/expense included in income tax expense comprises Increase in deferred tax assets Decrease in deferred tax liabilities (f) Deferred tax assets not brought to account Tax effect of capital losses Tax effect of operating losses (358) 733 375 847 717 1,564 (384) 206 (178) 847 2,015 2,862 48 Annual Report 2014 | Hansen Technologies 7. Dividends 2014 A 3 cent per share fully franked final dividend was announced to the market on 26 August 2014. The amount declared has not been recognised as a liability in the accounts of Hansen Technologies Ltd as at 30 June 2014. Dividends provided for or paid during the year 3 cent per share final dividend paid 30 September 2013 3 cent per share final dividend paid 28 September 2012 3 cent per share interim dividend paid 28 March 2014 3 cent per share interim dividend paid 28 March 2013 Consolidated Entity 2013 2014 $’000 $’000 4,807 4,818 9,625 4,759 4,772 9,531 Proposed dividend not recognised at the end of the year. 4,866 4,800 Dividend franking account 30% franking credits, on a tax paid basis, are available to shareholders of Hansen Technologies Ltd for subsequent financial years. 1,879 2,326 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; and (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. 8. Cash and cash equivalents Current Cash at bank and on hand Interest bearing deposits Consolidated Entity 2013 2014 $’000 $’000 2,828 1,001 3,829 3,143 6,510 9,653 49 Annual Report 2014 | Hansen Technologies NOTES TO THE FINANCIAL STATEMENTS continued 30 June 2014 9. Receivables Current Trade receivables Less: provision for impairment Sundry receivables 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 2014 $’000 10,162 1,739 800 815 13,516 Impairment 2014 $’000 - - - 317 317 The entity expects to collect all receivables where no provision for impairment has been recorded. 10. Other current assets Current Prepayments Accrued revenue Consolidated Entity 2013 2014 $’000 $’000 13,516 (317) 13,199 1,502 14,701 Gross 2013 $’000 10,511 480 1,891 1,556 14,438 14,438 (238) 14,200 471 14,671 Impairment 2013 $’000 - - - 238 238 Consolidated Entity 2013 2014 $’000 $’000 1,517 3,792 5,309 948 1,216 2,164 50 Annual Report 2014 | Hansen Technologies 11. Plant, equipment and leasehold improvements Plant, equipment and leasehold improvements at cost Accumulated depreciation Total plant, equipment and leasehold improvements Consolidated Entity 2013 2014 $’000 $’000 23,898 25,711 (19,199) (21,335) 4,376 4,699 Reconciliation Reconciliation of the carrying amounts of plant, equipment and leasehold improvements at the beginning and end of the current financial year. Plant, equipment and 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 12. Intangible assets Goodwill at cost Accumulated amortisation and impairment Technology, trademarks and customer contracts at cost Accumulated amortisation and impairment Software development at cost Accumulated amortisation Total intangible assets Consolidated Entity 2013 2014 $’000 $’000 4,699 1,244 9 (23) (1,588) 35 4,376 4,554 1,026 626 4 (1,597) 86 4,699 Consolidated Entity 2013 2014 $’000 $’000 37,408 54,944 (1,418) (1,433) 35,990 53,511 12,377 (3,764) 8,613 28,627 (21,977) 6,650 7,177 (2,170) 5,007 29,705 (25,048) 4,657 68,774 45,654 51 Annual Report 2014 | Hansen Technologies NOTES TO THE FINANCIAL STATEMENTS continued 30 June 2014 12. Intangible assets continued 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 and impairment at beginning of year Fully amortised write back Net foreign currency movements arising from foreign operations Accumulated amortisation and impairment at end of year Reconciliation of technology, trademarks and 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 and impairment at beginning of year Amortisation of technology, trademarks and customer contracts Net foreign currency movements arising from foreign operations Accumulated amortisation and impairment at end of year Reconciliation of software development at cost Carrying amount at 1 July Expenditure capitalised in current period Fully amortised write back Net foreign currency movements arising from foreign operations Carrying amount at 30 June Accumulated amortisation at beginning of year Current year charge Fully amortised write back Accumulated amortisation at end of year Consolidated Entity 2013 2014 $’000 $’000 37,408 18,056 (520) - 54,944 (1,418) - (15) (1,433) 7,177 5,390 (190) 12,377 (2,170) (1,627) 33 (3,764) 29,705 3,553 (4,574) (57) 28,627 (25,048) (1,503) 4,574 (21,977) 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) 52 Annual Report 2014 | Hansen Technologies 13. Payables Current Trade payables Other payables 14. Borrowings Current Secured Bank overdraft Consolidated Entity 2013 2014 $’000 $’000 1,394 3,612 5,006 1,127 4,362 5,489 Consolidated Entity 2013 2014 $’000 $’000 10,055 10,055 - - The Company has a secured $A20 million multi-currency three-year term facility with its external bankers to provide additional funding as required for acquisitions and general corporate purposes. The facility is secured by the Australian Group entities and guaranteed by the parent entity Hansen Technologies Limited. As at 30 June 2014 the remaining unutilised portion of the facility is $A9.945 million. 53 Annual Report 2014 | Hansen Technologies NOTES TO THE FINANCIAL STATEMENTS continued 30 June 2014 15. 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 Net provisions (payments) made 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 Payments made during the year Foreign exchange adjustment Carrying amount at end of year 16. Contributed capital (a) Issued and paid up capital Ordinary shares, fully paid 54 Consolidated Entity 2013 2014 $’000 $’000 6,748 130 95 6,973 123 - 123 6,417 147 85 6,649 152 24 176 6,871 6,569 427 413 147 (17) 130 85 10 95 24 (24) - - - 147 147 129 (44) 85 22 - 2 24 Consolidated Entity 2014 $’000 2013 $’000 45,126 43,650 Annual Report 2014 | Hansen Technologies Consolidated Entity Consolidated Entity 2014 No. of Shares 2014 $’000 2013 No. of Shares 2013 $’000 (b) Movements in shares on issue Balance at beginning of the financial year 159,634,602 43,650 158,072,120 42,579 Shares issued under Dividend Reinvestment Plan Shares issued under Employee Share Plan Options exercised 825,800 134,240 615,000 979 160 337 813,722 178,760 570,000 676 164 231 Balance at end of the financial year 161,209,642 45,126 159,634,602 43,650 (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 five years after the date upon which it was granted. 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. Options issued under the employee share option plan are valued on the same basis as those issued to key management personnel. Refer to note 22 for disclosure regarding valuation inputs. Since the end of the financial year 1,115,000 (2013: 1,945,000) share options have been granted under this scheme. 55 Annual Report 2014 | Hansen Technologies NOTES TO THE FINANCIAL STATEMENTS continued 30 June 2014 16. Contributed capital continued Options issued and not yet exercised at 30 June 2014 Grant Date Exercise Date Expiry Date Exercise Price $ No. of Options at Beg. of Year Options Granted Options Exercised or Lapsed No. of Options at End of Year Issued Vested Consolidated 2014 1 July 2012 1 July 2009 1 July 2013 1 July 2010 1 Jan 2014 1 Jan 2011 2 July 2014 2 July 2011 1 July 2014 1 Dec 2011 1 July 2014 1 Dec 2011 1 July 2014 1 Dec 2011 2 July 2013 2 Dec 2011 2 July 2014 2 Dec 2011 2 July 2015 2 July 2012 2 July 2015 1 Dec 2012 2 July 2015 1 Dec 2012 2 July 2015 1 Dec 2012 2 July 2015 1 Dec 2012 2 July 2013 2 July 2016 12 Dec 2013 2 July 2016 12 Dec 2013 2 July 2016 12 Dec 2013 2 July 2016 Total 1 July 2014 1 July 2015 1 Jan 2016 2 July 2016 1 July 2016 1 July 2016 1 July 2016 2 July 2015 2 July 2016 2 July 2017 2 July 2017 2 July 2017 2 July 2017 2 July 2017 2 July 2018 2 July 2018 2 July 2018 2 July 2018 $0.41 $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 $1.06 $1.11 $1.16 115,000 605,000 75,000 745,000 250,000 250,000 250,000 40,000 40,000 785,000 70,000 350,000 350,000 350,000 - - - - - - - - - - - - - - - - - - 895,000 350,000 350,000 350,000 115,000 500,000 - - - - - - - - - - - - - - - - - 105,000 75,000 745,000 250,000 250,000 250,000 40,000 40,000 785,000 70,000 350,000 350,000 350,000 895,000 350,000 350,000 350,000 4,275,000 1,945,000 615,000 5,605,000 - 105,000 75,000 - - - - 40,000 - - - - - - - - - - 220,000 Options issued and not yet exercised at 30 June 2013 Grant Date Exercise Date Expiry Date Consolidated 2013 1 July 2008 1 July 2009 1 July 2010 1 Jan 2011 2 July 2011 1 Dec 2011 1 Dec 2011 1 Dec 2011 2 Dec 2011 2 Dec 2011 2 July 2012 1 Dec 2012 1 Dec 2012 1 Dec 2012 1 Dec 2012 Total 1 July 2011 1 July 2012 1 July 2013 1 Jan 2014 2 July 2014 1 July 2014 1 July 2014 1 July 2014 2 July 2013 2 July 2014 2 July 2015 2 July 2015 2 July 2015 2 July 2015 2 July 2015 1 July 2013 1 July 2014 1 July 2015 1 Jan 2016 2 July 2016 1 July 2016 1 July 2016 1 July 2016 2 July 2015 2 July 2016 2 July 2017 2 July 2017 2 July 2017 2 July 2017 2 July 2017 Exercise Price $ No. of Options at Beg. of Year Options Granted Options Exercised or Lapsed No. of Options at End of Year Issued Vested $0.39 $0.41 $0.58 $0.75 $0.91 $0.95 $1.00 $1.05 $0.91 $0.91 $0.92 $0.92 $0.97 $1.02 $1.07 115,000 570,000 605,000 75,000 745,000 250,000 250,000 250,000 40,000 40,000 - - - - - - - - - - - - - - - 785,000 70,000 350,000 350,000 350,000 115,000 455,000 - - - - - - - - - - - - - - 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 - 115,000 - - - - - - - - - - - - - 2,940,000 1,905,000 570,000 4,275,000 115,000 56 Annual Report 2014 | Hansen Technologies 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. 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 three 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 2014 No. of Shares 421,684 134,240 (158,347) 2013 No. of Shares 438,508 178,760 (195,584) 397,577 421,684 The consideration for the shares issued on 16 May 2014 was $1.1909 (15 May 2013: $0.917). 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 2014 $’000 40 164 2013 $’000 40 164 The market value of ordinary Hansen Technologies Ltd shares closed at $1.265 on 30 June 2014 ($0.91 on 30 June 2013). 57 Annual Report 2014 | Hansen Technologies NOTES TO THE FINANCIAL STATEMENTS continued 30 June 2014 17. Reserves and retained earnings Foreign currency translation reserve Options granted reserve Retained earnings (a) Foreign currency translation reserve 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 beginning of year Dividends paid during the year Net profit attributable to members of Hansen Technologies Ltd Balance at end of year Consolidated Entity 2013 2014 $’000 $’000 (1,448) (2,106) 523 748 17,142 22,318 Note 17 (a) 17 (b) 17 (c) (1,448) (658) (2,106) (3,038) 1,590 (1,448) 523 225 748 346 177 523 17,142 (9,625) 14,801 22,318 17,540 (9,531) 9,133 17,142 58 Annual Report 2014 | Hansen Technologies 18. Cash flow information (a) Reconciliation of the net profit after tax to net cash flows from operations Net profit from ordinary activities after income tax Add/(less) items classified as investing/financing activities: (Profit)/loss on sale of non-current assets Add/(less) non-cash items: Amortisation and depreciation Share based payment expense Unrealised foreign exchange Consolidated Entity 2013 2014 $’000 $’000 14,801 9,133 23 (4) 4,718 225 167 3,672 178 (717) Net cash provided by operating activities before change in assets and liabilities 19,934 12,262 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 2,875 (3,145) 207 (1,584) 271 375 (55) (2,944) 178 1,101 1,322 339 (178) (782) Net cash provided by operating activities 18,878 11,298 (b) Reconciliation of cash Cash at bank (c) Loan facilities Loan facility Amount utilised Unused loan facility 3,829 9,653 20,000 (10,055) 9,945 10,000 - 10,000 59 Annual Report 2014 | Hansen Technologies NOTES TO THE FINANCIAL STATEMENTS continued 30 June 2014 19. Business combinations (a) Hansen Banner, LLC (i) Hansen Banner, LLC was incorporated in April 2014 to acquire the assets of the Banner business unit from Ventyx Inc. with effect on 1 May 2014. 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 Customer contracts Goodwill Net intangibles 2014 $’000 21,812 - 21,812 - 21,812 Fair Value 2014 $’000 - 2,905 9 2,914 4,548 - 4,548 (1,634) 23,446 3,773 1,617 18,056 23,446 Goodwill arose on the acquisition of Banner 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 customer contracts and technology. The value of goodwill represents the future benefit arising from the expected future earnings, synergies and personnel assumed via the acquisition. 60 Annual Report 2014 | Hansen Technologies (ii) Revenue and profit of Banner included in the consolidated results of the Group since acquisition. Total revenue Profit after income tax 2014 $’000 2,410 470 (iii) Results of the entity for the period as though the date for the acquisition of Banner occurred at 1 July 2013 It is impracticable to disclose this detail as the Banner business unit was integrated within the larger parent entity of the seller and accordingly audited financials are not available for the business unit acquired. (b) 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 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 technology. The value of goodwill represents the future benefit arising from the expected future earnings, synergies and personnel assumed via the acquisition. 61 Annual Report 2014 | Hansen Technologies NOTES TO THE FINANCIAL STATEMENTS continued 30 June 2014 19. Business combinations continued (ii) Revenue and profit of the ICC group included in the consolidated results of the Group since acquisition. Total revenue Profit after income tax 2014 $’000 23,816 3,776 (c) Utilisoft Pty Ltd (i) The Company acquired 100% of the share capital of Utilisoft Pty Ltd, effective 1 March 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 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 2013 $’000 9,673 903 2013 $’000 3,250 - 3,250 (1,260) 1,990 Fair Value 2013 $’000 1,260 586 107 110 2,063 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. 62 Annual Report 2014 | Hansen Technologies (ii) Revenue and profit of Utilisoft Pty Ltd included in consolidated results of the Group since acquisition. Total revenue Profit after income tax 20. 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 2014 $’000 6,133 2,764 2013 $’000 1,347 80 Consolidated Entity 2013 2014 $’000 $’000 1,874 3,037 86 4,997 2,272 1,985 - 4,257 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 require the minimum lease payments to be increased by CPI per annum. 21. 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 2014 $’000 $’000 14,801 14,801 9,133 9,133 2014 No. Shares 2013 No. Shares 160,585,269 158,989,963 165,742,352 162,788,114 2014 Cents per Share 9.2 9.2 2013 Cents per Share 5.7 5.7 9.0 9.0 5.6 5.6 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. 63 Annual Report 2014 | Hansen Technologies NOTES TO THE FINANCIAL STATEMENTS continued 30 June 2014 22. 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: 2014 Directors A Hansen Specified executives M Benne C Hunter G Lister D Meade S Weir Total 2013 Directors A Hansen Specified executives M Benne C Hunter G Lister D Meade S Weir Total Terms and Conditions for each Grant Vested During the Year Granted During the Year Grant Date Value per Option at Grant Date Exercise Price Vesting Date - - - 350,000 350,000 350,000 12 Dec 13 12 Dec 13 12 Dec 13 75,000 75,000 75,000 75,000 40,000 340,000 75,000 100,000 100,000 75,000 75,000 1,475,000 2 July 13 2 July 13 2 July 13 2 July 13 2 July 13 $0.139 $0.131 $0.123 $0.128 $0.128 $0.128 $0.128 $0.128 $1.060 $1.110 $1.160 $0.920 $0.920 $0.920 $0.920 $0.920 2 July 16 2 July 16 2 July 16 2 July 16 2 July 16 2 July 16 2 July 16 2 July 16 Last Exercise Date 2 July 18 2 July 18 2 July 18 2 July 18 2 July 18 2 July 18 2 July 18 2 July 18 Terms and Conditions for each Grant Vested During the Year Granted During the Year Grant Date Value per Option at Grant Date Exercise Price Vesting Date - - - 350,000 350,000 350,000 - 75,000 75,000 75,000 40,000 - 265,000 75,000 100,000 100,000 75,000 40,000 70,000 1,510,000 1 Dec 12 1 Dec 12 1 Dec 12 2 July 12 2 July 12 2 July 12 2 July 12 2 July 12 1 Dec 12 $0.137 $0.131 $0.125 $0.196 $0.196 $0.196 $0.196 $0.196 $0.144 $0.970 $1.020 $1.070 $0.920 $0.920 $0.920 $0.920 $0.920 $0.920 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 64 Annual Report 2014 | Hansen Technologies 2014 Directors A Hansen 2013 Directors A Hansen (b) Number of options held by key management personnel Balance 30 June 13 Granted as Remuneration Options Exercised Options Forfeited Balance 30 June 14 Total Exer- cisable Unexer- cisable Vested at 30 June 2014 1,800,000 1,050,000 - - 2,850,000 Specified executives M Benne C Hunter G Lister D Meade S Weir Total 225,000 275,000 275,000 225,000 190,000 2,990,000 75,000 100,000 100,000 75,000 75,000 1,475,000 75,000 75,000 75,000 75,000 40,000 340,000 - - - - - - 225,000 300,000 300,000 225,000 225,000 4,125,000 - - - - - - - - - - - - - - - - - - - - - Balance 30 June 12 Granted as Remuneration Options Exercised Options Forfeited Balance 30 June 13 Total Exer- cisable Unexer- cisable Vested at 30 June 2013 750,000 1,050,000 - - 1,800,000 Specified executives M Benne C Hunter G Lister D Meade S Weir Total 150,000 250,000 250,000 225,000 120,000 1,745,000 75,000 100,000 100,000 75,000 110,000 1,510,000 - 75,000 75,000 75,000 40,000 265,000 - - - - - - 225,000 275,000 275,000 225,000 190,000 2,990,000 - - - - - - - - - - - - - - - - - - - - - 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 2018. 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 three-year option vesting period of 27%; • a continuously compounding risk-free interest rate of 3.75%; • 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 $0.128 cents per option. 65 Annual Report 2014 | Hansen Technologies NOTES TO THE FINANCIAL STATEMENTS continued 30 June 2014 22. Directors’ and executives’ equity holdings continued (c) Number of shares held by key management personnel Balance 30 June 13 Received as Remuneration Options Exercised Net Change Other Balance 30 June 14 150,000 - 70,163,026 344,781 - 40,000 6,913 628,578 1,339,357 4,943 87,039 72,764,637 - - - - - - - - - - - - - - - - - - - - (17,171,136) 17,872 54,000 60,000 150,000 - 52,991,890 362,653 54,000 100,000 75,000 75,000 75,000 75,000 40,000 340,000 (40,429) - 14,635 (75,823) 6,506 (17,134,375) 41,484 703,578 1,428,992 4,120 133,545 55,970,262 Balance 30 June 12 Received as Remuneration Options Exercised Net Change Other Balance 30 June 13 150,000 - 2,777 332,890 - 40,000 15,683 583,109 1,209,949 3,853 41,214 2,379,475 - - - - - - - - - - - - - - - - - - - - 70,160,249 11,891 - - 150,000 - 70,163,026 344,781 - 40,000 - 75,000 75,000 75,000 40,000 265,000 (8,770) (29,531) 54,408 (73,910) 5,825 70,120,162 6,913 628,578 1,339,357 4,943 87,039 72,764,637 2014 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 2013 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 66 Annual Report 2014 | Hansen Technologies 23. Related party disclosures (a) The consolidated financial statements include the financial statements of Hansen Technologies Ltd and its controlled entities Name Parent entity Hansen Technologies Ltd Subsidiaries of Hansen Technologies Ltd Hansen Corporation Pty Ltd Hansen Corporation Investments Pty Ltd Hansen Holdings (Asia) Pty Ltd Hansen Research and Development Pty Ltd Peace Software Australia Pty Ltd Utilisoft Pty Ltd Peace Software Canada Inc. Hansen Technologies (Shanghai) Company Limited Hansen Corporation Asia Limited Hansen New Zealand Limited Hansen Corporation Europe Limited Hansen Technologies North America, Inc. Hansen ICC, LLC Hansen Banner, LLC NirvanaSoft, LLC Peace Software Inc. Note Country of Incorporation Ordinary Share Consolidated Entity Interest 2013 % 2014 % Australia Australia Australia Australia (ii) (ii) (iii) (i) Australia Australia Australia Canada China Hong Kong New Zealand United Kingdom United States of America United States of America United States of America United States of America United States of America 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 - 100 100 Notes (i) Company formed in April 2014 to house the assets of Banner upon acquisition from Ventyx Inc. on 1 May 2014. (ii) Officially de-registered by ASIC on 11 April 2014. (iii) In the final stages of de-registration. (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: A Hansen – lease rental payments Consolidated Entity 2013 2014 $ $ 924,004 1,088,949 67 Annual Report 2014 | Hansen Technologies NOTES TO THE FINANCIAL STATEMENTS continued 30 June 2014 24. Auditor’s remuneration Amounts paid and payable to Pitcher Partners (Melbourne) 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 – compliance services Total remuneration of Pitcher Partners (Melbourne) 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 – compliance services Total remuneration of network firms of Pitcher Partners 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 – compliance services Total remuneration of non-related auditors of group entities Total auditors’ remuneration Consolidated Entity 2013 2014 $’000 $’000 310 46 12 58 368 74 12 64 76 150 65 20 2 22 87 605 226 33 30 63 289 31 3 4 7 38 5 9 3 12 17 344 68 Annual Report 2014 | Hansen Technologies 25. Parent entity information Summarised presentation of the parent entity, Hansen Technologies Ltd.’s, 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 Parent Entity 2014 $’000 2013 $’000 127 62,411 62,538 1,999 - 1,999 151 65,335 65,486 1,844 4,181 6,025 60,539 59,461 45,126 14,665 748 43,650 15,288 523 60,539 59,461 Parent Entity 2014 $’000 9,001 9,001 2013 $’000 10,033 10,033 (c) Parent entity guarantees Hansen Technologies Ltd, being the parent entity, has entered into a guarantee in regard to the loan facility (refer note 14), but other than that has not entered into any guarantees in relation to debts of its subsidiaries. 69 Annual Report 2014 | Hansen Technologies NOTES TO THE FINANCIAL STATEMENTS continued 30 June 2014 26. 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. Segment capital expenditure is the total cost incurred during the period to include segment assets which are expected to be used for more than one period. Business 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. Geographical segments 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. (b) Segment information 2014 Segment revenue Total segment revenue Segment revenue from external source Segment result before income tax Total segment result Segment result from external source before income tax Items included within the segment result: Depreciation expense Amortisation expense Billing $’000 75,065 75,065 17,111 17,111 836 3,202 2014 Financial Year Other $’000 Outsourcing $’000 Total $’000 86,021 86,021 21,327 21,327 3,892 3,892 1,302 1,302 17 - 878 3,204 7,064 7,064 2,914 2,914 25 2 Total segment assets 89,176 2,776 953 92,905 Additions to non-current assets 923 103 - 1,026 Total segment liabilities 14,656 1,931 1,064 17,651 70 Annual Report 2014 | Hansen Technologies 2013 Segment revenue Total segment revenue Segment revenue from external source Segment result before income tax Total segment result Segment result from external source before income tax Items included within the segment result: Depreciation expense Amortisation expense Billing $’000 51,729 51,729 9,908 9,908 860 2,121 2013 Financial Year Other $’000 Outsourcing $’000 Total $’000 63,780 63,780 14,360 14,360 3,496 3,496 1,062 1,062 38 - 918 2,123 8,555 8,555 3,390 3,390 20 2 Total segment assets 64,940 3,198 1,307 69,445 Additions to non-current assets 489 380 - 869 Total segment liabilities 13,333 2,427 991 16,751 (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 source attributed to geographic regions is detailed as follows: APAC Americas EMEA Total revenue 2014 $’000 86,021 287 149 86,457 2014 $’000 36,033 19,982 30,006 86,021 2013 $’000 63,780 967 611 65,358 2013 $’000 31,842 12,113 19,825 63,780 71 Annual Report 2014 | Hansen Technologies NOTES TO THE FINANCIAL STATEMENTS continued 30 June 2014 26. Segment information continued (ii) Reconciliation of segment result from the external source to the consolidated statement of comprehensive income 2014 $’000 21,327 149 (58) (638) 658 (1,980) 19,458 2014 $’000 92,905 3,829 703 4,532 97,437 2014 $’000 44,055 49,554 3,828 97,437 2014 $’000 17,651 10,055 3,645 13,700 31,351 2013 $’000 14,360 611 (1) (631) (1,590) (80) 12,669 2013 $’000 69,445 7,134 1,085 8,219 77,664 2013 $’000 50,182 22,939 4,543 77,664 2013 $’000 16,751 - 1,046 1,046 17,797 Segment result from external source Interest revenue Interest expense Depreciation and amortisation Adjustment to carrying value of overseas interests due to currency fluctuation Other expense Total profit before income tax (iii) Reconciliation of segment assets to the consolidated statement of financial position Segment assets Unallocated assets – Cash – Other Total unallocated assets Total assets Non-current assets attributed to geographic regions is detailed as follows: APAC Americas EMEA Total assets (iv) Reconciliation of segment liabilities to the consolidated statement of financial position Segment liabilities Unallocated liabilities – Bank facility – Other Total unallocated liabilities Total liabilities 72 Annual Report 2014 | Hansen Technologies 27. Subsequent events There has been no matter or circumstance, which has arisen since 30 June 2014 that has significantly affected or may significantly affect: (a) the operations, in financial years subsequent to 30 June 2014, of the consolidated entity; or (b) the results of those operations; or (c) the state of affairs, in financial years subsequent to 30 June 2014, of the consolidated entity. 73 Annual Report 2014 | Hansen Technologies DIRECTORS’ DECLARATION The Directors declare that the financial statements and notes set out on pages 32 to 73 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 2014 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 2014. This declaration is made in accordance with a resolution of the Directors. David Trude Director Melbourne 30 September 2014 Andrew Hansen Director 74 Annual Report 2014 | Hansen Technologies INDEPENDENT AUDITOR’S REPORT To the Members of Hansen Technologies Ltd Report on the Financial Report We have audited the accompanying Financial Report of Hansen Technologies Limited and controlled entities, which comprises the consolidated statement of financial position as at 30 June 2014, the consolidated statement of comprehensive income, consolidated statement of changes in equity and 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 aterial misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the Financial Report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the Financial Report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the 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 2014 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. Report on the Remuneration Report We have audited the Remuneration Report included in pages 19 to 26 of the Directors’ report for the year ended 30 June 2014. The Directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. Opinion In our opinion the Remuneration Report of Hansen Technologies Ltd and controlled entities for the year ended 30 June 2014 complies with Section 300A of the Corporations Act 2001. S D Whitchurch Partner Melbourne 30 September 2014 Pitcher Partners An independent Victorian Partnership ABN 27 975 255 196 Liability limited by a scheme approved under Professional Standards Legislation. Pitcher Partners is an association of independent firms Melbourne | Sydney | Perth | Adelaide | Brisbane | Newcastle An independent member of Baker Tilly International 75 Annual Report 2014 | Hansen Technologies ASX ADDITIONAL INFORMATION As at 25 September 2014 Additional information required by the Australian Stock Exchange Limited Listing Rules and not disclosed elsewhere in the report is set out below: Substantial Shareholders The number of shares held by substantial shareholders is set out below: Shareholder Othonna Pty Ltd (including associates) HSBC Custody Nominees Voting Rights Ordinary shares and options – refer note 16. Distribution of Equity Security Holders Category 1 to 1,000 1,001 to 5,000 5,001 to 10,000 10,001 to 100,000 100,000 and over Number of Ordinary Shares Percentage Held 23.38% 13.01% 37,989,113 21,133,840 Number of Equity Security Holders Options 0 0 0 4 11 Ordinary Shares 445 1,632 897 1,366 90 The number of shareholders holding less than a marketable parcel of ordinary shares is 96. Twenty Largest Shareholders Name/Address Othonna Pty Ltd HSBC Custody Nominees National Nominees Limited Citicorp Nominees Pty Limited Rbc Investor Services Australia Nominees Pty Limited J P Morgan Nominees Australia Limited Bond Street Custodians Limited OZCUN Pty Ltd Bnp Paribas Noms Pty Ltd Mrs Yvonne Irene Hansen Rbc Investor Services Australia Nominees Pty Ltd Mr Cameron Hunter Mr James Lucas + Ms Lesley Dormer Andrew Alexander Hansen Rangeworthy Pty Ltd Six of us Pty Ltd Equitas Nominees Pty Limited Pacific Custodians Pty Limited Mr Meng Ghee Yeoh FGDG Super Pty Ltd Total 76 Total Units 37,989,113 21,133,840 13,265,057 6,992,793 5,420,000 2,835,921 1,642,055 1,528,992 1,331,159 1,187,714 1,174,000 801,387 798,636 750,000 750,000 600,000 528,799 511,468 500,000 455,000 100,195,934 Percentage of Issued Capital 23.38 13.01 8.16 4.3 3.34 1.75 1.01 0.94 0.82 0.73 0.72 0.49 0.49 0.46 0.46 0.37 0.33 0.31 0.31 0.28 61.66 Annual Report 2014 | Hansen Technologies CORPORATE DIRECTORY Directors David Trude, Chairman Andrew Hansen, Managing Director and Chief Executive Bruce Adams, Non-Executive David Osborne, Non-Executive Peter Berry, Non-Executive Company secretary Grant Lister Principal registered office 2 Frederick Street, Doncaster VIC 3108 T. (03) 9840 3000 F. (03) 9840 3099 Share registry Link Market Services Level 1, 333 Collins Street Melbourne VIC 3000 T. (02) 8280 7761 or 1300 554 474 F. (02) 9287 0309 – Proxy forms F. (02) 9287 0303 – General Stock exchange The Company is listed on the Australian Stock Exchange ASX Code: HSN Auditors Pitcher Partners Level 19, 15 William Street Melbourne VIC 3000 Solicitors GrilloHiggins Level 20, 31 Queen Street Melbourne VIC 3000 Other information Hansen Technologies Limited ABN 90 090 996 455, incorporated and domiciled in Australia, is a publicly listed Company limited by shares. 77 Annual Report 2014 | Hansen Technologies