P R O V E N FLEXIBLE G L O B A L GROWTH Annual Report 2015 Contents Company Profile 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 2 14 16 21 29 30 35 Consolidated Statement of Comprehensive Income 36 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 37 38 39 40 77 78 79 80 Sønderborg Hamburg London Carlsbad New York Atlanta Houston Columbia South Carolina Shanghai Notice of Annual General Meeting Annual General Meeting of the Company is to be held on Thursday 26 November 2015 at 11am at 2 Frederick Street Doncaster VIC 3108. Buenos Aires Johannesburg Melbourne Auckland Company Profile About Hansen Technologies Ltd Hansen Technologies (ASX: HSN) is a global provider of customer care and billing solutions to utility, Pay TV and telecommunications companies. The Hansen family of products includes HUB, PeacePlus, NirvanaSoft, ICC, Utilisoft, Banner and NaviBilling. Hansen’s unique approach to best-fit solutions leverages these products to deliver and support high-value solutions to customers across 40-plus countries. Hansen supports its customers from offices in Australia, United States, New Zealand, China, Argentina, Denmark, Germany, South Africa and the United Kingdom. Hansen has developed a reputation of using technology to provide state-of-the-art solutions to its customers that deliver real benefit on a daily basis. From professional on-time delivery through relevant timely enhancements, Hansen offers solutions that adapt to our customers’ needs. Sønderborg Hamburg London Johannesburg Carlsbad Columbia South Carolina New York Atlanta Houston Shanghai Buenos Aires Melbourne Auckland Operations Offices Branches Customer locations in regions serviced Americas Europe, Middle East, Africa Asia-Pacific 1 Hansen Technologies LtdAnnual Report 2015 Chairman and Chief Executive Officer Joint Report Fiscal 2015 has been a year of significant achievements and strong profit performance. At the same time our focus remained on growth, with a strategic acquisition delivering international expansion in our core billing business in the European market. Over the past four years our business has experienced strong growth. We have successfully integrated a number of businesses into the Hansen family over that time while continuing to service our existing customers to the highest standard. The Company’s growth and profit performance is an achievement of which all Hansen staff can be proud. We wish to extend our congratulations and thanks to the 540-plus staff across the globe whose contribution and commitment has delivered this outstanding result. The acquisition of the TeleBilling business in May 2015 increased our presence in Europe and strengthens our offering in the telecommunications market. This is an exciting business that has made an immediate contribution to the Group’s performance. This natural addition to the Hansen business complements Hansen’s existing customer care and billing products and provides a critical mass of established telecommunications and Pay TV clients. We are delighted by the way the TeleBilling staff have responded to joining the Hansen team. Their level of commitment to the transition process has been excellent and we look forward to the strong growth opportunities available across the markets serviced by TeleBilling. Other highlights for Fiscal 2015: • continued to expand and cross train our international delivery teams, improving staff utilisation and our delivery capability; • raised $27 million via equity placements during the year. With the announcement of the TeleBilling acquisition, an institutional placement at $2.17 per share raised $15 million. Following the placement, a Share Purchase Plan was offered to all eligible shareholders at $2.17. The Share Purchase Plan was well supported, raising an additional $12 million. This capital was used to retire the debt created at the time of the TeleBilling acquisition; • further enhanced our financial reporting capabilities, expanding on the level of management reporting available to the business across industry verticals and the regional management structure. Operational performance across the year was strong, assisted by the weakening of the Australian dollar against all major currencies. A direct presence in these overseas geographies limits any currency benefit to the profit margin, as increases in revenue due to foreign exchange are somewhat offset by expenses in the same businesses. This year we completed the integration of the Banner business acquired in May 2014. This business has grown our utility billing business and introduced us to the municipality market in the USA, whilst the Banner customers have been impressed by Hansen’s commitment to delivering further enhancements to the product suite. Hansen people The results are the culmination of a great many people’s ongoing efforts to deliver outstanding service on a daily basis. We are very fortunate to have a large number of industry experts supported by multi-skilled teams that deliver positive outcomes to our customers each and every day. We continued to grow our offering to the telecommunications and Pay TV market. We have been able to capitalise on opportunities in emerging markets delivering growth from our existing customers and maximising new opportunities. The recently announced multi-year licensing agreement with the Hinduja Group in India brings Hansen’s ICC (Intelligent Customer Care) billing solution to one of the fastest growing Pay TV markets in the world. Hansen’s offering was recognised for its powerful and flexible multi-company, multi-tenancy architecture. In established markets this capability is further enhanced with NaviBilling (TeleBilling product), providing the ability to deliver a ‘Quadplay’ billing solution to the telecommunications market. NaviBilling customers can combine the service provision of fixed line, mobile, internet and Pay TV on the one bill. We would like to take this opportunity to record our continued appreciation to all our staff across the world. The quality of our people and their commitment to our success is second to none. As our business continues to grow overseas we now have approximately 60% of our workforce based outside of Australia. Our major presence outside of Australia includes the United States, China, the United Kingdom, New Zealand and Denmark. With our worldwide team now exceeding 540 people it is a credit to the Board and executive and management team, whose strategy has ensured the integration of these people into a true international team focused on customer delivery. 2 Hansen Technologies LtdAnnual Report 2015 Highlights $106.3 million Operating revenue up 24% $16.9 million After tax profit up 14% $31.3 million 10.3 cents EBITDA up 30% Earnings per share up 12% Annual Report 2015 Hansen Technologies Ltd 3 Chairman and Chief Executive Officer Joint Report continued 2014–15 financial performance Operating revenue of $106.3 million for the year was up 24% on the previous year and 67% on Fiscal 2013. Earnings before Interest, Tax, Depreciation and Amortisation (EBITDA) of $31.3 million represents an increase over Fiscal 2014 of 30% and represents a return on operating revenue of 29%. Revenue ($ millions) 24% 35% 86.0 106.3 Net profit after tax (NPAT) was $16.9 million, and earnings per share 10.3 cents per share compared to 9.2 cents per share last year. 63.8 Following the release of the full year’s operating results, the Directors declared a 3 cent per share final dividend franked at 83% to be paid on 30 September 2015 to those shareholders on record at 9 September 2015. When combined with the 3 cent per share interim dividend franked at 83%, the total distribution of 6 cents per share is consistent with the prior year. As the profits from overseas operations comprise an ever-increasing percentage of total Group profits, the Company’s ability to provide shareholders with fully franked dividends is expected to diminish. Year on year comparison (A$m) The year to June 2015 has benefited from the Banner and TeleBilling acquisitions (acquired May 2014 and May 2015 respectively) along with organic growth in our core business. 2013 2014 2015 EBITDA ($ millions) 30% 31.3 54% 24.1 15.7 2013 2014 2015 EPS (basic – cents) 61% 9.2 12% 10.3 5.7 2013 2014 2015 4 Hansen Technologies LtdAnnual Report 2015 Who we are Hansen’s core business is focused on the provision of customer care and billing solutions. Our products service four major industry verticals (energy, water, Pay TV and telecommunications) each with industry-specific needs while utilising our ability to deliver complex billing outcomes. Our products have developed in line with the specific industry requirements. They have maintained their own identity while being integrated into the Hansen product family that utilises common values and delivery standards. Strategic matrix – products and industries Energy and Water Pay TV and Telecommunications Energy and telecommunications Energy – large retailers and distribution Energy – complex billing and smart grid Energy – market data management Energy and water – municipal market Pay TV Quad play 5 Hansen Technologies LtdAnnual Report 2015 Chairman and Chief Executive Officer Joint Report continued Strategic matrix – products and industries The benefits of our strategic matrix include: • Best of breed solutions – reap the benefits of scale and scope, being able to leverage product solutions and subject matter experts from across our business to meet the needs of the different market segments. • Stable platform – the business is not overly exposed to a single customer, product, industry or region. While not immune from market influences, the mission-critical nature of our proprietary software, added to our diversification, provides a strong, stable operating environment. • Employee engagement – enhanced career development opportunities for our staff, who are able to cross skill through their exposure to new technologies, industries and geographies. Our market focus Asia Pacific – APAC The past 12 months have seen a number of new projects commence across many of the industry verticals. Existing customers have also continued to commission enhancements to installed products as they strive to differentiate themselves in a competitive market place. Europe, the Middle East and Africa – EMEA It has been a fantastic year within the EMEA region with continued strong client engagement across the region underscored by the completion of a strategic acquisition (TeleBilling) in May 2015 enhancing the region’s telecommunications offering. Market competition has seen our existing customer base increase its appetite for more complex billing combinations as it strives to differentiate itself in the market. This has resulted in a continuing strong level of customer-paid enhancements. This trend is expected to continue as our existing customers look to enter into new vertical markets. Major Pay TV assignments across the region with customers continuing on scheduled upgrade paths will continue to deliver opportunities to the Company over the coming year. The acquisition of the TeleBilling software business in May 2015 has increased our presence in Europe, adding an impressive list of top tier telecommunications customers to the European customer base. The NaviBilling system expands the Company’s telecommunications reach with a product capable of significant product bundling, including the provision of fixed line, mobile, internet and Pay TV billing all on the one service. The energy sector continues to experience change, with ongoing deregulation and the progressive introduction of smart meter technology increasing the potential for billing complexity across the residential market space. With the Australian market being one of the most mature deregulated markets in the world, Hansen is well positioned to address the needs of other deregulated and competitive markets. This product has broadened the opportunities available to Hansen as the EMEA region continues with its ongoing transition from analogue to digital technology. The Americas The 2014–15 year has seen an ongoing expansion of our presence across North and South America. The Pay TV sector continues to offer opportunities especially in emerging markets. For example, India is currently going through a government mandated digitisation program and it is expected that over 110 million TV-owning homes will make the transition from analogue to digital within the next 18 months. With Direct to Home (DTH) delivery associated with satellite technology often the preferred method of distribution in emerging economies, Hansen’s ICC product is very well placed to service this market. The signing of a multi-year licence with the global Hinduja Group for Hansen’s ICC Customer Care and Billing product in July 2015 is an exciting development. The integration of the Banner customer information system (CIS) utilities billing system was completed during the year with customers excited by the level of expertise and professionalism introduced by Hansen as we developed a product pathway. Product development has continued across the year and Hansen is now well positioned with both upgrade and new business opportunities available in the municipality market space. Our contract with Direct TV, with licensing and support arrangements in Argentina, Columbia, Chile, Ecuador, Peru, Puerto Rico, Venezuela, the Caribbean and Uruguay, has established a significant presence and reputation across the region. This key customer is a valuable reference as we continue to leverage the product into the South American region. 6 Hansen Technologies LtdAnnual Report 2015 The gas market changes will enable greater efficiencies in market transactions and improve security and reliability. Hansen is well placed to assist market participants with adapting to these new market conditions. 7 Hansen Technologies LtdAnnual Report 2015 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 innovative 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 system 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 development and provision of best of breed applications that deliver the optimum outcomes for our customers; • delivering our own projects with a collaborative hands-on approach with our customers; • offering the security of a company that is large enough to deliver strong industry-relevant expertise while retaining a more flexible approach to product delivery; • offering the option of a fully outsourced facility-managed solution service that is supported directly by the owner of the intellectual property; and • ensuring the underlying technology keeps pace with the ever-increasing complexity of multi-layered, multi-faceted billing solutions. We are positioned in our selected geographies as a flexible provider of best of breed solutions in our core business focus areas. 3. Energy and water utilities (i) Energy billing and customer information systems The energy industry across the globe remains in various states of evolution as industry discussions continue to embrace climate change and the practical application of ‘smart grid’ and region-specific competitive drivers. The introduction of smart meters continues to open the market to more complex billing options and an expanding level of competition in the retail market. The ‘Smart Grid’ initiative has begun to accelerate slowly as the industry starts to understand and embrace the level of integration and the complexity of the technology required to deliver the benefits associated with smoothing energy peaks and managing demand. 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 introduction of the initiative without the need for a complete upgrade to the underlying system. Governments globally continue to regulate for change, driving efficiency, the lowering of greenhouse gas emissions and the increase in retail contestability. Working with our strategic partner Toshiba in the Japanese market, we are well positioned to take advantage of a number of opportunities that are emerging as this market moves towards full retail contestability in April 2016. With the Australian market representing one of the most deregulated retail markets in the world and with a smart meter roll-out program underway, our experience and product readiness will see the energy market being one of significant opportunity into the future. (ii) Utilisoft Utilisoft is a software product that provides market integration along with transactions data management for energy generators, traders and retail companies in the Australian energy industry. Utilisoft functionality is tied strongly to market-mandated requirements with ongoing market change impacting our customer base. Working with the industry and our customers, we continually update our product set to keep our off-the-shelf technology compliant with market requirements and relevant to the continuing business needs of our customers. 8 Hansen Technologies LtdAnnual Report 2015 technology and delivered a new user interface. This investment has positioned the product, with existing customers keen to embark on a defined upgrade path while delivering a fresh new version of the product ready to deliver to new prospects in the market. The integration of the Banner team into the different functional areas of Hansen has been completed, expanding the resource pool and development and delivery capabilities, as well as broadening the implementation expertise. 4. Telecommunications Hansen has a long association within the industry, with many in-house industry experts able to assist with the delivery of the expanding list of Hansen products available to address the challenges in this evolving industry segment. 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 telecommunications 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 telecommunications 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. We see great opportunity for convergence within the telecommunications and Pay TV space, which aligns very well with our solutions and industry expertise. Our recent acquisition of TeleBilling in Denmark has added a product to the Hansen family that introduces ‘Quad Play’, an ability to combine billing for fixed line, mobile, internet and Pay TV under the same billing solution. The Australian electricity and gas markets continue to experience change and this year has seen two significant market-mandated changes introduced. The National Electricity Market (NEM) is in the process of adapting to recommendations to Commonwealth and State Governments made by the AEMC ‘Power of Choice’ review in 2012, whilst the NSW gas market is currently undergoing a significant project to harmonise with the Victorian and South Australian gas markets. These electricity market reforms will give consumers more options in the way they consume energy and will expand competition in the metering and related services, paving the way for new entrants to the smart meter space. The gas market changes will enable greater efficiencies in market transactions and improve security and reliability. Hansen is well placed to assist market participants with adapting to these new market conditions. Our expertise in the Australian deregulated energy market space continues to be the basis for our moves into markets around the world, with utility projects in Japan and Europe benefitting from our long experience with the Utilisoft product suite in the Australian market. We expect market growth to continue and technical requirements to become ever more complex, driven by the demand for renewable energy, consumer awareness, smart grids and the need for increased energy efficiency. The Utilisoft product suite plays a mission-critical role in our clients’ market data value chain and we look forward to helping them meet new challenges in the year ahead. (iii) Banner The Banner solution is a full-featured, functionally rich CIS for utility billing and brings to the Hansen stable of products strong referenceability in water billing and application in the North American municipality market. The product is applicable for some of the largest utilities in the USA as well as smaller municipalities. This allows for a significant addressable market for a product that has a proven track record and an established customer base. Banner has a long history of success and a loyal customer base that is being re-energised by Hansen’s focus on product development. Historical customers have reached out to Hansen to learn more about our future plans for the product. During the year a clearly defined product map supported by significant expenditure in product development has refreshed the 9 Hansen Technologies LtdAnnual Report 2015 Chairman and Chief Executive Officer Joint Report continued 6. Outsourcing With our software solutions driving mission-critical outcomes for our customers, the attractiveness of having the owner of the IP providing total IT support is growing in its popularity. As a natural business progression we offer to our customers varying degrees of hosting and support. This service provides a valuable means of differentiation through the ability to provide a full range of IT services to our customers. 7. Mergers and acquisitions We continue to grow our business with a targeted acquisition strategy. These targets must meet strict strategic criteria to be considered, as follows: • business must be in customer care and billing or adjacent to this core focus; • revenue streams must be recurring or annuity based; and • the business must have strong ownership of its intellectual property. The opportunity must extend Hansen’s footprint into: • a new market; • a new geography; and/or • a new industry vertical. 5. Pay TV Hansen’s Customer Care and Billing solution ICC 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; and • offer full account receivable capabilities. Our extensive knowledge and experience with digital satellite and digital terrestrial distribution, as well as cable networks, coupled with flexible pricing models/offerings for consumers, businesses and multiple dwelling units, facilitates a lower cost of deployment when compared with other industry-leading CRM and billing platforms. The software can be configured to run multiple territories or countries from a single instance of the software. 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 that 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, telecommunications, 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. 10 Hansen Technologies LtdAnnual Report 2015 The acquisition of TeleBilling expands the Company’s telecommunications reach with a product capable of significant product bundling, including the provision of fixed line, mobile, internet and Pay TV billing all on the one service. 11 Hansen Technologies LtdAnnual Report 2015 Chairman and Chief Executive Officer Joint Report continued 7. Mergers and acquisitions continued Recent acquisitions 2010 2013 2013 2014 2015 • Core business – customer care and billing. • Added United States commercial and industrial segment. North America Fully integrated • Core business – customer care and billing. • New industry vertical – Pay TV. Global Fully integrated • Adjacent to core business. • Energy market data management Australia – cross sell. Fully integrated • Core business – customer care and billing. • Extended footprint into water and municipal market segment. North America and Caribbean Fully integrated • Core business – customer care and billing. • Strengthens footprint in European telecommunications and Pay TV. Europe Integration progressing The future We will continue our disciplined approach to profitable growth into the future. Our philosophy of putting our customers’ needs at the forefront of our business will remain our first priority. Prioritising the customer will put Hansen front of mind as we look to take advantage of the organic growth available in our markets. Our strategic approach to acquisitions will continue to be applied as we look to expand the business into new but related markets. Finally we would like to record our appreciation for the level of support shown by our shareholders across the year. This support was illustrated through the over-subscription to our recent share offer as well as the growth in our share register. Our shareholder base has now grown to in excess of 7,300 members. We would like to take this opportunity to welcome all shareholders who have joined the Company during the year and we look forward to delivering additional value across the year to come. We will continue to focus on customer delivery, being mindful of the need to balance the timely investment in staff growth with the ongoing need to deliver projects on time and on budget. We are very proud of our continuing business achievements. We have seen significant growth in the value of the Company since its listing on the ASX in 2000, while returning to our investors a total of over $80 million by way of capital distributions and dividend payments. David Trude Chairman Having been admitted to the ASX 300 in March of this year, we look forward to continuing to offer our growing shareholder base ongoing value through sustainable revenue growth and consistent profitability. The outlook for Fiscal 2016 is for another record year as we continue to grow internationally. We expect revenue to exceed $135 million while continuing to target an EBITDA margin in the range of 25 –30%. Andrew Hansen CEO 30 September 2015 12 Hansen Technologies LtdAnnual Report 2015 With the Australian market representing one of the most deregulated retail markets in the world, with a smart meter roll-out program underway, our experience and product readiness will see the energy market being one of significant opportunity into the future. 13 Hansen Technologies LtdAnnual Report 2015 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 is provided below, together with details of the Company Secretary as at the year end. Mr Bruce Adams Non-Executive Director Mr Peter Berry Non-Executive Director Director since 2000 Director since 2012 Member of the Remuneration Committee Age 55 Bruce has over 25 years experience as a commercial lawyer. He has practised extensively in the areas of information technology law and 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. Chair of the Remuneration Committee Member of the Audit and Risk Committee Age 55 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 a Director of Pacific Hydro, an international renewable energy developer, and an adviser to investors in infrastructure. Peter was a Director of Metgasco Ltd until 21 January 2015. Previously Peter practised as a corporate lawyer in both Melbourne and New York and holds Degrees in Bachelor of Laws and Bachelor of Commerce (majoring in accounting) from Melbourne University. Mr David Trude Non-Executive Director Chairman since 2011 Director since May 2011 Age 67 Mr Andrew Hansen Managing Director and CEO Managing Director since 2000 Age 55 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. 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, and a Director of CHI-X Australia Limited. On 27 February 2014 David was appointed Non-Executive Director of Acorn Capital Investment Fund Limited, an ASX listed entity. 14 Hansen Technologies LtdAnnual Report 2015 Ms Sarah Morgan Non-Executive Director Mr David Osborne Non-Executive Director Ms Melinda Osborne Non-Executive Director Director since 1 October 2014 Director since 2006 Director since 2012 Ms Julia Chand (i) General Counsel and Company Secretary Chair of the Audit and Risk Committee Member of the Audit and Risk Committee Member of the Remuneration Committee Age 66 Resigned 22 August 2014 Company Secretary since 1 October 2014 Age 60 Age 45 Age 45 Sarah has extensive experience in the finance industry, primarily as part of independent corporate advisory firm Grant Samuel. Sarah has been involved in public and private company mergers and acquisitions, as well as equity and debt capital raisings across a broad range of industries. Sarah is also Non-Executive Director and Chair of the Audit and Risk Committee of Adslot Limited, an ASX listed media and technology business, and Non-Executive Director of Future Generation Global Investment Company Limited, an ASX listed investment company. David is a Fellow of the Institute of Chartered Accountants, and a Fellow of the Australian Institute of Company Directors, with over 40 years of financial management, taxation and accounting experience in public practice. David’s experience includes having been the Audit Partner of his accounting practice, as a Registered Company Auditor, for over 25 years. He also has experience in the various aspects of risk management. 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. Julia joined Hansen Technologies in 2007 and plays a strategic role as General Counsel as well as Company Secretary. Julia has significant legal experience in IT, financial services and retail organisations. As Company Secretary she is responsible for the Company’s corporate and ASX obligations. 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. Unless stated, no Directors of Hansen Technologies Ltd held any other Directorships of listed companies at any time during the three years prior to 30 June 2015. (i) Grant Lister was the Company Secretary from 1 July 2014 to 30 September 2014. 15 Hansen Technologies LtdAnnual Report 2015 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 finanical year ended 30 June 2015 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, and water industries. Additional activities undertaken by the consolidated entity include IT outsourcing services and the development of other specific software applications. With the exception of an 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 members of Hansen Technologies Ltd for the 2015 financial year was $16,944,094 (2014: $14,800,849). Review of operations The 2014–2015 year continued the trend of 2013–2014 with the Company delivering on all of its key objectives, resulting in considerable growth over the previous year, delivering record revenues, profits and earnings per share. The Group’s operating performance for the Fiscal Year compared to last year is as follows: Operating revenue EBITDA Profit before tax NPAT Earnings per share (cents) 2015 A$ Million 106.3 31.3 24.0 16.9 10.3 2014 A$ Million 86.0 24.1 19.5 14.8 9.2 Variance % 24 30 23 14 12 During 2015 we completed the integration of the Banner business acquired in the previous year. This business has performed to expectations across the year and we are encouraged by the level of customer engagement as we map out the future for the product. We continued to invest in the Company’s delivery capacity. With a new regional management structure in place, this ongoing investment has been necessary to support the organic growth across the business. Cross-skilling has continued to improve productivity across our professional staff and has assisted us to deliver major projects across utilities, Pay TV and the telecommunications lines of business during the year. We continue to invest in research and development, enhancing the functionality of our products in line with customers’ requirements. This approach to product development has delivered real benefits to our customers while increasing the value of our intellectual property. The acquisition of the TeleBilling software business in May 2015 has increased our presence in Europe, adding an impressive list of top tier telecommunications customers to the European customer base. The NaviBilling system expands the Company’s telecommunications reach with a product capable of significant product bundling including the provision of fixed line, mobile, internet and Pay TV billing all on the one service. We continue to provide IT and Facilities Management (FM) services to our customers wishing to outsource their software solution. This business remained competitive during the year with hosting services offered in Australia, the United States and Europe. Significant changes in the state of affairs On 12 May 2015 the Company completed a transaction to acquire the business TeleBilling as a going concern. This transaction gave Hansen control of the business from 1 May 2015. This business extends the Company’s presence in Europe and extends its ability to deliver into the telecommunications billing space. For additional detail please refer to note 20(a) of the accompanying Financial Report. On 19 May 2015 the Company completed a capital raising of $15,117,776 via an institutional placement for 6,966,717 shares at $2.17 per share. A further capital raising of $12,318,133 occurred on 17 June 2015 for 5,676,559 shares at $2.17 per share. For further details refer to note 17. This additional capital was primarily used to repay the bank facility drawn down to fund the TeleBilling acquisition. For additional information refer to note 15. There have been no other significant changes in the consolidated entity’s state of affairs during the financial year. After balance date event Post balance date the Term Facility drawn to $10 million as at 30 June 2015 was fully repaid on 8 July 2015. No other matters have arisen since the end of the financial year and the date of this report 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 years. 16 Hansen Technologies LtdAnnual Report 2015 Likely developments The Company will continue to pursue its operating strategy of providing billing solutions to our targeted industries while assessing appropriate acquisitions to enhance shareholder value. As part of normal business activities the Company is from time to time in negotiations with prospects and third parties over new business opportunities. Where these activities are significant and the transaction is finalised, then releases are made to the ASX in accordance with the listing rules on Continuous Disclosure. Further information about likely developments in the operations of the Group and the expected results of those operations in future financial years has not been included in the report because disclosure of the information would be likely to result in unreasonable prejudice to the Group. Environment regulations The consolidated entity’s operations are not subject to any significant environmental Commonwealth or State regulations or laws. Dividend paid, recommended and declared A 3 cent per share (2.5 cents franked) final dividend was announced to the market on 27 August 2015 with payment to be made on 30 September 2015. The amount declared has not been recognised as a liability in the accounts of Hansen Technologies Ltd as at 30 June 2015. Dividends paid during the year: • 3 cent per share partially franked interim dividend paid 27 March 2015, totalling $4,898,681; and • 3 cent per share fully franked final dividend paid 30 September 2014, totalling $4,874,389. Share options Options over shares may be issued to key management personnel (KMP) 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 KMP 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 KMP as part of their remuneration are as follows: Executives M Benne N Fernando C Hunter G Lister D Meade G Taylor S Weir Total Granted Number Grant Date 75,000 75,000 100,000 100,000 100,000 100,000 75,000 100,000 100,000 75,000 75,000 975,000 2 July 2014 2 July 2015 2 July 2015 2 July 2014 2 July 2015 2 July 2014 2 July 2014 2 July 2015 2 July 2015 2 July 2014 2 July 2015 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 (KPI) 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. Further details regarding options granted as remuneration are provided in the Remuneration Report. 17 Hansen Technologies LtdAnnual Report 2015 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 2 July 2011 2 July 2012 1 December 2012 1 December 2012 1 December 2012 2 July 2013 12 December 2013 12 December 2013 12 December 2013 2 July 2014 2 July 2015 Total Exercise Date 2 July 2014 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 2 July 2018 Expiry Date 2 July 2016 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 2 July 2020 Exercise Price $0.91 $0.92 $0.97 $1.02 $1.07 $0.92 $1.06 $1.11 $1.16 $1.30 $2.67 Number of Options at Date of Report 190,000 510,000 350,000 350,000 350,000 795,000 350,000 350,000 350,000 975,000 1,000,000 5,570,000 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: Number of Ordinary Shares Issued 100,000 250,000 250,000 250,000 60,000 75,000 255,000 30,000 75,000 200,000 100,000 185,000 40,000 20,000 40,000 75,000 30,000 75,000 2,110,000 Amount Paid Per Share $0.91 $0.95 $1.00 $1.05 $0.91 $0.58 $0.91 $0.58 $0.91 $0.92 $1.30 $0.92 $0.91 $0.92 $0.92 $0.75 $0.91 $0.91 Date Issued 2 July 2014 8 July 2014 8 July 2014 8 July 2014 24 July 2014 5 August 2014 29 August 2014 29 August 2014 2 March 2015 6 July 2015 6 July 2015 15 July 2015 21 July 2015 21 July 2015 31 August 2015 31 August 2015 8 September 2015 23 September 2015 Total There are no amounts unpaid on shares issued on exercise of options. 18 Hansen Technologies LtdAnnual Report 2015 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 Audit Committee Meetings Remuneration Committee Meetings Director Mr David Trude Mr Bruce Adams Mr Peter Berry Mr Andrew Hansen Ms Sarah Morgan Mr David Osborne Ms Melinda Osborne Eligible 13 13 13 13 10 13 2 Attended 13 13 13 13 10 13 2 Eligible - - 3 - 1 3 2 Attended - - 3 - 1 3 2 Eligible - 2 2 - 1 - 1 Attended - 2 2 - 1 - 1 Directors’ interests in shares or options Directors’ relevant interests in shares of Hansen Technologies Ltd or options over shares in the Company are detailed below. Directors’ Relevant Interests in: D Trude B Adams P Berry A Hansen S Morgan D Osborne M Osborne Ordinary Shares of Hansen Technologies Ltd 103,623 152,304 15,304 38,744,194 - 377,521 55,871 Options over Shares in Hansen Technologies Ltd - - - 2,100,000 - - - 19 Hansen Technologies LtdAnnual Report 2015 Directors’ Report continued 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 25 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. Non-audit services Non-audit services are approved by resolution of the Audit Committee and approval is provided in writing to the Board of Directors. Non-audit services were provided by the auditors of entities in the consolidated 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 2015 $’000 2014 $’000 24 16 40 8 36 44 53 2 55 139 46 12 58 12 64 76 20 2 22 156 20 Hansen Technologies LtdAnnual Report 2015 Audited Remuneration Report The Directors present the consolidated entity’s 2015 Remuneration Report. This report outlines the remuneration arrangements in place for the Directors, Non-Executive Directors and other 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 78 of this Annual Report. The following executives of the Group were classified as KMP during the 2015 financial year and unless otherwise indicated were classified as KMP for the entire year. 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 S Morgan D Osborne M Osborne (ii) Executive Director A Hansen (iii) Other executive KMP M Benne N Fernando C Hunter D Meade G Taylor S Weir (iv) Former executives G Lister Chairman Director Director Director (appointed October 2014) Director Director (resigned August 2014) Managing Director and CEO General Manager, APAC (i) Chief Strategy Officer (ii) Chief Operating Officer Group Client Services and Delivery Manager Chief Financial Officer (iii) Director, EMEA(i) Chief Financial Officer(iii) (i) M Benne and S Weir no longer met the definition of KMP at 30 September 2014 due to the finalisation of the regional organisational structure. Their roles as Senior Managers of individual geographical regions are focused on planning, directing and controlling these regions and not the Company as a whole. (ii) The Chief Strategy Officer met the definition of KMP from 1 October 2014 with responsibility for the corporate strategy and mergers and acquisitions. (iii) G Lister in his role as CFO was KMP from 1 July to 30 September 2014 prior to retiring from the role of CFO. G Taylor was a KMP when appointed to the role of CFO from 1 October 2014. At the Company’s most recent Annual General Meeting (AGM), a resolution to adopt the prior year Remuneration Report was put to the vote and at least 75% of ‘yes’ votes were cast for adoption of that report. No comments were made on the Remuneration Report that was considered at the AGM. 21 Hansen Technologies LtdAnnual Report 2015 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 2015 the Remuneration Committee was made up of three Non-Executive Directors, Bruce Adams, Sarah Morgan and the Chairman Peter Berry. The CEO and other Directors attend meetings as required at the invitation of the Committee Chairman. 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 from the retention of a quality Board and executive 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. 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. As required, advice is received on 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. Given independent advice was received in 2014, the Remuneration Committee did not seek independent advice in FY2015, however a review has been commissioned in FY2016 to assist with the setting of future executive salaries. Details of key management personnel remuneration Directors’ and executives’ remuneration Short Term Salary Fees 2015 $ Cash Bonus 2015 $ Maximum Bonus Paid 2015 % Non- monetary 2015 $ Post Employment Long Term Other 2015 $ Super 2015 $ Options 2015 $ Total Performance Related 2015 % Options as % of Total 2015 % Total 2015 $ Directors D Trude B Adams P Berry A Hansen S Morgan D Osborne M Osborne Executives M Benne N Fernando C Hunter G Lister D Meade G Taylor S Weir 91,159 55,706 55,706 639,141 41,950 55,706 7,905 947,273 - - - -(i) - - - - 58,686 206,054 311,550 73,575 290,071 165,870 51,652 43,835(iii) - 54,794 54,794(iii) 31,963 - 46,934(iii) 1,157,458 232,320 2,104,731 232,320 - - - - - - - - 96 - 100 100 70 - 74 - - - - - - - - - 306,375(i) - - - - - - - 306,375 8,660 5,292 5,292 34,999 3,985 5,292 751 64,271 99,819 - 60,998 - 60,998 - -(ii) 980,515 45,935 - 60,998 - - 8,656 - 1,317,919 - - - - - 3,545 - - - 10,699 - - 14,244 - 14,244 306,375 9,739 19,143 29,998 12,195 29,999 15,758 4,643 121,475 185,746 2,997 11,989 15,986 3,996 11,989 8,991 2,997 115,257 237,186 412,328 148,105 364,022 201,318 106,226 58,945 1,584,442 58,945 2,902,361 - - - 31 - - - 23 40 5 17 40 12 4 47 18 21 - - - - - - - - 3 5 4 3 3 4 3 4 2 (i) Note: A Hansen was awarded a bonus of $306,375 in relation to the FY14 financial year being 95% of his maximum bonus entitlement. At reporting date the amount was payable and accrued in the financial statements. (ii) During 2014 the Board elected to implement a cash based long term incentive for A Hansen. Refer to Long Term Incentive plans below. (iii) The full bonus paid in the 2015 financial year has been disclosed as it relates to the performance in 2014 financial year where the employees were a KMP for the full year. The above details are for the period that the individual was a KMP during the year. 22 Hansen Technologies LtdAnnual Report 2015 Directors’ and executives’ remuneration continued Short Term Salary Fees 2014 $ Cash Bonus 2014 $ Maximum Bonus Paid 2014 % Non- monetary 2014 $ Post Employment Long Term Super 2014 $ Options 2014 $ Total 2014 $ Total Performance Related 2014 % Options as % of Total 2014 % Directors D Trude B Adams P Berry A Hansen D Osborne M Osborne Executives M Benne C Hunter G Lister D Meade S Weir 88,590 54,137 54,137 - - - 618,941 248,000 - - 924,079 248,000 54,137 54,137 216,480 285,632 295,238 234,415 194,767 46,000 60,000 56,000 45,500 44,333 1,226,532 251,833 2,150,611 499,833 - - - 80 - - - 90 100 90 91 100 - - - - - - - - - - - - 8,194 5,007 5,007 96,784 59,144 59,144 25,000 123,831 1,015,772 59,144 59,144 53,222 123,831 1,349,132 5,007 5,007 - - - - 13,367 - - 13,367 13,367 7,185 9,580 9,580 7,185 7,185 289,689 20,024 380,211 24,999 404,442 30,257 308,246 21,146 263,974 17,689 114,115 40,715 1,646,562 167,337 164,546 2,995,694 - - - 37 - - 28 18 18 16 17 20 18 22 - - - 12 - - 9 2 3 2 2 3 2 5 Options granted as remuneration are valued at grant date in accordance with AASB 2 Share-based Payments. No options previously granted as remuneration to KMP 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 and is agreed by the Board as a whole. 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 from year to year. The relativities in recent years between fixed and targeted performance linked remuneration have been broadly: • CEO: – 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. 23 Hansen Technologies LtdAnnual Report 2015 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. 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 interests 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, 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 Group’s strategic objectives, targeted improvements in operating performance and the overall corporate objective of creating enhanced shareholder value for that year. 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. The nature and range of KPIs and other targets against which the individual performance of a 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. The actual parameters applied may be dependent upon the roles and responsibilities of each individual executive and their ability to influence the performance outcome; • the financial operating performance of individual business units and geographic regions against budgeted revenue and EBITDA; and • 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. 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 AGM 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 through share price appreciation and dividend return. 24 Hansen Technologies LtdAnnual Report 2015 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. 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 2015 the following KMP, performing the same role as the prior year, received remuneration increases above the general trend of salary increases. The reasons for these increases are summarised as follows: ii. Long term incentives The Company’s long term incentive component of KMP remuneration can be via cash or via options. Historically the issue of options has occurred in accordance with the Company’s Executive Option Plan as approved at the 2011 AGM of shareholders. Alternatively at the Board’s discretion, long term incentives may be on a cash basis. During 2014, the Board elected to allocate the CEO’s long term incentive on a cash basis, payable in two equal parts in FY16 and FY17. The payments are conditional on the operational performance of the Company in the initial financial year and ongoing employment with the Company. 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. 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 • Cameron Hunter – Chief Operating Officer, increase in total three years; remuneration 8%; and • are conditional upon continued employment • Darren Meade – Group Client Services and Delivery Manager, throughout the vesting period; increase in total remuneration of 18%; • may not be exercised until the end of the – increase in size and complexity of the business operations vesting period; and from a 24% increase in revenue during FY15, directly impacting their areas under management; – their role in the successful completion of acquisitions over the past two years (Banner and TeleBilling); – their management of the successful integration of past acquisitions into the Company operations; and – increase of the size of workforce under their direct management and international diversity/complexity of the operations under their management. • 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. 25 Hansen Technologies LtdAnnual Report 2015 Audited Remuneration Report continued B. Incentive elements of remuneration 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 $1.30 per share the employee will be required to pay the Company $130,000 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 $1.30 per share and a VWAP at the date of vesting of $2.00, the employee would be required to declare as income for tax purposes $70,000 and pay to the tax authority the applicable tax on this income; and • due to a change in applicable taxation rules, options issued after 1 July 2015 will be taxable on the exercise date not the vesting date. Options issued to executives are not able to be traded on the ASX. They do not qualify for receipt of dividends or 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 any 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 Options Granted Grant Date Value Per Option at Grant Date $ Terms and Conditions for Each Grant Exercise Price $ Vesting Date Last Exercise Date 750,000 - - - - - - 75,000 - 100,000 100,000 75,000 - 40,000 1,140,000 75,000 100,000 100,000 100,000 75,000 75,000 75,000 600,000 2 July 2014 2 July 2014 2 July 2014 2 July 2014 2 July 2014 2 July 2014 2 July 2014 0.200 0.200 0.200 0.200 0.200 0.200 0.200 $1.30 $1.30 $1.30 $1.30 $1.30 $1.30 $1.30 2 July 2017 2 July 2017 2 July 2017 2 July 2017 2 July 2017 2 July 2017 2 July 2017 2 July 2019 2 July 2019 2 July 2019 2 July 2019 2 July 2019 2 July 2019 2 July 2019 Executive Directors A Hansen Specified executives M Benne N Fernando C Hunter G Lister D Meade G Taylor S Weir Total 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. 26 Hansen Technologies LtdAnnual Report 2015 Key management personnel’s equity holdings Number of options held by key management personnel Balance 1 July 2014 Granted as Remuneration Options Exercised Options Forfeited Balance 30 June 2015 Total Exercisable Unexercisable Vested at 30 June 2015 Executive Directors A Hansen 2,850,000 - 750,000 Specified executives M Benne N Fernando C Hunter G Lister D Meade G Taylor S Weir Total 225,000 - 300,000 300,000 225,000 - 225,000 4,125,000 75,000 100,000 100,000 100,000 75,000 75,000 75,000 - - 100,000 100,000 75,000 - 40,000 600,000 1,065,000 Number of shares held by key management personnel - - - - - - - 2,100,000 - - 300,000 75,000 - 100,000 300,000 - 300,000 225,000 75,000 260,000 - - 75,000 - - - - 3,660,000 75,000 75,000 - - - - - - - Specified Directors D Trude B Adams P Berry A Hansen S Morgan D Osborne M Osborne Specified executives M Benne N Fernando C Hunter G Lister D Meade G Taylor S Weir Total Balance 30 June 2014 Received as Remuneration Options Exercised Net Change Other Balance 30 June 2015 100,000 150,000 - 52,991,890 - 362,653 54,000 41,484 4,065 703,578 1,428,992 4,120 839 133,545 55,975,166 - - - - - - - - - - - - - - - - - - 750,000 - - - - - 100,000 100,000 75,000 - 40,000 1,065,000 3,623 2,304 15,304 (14,997,696) - 14,868 1,871 7,514 2,728 113 (495,392) (70,610) 2,304 5,949 (15,507,120) 103,623 152,304 15,304 38,744,194 - 377,521 55,871 48,998 6,793 803,691 1,033,600 8,510 3,143 179,494 41,533,046 27 Hansen Technologies LtdAnnual Report 2015 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 25 to the accompanying financial statements, the CEO is a Director of the Trustee Company of the 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. The total lease rental payments during the 2015 financial year to the Trust were $1,104,615. Measurements of performance on shareholder value In assessing the relative performance of the senior executives and the Group as a whole on the primary corporate objective of enhancing shareholder value, the Remuneration Committee and the Board have regard to key financial indicators measured over time, including: EBITDA (A$ millions) Earnings per share (cents) ASX share price at 30 June Market capitalisation (millions) at 30 June Dividend (cents per share) End of the Remuneration Report 2015 31.3 10.3 $2.62 $461.6 6 2014 24.1 9.2 $1.27 $203.9 6 2013 15.7 5.7 $0.91 $145.3 6 2012 19.1 8.2 $0.92 $145.4 6 2011 20.5 8.7 $0.90 $140.5 6 2010 17.2 7.2 $0.62 $95.9 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 2015 Andrew Hansen Director 28 Hansen Technologies LtdAnnual Report 2015 Auditor’s Independence Declaration To the Directors of Hansen Technologies Ltd. In relation to the independent audit for the year ended 30 June 2015, 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. This declaration is in respect of Hansen Technologies Ltd and the entities it controlled during the year. S D Whitchurch Partner 30 September 2015 Pitcher Partners Melbourne An independent Victorian Partnership ABN 27 975 255 196 Level 19, 15 William Street, Melbourne VIC 3000 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 29 Hansen Technologies LtdAnnual Report 2015 Corporate Governance Statement For the Year Ended 30 June 2015 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 • ensuring that continuous disclosure requirements are met; and • ensuring responsible corporate governance is understood and observed at management, executive and Board level. Hansen Technologies Ltd (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 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; 30 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, the Board 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 that 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 Hansen Technologies LtdAnnual Report 2015 The table below shows the gender diversity of the Company (worldwide) as at 30 June 2015: Board Senior management Hansen Group Female % 17 13 25 Male % 83 87 75 For this purpose senior management is defined as the corporate leadership team reporting directly to the CEO. 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 six Directors, five of whom are Non-Executive Directors: the Chairman, David Trude; four other Non-Executive Directors, being Bruce Adams, Peter Berry, David Osborne and Sarah Morgan; and one Executive Director, the CEO Andrew Hansen. 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. The Board has three independent Directors, David Trude, Peter Berry and Sarah Morgan (who was appointed as a Director on 1 October 2014). This represents 50% of the Board’s total membership. Director induction training and continuing education All incoming Directors are required to undertake the standard Company induction program 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. 31 Hansen Technologies LtdAnnual Report 2015 Corporate Governance Statement continued For the Year Ended 30 June 2015 Principle 3: Act ethically and responsibly continued • accurately record and explain its financial position and performance; 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. Principle 4: Safeguard integrity in corporate reporting Audit and Risk Committee The Audit Committees obligations were extended by the Board by delegating the monitoring of the Risk Framework to the expanded Audit and Risk Committee in July 2015. The Audit and Risk Committee monitors and reviews the effectiveness of the Company’s controls in the areas of operational reporting. The Audit and Risk Committee makes an assessment of external auditor performance and makes recommendations in respect of the external auditor’s appointment and remuneration. The Committee has a formal charter, which is contained in the ‘Board’ document and is posted in the corporate governance section of the Company’s website. The members of the Committee as at 30 June 2015 were Non-Executive Directors David Osborne, Peter Berry and the Chairman of the Committee, Sarah Morgan, with 67% of the membership being deemed independent. The skills, tenure of office, experience and expertise relevant to the positions of the members of the Audit and Risk Committee is 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 the 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: 32 • enable true and fair financial statements to be prepared and audited; • the financial statements and notes required by the accounting standards for the financial year comply with the accounting standards; 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 2015. External auditor The external auditor attends the 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. 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 that: • 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. 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 Annual Report is distributed either over the web or by post; • notice of the AGM 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 Technologies LtdAnnual Report 2015 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 Audit and Risk Committee is responsible for overseeing the Company’s risk management framework. The Audit and Risk Committee reviews the Company’s risk management framework regularly to satisfy itself that it continues to be sound and reports its findings to the Board. 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 that 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 are set out in the Risk Management Policy on the Company’s website. In addition, the Audit and Risk Committee Charter is set out in the ‘Board’ document posted in the corporate governance section of the Company’s website. Principle 8: Remunerate fairly and responsibly Remuneration Committee The Remuneration Committee members as at 30 June 2015 were Bruce Adams plus independent Non-Executive Directors Sarah Morgan and the Chairman Peter Berry. The Committee meets at least annually to assess annual remuneration changes, and will hold additional meetings where required. The Remuneration Committee met twice during the financial year and all members of the Remuneration Committee at the time were present. The Remuneration Committee Charter is set out in the ‘Board’ document posted in the corporate governance section of the Company’s website. 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. The Company has share and option plans for its employees. The Company’s Employee Option Plan was approved by shareholders at the 2011 AGM. 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. 33 Hansen Technologies LtdAnnual Report 2015 Corporate Governance Statement continued For the Year Ended 30 June 2015 Principle 8: Remunerate fairly and responsibly continued 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 KMP 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 AGM 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 that can be found in the corporate governance section of the Company’s website. The Corporations Act prohibits the KMP 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. 34 Hansen Technologies LtdAnnual Report 2015 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. Foreign currency translations and balances Note 4. Financial risk management Note 5. Revenue and other income Note 6. Profit from continuing operations Note 7. Income tax Note 8. Dividends Note 9. Cash and cash equivalents Note 10. Receivables Note 11. Other current assets Note 12. Plant, equipment and leasehold improvements Note 13. Intangible assets Note 14. Payables Note 15. Borrowings Note 16. Provisions Note 17. Contributed capital Note 18. Reserves and retained earnings Note 19. Cash flow information Note 20. Business combinations Note 21. Commitments Note 22. Earnings per share Note 23. Directors’ and executives’ equity holdings Note 24. Directors’ and executives’ compensation Note 25. Related party disclosures Note 26. Auditor’s remuneration Note 27. Parent entity information Note 28. Segment information Note 29. Subsequent events 36 37 38 39 40 40 46 47 47 50 50 51 53 53 54 54 55 55 57 57 58 58 62 63 64 66 67 68 70 71 72 73 74 76 Annual Report 2015 Hansen Technologies Ltd 35 Consolidated Statement of Comprehensive Income For the Year Ended 30 June 2015 Revenue from continuing operations Other income Total revenue and other income 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 2015 $’000 106,257 475 106,732 (55,295) (1,863) (5,213) (4,575) (1,582) (1,092) (3,251) (3,719) (1,768) (1,407) (2,964) (82,729) 24,003 (7,059) 2014 $’000 86,021 436 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) Note 5 5 6 6 6 6 7(b) Profit after income tax from ongoing operations 16,944 14,801 Other comprehensive income/(expense) Items that may be reclassified subsequently to profit and loss Exchange differences on translation of foreign entities 18(a) 10,052 Other comprehensive income/(expense) for the year 10,052 (658) (658) Total comprehensive income for the year attributable to members of the parent 26,996 14,143 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 22 22 10.3 10.3 10.0 10.0 9.2 9.2 9.0 9.0 The consolidated statement of comprehensive income is to be read in conjunction with the notes to the financial statements set out on pages 40 to 76. 36 Hansen Technologies LtdAnnual Report 2015 Consolidated Statement of Financial Position As at 30 June 2015 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 Deferred tax liabilities Borrowings Provisions Total non-current liabilities Total liabilities Net assets Equity Share capital Foreign currency translation reserve Options granted reserve Retained earnings Total equity Note 9 10 11 12 13 7 14 15 7 16 7 15 16 Consolidated Entity 2015 $’000 21,985 19,950 5,202 47,137 7,556 104,103 3,599 115,258 2014 $’000 3,829 14,701 5,309 23,839 4,376 68,774 2,578 75,728 162,395 99,567 8,005 10,087 3,813 8,862 13,570 44,337 4,012 374 143 4,529 5,006 10,055 1,061 6,973 8,133 31,228 2,130 - 123 2,253 48,866 33,481 113,529 66,086 17 18(a) 18(b) 18(c) 75,127 7,946 967 29,489 113,529 45,126 (2,106) 748 22,318 66,086 The consolidated statement of financial position is to be read in conjunction with the notes to the financial statements set out on pages 40 to 76. 37 Hansen Technologies LtdAnnual Report 2015 Consolidated Statement of Changes in Equity For the Year Ended 30 June 2015 Consolidated entity Balance as at 1 July 2014 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 Institutional placement Share purchase plan offer Dividends paid Total transactions with owners in their capacity as owners Consolidated Entity Contributed Equity $’000 45,126 Note Reserves $’000 (1,358) Retained Earnings $’000 22,318 Total Equity $’000 66,086 18(a) 17 17 18(b) 17 17 17 8 - - - 155 1,257 - 1,510 14,780 12,299 - 30,001 - 16,944 16,944 10,052 10,052 - 16,944 10,052 26,996 - - 219 - - - - 219 - - - - - - (9,773) (9,773) 155 1,257 219 1,510 14,780 12,299 (9,773) 20,447 Balance as at 30 June 2015 17, 18 75,127 8,913 29,489 113,529 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 Consolidated Entity Contributed Equity $’000 43,650 Note Reserves $’000 (925) Retained Earnings $’000 17,142 Total Equity $’000 59,867 18(a) 17 17 18(b) 17 8 - - - 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 17, 18 45,126 (1,358) 22,318 66,086 The consolidated statement of changes in equity is to be read in conjunction with the notes to the financial statements set out on pages 40 to 76. 38 Hansen Technologies LtdAnnual Report 2015 Consolidated Statement of Cash Flows For the Year Ended 30 June 2015 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 Payment for acquisition of business net of bank overdraft assumed Payment for plant and equipment Payment for capitalised development costs Net cash used in investing activities Cash flows from financing activities Proceeds from share issue Proceeds from options exercised Proceeds from borrowings Payment of borrowings Dividends paid net of dividend re-investment Net cash provided by financing activities Note 19(a) 20 12 13 17 17 15 15 Consolidated Entity 2015 $’000 113,528 (72,336) 60 (234) (4,129) 36,889 (29,900) (3,037) (4,479) (37,416) 27,436 1,257 24,000 (25,748) (8,262) 18,683 2014 $’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 Net increase/(decrease) in cash and cash equivalents 18,156 (5,824) Cash and cash equivalents at beginning of year 3,829 Cash and cash equivalents at end of the year 19(b) 21,985 9,653 3,829 The consolidated statement of changes in equity is to be read in conjunction with the notes to the financial statements set out on pages 40 to 76. 39 Hansen Technologies LtdAnnual Report 2015 Notes to the Financial Statements 30 June 2015 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 applicable 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 entity for the purpose of preparing the financial statements. The Financial Report was authorised for issue by the Directors on 30 September 2015. 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 entity’s accounting policies. Those estimates and judgements significant to the Financial Report are disclosed in note 2. (b) Principles of consolidation The consolidated financial statements are those of the consolidated entity, comprising the financial statements of the parent entity, Hansen Technologies Ltd, and of all entities, which the parent controls. The Group 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 financial statements of subsidiaries are prepared for the same reporting period as the parent 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 that 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 record 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). 40 Hansen Technologies LtdAnnual Report 2015 (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. (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 2015 2.5 to 12 years 2.5 to 12 years 2014 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 the sum of the acquisition-date fair values of the assets transferred, equity instruments issued or liabilities incurred by the acquirer to former owners of the acquired. Deferred consideration payable is measured at fair value. Contingent consideration to be transferred by the acquirer is recognised at the acquisition-date fair value. Goodwill is recognised initially at the excess over the aggregate of the consideration transferred, the fair value of the non-controlling interest, less the fair value of the identifiable assets acquired and liabilities assumed. Acquisition-related costs are expensed as incurred. 41 Hansen Technologies LtdAnnual Report 2015 Notes to the Financial Statements continued 30 June 2015 1. Statement of significant accounting policies continued (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 10 years. Technology, trademarks and customer contracts are carried at cost less accumulated amortisation and any impairment losses. Research and development Expenditure on research activities is recognised as an expense when incurred. Expenditure on development activities is capitalised only when technical feasibility studies demonstrate that the project will deliver future economic benefits and these benefits can be measured reliably. Capitalised development expenditure is stated at cost less accumulated amortisation. Amortisation is calculated using a straight-line method to allocate the cost of the intangible asset over a five-year period (or earlier if the development project is abandoned), commencing when the intangible asset is available for use. Other development expenditure is recognised as an expense when incurred. (i) Impairment of non-financial assets Assets with an indefinite useful life are not amortised but are tested at least 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. 42 Hansen Technologies LtdAnnual Report 2015 Tax consolidation The parent entity and all eligible Australian controlled entities have formed an income tax consolidated group under the tax consolidation legislation. The tax consolidated group has entered a tax funding agreement whereby each entity in the tax consolidated group recognises the assets, liabilities, expenses and revenues in relation to its own transactions, events and balances only. This means that: • the parent 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; and • the current tax liabilities and deferred tax assets arising in respect of tax losses, are transferred from the subsidiary to the head entity as inter-company payables or receivables. The tax consolidated group also has a tax sharing agreement in place to limit the liability of subsidiaries in the tax consolidated group arising under the joint and several liability requirements of the tax consolidation system, in the event of default by the parent 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 group. (k) Provisions Provisions are recognised when the consolidated entity has a legal or constructive obligation, as a result of past events, for which it is probable that an outflow of economic benefits will result and that outflow can be reliably measured. (l) Employee benefits (i) Short term employee benefit obligations Liabilities arising in respect of wages and salaries, annual leave, long service leave and any other employee benefits expected to be settled within 12 months of the reporting date are measured at the amounts based on remuneration rates that 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 annual leave and long service leave that 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 contribution superannuation plans in respect of employee services rendered during the year. These superannuation contributions are recognised as an expense in the same period when the employee services are received. (iv) Share-based payments The consolidated entity operates 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. 43 Hansen Technologies LtdAnnual Report 2015 Notes to the Financial Statements continued 30 June 2015 1. Statement of significant accounting policies continued (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 group of employees is terminated before the normal retirement date. The consolidated entity recognises a provision for termination benefits when the 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 and finance charges in respect of finance leases. Borrowing costs are expensed as incurred except for borrowing costs incurred as part of the construction of a qualifying asset, which are capitalised until the asset is ready for its intended use or sale. (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. Non-derivative financial instruments Non-derivative financial instruments consist of investments in equity and debt securities, trade and other receivables, cash and cash equivalents, loans and borrowings, and trade and other payables. Non-derivative financial instruments are initially recognised at fair value, plus directly attributable transaction costs (if any), except for instruments recorded at fair value through profit or loss. After initial recognition, non-derivative financial instruments are measured as described below. 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. (o) Foreign currencies translations and balances Functional and presentation currency The financial statements of each entity within the consolidated Group are measured using the currency of the primary economic environment in which that entity operates. The consolidated financial statements are presented in Australian dollars, which is the consolidated entity’s functional and presentation currency. 44 Hansen Technologies LtdAnnual Report 2015 Transactions and balances Transactions in foreign currencies of entities within the consolidated Group are translated into functional currency at the rate of exchange ruling at the date of the transaction. Foreign currency monetary items that are outstanding at the reporting date (other than monetary items arising under foreign currency contracts where the exchange rate for that monetary item is fixed in the contract) are translated using the spot rate at the end of the financial year. All resulting exchange differences arising on settlement or re-statement are recognised as revenues and expenses for the financial year. Foreign subsidiaries 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 arising on translation of foreign operations are transferred directly to the Group’s foreign currency translation reserve as a separate component of equity in the balance sheet. Exchange differences arising on the reduction of a foreign subsidiary’s equity continues to be recognised in the Group’s foreign currency translation reserve until such time that the foreign subsidiary is disposed of. (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 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 2015 There are no new or amended accounting standards effective for the financial year beginning 1 July 2014 that have affected any amounts recorded in the current or prior year. (u) Accounting standards and interpretations issued but not operative at 30 June 2015 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 on the following page. 45 Hansen Technologies LtdAnnual Report 2015 Notes to the Financial Statements continued 30 June 2015 1. Statement of significant accounting policies continued (i) AASB 15 Revenue from Contracts with Customers AASB 15 introduces a five-step process for revenue recognition with the core principle being for entities to recognise revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration (that is, payment) to which the entity expects to be entitled in exchange for those goods or services. The five-step approach is as follows: • Step 1: Identify the contracts with the customer. • Step 2: Identify the separate performance obligations. • Step 3: Determine the transaction price. • Step 4: Allocate the transaction price. • Step 5: Recognise revenue when a performance obligation is satisfied. AASB 15 will also result in enhanced disclosures about revenue, provide guidance for transactions that were not previously addressed comprehensively (for example, service revenue and contract modifications) and improve guidance for multiple-element arrangements. The effective date is annual reporting periods beginning on or after 1 January 2017. The changes in revenue recognition requirements in AASB 15 may cause changes to the timing and amount of revenue recorded in the financial statements as well as additional disclosures. The impact if any of AASB 15 has not yet been quantified. (ii) AASB 9 Financial Instruments AASB 9 makes significant revisions to the classification and measurement of financial assets, reducing the number of categories and simplifying the measurement choices, including the removal of impairment testing of assets measured at fair value. The amortised cost model is available for debt assets meeting both business model and cash flow characteristics tests. All investments in equity instruments using AASB 9 are to be measured at fair value. AASB 9 amends measurement rules for financial liabilities that the entity elects to measure at fair value through profit and loss. Changes in fair value attributable to changes in the entity’s own credit risk are presented in other comprehensive income. Impairment of assets is now based on expected losses in AASB 9, which requires entities to measure: • the 12-month expected credit losses (expected credit losses that result from those default events on the financial instrument that are possible within 12 months after the reporting date); or • full lifetime expected credit losses (expected credit losses that result from all possible default events over the life of the financial instrument). The effective date is annual reporting periods beginning on or after 1 January 2018. The impact if any of AASB 9 has yet to be quantified. 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. 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 on the following page. 46 Hansen Technologies LtdAnnual Report 2015 (a) Impairment of goodwill The intangible asset of goodwill is subject to periodic review to assess if its carrying value has been impaired. This assessment compares the carrying book value with the recoverable amount of these assets using value in-use discounted cash flow projection calculations based on management’s determination of budgeted cash flow projections and gross margins, past performance and its expectations 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 goodwill applies), and: • provides for a constant 5% growth rate (2014: 3%) for the remainder of the forecast period; and • utilises a 12% (2014:14.5%) weighted cost of capital discount rate; to • determine the discounted value of the resultant cash flow over a five-year period, plus terminal value using a terminal growth rate of 2% (2014: 3%) at period end. (b) Impairment of non-financial assets other than goodwill All assets are assessed for impairment at each reporting date by evaluating whether indicators of impairment exist in relation to the continued use of the asset by the consolidated entity. Impairment triggers include declining product or manufacturing performance, technology changes, adverse changes in the economic or political environment or future product expectations. If an indicator of impairment exists the recoverable amount of the asset is determined. (c) 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. (d) 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 investment in research and development expenditure incurred in relation to the HUB, Peace, ICC, Banner and NaviBilling software in the 2015 year. Returns are expected to be derived from this investment over coming years. 3. Foreign currency translations and balances Exchange differences arising on translation of the foreign controlled entities are recognised in other comprehensive income and accumulated in a separate reserve within equity. On consolidation, exchange differences arising from the translation of any net investment in foreign entities are recognised in other comprehensive income. When a foreign operation is sold or any borrowings forming part of the net investment are repaid, the associated exchange differences are reclassified to profit or loss as part of the gain or loss on sale. 4. 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; and (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. 47 Hansen Technologies LtdAnnual Report 2015 Notes to the Financial Statements continued 30 June 2015 4. Financial risk management continued 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: Financial Instruments 2015 Financial assets Cash and cash equivalents Receivables Other current assets Financial liabilities Payables Deferred consideration Borrowings 2014 Financial assets Cash and cash equivalents Receivables Other current assets Financial liabilities Payables Borrowings Consolidated Entity Interest Bearing $’000 Non-interest Bearing $’000 Note Total Carrying Amount $’000 Weighted Avg. Effective Interest Rate % Fixed/ Variable Rate 9 10 11 14 14 15 9 10 11 14 15 21,985 - - 21,985 - - 10,461 10,461 3,829 - - 3,829 - 10,055 10,055 - 19,950 5,202 25,152 5,724 2,281 - 8,005 - 14,701 5,309 20,010 5,006 - 5,006 21,985 19,950 5,202 47,137 5,724 2,281 10,461 18,466 3,829 14,701 5,309 23,839 5,006 10,055 15,061 2.63 variable 3.34 variable 2.25 variable 4.06 variable Management is 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. Post balance date the term facility drawn down to $10 million as at 30 June 2015 was fully repaid on 8 July 2015. (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. Concentrations of credit risk on trade debtors are with customers in the following industries: utilities 21% (2014: 37%), finance sector 0% (2014: 4%), telecommunications 32% (2014: 18%), Pay TV 44% (2014: 35%) and other 3% (2014: 6%). 48 Hansen Technologies LtdAnnual Report 2015 (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 activities. 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 is 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 predominantly made up of $10 million drawn down from our $30 million secured facility (refer to note 15). Management has treated the entire borrowing as current to reflect its intended repayment, which has subsequently occurred on 8 July 2015. Lease liabilities of $0.46 million are due for repayment by January 2020. Trade creditors are due for repayment within six months. (d) Fair value measurements 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. Included in ‘Other Payables’ is a liability for deferred consideration measured at fair value on a recurring basis, expected to be paid in relation to a business combination dated 1 May 2015. There are no other assets or liabilities carried at fair value on a recurring basis. (i) Fair value hierarchy Asset and liabilities measured and recognised at fair value have been determined by the following fair value measurement hierarchy: Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2: Input other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3: Inputs for the asset or liability that are not based on observable market data. Deferred consideration liabilities totalling $2,281,000 are measured and recognised at fair value and have been determined to be a recurring Level 3 financial liability. (ii) Valuation techniques and significant unobservable inputs The deferred consideration is based on management’s best and most probable estimate of the business performance targets. In determining the fair value of the deferred consideration, management considers the probability of business targets being met by comparison to budget. A fair value is placed on the option that the seller has to receive, either cash or shares in Hansen Technologies Ltd at a pre-determined price using the Black-Scholes model. The entire deferred consideration payment is dependent on performance criteria being met. Under the arrangement the minimum deferred consideration amount is $nil and the maximum is dependent on the movement in the Hansen share price from the pre-determined price per share (which was included in the contract) and the value as at the date the amount becomes payable. (iii) Reconciliation of recurring Level 3 fair value movements 2015 Opening balance Deferred consideration from business acquisition Movement in foreign currency Change in fair value of deferred consideration Closing balance Level 3 Liability $’000 - 1,881 106 294 2,281 49 Hansen Technologies LtdAnnual Report 2015 Notes to the Financial Statements continued 30 June 2015 5. 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 income Total revenue and other income from continuing operations 6. 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 Finance charges Finance costs Total finance costs 50 Consolidated Entity 2015 $’000 106,257 106,257 60 203 212 475 106,732 2014 $’000 86,021 86,021 149 43 244 436 86,457 Consolidated Entity 2014 $’000 2015 $’000 Note 12 13 13 51,142 3,934 219 55,295 1,863 1,863 3,082 2,131 5,213 4,575 4,575 234 234 43,016 3,184 225 46,425 1,588 1,588 1,627 1,503 3,130 3,993 3,993 58 58 Hansen Technologies LtdAnnual Report 2015 7. 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 reconciled to the income tax expense is 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) Deferred tax not previously brought to account Other non-allowable items Income tax expense attributable to profit (c) Current tax liability Current tax relates to the following: Current tax liabilities/(assets) Opening balance Liability from acquisition Prior year under/(over) provision Income tax Tax payments Other Consolidated Entity 2015 $’000 6,537 861 (339) 7,059 7,201 772 (271) 65 (339) - - (420) 51 7,059 1,061 544 (339) 6,537 (4,129) 139 3,813 2014 $’000 4,326 375 (44) 4,657 5,838 108 (362) 68 (44) (958) (16) - 23 4,657 1,116 - (44) 4,326 (4,339) 2 1,061 51 Hansen Technologies LtdAnnual Report 2015 Notes to the Financial Statements continued 30 June 2015 7. 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 Difference in depreciation and amortisation of plant, equipment and intangibles for accounting and income tax purposes Other income not yet assessable Consolidated Entity 2015 $’000 2014 $’000 369 1,121 2,109 3,599 (3,182) (781) (49) (4,012) 256 620 1,702 2,578 (2,066) - (64) (2,130) Net deferred tax (413) 448 (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 (1,021) 1,882 861 847 819 1,666 (358) 733 375 847 717 1,564 52 Hansen Technologies LtdAnnual Report 2015 8. Dividends 2015 A 3 cent per share final dividend, franked to 2.5 cents, was announced to the market on 27 August 2015. The amount declared has not been recognised as a liability in the accounts of Hansen Technologies Ltd as at 30 June 2015. Dividends provided for or paid during the year 3 cent per share final dividend paid 30 September 2014 – fully franked 3 cent per share final dividend paid 30 September 2013 – fully franked 3 cent per share interim dividend paid 27 March 2015 – franked to 2.5 cents 3 cent per share interim dividend paid 28 March 2014 – franked to 2.5 cents Proposed dividend not recognised at the end of the year Consolidated Entity 2015 $’000 4,874 4,899 9,773 5,307 2014 $’000 4,807 4,818 9,625 4,874 Dividend franking account 30% franking credits, on a tax paid basis, are available to shareholders of Hansen Technologies Ltd for subsequent financial years 2,473 1,879 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. 9. Cash and cash equivalents Current Cash at bank and on hand Interest bearing deposits Consolidated Entity 2015 $’000 5,718 16,267 21,985 2014 $’000 2,828 1,001 3,829 53 Hansen Technologies LtdAnnual Report 2015 Notes to the Financial Statements continued 30 June 2015 10. 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 2015 $’000 15,708 1,350 1,072 1,448 19,578 Impairment 2015 $’000 - - - 470 470 The entity expects to collect all debtor amounts where no provision for impairment has been recorded. Movements in the provision for impairment were: Opening balance at 1 July Charge for the year Amounts written off Foreign exchange translation Closing balance at 30 June 11. Other current assets Current Prepayments Other receivables Accrued revenue 54 Consolidated Entity 2015 $’000 19,578 (470) 19,108 842 19,950 Gross 2014 $’000 10,162 1,739 800 815 13,516 2015 $’000 317 393 (319) 79 470 2014 $’000 13,516 (317) 13,199 1,502 14,701 Impairment 2014 $’000 - - - 317 317 2014 $’000 238 142 (18) (45) 317 Consolidated Entity 2015 $’000 1,990 38 3,174 5,202 2014 $’000 1,517 - 3,792 5,309 Hansen Technologies LtdAnnual Report 2015 12. Plant, equipment and leasehold improvements Plant, equipment and leasehold improvements at cost Accumulated depreciation Total plant, equipment and leasehold improvements Consolidated Entity 2015 $’000 32,111 (24,555) 7,556 2014 $’000 25,711 (21,335) 4,376 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 13. 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 Consolidated Entity 2015 $’000 4,376 3,037 1,960 (19) (1,863) 65 7,556 2014 $’000 4,699 1,244 9 (23) (1,588) 35 4,376 Consolidated Entity 2015 $’000 81,888 (1,454) 80,434 21,740 (7,487) 14,253 29,574 (20,158) 9,416 2014 $’000 54,944 (1,433) 53,511 12,377 (3,764) 8,613 28,627 (21,977) 6,650 Total intangible assets 104,103 68,774 55 Hansen Technologies LtdAnnual Report 2015 Notes to the Financial Statements continued 30 June 2015 13. Intangible assets continued Consolidated Entity Note 20 20 Reconciliation of goodwill 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 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 Net foreign currency movements arising from foreign operations Accumulated amortisation at end of year 2015 $’000 54,944 20,062 6,882 81,888 (1,433) (21) (1,454) 12,377 7,091 2,272 21,740 (3,764) (3,082) (641) (7,487) 28,627 4,479 (3,994) 462 29,574 (21,977) (2,131) 3,994 (44) (20,158) 2014 $’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) 56 Hansen Technologies LtdAnnual Report 2015 14. Payables Current Trade payables Other payables Consolidated Entity 2015 $’000 1,885 6,120 8,005 2014 $’000 1,394 3,612 5,006 Included in other payables is a liability for contingent consideration expected to be paid in relation to a business combination dated 1 May 2015. Refer to note 4 for further information regarding Fair Value calculations. 15. Borrowings Current Secured Term facility Lease liability Non-current Secured Lease liability Consolidated Entity 2015 $’000 10,000 87 10,087 374 374 2014 $’000 10,055 - 10,055 - - The Company has a secured A$30 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 90% of Group assets. As at 30 June 2015, the remaining unutilised portion of the facility is A$20 million. Subsequent to balance date the amount outstanding was repaid in full. The Company acquired additional borrowings of A$1.693 million via the business combination on 1 May 2015, refer to note 20 for further details. The Company has a lease liability relating to IT equipment due for repayment in full by January 2020. 57 Hansen Technologies LtdAnnual Report 2015 Notes to the Financial Statements continued 30 June 2015 16. Provisions Current Employee benefits Onerous lease Other Non-current Employee benefits (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 17. Contributed capital (a) Issued and paid up capital Ordinary shares, fully paid Consolidated Entity 2015 $’000 8,586 - 276 8,862 143 143 8,729 544 130 (130) - 95 181 276 2014 $’000 6,748 130 95 6,973 123 123 6,871 427 147 (17) 130 85 10 95 Consolidated Entity 2015 $’000 2014 $’000 75,127 45,126 (b) Movements in shares on issue Balance at beginning of the financial year Shares issued under dividend reinvestment plan Shares issued under employee share plan Options exercised Institutional placement Share purchase plan offer Balance at end of the financial year Consolidated Entity Consolidated Entity 2015 No. of Shares 2015 $’000 2014 No. of Shares 161,209,642 931,695 65,720 1,345,000 6,966,717 5,676,559 176,195,333 45,126 1,510 155 1,257 14,780 12,299 75,127 159,634,602 825,800 134,240 615,000 - - 161,209,642 2014 $’000 43,650 979 160 337 - - 45,126 The institutional placement above is net of $337,000 of transaction fees. 58 Hansen Technologies LtdAnnual Report 2015 (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 AGM 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 KMP. Refer to note 23 for disclosure regarding valuation inputs. Since the end of the financial year 1,000,000 (2014: 1,115,000) share options have been granted under this scheme. 59 Hansen Technologies LtdAnnual Report 2015 Notes to the Financial Statements continued 30 June 2015 17. Contributed capital continued Options issued and not yet exercised at 30 June 2015 1 July 2015 Expiry Date Exercise Date Grant Date Consolidated 2015 1 July 2013 1 July 2010 1 January 2014 1 January 2016 1 January 2011 2 July 2014 2 July 2011 1 July 2014 1 December 2011 1 July 2014 1 December 2011 1 July 2014 1 December 2011 2 July 2013 2 December 2011 2 July 2014 2 December 2011 2 July 2015 2 July 2012 2 July 2015 1 December 2012 2 July 2015 1 December 2012 2 July 2015 1 December 2012 2 July 2015 1 December 2012 2 July 2013 2 July 2016 12 December 2013 2 July 2016 12 December 2013 2 July 2016 12 December 2013 2 July 2016 2 July 2014 2 July 2017 Total 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 2 July 2019 Exercise Price $ No. of Options at Beg. of Year Options Granted Options Exercised or Lapsed No. of Options at End of Year Issued Vested 0.58 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 1.30 105,000 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 - - - - - - - - - - - - - - - - - - 1,115,000 5,605,000 1,115,000 105,000 - 450,000 250,000 250,000 250,000 40,000 - - - - - - - - - - 40,000 1,385,000 - 75,000 295,000 - - - - 40,000 785,000 70,000 350,000 350,000 350,000 895,000 350,000 350,000 350,000 1,075,000 5,335,000 - 75,000 295,000 - - - - 40,000 - - - - - - - - - - 410,000 Options issued and not yet exercised at 30 June 2014 Expiry Date 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 Exercise Date Grant Date Consolidated 2014 1 July 2012 1 July 2009 1 July 2013 1 July 2010 1 Jan 2014 1 January 2011 2 July 2014 2 July 2011 1 July 2014 1 December 2011 1 July 2014 1 December 2011 1 July 2014 1 December 2011 2 July 2013 2 December 2011 2 July 2014 2 December 2011 2 July 2015 2 July 2012 2 July 2015 1 December 2012 2 July 2015 1 December 2012 2 July 2015 1 December 2012 2 July 2015 1 December 2012 2 July 2013 2 July 2016 12 December 2013 2 July 2016 12 December 2013 2 July 2016 12 December 2013 2 July 2016 Total 60 Exercise Price $ No. of Options at Beg. of Year Options Granted Options Exercised or Lapsed No. of Options at End of Year Issued Vested 0.41 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 - 4,275,000 1,945,000 115,000 500,000 - - - - - - - - - - - - - - - - 615,000 - 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 5,605,000 - 105,000 75,000 - - - - 40,000 - - - - - - - - - - 220,000 Hansen Technologies LtdAnnual Report 2015 Employee Share Plan The Employee Share Plan (ESP) was approved by shareholders at the Company’s AGM 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 2015 No. of Shares 397,577 65,720 (133,971) 329,326 2014 No. of Shares 421,684 134,240 (158,347) 397,577 The consideration for the shares issued on 27 April 2015 was $2.3534 (16 May 2014: $1.1909). 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 2015 $’000 39 155 2014 $’000 40 164 The market value of ordinary Hansen Technologies Ltd shares closed at $2.62 on 30 June 2015 ($1.265 on 30 June 2014). 61 Hansen Technologies LtdAnnual Report 2015 Notes to the Financial Statements continued 30 June 2015 18. 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 2015 $’000 7,946 967 29,489 2014 $’000 (2,106) 748 22,318 Note 18(a) 18(b) 18(c) (2,106) 10,052 7,946 (1,448) (658) (2,106) 748 219 967 22,318 (9,773) 16,944 29,489 523 225 748 17,142 (9,625) 14,801 22,318 62 Hansen Technologies LtdAnnual Report 2015 19. 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 Adjustment to fair value on contingent liabilities Employee share scheme Consolidated Entity 2015 $’000 2014 $’000 16,944 14,801 - 7,076 219 425 294 112 23 4,718 225 47 - 120 Net cash provided by operating activities before change in assets and liabilities 25,070 19,934 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 Net cash provided by operating activities (b) Reconciliation of cash Cash at bank (c) Loan facilities Loan facility Amount utilised Unused loan facility 85 2,874 (134) (154) 6,218 722 2,208 36,889 2,875 (3,145) 207 (1,584) 271 375 (55) 18,878 21,985 3,829 30,000 (10,000) 20,000 20,000 (10,055) 9,945 63 Hansen Technologies LtdAnnual Report 2015 Notes to the Financial Statements continued 30 June 2015 20. Business combinations (a) TeleBilling Group (i) The Company acquired 100% of the share capital of TeleBilling A/S and its subsidiary, TeleBilling Systems A/S, with the effective date being 1 May 2015 Consideration Cash paid Deferred consideration Total acquisition cost Add bank overdraft assumed Payment for acquisition of business Net assets acquired Assets Cash Receivables Other current assets Plant and equipment Total assets acquired Liabilities Payables Accruals Provisions Lease liability Borrowings Current tax liability Deferred tax liability Total liabilities acquired Net assets acquired Total acquisition cost adjusted for net assets acquired Technology Customer contracts Tradename Goodwill Net intangibles 2015 $’000 29,658 1,881 31,539 242 31,781 Fair Value 2015 $’000 (242) 5,334 2,767 1,898 9,757 626 782 1,128 460 1,693 544 138 5,371 4,386 27,153 3,514 3,025 552 20,062 27,153 Goodwill arose on the acquisition of TeleBilling 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 customer contracts, technology and tradename. The value of goodwill represents the future benefit arising from the expected future earnings, synergies and personnel assumed via the acquisition. Goodwill is not deductible for tax purposes. (ii) Revenue and profit of TeleBilling included in the consolidated results of the Group since acquisition Transaction costs External transaction costs of $132,823 were incurred in relation to the acquisition. These costs are included with professional expenses in the statement of comprehensive income. 64 Hansen Technologies LtdAnnual Report 2015 Total revenue Profit after income tax 2015 $’000 4,219 743 (iii) Results of the entity for the period as though the date for the acquisition of TeleBilling occurred at 1 July 2014 It is impracticable to disclose this detail as the TeleBilling business prior to our purchase was being accounted in Denmark in compliance with Danish General Accepted Accounting Principles resulting in different accounting treatments to IFRS. Additionally, TeleBilling operated on a conflicting comparative balance date. (b) 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/(liabilities assumed) 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. 65 Hansen Technologies LtdAnnual Report 2015 Notes to the Financial Statements continued 30 June 2015 20. Business combinations continued (ii) Revenue and profit of Banner included in the consolidated results of the Group since acquisition Total revenue Profit after income tax 21. 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 Finance lease commitments Not later than one year Later than one year and not later than five years Total minimum lease payments Less: Future finance charges Present value of minimum lease payment Lease liabilities provided for in the financial statements: Current Non-current Total lease liabilities Operating leases (non-cancellable) 2015 $’000 13,848 2,823 2014 $’000 2,410 470 Consolidated Entity 2015 $’000 3,378 9,499 3,128 16,005 87 374 461 - 461 87 374 461 2014 $’000 1,874 3,037 86 4,997 - - - - - - - - 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. Finance lease commitments The consolidated entity leases IT equipment under finance leases expiring from three to five years. At the end of the lease term, the consolidated entity has the option to return the assets to the lessor or to renew the lease agreements. 66 Hansen Technologies LtdAnnual Report 2015 22. 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 Classification of securities as potential ordinary shares Consolidated Entity 2015 $’000 16,944 16,944 2014 $’000 14,801 14,801 2015 No. Shares 2014 No. Shares 164,045,486 169,374,596 160,585,269 165,742,352 2015 Cents Per Share 10.3 10.3 10.0 10.0 2014 Cents Per Share 9.2 9.2 9.0 9.0 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. 67 Hansen Technologies LtdAnnual Report 2015 Notes to the Financial Statements continued 30 June 2015 23. 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 key management personnel of the Company as part of their remuneration: Vested During the Year Granted During the Year Grant Date Value per Option at Grant Date Terms and Conditions for each Grant Last Exercise Date Vesting Date Exercise Price 750,000 - - - - - - 75,000 - 100,000 100,000 75,000 - 40,000 1,140,000 75,000 100,000 100,000 100,000 75,000 75,000 75,000 600,000 2 July 2014 2 July 2014 2 July 2014 2 July 2014 2 July 2014 2 July 2014 2 July 2014 $0.200 $0.200 $0.200 $0.200 $0.200 $0.200 $0.200 $1.30 $1.30 $1.30 $1.30 $1.30 $1.30 $1.30 2 July 2017 2 July 2017 2 July 2017 2 July 2017 2 July 2017 2 July 2017 2 July 2017 2 July 2019 2 July 2019 2 July 2019 2 July 2019 2 July 2019 2 July 2019 2 July 2019 Vested During the Year Granted During the Year Grant Date Value per Option at Grant Date Terms and Conditions for each Grant Last Exercise Date Exercise Price Vesting Date 2015 Executive Directors A Hansen Specified executives M Benne N Fernando C Hunter G Lister D Meade G Taylor S Weir Total 2014 Executive Directors A Hansen $0.139 $0.131 $0.123 $0.128 $0.128 $0.128 $0.128 $0.128 $1.06 $1.11 $1.16 $0.92 $0.92 $0.92 $0.92 $0.92 2 July 16 2 July 16 2 July 16 2 July 2018 2 July 2018 2 July 2018 2 July 16 2 July 16 2 July 16 2 July 16 2 July 16 2 July 2018 2 July 2018 2 July 2018 2 July 2018 2 July 2018 - - - 350,000 12 December 2013 350,000 12 December 2013 350,000 12 December 2013 Specified executives M Benne C Hunter G Lister D Meade S Weir Total 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 2013 2 July 2013 2 July 2013 2 July 2013 2 July 2013 68 Hansen Technologies LtdAnnual Report 2015 (b) Number of options held by key management personnel 2015 Executive Directors A Hansen Specified executives M Benne N Fernando C Hunter G Lister D Meade G Taylor S Weir Total 2014 Executive Directors A Hansen Specified executives M Benne C Hunter G Lister D Meade S Weir Total Balance 30 June 14 Granted as Remuneration Options Exercised Options Forfeited Balance 30 June 15 Vested at 30 June 2015 Exer- cisable Unexer- cisable Total 2,850,000 - 750,000 - 2,100,000 - - 225,000 - 300,000 300,000 225,000 - 225,000 4,125,000 75,000 100,000 100,000 100,000 75,000 75,000 75,000 600,000 - - 100,000 100,000 75,000 - 40,000 1,065,000 - - - - - - - - 300,000 100,000 300,000 300,000 225,000 75,000 260,000 3,660,000 75,000 - - - - - - 75,000 75,000 - - - - - - 75,000 - - - - - - - - - Balance 30 June 13 Granted as Remuneration Options Exercised Options Forfeited Balance 30 June 14 1,800,000 1,050,000 - - 2,850,000 225,000 275,000 275,000 225,000 190,000 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 - - - - - - 225,000 300,000 300,000 225,000 225,000 4,125,000 Vested at 30 June 2014 Exer- cisable Unexer- cisable Total - - - - - - - - - - - - - - - - - - - - - Any options not exercised are forfeited if not exercised within 28 days of termination of employment. Share-based payments represent a value attributed to options over ordinary shares issued to executives. They expire during the period up to 2 July 2019. 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 25%; • a continuously compounding risk-free interest rate of 2.96%; • a probability factor for the likelihood of the options being exercised based on historical trends of 80%; and • compared the issue price ($1.30 cents per share) with the market price on day of issue ($1.30 cents per share); to • determine a weighted average fair value for the options issued as at grant date of $0.200 cents per option. 69 Hansen Technologies LtdAnnual Report 2015 Notes to the Financial Statements continued 30 June 2015 23. Directors’ and executives’ equity holdings continued (c) Number of shares held by key management personnel 2015 Directors D Trude B Adams P Berry A Hansen S Morgan D Osborne M Osborne Specified executives M Benne N Fernando C Hunter G Lister D Meade G Taylor S Weir Total 2014 Directors D Trude B Adams P Berry A Hansen D Osborne M Osborne Specified executives M Benne C Hunter G Lister D Meade S Weir Total Balance 30 June 14 Received as Remuneration Options Exercised Net Change Other Balance 30 June 15 100,000 150,000 - 52,991,890 - 362,653 54,000 41,484 4,065 703,578 1,428,992 4,120 839 133,545 55,975,166 - - - - - - - - - - - - - - - - - - 750,000 - - - - - 100,000 100,000 75,000 - 40,000 1,065,000 3,623 2,304 15,304 (14,997,696) - 14,868 1,871 7,514 2,728 113 (495,392) (70,610) 2,304 5,949 (15,507,120) 103,623 152,304 15,304 38,744,194 - 377,521 55,871 48,998 6,793 803,691 1,033,600 8,510 3,143 179,494 41,533,046 Balance 30 June 13 Received as Remuneration Options Exercised Net Change Other Balance 30 June 14 40,000 150,000 - 70,163,026 344,781 - 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 60,000 - - (17,171,136) 17,872 54,000 (40,429) - 14,635 (75,823) 6,506 (17,134,375) 100,000 150,000 - 52,991,890 362,653 54,000 41,484 703,578 1,428,992 4,120 133,545 55,970,262 24. Directors’ and executives’ compensation Short term employment benefits Post-employment benefits Share-based payments 70 Consolidated Entity 2015 2,657,670 185,746 58,945 2,902,361 2014 2,663,811 167,337 164,546 2,995,694 Hansen Technologies LtdAnnual Report 2015 25. 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 Utilisoft Pty Ltd Peace Software Canada Inc. Hansen Technologies (Shanghai) Company Limited TeleBilling A/S TeleBilling Systems A/S Hansen Corporation Asia Limited Hansen New Zealand Limited Hansen Corporation Europe Limited Hansen Holdings 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 2014 % 2015 % Australia Australia Australia Australia Australia (i) Canada China (ii) Denmark (ii) Denmark (iii) Hong Kong New Zealand United Kingdom (iv) United Kingdom United States United States United States (v) United States United States 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) Deregistered effective 30 June 2015. (ii) Acquired 1 May 2015 by Hansen Holdings Europe Limited. (iii) Officially deregistered 13 March 2015. (iv) UK company formed to purchase the equity in TeleBilling A/S and TeleBilling Systems A/S. (v) Officially deregistered 16 January 2015. (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 related party to Andrew Hansen – lease rental payments Consolidated Entity 2015 $ 1,104,615 2014 $ 1,088,949 71 Hansen Technologies LtdAnnual Report 2015 Notes to the Financial Statements continued 30 June 2015 26. Auditor’s remuneration (a) 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) (b) Amounts paid and payable to network firms of Pitcher Partners for: (i) Audit and other assurance services – an audit and/or review of the Financial Report of other entities in the consolidated entity (ii) Other non-audit services – taxation services – compliance services Total remuneration of network firms of Pitcher Partners (c) Amounts paid and payable to non-related auditors of Group entities for: (i) Audit and other assurance services – an audit and/or review of the Financial Report of other entities in the consolidated entity (ii) Other non-audit services – taxation services – compliance services Total remuneration of non-related auditors of group entities Total auditors’ remuneration Consolidated Entity 2015 $’000 2014 $’000 289 24 16 40 329 40 8 36 44 84 82 53 2 55 137 550 310 46 12 58 368 74 12 64 76 150 65 20 2 22 87 605 72 Hansen Technologies LtdAnnual Report 2015 27. 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 2015 $’000 2014 $’000 68 85,502 85,570 3,773 13 3,786 127 62,411 62,538 1,999 - 1,999 81,784 60,539 75,127 5,690 967 45,126 14,665 748 81,784 60,539 Parent Entity 2015 $’000 798 798 2014 $’000 9,001 9,001 (c) Parent entity guarantees Hansen Technologies Ltd, being the parent entity, has entered into a guarantee in regard to the loan facility (refer note 15), but other than that has not entered into any guarantees in relation to debts of its subsidiaries. 73 Hansen Technologies LtdAnnual Report 2015 Notes to the Financial Statements continued 30 June 2015 28. 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. 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. 2015 Financial Year Billing $’000 Outsourcing $’000 97,275 97,275 21,779 21,779 1,514 5,213 135,799 1,285 32,695 6,040 6,040 2,858 2,858 84 - 1,558 631 1,606 Other $’000 2,942 2,942 958 958 6 - 758 - 782 Total $’000 106,257 106,257 25,595 25,595 1,604 5,213 138,115 1,916 35,083 (b) Segment information 2015 Segment revenue Total segment revenue Segment revenue from external source Segment result Total segment result Segment result from external source Items included within the segment result: Depreciation expense Amortisation expense Total segment assets Additions to non-current assets Total segment liabilities 74 Hansen Technologies LtdAnnual Report 2015 2014 Segment revenue Total segment revenue Segment revenue from external source Segment result Total segment result Segment result from external source Items included within the segment result: Depreciation expense Amortisation expense Total segment assets Additions to non-current assets Total segment liabilities 2014 Financial Year Billing $’000 Outsourcing $’000 75,065 75,065 17,111 17,111 836 3,202 89,176 923 14,656 7,064 7,064 2,914 2,914 25 2 2,776 103 1,931 Other $’000 3,892 3,892 1,302 1,302 17 - 953 - Total $’000 86,021 86,021 21,327 21,327 878 3,204 92,905 1,026 1,064 17,651 (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 individual countries is detailed as follows: APAC Americas EMEA Total revenue 2015 $’000 106,257 415 60 106,732 2015 $’000 39,068 32,142 35,047 106,257 2014 $’000 86,021 287 149 86,457 2014 $’000 36,033 19,982 30,006 86,021 75 Hansen Technologies LtdAnnual Report 2015 Notes to the Financial Statements continued 30 June 2015 28. Segment information continued (ii) Reconciliation of segment result from the external source to the consolidated statement of comprehensive income Segment result from external source Interest revenue Interest expense Depreciation and amortisation 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 Total assets attributed to individual countries 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 2015 $’000 25,595 60 (234) (259) (1,159) 24,003 2015 $’000 138,115 21,985 2,295 24,280 162,395 2015 $’000 58,691 58,355 45,349 162,395 2015 $’000 35,083 10,000 3,783 13,783 48,866 2014 $’000 21,327 149 (58) (638) (1,322) 19,458 2014 $’000 92,905 3,829 2,833 6,662 99,567 2014 $’000 46,185 49,554 3,828 99,567 2014 $’000 17,651 10,055 5,775 15,830 33,481 29. Subsequent events Post balance date the Term Facility drawn to $10 million as at 30 June 2015 was fully repaid on 8 July 2015. There has been no matter or circumstance that has arisen since 30 June 2015 that has significantly affected or may significantly affect: (a) the operations, in financial years subsequent to 30 June 2015, of the consolidated entity; or (b) the results of those operations; or (c) the state of affairs, in financial years subsequent to 30 June 2015, of the consolidated entity. 76 Hansen Technologies LtdAnnual Report 2015 Directors’ Declaration The Directors declare that the financial statements and notes set out on pages 35 to 76 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 2015 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 CEO and Chief Financial Officer to the Directors in accordance with sections 295A of the Corporations Act 2001 for the financial year ending 30 June 2015. This declaration is made in accordance with a resolution of the Directors. David Trude Director Melbourne 30 September 2015 Andrew Hansen Director 77 Hansen Technologies LtdAnnual Report 2015 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 Ltd and controlled entities, which comprises the consolidated statement of financial position as at 30 June 2015, 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 material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the Financial Report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the Financial Report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the 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 and its controlled entities 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 2015 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 21 to 28 of the Directors’ Report for the year ended 30 June 2015. 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 2015 complies with section 300A of the Corporations Act 2001. S D Whitchurch Partner Melbourne 30 September 2015 Pitcher Partners An independent Victorian Partnership ABN 27 975 255 196 Level 19, 15 William Street, Melbourne VIC 3000 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 78 Hansen Technologies LtdAnnual Report 2015 ASX Additional Information As at 24 September 2015 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 17. 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 21.47% 13.35% 37,989,113 23,621,160 Number of Equity Security Holders Options - - - 2 16 Ordinary Shares 1,231 3,139 1,441 1,781 100 The number of shareholders holding less than a marketable parcel of ordinary shares is 104. Twenty largest shareholders Name Othonna Pty Ltd HSBC Custody Nominees National Nominees Limited J P Morgan Nominees Australia Citicorp Nominees Pty Limited BNP Paribas Noms Pty Ltd RBC Investor Services Australia Pty Ltd Brispot Nominees Pty Ltd Mrs Yvonne Irene Hansen Mr Cameron Hunter Mr James Lucas + Mr Lesley Dormer OZCUN Pty Ltd Andrew Alexander Hansen UBS Nominees Pty Ltd Six of us Pty Ltd Pacific Custodians Pty Limited Mr Meng Ghee Yeoh FGDG Super Pty Ltd Mr Brian Gregory Wright + Mrs Patricia Gladys Wright Mr John Henry Waterhouse + Mrs Carol Evelyn Waterhouse Total Total Units 37,989,113 23,621,160 12,624,299 7,514,804 3,033,718 2,480,403 2,476,639 1,431,267 1,187,714 803,691 800,940 795,866 752,304 738,888 650,000 584,603 500,000 442,416 412,304 402,304 99,242,433 Percentage of Issued Capital 21.47% 13.35% 7.13% 4.25% 1.71% 1.4% 1.4% 0.81% 0.67% 0.45% 0.45% 0.45% 0.43% 0.42% 0.37% 0.33% 0.28% 0.25% 0.23% 0.23% 56.08% 79 Hansen Technologies LtdAnnual Report 2015 Corporate Directory Directors David Trude, Chairman Andrew Hansen, Managing Director and CEO Bruce Adams, Non-Executive Peter Berry, Non-Executive Sarah Morgan, Non-Executive David Osborne, Non-Executive Company secretary Julia Chand 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. 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 Ltd ABN 90 090 996 455, incorporated and domiciled in Australia, is a publicly listed Company limited by shares. 80 Hansen Technologies LtdAnnual Report 2015