50 YEARS OF CREATING SOLUTIONS Annual Report 2021 Hansen Technologies Ltd Annual Report 2021 CONTENTS Espoo Stockholm Kista Trondheim Førde Dale Sønderborg London Cwmbran Rotterdam Hamburg Zürich Toronto New York New York Bethlehem Hazleton Allentown Columbia Atlanta Columbia Houston Houston Jyväskylä Kuopio Lillehammer Hamar Oslo Pune Carlsbad Carlsbad Tokyo Shanghai Hyderabad Ho Chi Minh City Jakarta São Paulo Buenos Aires Buenos Aires Johannesburg Melbourne Auckland Chairperson and Chief Executive Officer Joint Report Remuneration Report 04 08 Board of Directors and Company Secretary 10 Directors’ Report 16 35 36 Financial Report 37 38 Consolidated Statement of Financial Position Auditor’s Independence Declaration Consolidated Statement of Comprehensive Income 39 Consolidated Statement of Changes in Equity 40 Consolidated Statement of Cash Flows 41 Notes to the Financial Statements 94 Directors’ Declaration 95 99 Independent Auditor’s Report Australian Securities Exchange (ASX) Shareholder Information 101 Corporate Directory 1 Espoo Stockholm Kista Trondheim Førde Dale Sønderborg London Cwmbran Rotterdam Hamburg Zürich Jyväskylä Kuopio Lillehammer Hamar Oslo Carlsbad Carlsbad Pune Tokyo Shanghai Hyderabad Ho Chi Minh City Jakarta São Paulo Buenos Aires Buenos Aires Johannesburg OPERATIONS CUSTOMERS SERVED Offices Regions Melbourne Auckland Toronto New York Bethlehem New York Hazleton Allentown Columbia Atlanta Columbia Houston Houston TURNING TODAY’S ENERGY AND COMMUNICATIONS INTO TOMORROW’S NEXT DIGITALLY DRIVEN EXPERIENCE COMPANIES. USING OUR 1,450+ STAFF SPREAD ACROSS 34 OFFICES TO SUPPORT OUR CUSTOMERS. Hansen Technologies Ltd Annual Report 2021 2 Turning product innovation into new business revenue is the imperative in the age of 5G and digital services. The Hansen Create-Deliver-Engage Suite for communication services providers is comprised of catalog-driven cloud applications that enable service providers to create and deliver the next experience and grow new business models through accelerated product innovation. $158.4m Revenue To enable Telcos to innovate freely and monetise the 5G and complex B2B segment opportunity COMMUNICATIONS Hansen Technologies Ltd Annual Report 2021 3 GAS, ELECTRICITY AND WATER Energy and Utilities markets are changing from a system characterised by large, centralised experiences to an advanced infrastructure with distributed and decarbonised resources. Turning personalised energy experiences into new business opportunities is imperative for next generation energy and utility providers. The Hansen Create-Deliver- Engage for Energy and Utilities suite is to designed to deliver the next experience while enabling energy and utilities to grow from new business models. $141.3m Revenue To transform our customers from basic ‘utilities’ to suppliers of new energy related products and services Hansen Technologies Ltd Annual Report 2021 4 CHAIRPERSON AND CHIEF EXECUTIVE OFFICER JOINT REPORT David Trude Chairman Andrew Hansen CEO We are pleased to present the Annual Report for Hansen Technologies Limited for financial year ended 30 June 2021 (FY21). After 50 highly successful years in operation, it is with great pleasure that we share the Hansen results with our shareholders for FY21. Reflecting on our 50-year journey, the Hansen business has evolved over time from an Australian centric operation into a truly global enterprise with over 1,500 staff and our technology being used in over 80 countries. Our ‘Hansen’ acquisition strategy was implemented over twenty years ago and today we continue to expand into even more regions. Due to the dedication of Management and our loyal and incredibly passionate employees, this half century anniversary has been a true honour to be part of. As we review the year passed, we would like to thank our employees who have remained committed and dedicated to delivering outstanding results for our customers and shareholders. The Hansen Team has once again risen to the challenges and delivered a record result. When assessing the Company’s success, we look at several factors. These include: The Hansen Mission To further grow our best-in-class core business through aggregating mature, entrenched and predictable businesses in the Energy and Communications sectors. Our Strategy • To continue to diversify and grow our business over the long-term through aggregation, accelerating new market entry be it geographic, vertical or by further customer diversification; • To continue to leverage our global experience; and • To continue to evolve our product offering ensuring our customers’ technical journey is on point and cost effective. Strong execution on this mission and strategy has resulted in another record year for Hansen. Hansen Technologies Ltd Annual Report 2021 Hansen Technologies Ltd Annual Report 2021 5 HIGHLIGHTS $307.7m Operating revenue $120.2m Underlying EBITDA Underpinning this strong performance is our improved organic growth, development of inorganic growth opportunities and continued focus on our cost base. This has resulted in strong cash generation enabling further investments in the business while strengthening our financial position and returning cash to our loyal shareholder base. This continued momentum in our business increases our confidence in achieving our FY25 financial targets of $500m revenues and EBITDA margins of 32%–35%. Year in Review Our business has always been characterised by highly predictable revenues with strong business resilience. The Energy and Communications sectors are recession proof and non- cyclical and the services they provide are utilised regardless of the economic backdrop; proven through the Global Financial Crisis and COVID-19. Our long-term customer relationships form the bedrock of our revenue visibility and platform for organic growth driven by our thought leadership and an executive team with over 100 years of expertise and experience in communications, IT, business process and management. We are particularly pleased with the forward looking and strategic customer wins we have seen this year across 5G Telecoms (with global companies such as Telefonica and DISH), smart energy (with companies including Western Power) and renewables (including solar, with companies such as Nautilus Solar). This, coupled with expectations of continued regulatory change provide a tailwind to our organic growth. Hansen’s ability to win these new customers in today’s rapidly developing and competitive environment underscores the strength of our product offering and the relevance of this offering in the marketplace. We expect to further capitalise on these market developments and are investing in our technology and our people to achieve this. Revenue growth across the year was also driven by our existing customer base, with many successful upgrades and projects completed throughout the year. Building of Acquisition Pipeline Throughout the year our focussed M&A team has been identifying and researching potential acquisition opportunities, with proactive relationship development with many brokers and bankers around the world. We have been encouraged by the volume of targets that have been presented to us. With the same disciplined approach, we are confident we will deliver the value accretive growth that has been a key pillar of the Hansen story. Our cash flows continue to support significant investment in acquired growth and we have the financial capacity to move quickly and decisively when we find the right opportunities. Continued Focus on Profitability As shareholders will have heard from us repeatedly over the years, “spend it like it is your own” is an ongoing mantra and one that pervades throughout the entire organisation, ensuring our focus on profitability remains as strong as ever. While the FY21 EBITDA margin was enhanced by the revenue recognition of the Telefonica contract, with $21 million recognised at the beginning of the initial contract term, to continue to deliver the best-in-class technology we are renowned for, we continued to invest in our technology roadmaps and talent to ensure ongoing profitability and strong margins. 6 CHAIRPERSON AND CHIEF EXECUTIVE OFFICER JOINT REPORT CONTINUED We continue to optimise the Hansen portfolio of products and expect strong margins over the coming years from the ongoing improvement in companies recently aggregated into the Hansen family. While revenues have grown, and margins have improved since initial integration, there remains significant opportunity to generate further increased revenue and profitability from acquired businesses. Strong Cash Generation Our business continues to be highly cash generative continuing the recent trend of adding financial capacity for future investments in growth and the continued ability to pay strong dividends to our shareholders absent of immediate investment opportunities. Operating Revenue ($m) Financials The Group’s Financial Performance this year has been outstanding across all financial metrics. A$ million Operating revenue Underlying EBITDA1, 2, 4 Underlying NPAT4 Underlying NPATA1, 3 Basic EPS based on underlying NPATA (EPSa)(cents)1 FY21 307.7 120.2 56.8 73.1 36.7 Variance (%) 2.1% 40.3% 92.5% 55.9% 54.9% FY20 301.4 85.7 29.5 46.9 23.7 1. The Directors believe the information additional to IFRS measures Underlying EBITDA* ($m) included in the report is relevant and useful in measuring the financial performance of the Group. These include: EBITDA, NPATA and EPSa. C A G R : 1 6 % 5 - y e a r 230.8 231.3 301.4 307.7 174.7 149.0 60 350 300 250 200 150 100 50 0 140 2. EBITDA is a non-IFRS term, defined as earnings before interest, tax, depreciation and amortisation and excluding net foreign exchange gains (losses). 120.2 3. NPATA is a non-IFRS term, defined as net profit after tax, excluding tax- 1 9 % effected amortisation of acquired intangibles. C A G R : 120 100 5 - y e a r 4. Underlying EBITDA, underlying NPAT and underlying NPATA exclude 80 separately disclosed items, which represent one-off costs and income during the period. Further details of the separately disclosed items are outlined in Note 4 to the Financial Report. 63.1 66.7 85.7 49.7 51.0 40 The Group revenues increased by 2.1% to $307.7 million with 20 underlying EBITDA for the year up 40.3% to $120.2 million. Additionally, with ongoing rationalisation of the Company’s cost base, there has been an improved underlying EBITDA margin for the full year of 39.1%. 2017 2019 2018 2016 2020 2021 0 This strong profit performance is further underpinned by the Company’s ability to generate cash flow from operations which was $93.2 million and free cash flow of $70.1 million after adjusting for the repayment of lease liabilities. Hansen’s ability to generate cash in the current environment further underscores the strength it has enabling it to invest in its products and fund acquisitions. This strong financial outcome has enabled us to declare dividends amounting to 5 cents per share this year returning 27.3% of NPATA to shareholders. Operating Revenue ($m) Underlying EBITDA* ($m) 2016 2017 2018 2019 2020 2021 350 300 250 200 150 100 50 0 C A G R : 1 6 % 5 - y e a r 230.8 231.3 301.4 307.7 174.7 149.0 2016 2017 2018 2019 2020 2021 140 120 100 80 60 40 20 0 1 9 % C A G R : 5 - y e a r 66.7 63.1 120.2 85.7 49.7 51.0 2016 2017 2018 2019 2020 2021 * EBITDA is a non-IFRS term that relates to earnings before interest, tax, depreciation and amortisation and excluding net foreign exchange gains (losses). AASB 16 Leases (AASB 16) has been applied to FY15 to FY19 to reflect an estimated impact of the adoption of this standard. AASB 16 has been adopted by the Group in FY2020. Non-recurring items have been excluded from each year, where applicable. Hansen Technologies Ltd Annual Report 2021 Hansen Technologies Ltd Annual Report 2021 7 Confident in the short and long-term outlook We remain extremely confident in the future of our business. Energy and Communications are two industries that are rapidly transforming from delivering ‘just essentials’ to delivering energy and connected experiences. These things are the foundation of our next society. We align ourselves with our clients and provide proven products and the right customer mindset. These Industry segments continue to expand their offering to their customers. • Energy customers are looking to consume energy responsibly while reducing their environmental footprint creating complexity as they look to avail themselves of green energy options and other related services. • The offerings available through our Communications providers continue to expand with the introduction of new technology, most recently 5G, supported by a customer base demanding the ability to consume information in a mobile environment. We will continue our successful history of aggregating mature, entrenched, and predictable businesses. Supported by the highly cash generative nature of our business, we will continue to ‘Hansenise’ these businesses to drive growth and enhance profitability. What becomes imperative for our customers is the ability to transition from basic providers of services to ones that can capitalise on the growing ecosystems and variety of the next experiences that surround the core connectivity and energy services already provided. At the core of our proposition is our ability to evolve together with our customers, providing business solutions through our software products that deliver a competitive advantage. Coupled with the Company’s drive to aggregate strategic business we see a future of sustainable revenue growth and increased shareholder value. Our ability to continue investing in our products, providing thought leadership through our global experiences and leveraging our extensive industry knowledge puts us at the forefront of the industry. In conclusion, 50 years in operation for Hansen has been an incredible achievement that we are truly proud of. We are confident that our business strategy, combined with the strength of our people, will ensure the continued success of Hansen, its customers and its shareholders. EVERYDAY WE SET OUT TO INSPIRE AND CHALLENGE TODAY’S ENERGY AND COMMUNICATION PROVIDERS TO BECOME TOMORROW’S NEXT DIGITALLY-DRIVEN EXPERIENCE COMPANIES. 8 BOARD OF DIRECTORS AND COMPANY SECRETARY The qualifications, experience and special responsibilities of each person who has been a Director of Hansen Technologies Limited at any time during or since the end of the financial year are provided below, together with details of the Company Secretary as at the year end. Mr David Trude Non-Executive Director Chairman since 2011 Director since 2011 Member of the Independent Board Committee (BGH Proposal) Age 73 Mr Andrew Hansen Managing Director and CEO Managing Director since 2000 Age 61 Mr Bruce Adams Non-Executive Director Mr Don Rankin Non-Executive Director Director since 2000 Director since 2019 Member of the Remuneration Committee Chair of the Audit and Risk Committee Age 61 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 Stockbrokers and Financial Advisers Association of Australia and the Australian Institute of Company Directors. David is also a Non-Executive Director of Chi-X Australia Limited and Non-Executive Director of ASX listed Acorn Capital Investment Fund Limited and MSL Solutions Ltd. Andrew has over 40 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 led Hansen from its listing on the ASX in 2000 to today being a global business with a strong history of decades of strong profitability and growth. Andrew is responsible for implementing the Group’s strategic direction and overseeing the everyday affairs of the Hansen Group. Bruce has over 30 years’ experience as a commercial and corporate lawyer. He has practised extensively in the areas of information technology law, contract law and mergers and acquisitions and has considerable experience advising listed public companies. Bruce has held positions as partner of two Australian law firms and general counsel of an Australian owned international group of companies He holds degrees in Law and Economics from Monash University and is a graduate of Australian Institute of Company Directors (AICD). Member of the Remuneration Committee Member of the Independent Board Committee (BGH Proposal) Age 69 Don Rankin joined the Hansen Technologies Board in 2019. He was one of the founding partners of Pitcher Partners and National Chairman of the Pitcher Partners Association for 11 years. He sits on the board of the Victorian Chamber of Commerce and Industry and was its President for three years. With over thirty years’ experience advising private and family businesses across a broad range of industries, he specialises particularly in assisting clients in the management, growth and evolution of their business. Don sits on a number of Family Board Advisory Committees. Hansen Technologies Ltd Annual Report 2021 9 Mr David Osborne Non-Executive Director Ms Jennifer Douglas Non-Executive Director Mr David Howell Non-Executive Director Director since 2006 Member of the Audit and Risk Committee Age 72 Director since 2017 Director since 2018 Member of the Remuneration Committee Member of the Audit and Risk Committee Member of the Independent Board Committee (BGH Proposal) Chair of the Remuneration Committee Chair of the Independent Board Committee (BGH Proposal) Member of the Audit and Risk Committee Age 54 Age 63 Ms Julia Chand General Counsel and Company Secretary Company Secretary since 2014 Age 51 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. David is a highly accomplished executive having worked across a number of industries including financial services, retail, technology and social media. David has had roles as Managing Director, Board Director and Board Advisor across large corporates, SMEs and early-stage businesses, including private equity. David is also a Non-Executive Director of The Pistol (a digital marketing agency). David is a Fellow of the Institute of Chartered Accountants, and a Fellow of the Australian Institute of Company Directors, with over 50 years of financial management, taxation and accounting experience in public practice. David’s experience includes having been the Audit Partner of his accounting practice and 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. Jennifer has over 25 years’ experience in the technology and media industries. Jennifer started her career as a lawyer before holding senior executive roles at Telstra and Sensis from 1997 to 2016. She has significant experience in driving growth and customer centred change. Jennifer holds degrees in Science and Law from Monash University, a Master of Law and Master of Business Administration from Melbourne University and is a Graduate of AICD. Jennifer is also a Non-Executive Director of GUD Holdings Limited, OptiComm Limited (until November 2020), Essential Energy, Judo Bank Pty Ltd, the St Kilda Football Club and the Peter MacCallum Cancer Foundation. Unless stated, no Directors of Hansen Technologies Limited held any other Directorships of listed companies at any time during the three years prior to 30 June 2021. Hansen Technologies Ltd Annual Report 2021 10 DIRECTORS’ REPORT The Directors present their report together with the Financial Report of the consolidated entity (the Group), being Hansen Technologies Limited (the Company) and the entities it controlled for the financial year ended 30 June 2021, and Auditor’s Report thereon. This Financial Report has been prepared in accordance with Australian Accounting Standards. Principal activities The principal activities of the Group during the financial year were the development, integration and support of billing systems software for the Energy and Communications sectors. Other activities undertaken by the Group include IT outsourcing services and the development of other specific software applications. Operating and financial review Review of operations The Group’s operating performance for the fiscal year compared to last year is as follows: Operating revenue Underlying EBITDA1 Underlying NPAT2 Underlying NPATA1 Basic Earnings per Share (EPS) (cents) Basic EPS based on underlying NPATA (EPSa) (cents)1 2021 A$ Million 307.7 2020 A$ Million 301.4 120.2 56.8 73.1 28.8 36.7 85.7 29.5 46.9 13.0 23.7 Variance % 2.1% 40.3% 92.5% 55.9% 121.5% 54.9% 1. The Directors believe the information additional to IFRS measures included in the report is relevant and useful in measuring the financial performance of the Group. These include: EBITDA, NPATA and EPSa. These measures have been defined in the Chairperson and Chief Executive Officer’s Joint Report on page 6. 2. Underlying net profit after tax attributable to members excludes separately disclosed items and acquired amortisation. Further details of the separately disclosed items are outlined in Note 4 to the Financial Report. In 2021 the business delivered record results following on from the successful 2020 year. Further details on the Group’s results are outlined in the Chairperson and Chief Executive Officer’s Joint Report on page 4. The Group’s revenue for the financial year exceeded 2020, notwithstanding significant foreign exchange headwinds which impacted the business. The new logo wins were the highest on record with a significant number of new logos signed and recognised as revenue in the financial year. Several key sales appointments were also made which will provide ongoing momentum in our lead generation and sales cycle. The Group has generated operating cash flows of $93.2 million, which has been used to retire net external debt of $41.7 million, fund our ongoing product development program $12.1 million and pay dividends of $21.9 million (net of dividend reinvestments). With the Group’s cash generation capabilities, Hansen remains well placed to continue to acquire mature, predictable businesses in the energy and communications sectors. The continued challenges of COVID-19 were managed with care throughout the business and Hansen employees were at the forefront of any Board and Management decisions in relation to working and travel conditions. Billing segment The Billing segment represents a major part of the Group’s business operations, delivering $299.6 million of revenue in 2021 (2020: $291.6 million), which translates into a 2.7% increase. Segment profit before tax was $74.5 million in 2021 (2020: $33.2 million), representing a 124.4% increase. Other activities Segment revenues from other activities was $8.1 million in 2021 (2020: $9.7 million), representing a 16.5% decrease for the year. This 16.5% decrease in revenues resulted from an expected reduction in business activity associated with the Customer Care call centre. Segment profit before tax was $0.9 million for 2021 (2020: $0.7 million), representing a 28.6% increase for the year. Hansen Technologies Ltd Annual Report 2021 11 Significant changes in the state of affairs There have been no significant changes in the Group’s state of affairs during the financial year. Subsequent events Loan facility extension On 4 August 2021, the existing syndicated facility was amended to have a new expiry date of 1 September 2023 (original expiry date was 1 May 2022). As per the amendment, the facility limit is now $151,323,000 and a renegotiated margin pricing grid has delivered a favourable outcome for the Group. Refer to Note 19 (a) of the Financial Report for further information. Proposal from BGH As announced to the market on 7 June 2021, the Group has received a non-binding conditional proposal from BGH Capital Pty Ltd (“BGH Capital”) to acquire 100% of the outstanding shares in Hansen by way of a Scheme of Arrangement. Hansen due diligence materials have been made available to BGH Capital via a Virtual Data Room. The parties have agreed that due diligence has commenced with the Virtual Data Room suitably populated and unless extended, the Exclusivity Period will end on the 25 August 2021. At the date of signing, the bid remains active. Apart from the above and the final dividend declared as per the next page, no matters have arisen between the end of the financial year and the date of this report that have significantly affected or may significantly affect the operations of the Group, the results of those operations or the state of affairs of the Group in future years. Opportunities and business risks The business remains committed to increasing shareholder value whilst managing the risk profile of the Group. The Energy and Communications markets continue to evolve and with this change comes complexity and opportunity. The Communications vertical is experiencing rapid progress in the roll-out and adoption of 5G technology. Energy continues to develop new offerings and the continued roll-out of green energy initiatives. Both verticals continue to develop enhanced digital platforms to deliver a satisfactory customer experience. To ensure we deliver on our strategic objectives, the Group continues to operate an Enterprise Risk Management Framework that actively identifies, controls, plans and mitigates a wide array of risks across functions and geographies and seeks to unlock opportunities to gain a competitive advantage. Risks identified include, but are not limited to the following: • Security or data incidents: As a technology-focused business, managing security and protecting customer data is essential. To manage the risk of damaging security incidents, we have appropriate data management, security and compliance policies, procedures and practices in place. • Loss of customers: While loss of customers due to market competition is a risk to the business, we manage this risk by ensuring we are focused on meeting our customers’ expectations for system performance and service delivery and by diversifying our customer base across industry sectors around the world. • Decline in international market conditions: As a business with international operations, we have exposure to currency fluctuations, which we monitor and manage. • Investment opportunities: The Group has an active M&A program. Potential investments may carry execution and integration risks, and this is managed via maintaining a highly experienced M&A team with a proven track record of business integration and value generation. • Employee Recruitment and Retention: Our people are critical to the Group’s ongoing success. We manage risks to our employee base by focussing on our employee value proposition, offering competitive remuneration and benefits packages tailored to the market in which personnel are based. We manage risks by regularly monitoring our market and global conditions to ensure our control environment and risk treatment plans respond to the risks faced by the business. Hansen Technologies Ltd Annual Report 2021 12 DIRECTORS’ REPORT CONTINUED Outlook and likely developments for FY22 After the success of 2021, the Group continues to focus on the strategic pillars that drive shareholder value. These include our global diversification and aggregation strategy and our ongoing investment in product roadmap and low-cost development centres. The Board remains confident in the Hansen long-term strategy and the focus on delivering to revenue and EBITDA targets for 2025, being $500 million of revenue on an EBITDA margin of 32-35%. As always, Shareholders are kept abreast of any changes to our strategy or financial outlook as each year progresses. Environmental regulations and climate change The Group’s operations are not subject to any significant environmental Commonwealth or State regulations or laws. The Group is aware of the general risks associated with climate change and continues to be committed to operating sustainably. However, the Group’s operations are not significantly impacted by any environmental factors. Corporate Governance Statement Hansen and the Board are committed to achieving and demonstrating the highest standards of corporate governance. Hansen has reviewed its corporate governance practices against the Corporate Governance Principles and Recommendations (3rd edition) published by the ASX Corporate Governance Council. A description of the group’s current corporate governance practices is set out in the Group’s corporate governance statement, which can be viewed at hansencx.com/about/investor-relations. Dividends paid and declared A final dividend of 5 cents per share has been declared, partially franked to 2.70 cents per share, comprising of a regular dividend of 5 cents per share. The final dividend was announced to the market on 24 August 2021 with payment to be made on 21 September 2021. The amount declared has not been recognised as a liability in the accounts of the Company as at 30 June 2021. Dividends paid during the year, excluding dividends reinvested as part of the Company’s Dividend Reinvestment Program (DRP): • 5 cents per share partially franked to 1.1 cents interim dividend paid 25 March 2021, totalling $8,973,832; and • 7 cents per share partially franked to 0.7 cents final dividend paid 25 September 2020, totalling $12,973,389. This is consistent with the Board’s capital management policy that balances growth through acquisitions against the payment of dividends. Share options and performance rights Options and performance rights over shares may be issued to key management personnel (KMP) as an incentive for motivating and rewarding performance as well as encouraging longevity of employment. The issuing of options and performance rights is intended to enhance the alignment of KMP with the primary shareholder objective of increasing shareholder value. Performance rights over unissued ordinary shares granted by the Company during the financial year to the KMP as part of their remuneration for the year ended 30 June 2021 are as follows: Grant Date Executives A Hansen C Hunter D Meade G Taylor Total Number of Rights Granted on 1 July 20201 157,918 34,863 35,033 33,574 261,388 1. The number of rights granted that will vest is conditional on achievement of annual financial and non-financial measures under the Enhanced STI plan. The above KMP will be awarded a combined total of additional 91,486 rights for overachievement of performance measures. The rights are subject to a two-year deferral period of which the KMP must remain employed. Refer to the Remuneration Report for further details. There were rights granted to the KMP over unissued ordinary shares since the end of the financial year in relation to the FY19 LTI Plan. No options were granted over unissued ordinary shares since the end of the financial year to the KMP as part of their remuneration. All grants of options and rights are subject to the achievement of performance measurements. Further details regarding options and rights granted as remuneration are provided in the Remuneration Report. Hansen Technologies Ltd Annual Report 2021 13 Shares under options and performance rights Unissued ordinary shares of the Company under performance rights at the date of this report are as follows: Instrument Rights Rights Rights Rights Rights Plan LTI STI LTI STI LTI Grant Date 2 Jul 2018 2 Sep 2019 2 Sep 2019 1 Jul 2020 1 Jul 2020 Vesting Date 31 Aug 20211,2 30 Jun 2022 30 Jun 2022 30 Jun 20233 30 Jun 2023 Number of Rights at 30 June 2021 448,841 78,384 463,588 448,501 239,313 1. The vesting date for rights granted on 2 July 2018 is the date on which the Board will notify the executive that the rights have vested, after the outcomes for the measurement period have been determined and satisfaction of the performance conditions have been assessed. 2. Performance rights in relation to the EPSa CAGR and TSR measures exceeded the required performance measurement hurdles and market conditions, respectively and will vest on an accelerated basis paying 150% of the entitlement on 31 August 2021. 3. Additional performance rights will be awarded for overachievement of annual financial and non-financial targets. These rights are subject to a two-year deferral period during which the recipient must be employed. If the Company makes a bonus issue of securities to ordinary shareholders, each unexercised performance right will, on exercise, entitle its holder to receive the bonus securities as if the performance right had been exercised before the record date for the bonus issue. Performance rights holders do not have any right, by virtue of the performance right held, to participate in any share issue of the Company. Performance rights will not give any right to participate in dividends or any voting rights until shares are issued upon the exercise of vested performance rights. Shares issued on exercise of options and performance rights The following ordinary shares of the Company were issued during or since the end of the financial year as a result of the exercise of options and performance rights: Date Issued 31 Aug 2020 31 Aug 2020 16 Feb 2021 22 Feb 2021 29 Mar 2021 1 Apr 2021 Total Number of Ordinary Shares Issued on Exercise of Performance rights 259,122 – – – – – 259,122 Amount Paid Per Share – 2.67 2.67 2.67 2.67 2.67 Options – 75,000 240,000 100,000 220,000 250,000 885,000 There are no amounts unpaid on shares issued on exercise of options. 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 Group 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. Hansen Technologies Ltd Annual Report 2021 14 DIRECTORS’ REPORT CONTINUED 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 and 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 disclosures are prohibited under the terms of the contract. No insurance premium is paid in relation to the auditors. Rounding of amounts In accordance with ASIC Corporations (Rounding in Financial/ Directors’ Reports) Instrument 2016/191, the amounts in the Financial Report have been rounded to the nearest one thousand dollars, or in certain cases, to the nearest dollar (where indicated). Directors’ meetings The number of meetings of the Board of Directors and of each Board Committee held during the financial year and the numbers of meetings attended by each Director were: Director Mr David Trude Mr Bruce Adams Mr Andrew Hansen Mr Don Rankin Mr David Osborne Ms Jennifer Douglas Mr David Howell Board Meetings Audit and Risk Committee Meetings Remuneration Committee Meetings Independent Board Committee Eligible Attended Eligible Attended Eligible Attended Eligible Attended 19 19 19 19 19 19 19 18 19 19 19 19 19 19 – – – 5 5 5 5 – – – 5 5 5 5 – 3 – 3 – 3 3 – 3 – 3 – 3 3 8 - - 8 - 8 8 3 - - 8 - 8 8 Meetings were held in June 2021 to consider the proposal from BGH Capital Pty Ltd to acquire all of the ordinary shares in Hansen. Directors’ interests in shares or options Directors’ relevant interests in shares of the Company or options/rights over shares in the Company as at the date of this report are detailed below: Directors’ Relevant Interests in: Mr David Trude Mr Bruce Adams1,2 Mr Andrew Hansen1 Mr Don Rankin Mr David Osborne1,2 Ms Jennifer Douglas Mr David Howell Ordinary Shares of the Company 107,056 Rights over Shares in the Company – 34,891,417 35,055,228 25,000 35,125,448 16,000 33,290 – 426,346 – – – – 1. Each of Mr Bruce Adams, Mr Andrew Hansen and Mr David Osborne has a joint interest in a single parcel of 34,739,113 shares as at the date of this report. 2. For further details, please refer to the substantial shareholding notice lodged with the ASX dated 16 August 2019. Hansen Technologies Ltd Annual Report 2021 15 Proceedings on behalf of the Company No person applied for leave of Court to bring proceedings on behalf of the Company or any of its subsidiaries. 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 were provided by the auditors of the Group during the year, namely RSM Australia Partners, network firms of RSM 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 auditors is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The nature and scope of each type of non-audit service provided means that auditor independence was not compromised. Amounts paid and payable to RSM Australia Partners for non-audit services: – taxation services – compliance services Amounts paid and payable to network firms of RSM Australia 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 2021 $ – 3,609 3,609 135,468 78,817 214,285 – 2,116 2,116 2020 $ – – – 110,275 31,420 141,695 – – – Total auditor’s remuneration for non-audit services 220,010 141,695 Auditor’s remuneration is disclosed in Note 26 of the Financial Report. Hansen Technologies Ltd Annual Report 2021 16 REMUNERATION REPORT Dear Shareholder, On behalf of the Board of Directors, I am pleased to present the Remuneration Report of the Group, consisting of Hansen Technologies Limited (the Company) and its controlled entities for the 2021 financial year. The 2021 financial year has been another record year for Hansen. Amidst an ongoing pandemic, all Hansen staff should be commended for the manner in which they have navigated this challenging period. Whilst continuing to work, for the most part, remotely throughout the year, Hansen has delivered successfully to both our customers and shareholders. For the 2021 financial year, I am pleased to advise that all financial targets for the KMP were exceeded. As a result, all target Short-Term Incentive (STI) cash-component payments were awarded to our KMP against financial and non-financial KPIs set for the year. In line with the STI scheme, the accelerator of certain STI components (financial) was also met. As we have concluded the 2021 financial year, the LTI program implemented on 2nd of July 2018 completed its measurement period of three years. I am pleased to report that with the exceptional EPS growth and an outperformance for the ranked TSR criteria, both LTI hurdles have been achieved over the measurement period. These measures have qualified for acceleration and will be paid out at 150% of the entitlement (refer to Performance outcomes against 2019 on page 24). The achievement of these long-term measurement targets has resulted in significant shareholder value. After the successful navigation of the pandemic challenges in the last fiscal year, the Board has made the decision to remove the 2021 enhanced STI program and revert to a framework rewarding the KMP with STI in a cash format with the LTI measurement continuing over a three-year period. The 2022 LTI scheme also introduces a new revenue measurement hurdle based on a revenue CAGR metric aligned with the Group goal of achieving $500 million turnover by 2025. Further information about this incentive scheme is referenced on page 28 of this report. The Board remains committed to the ongoing review and improvement of the Group’s Remuneration Framework to ensure it achieves its objectives of incentivising and rewarding performance that optimises business and shareholder value and ensuring the company is well placed to attract, retain and motivate a talented Executive team. Yours sincerely, David Howell Chair of the Remuneration Committee Hansen Technologies Ltd Annual Report 2021 17 Our detailed Remuneration Report (Audited) The Remuneration Report for the year ended 30 June 2021 outlines key aspects of our remuneration framework and has been prepared and audited in accordance with the Corporations Act 2001. Our Remuneration Report contains the following sections: 1. Persons to whom this report applies 2. Our remuneration framework 3. How reward was linked to performance 4. Remuneration details: Executive KMP 5. FY2022 Incentive Plan 6. Contractual arrangements with Executive KMP 7. Remuneration details: Non-Executive KMP 8. Share-based remuneration disclosures 9. Other transactions with KMP 1. Persons to whom this report applies The remuneration disclosures in the Report cover the following persons who were classified as the Key Management Personnel (KMP) of the Group during the 2021 financial year. KMP are those persons who, directly or indirectly, have authority and responsibility for planning, directing and controlling the major activities of the Group: Executives1 Andrew Hansen Cameron Hunter Darren Meade Graeme Taylor Niv Fernando Managing Director and Chief Executive Officer (CEO) Chief Operating Officer Group Head of Delivery Chief Financial Officer Chief Strategy and Commercial Officer2 (resigned on 31 July 2020) Non-Executive Directors David Trude Chairperson and Independent Non-Executive Director Jennifer Douglas Independent Non-Executive Director David Howell Don Rankin Bruce Adams David Osborne Independent Non-Executive Director Independent Non-Executive Director Non-Executive Director Non-Executive Director 1. These executives of the Group were classified as KMP during the 2021 financial year and unless stated otherwise, were KMP for the entire year. 2. Effective 1 January 2020, Niv Fernando was appointed as CEO of the Utilities Division. At the 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 considered at the AGM. Hansen Technologies Ltd Annual Report 2021 18 REMUNERATION REPORT CONTINUED 2. Our Remuneration Framework People are at the heart of the Group’s success, enabling us to deliver on our vision and long-term goals. Our remuneration framework focuses on providing competitive fixed pay and variable pay that rewards achievement of the Group’s annual objectives and long-term growth in shareholder value. Remuneration outcomes are aligned with both individual and Group performance, ensuring that employees are rewarded for overall Group achievement as well as their individual contribution to the Group’s success. This aligns remuneration to both individual performance and value creation for shareholders. (a) Remuneration governance The Board annually reviews the Group’s remuneration principles, practices, strategy and approach to ensure they support the Group’s long-term business strategy and are appropriate for a listed company of our size and nature. The Board has delegated to the Remuneration Committee the responsibility for reviewing and making recommendations to the Board regarding compensation arrangements for the Directors, Executive KMP and the balance of the CEO’s direct reports. As at 30 June 2021 the Remuneration Committee was made up of four Non-Executive Directors: David Howell (Chair of the Remuneration Committee), Jennifer Douglas, Bruce Adams and Don Rankin, the majority of whom are independent. The CEO and other Directors attend meetings as required at the invitation of the Committee Chair. The Remuneration Committee assesses the appropriateness of both the nature and amount of remuneration paid to the Executive and Non-Executive KMP on an annual basis by reference to market conditions and current remuneration practices, with the overall objective of ensuring maximum company performance and shareholder benefit from the retention of a quality Board and Executive team. The Committee also engages professional support as required to ensure remuneration practices remain in step with the market as well as the size and nature of the business. (i) Executive KMP remuneration review process CEO REMUNERATION COMMITTEE BOARD • Assesses each Senior Executive’s current year performance based on actual outcomes relative to agreed targets, general performance and market conditions. • Provides appropriate recommendations to the Remuneration Committee on incentive payments for the current year. • Provides appropriate recommendations to the Remuneration Committee of the amount of fixed remuneration, appropriate STI targets and Deferred STI/LTI payments for future measurement periods. • Reviews the CEO’s recommendations with respect to the Senior Executive team and provides appropriate recommendations to the Board. • Assesses CEO’s current year performance and remuneration outcomes against agreed targets, formulating a recommendation to the Board. • Provides appropriate recommendations to the Board of the amount of the CEO’s fixed remuneration, and appropriate STI and LTI targets for the future measurement period, considering general performance, market conditions and other external factors. • Reviews the Remuneration Committee’s recommendations. • Approves current year STI and LTI plans. • Approves the remuneration structure for future measurement periods, including STI and LTI targets. Hansen Technologies Ltd Annual Report 2021 19 (ii) Non-Executive Directors remuneration review process Non-Executive Directors’ remuneration is governed by resolutions passed at a General Meeting of the Shareholders. During the AGM held on 21 November 2019, shareholders approved an increase to the Non-Executive Directors’ maximum remuneration payable from $520,000 to $630,000. No increase in fees was sought for this financial year. Non-Executive Directors are excluded from participation in the Company’s equity incentive plans. (iii) Independent advice To support the review of the 2021 remuneration framework, the Remuneration Committee has considered the independent information, observations and previous advice from PricewaterhouseCoopers (PwC) in relation to remuneration strategy, structure and market practice. Potential conflicts of interest were considered by the Committee, and both the Committee and the Board are satisfied that the advice provided by PwC was free from undue influence. Any advice provided by PwC was used as a guide only and was not a substitute for detailed consideration of all the relevant issues by the Committee. No remuneration recommendations, as defined by the Corporations Act 2001, were provided during the year. (b) Remuneration structure (FY21 Plan) OBJECTIVE COMPONENT AND FORM ASSESSMENT Attract and retain employees with the skills and experience associated with the role. Total Fixed Remuneration (TFR) Cash + non-cash benefits Fixed Market data, individual experience and performance Incentivise and reward achievement of annual performance objectives and business outcomes. Align motivations with shareholder interests and creation of long-term value. Cash Annual performance based on financial and non-financial targets Enhanced short-term incentives Deferred performance rights (2 years) Variable (‘at-risk’) Continuous employment (i) Total Fixed Remuneration (TFR) TFR typically includes base salary and superannuation contributions and may include, at the discretion of the Board, other benefits such as a motor vehicle (aggregated with associated fringe benefits tax to represent the total employment cost to the Group). TFR is determined with reference to available market data, the scope of an individual’s role and the qualifications and experience of the individual, as well as geographic location. TFR is reviewed annually to account for market movements and individual performance outcomes. See page 31 for a summary of Executive KMP contracts. Hansen Technologies Ltd Annual Report 2021 20 REMUNERATION REPORT CONTINUED (ii) FY21 Enhanced STI Plan Objective How is it paid? To incentivise and align rewards attainable by Executive KMP with the achievement of specific annual objectives of the Group and the creation of shareholder value. On achievement of specific annual financial and non-financial KPIs, 40% of TFR for the CEO and 25% of TFR for other Executive KMP will be paid through annual cash entitlements. In addition, 50% of TFR for the CEO and 25% of TFR for other Executive KMP will be awarded as equity, subject to a two-year deferral period during which recipients must remain employed by the Company. How much can executives earn? Target benefit is set at 90% of TFR for the CEO and 50% of TFR for other Executive KMP. These are subject to the following minimum and target performance thresholds: Financial KPIs (70% total STI) 150% 125% 100% 75% 50% 25% 0% % STI awarded (financial component) (97% to 103% achievement) 100% of financial STI awarded (93% to 97% achievement) 0% to 100% of financial STI awarded on linear bases (0% to 93% achievement) No award (103% to a maximum 110% achievement) 100% to 150% of financial STI awarded on linear bases < 80% 85% 90% 95% 100% 105% 110% 115% >120% Financial KPI achievement How is performance measured? Non-financial KPIs (30% total STI) Non-financial KPIs are assessed and awarded up to a maximum of 100% based on specific outcomes. Performance measures (KPIs) selected reflect financial, strategic and operational objectives relevant to the level and function of the role that are central to achievement of delivering the best possible outcome over the next 12 months given the current economic environment. Financial measures selected are measures against which management and the Board assess the short-term financial performance of the Group. Strategic and operational objectives are assigned to each individual to drive specific outcomes considered to be of strategic importance to the Group within that individual’s level of responsibility. These objectives are determined by the CEO and the Board in accordance with the process set out on page 18. The weightings for each performance measure that comprise the total STI opportunity are set out below: The selection of non-financial KPIs varies depending on each KMP’s roles and responsibilities within the Group. These may include achievement of specific strategic projects that drive the best possible outcome over the next 12 months. Each KMP may have a number of separate non- financial KPIs. Achievement of each individual’s non-financial KPIs is determined by reference to an assigned performance rating determined by the CEO and the Board at the end of the financial year in accordance with the process described on page 18. 30% 70% Financial KPIs (budgeted revenues and EBITDA) Non-financial KPIs Achievement of financial KPIs is determined by reference to the Group’s audited accounts for the year in question. No payment is made in respect of financial KPIs to any KMP if the target amount is not met for the Group (set at 93% of budgeted revenue and EBITDA). The Board retains final discretion over incentive payments to ensure outcomes appropriately reflect performance and achieve objectives of the executive incentive scheme. Hansen Technologies Ltd Annual Report 2021 21 What happens if an executive leaves? If an eligible executive ceases employment with the Group during the performance period other than by way of dismissal or resignation (e.g., death, total and permanent disablement, redundancy, retrenchment or retirement with prior written consent of the Board) then the cash entitlements and the equity incentives will be awarded on a pro-rata basis according to the eligible period of time served up until the termination date. Where termination occurs by way of dismissal or resignation prior to the end of the measurement period, the cash component may be paid on a pro-rata basis. All equity entitlements are lost, unless otherwise determined by the Board. If termination of employment occurs for serious misconduct all vested and unvested rights will be forfeited and will lapse. What are the performance rights entitlements? Performance rights 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 vest on the vesting date and are converted to shares. Are there any restrictions attached to the performance rights? The Group prohibits Executive KMP from entering into arrangements to protect the value of unvested equity awards. The prohibition includes entering into contracts to hedge their exposure to any awards as part of their remuneration package. Changes from the FY20 STI and LTI plan Performance rights cannot be transferred to, or vest in, any person or body corporate other than the Executive KMP. The LTI Program has been suspended and an enhanced STI program to reward the Executive Team based on specific annual financial and non-financial KPIs has been put in place. For all KMP other than the CEO, there has been a reduction of 5% of TFR. The resulting 50% will be paid 50% in cash and 50% in equity, subject to a two-year deferral. For the CEO, with a total opportunity of 90%, 40% of the entitlement will be paid in cash with 50% in equity, subject to a two-year deferral. KPIs are structured in a way that the Company will be in the best position to manage the impact of the current environment, whilst being mindful of the longer term to ensure the business is optimally placed for future years. 3. How reward was linked to performance (a) Performance against Enhanced STI Plan A summary of key measurement criteria of the Group’s financial performance for the financial years ended over the last six financial years is below. Operating Revenue ($m) Reported EBITDA* ($m) 350 300 250 200 150 100 50 0 5-year CAGR: 16% 301.4 307.7 230.8 231.3 174.7 149.0 2016 2017 2018 2019 2020 2021 140 120 100 80 60 40 20 0 5-year CAGR: 21% 116.6 81.4 59.3 54.6 45.5 45.1 2016 2017 2018 2019 2020 2021 * Reported EBITDA is a non-IFRS term that relates to Earnings before Interest, Tax, Depreciation and Amortisation. Hansen Technologies Ltd Annual Report 2021 22 REMUNERATION REPORT CONTINUED For FY21, budget targets were established for Group Revenue and EBITDA and the STI financial payment gate was set with respect to these targets. Both the Group Revenue and EBITDA were above the budget thresholds this year and all non-financial goals were met for the STIs to be awarded. Refer to the operational and financial review section of the Directors’ Report for further information about the Group’s FY21 performance. FY21 FY20 Total Opportunity $ 1,128,997 276,742 278,092 300,262 – Awarded 70% Financial2 150% Awarded 30% KPIs2 100% Total Opportunity $ 371,423 Awarded 70% Financial3 100% Awarded 30% KPIs3 100% 150% 150% 150% – 100% 100% 100% – 143,496 144,196 138,191 136,769 100% 100% 100% 100% 100% 100% 100% 100% Andrew Hansen Cameron Hunter Darren Meade Graeme Taylor Niv Fernando1 1. Niv Fernando resigned on 31 July 2020. 2. For FY2021, a portion of the incentives will be awarded as equity to all KMP, subject to a two-year deferral during which recipients must remain employed by the Company. 3. For FY2020, a portion of the incentives will be awarded as equity to all KMP except for the CEO, subject to a two-year deferral during which recipients must remain employed by the Company. (b) Performance against equity outcomes Our legacy STI and LTI plans will continue to be measured and reported through until the Group’s FY23 Remuneration Report. As a consequence of legacy STI and LTI plans and the current enhanced STI framework, in FY21 we have three different years of awards that will be tested, and in due course, will subsequently vest or lapse based on their differing terms and vesting conditions. The following table sets out the different legacy awards that were in place in FY21 or are currently in place as at the end of FY21, each with their specific grant details and performance measures: Grant date 2 Jul 2017 Security Performance Measure/s Right EPSa, rTSR, 3-yr cont. employment Sect. 3 Ref. (b)(i) Status 2 Jul 2018 Right EPSa, rTSR, 3-yr cont. employment (b)(i) 2 Sept 2019 Right 2-yr cont. employment after achieving FY20 STI measures1 (b)(ii) 2 Sept 2019 Right EPSa, rTSR, 3-yr cont. employment (b)(i) 1 July 2020 Right 2-year cont. employment after achieving FY21 STI measures (b)(ii) 2018 and prior 2019 2020 2021 2022 2023 1. Applies to all KMP, except for the CEO. Measurement period Yet to vest 150% of EPSA-linked rights vested and the rTSR-linked rights did not satisfy market conditions. 150% of EPSa-linked rights and 150% of the rTSR-linked rights will vest on 31 August 2021. Hansen Technologies Ltd Annual Report 2021 23 (i) Performance against LTI plan measures (2017 to 2019 LTI plans) A summary of key measurement criteria of the Group’s performance relevant for assessing shareholder value creation over the last four financial years is shown below: Adjusted EPS (EPSa) (cents) Dividends paid* (cents per share) 40 35 30 25 20 15 10 5 0 36.7 19.8 17.1 23.9 2018 2019 2020 2021 14 12 10 8 6 4 2 0 12.0 7.0 6.0 6.0 FY18 FY19 FY20** FY21 * Amount of dividends paid represents the return on shareholder value. However, the amount of dividends paid is not in itself a performance measure included in the FY18 to FY20 plans, but is included as part of the calculation of relative TSR. ** FY20 dividend amount has been amended to reflect the dividends paid in FY20. The previous amount disclosed the dividends declared for FY20. Share price performance relative to S&P/ASX Small Ordinaries Index for the previous four years: 180% 160% 140% 120% 100% 80% 60% 40% 20% 0% July 2017 July 2018 July 2019 July 2020 July 2021 HSN.AX S&P/ASX Small Ords Hansen Technologies Ltd Annual Report 2021 24 REMUNERATION REPORT CONTINUED Performance outcomes against FY18 (2017) LTI plan measures Performance rights under the FY18 (2017) LTI plan exceeded the required performance measurement hurdles in relation to the EPSa CAGR measure and vested on an accelerated basis paying 150% of the entitlement on 31 August 2020. A total of 163,077 performance rights granted to Executive KMP have been exercised and converted to shares on that date. Performance rights associated with the TSR hurdle did not satisfy market conditions. Performance outcomes against FY19 (2018) LTI plan measures Performance rights under the FY19 (2018) LTI plan exceeded the required performance measurement hurdles in relation to the EPSa CAGR measure and exceeded the market conditions in relation to the TSR measure. The FY19 LTI plan will vest on an accelerated basis paying 150% of the entitlement on 31 August 2021. The below table sets out the LTI performance targets and outcomes under the FY19 (2018) LTI plan framework: Measure Relative TSR Minimum target Maximum target Actual outcome 75th percentile 50th percentile 77.16% Outstanding rights at 1 July 2020 138,485 Forfeited by termination (15,619) Additional rights that will vest 61,434 Rights that will vest and are exercisable at reporting date 184,300 EPSa CAGR 6% CAGR 10% CAGR 22.9% CAGR 138,485 (15,619) 61,434 Total rights 276,970 (31,238) 122,868 184,300 368,600 Performance outcomes against FY20 (2019) LTI plan measures Performance rights granted in FY20 (2019) LTI plan have performance and market measurement criteria attached that will be measured over three years. Assessment and vesting (where conditions are satisfied) will happen after the completion of FY22. (ii) Performance rights granted in FY21 and FY20 The table below sets out the value of LTI and Deferred STI performance rights granted in FY21 (2020) and FY20 (2019) LTI plans. Deferred STI Andrew Hansen Cameron Hunter Darren Meade Graeme Taylor Niv Fernando1 LTI Andrew Hansen Cameron Hunter Darren Meade Graeme Taylor Niv Fernando1 FY21 FY20 Value granted* $ 426,379 94,130 94,589 90,650 – – – – – – – 28,829 28,970 27,763 27,478 339,511 59,962 60,255 57,745 57,151 * Represents the value of performance rights at grant date, calculated in accordance with AASB 2 Share-based Payment. The fair value of the rights has been determined by an independent external valuation expert in accordance with Australian Accounting Standards. The fair value of the STI rights was based fully on Black Scholes option pricing model (BSOPM) while the fair value of the LTI rights was based on Monte Carlo simulation option pricing model for the TSR component and BSOPM for the EPSa component. Note 17 to the Group’s financial statements outlines the valuation methodology and key inputs and assumptions to the valuation in greater detail. 1. Niv Fernando resigned on 31 July 2020. The rights granted in FY20 have been forfeited in FY21. Hansen Technologies Ltd Annual Report 2021 25 (c) Total remuneration mix The following diagrams set out the proportional mix of remuneration for the CEO and KMP at both the target amount and the actual remuneration achieved for FY21: TARGET ACTUAL1 26% 53% 31% 45% CEO Total Fixed Remuneration Short-Term Incentive Deferred Short-Term Incentive 21% 24% 17% 67% 20% 60% KMPs 17% Total Fixed Remuneration Short-Term Incentive Deferred Short-Term Incentive 20% 1. Target and actual remuneration mix is calculated based on the combination of each CEO and KMP’s total fixed remuneration for FY21, the value of STIs awarded in relation to actual performance outcomes for FY2021 in cash and the value of deferred STIs under the FY21 Enhanced STI plan. The proportional mix of remuneration for KMP is based on an average amount. The difference between the target and actual remuneration mix relates to the overachievement of financial targets measure and the value of equity-based incentives, of which the target was based on the share price, while the actual was based on the fair value of the performance rights at grant date using Black Scholes option pricing model. Hansen Technologies Ltd Annual Report 2021 26 REMUNERATION REPORT CONTINUED 4. Remuneration details: Executive KMP (a) Statutory remuneration details Details of Executive KMP remuneration for the 2020 and 2021 financial years are set out in the table below: Fixed Remuneration Variable Remuneration Total Cash Salary $ 860,925 Year 2021 Non- monetary benefits $ 30,370 Super $ 25,000 Annual & long service leave $ 15,653 Total $ 931,948 STI1,2 awarded $ 693,291 LTI2 fair value $ Total $ 546,663 2,171,902 Perform- ance related% 57% 2020 860,926 25,000 34,848 72,785 993,559 371,423 410,874 1,775,856 2021 404,324 25,000 15,785 24,242 469,351 190,339 115,359 775,049 2020 392,398 25,000 11,504 14,952 443,854 136,451 95,321 675,626 2021 396,370 25,000 2020 395,749 25,000 2021 403,823 25,000 2020 381,264 25,000 2021 269,531 18,254 2020 377,115 25,000 – – – – – – 8,108 429,478 191,268 115,839 736,585 11,414 432,163 137,116 94,777 664,056 37,139 465,962 200,178 111,903 778,043 (15,988) 390,276 131,407 91,796 613,479 (905) 286,880 – (25,752) 261,128 (10%) 7,981 410,096 130,054 90,851 631,001 2021 2,334,973 118,254 46,155 84,237 2,583,619 1,275,076 864,012 4,722,707 2020 2,407,452 125,000 46,352 91,144 2,669,948 906,451 783,619 4,360,018 44% 39% 34% 42% 35% 40% 36% 35% 45% 39% Executive KMP Andrew Hansen Cameron Hunter Darren Meade Graeme Taylor Niv Fernando3 Total 1. Represents STI awarded and accrued in relation to actual performance during the 2021 and 2020 financial years. This includes performance rights granted as remuneration that are valued at grant date in accordance with AASB 2 Share-based Payment and amortised over vesting period. 2. Performance rights granted as remuneration are valued at grant date in accordance with AASB 2 Share-based Payment and amortised over vesting period. 3. Niv Fernando resigned on 31 July 2020. Cash salary for FY21 includes base salary of $29,738 and termination benefits of $239,793. Annual and long service leave for FY21 is the net of annual leave paid of $50,150 and long service leave not vested of $51,055. (b) Options awarded, vested and lapsed during the year There were no options awarded, vested and lapsed during the year. Hansen Technologies Ltd Annual Report 2021 27 (c) Performance rights awarded, vested and lapsed during the year Performance rights issued under the Group’s FY21 (2020) Enhanced STI plan during the year are subject to the service and performance criteria as described on pages 19 to 21. The following table sets out details of performance rights granted to executives: Name and grant date Andrew Hansen* 1 Jul 2020 2 Sep 2019 2 Jul 2018 2 Jul 2017 Sub-total Cameron Hunter 1 Jul 2020 2 Sep 2019 2 Sep 2019 2 Jul 2018 2 Jul 2017 Sub-total Darren Meade 1 Jul 2020 2 Sep 2019 2 Sep 2019 2 Jul 2018 2 Jul 2017 Sub-total Graeme Taylor 1 Jul 2020 2 Sep 2019 2 Sep 2019 2 Jul 2018 2 Jul 2017 Sub-total Niv Fernando 2 Sep 2019 2 Sep 2019 2 Jul 2018 2 Jul 2017 Sub-total Sub-total Sub-total Grand Total Type STI1 LTI LTI3 LTI STI1 STI2 LTI LTI3 LTI STI1 STI2 LTI LTI3 LTI STI1 STI2 LTI LTI3 LTI STI2 LTI LTI3 LTI STI1,2 LTI Opening balance Granted Forfeited Over-achievement of performance measure Market condition not satisfied Vested and exercised Closing balance at 30 June 2021 – 157,918 119,969 148,459 116,972 – – – 385,400 157,918 – 34,863 9,270 21,188 32,775 25,824 89,057 – – – – 34,863 – 35,033 9,315 21,291 32,935 25,157 88,698 – – – – 35,033 – 33,574 8,927 20,405 31,563 24,869 85,764 8,835 20,195 31,238 24,613 84,881 36,347 697,453 733,800 – – – – 33,574 – – – – – 261,388 – 261,388 – – – – – – – – – – – – – – – – – – – – – – (8,835) (20,195) (31,238) – (60,268) (8,835) (51,433) (60,268) – – – 29,243 29,243 – – – – 6,456 6,456 12,262 – – – 6,289 6,289 – – – – 6,218 6,218 – – 6,154 6,154 – 54,360 54,360 – – – – – – (58,486) (87,729) 157,918 119,969 148,459 – (58,486) (87,729) 426,346 – – – – – – – – (12,912) (19,368) 34,863 9,270 21,188 32,775 – (12,912) (19,368) 98,096 – – – – – – – – (12,578) (18,868) 35,033 9,315 21,291 32,935 – (12,578) (18,868) 98,574 – – – – – – – – (12,435) (18,652) 33,574 8,927 20,405 31,563 – (12,435) (18,652) 94,469 – – – – – – (12,307) (18,460) (12,307) – (18,460) – (108,718) (163,077) (108,718) (163,077) – – – – – 288,900 428,585 717,485 * The Board has resolved to issue 157,918 rights to Andrew Hansen, the Chief Executive Officer and an additional 55,271 rights on overachievement of targets, as part of the 2020 Enhanced STI plan issued in FY21. The issue of these rights was approved by shareholders at the Company’s Annual General Meeting on 26 November 2020. Any differences in the fair value of the performance rights between the original grant date by the Board and the date of shareholder approval is not material to remuneration awarded. 1. STI performance rights granted on 1 July 2020 represent 56% and 50% of the total short-term incentives awarded to the CEO and the rest of the KMP, respectively on achievement of specific annual financial and non-financial KPIs. The performance rights have exceeded the required specific annual financial and non-financial KPIs and will vest on an accelerated basis paying 135% of the entitlement on 30 June 2023. 2. STI performance rights granted on 2 September 2019 represent 25% of the total short-term incentives awarded to the KMP on achievement of specific annual financial and non-financial KPIs. This applies to all KMP except for the CEO. 3. Performance rights in relation to the EPSa CAGR and TSR measures for FY19 (2018) LTI plan exceeded the required performance measurement hurdles and market conditions, respectively and will vest on an accelerated basis paying 150% of the entitlement on 31 August 2021. Hansen Technologies Ltd Annual Report 2021 28 REMUNERATION REPORT CONTINUED The terms and conditions of each grant of rights affecting the remuneration in the current or future reporting period are as follows. Grant date 2 Jul 2018 Vesting date 31 Aug 20211 2 Sept 2019 30 Jun 2022 2 Sept 2019 30 Jun 2022 1 July 2020 30 June 2023 Type LTI STI3 LTI STI3 Value per right at grant date $3.01 Performance achieved 150%2 % Vested – $3.11 $2.83 $2.70 100% – 135%4 – – – Number of Rights on 30 June 2021 245,732 27,512 182,853 261,388 1. The vesting date for performance rights granted on 2 July 2018 is the date on which the Board notifies the executive that the options and rights have vested, after the outcomes for the measurement period have been determined and satisfaction of the performance conditions have been assessed. This is likely to be the date as stated in the table. 2. Performance rights in relation to the EPSa CAGR and TSR measures exceeded the required performance measurement hurdles and market conditions, respectively and will vest on an accelerated basis paying 150% of the entitlement on 31 August 2021. 3. Deferred STI plans are subject to a two-year deferral period of which the Executive KMP must be employed. Refer to 3(a) Performance Against STI Outcomes. 4. STI performance rights granted on 1 July 2020 have exceeded the required specific annual financial and non-financial KPIs and will vest on an accelerated basis paying 135% of the entitlement on 30 June 2023. 5. FY2022 Incentive plan (a) Short-term incentive plan Objective How is it paid? How much can executives earn? To incentivise and align rewards attainable by Executive KMP with the achievement of specific annual objectives of the Group and the creation of shareholder value. Annual cash entitlement on achievement of specific annual financial and non-financial KPIs. Target benefit is set at 40% of TFR for the CEO and 25% of TFR for other Executive KMP. These are subject to the following minimum and target performance thresholds: % STI awarded (financial component) (97% to 103% achievement) 100% of financial STI awarded (93% to 97% achievement) 0% to 100% of financial STI awarded on linear bases (0% to 93% achievement) No award (103% to a maximum 110% achievement) 100% to 150% of financial STI awarded on linear bases Financial KPIs (70% total STI) 150% 125% 100% 75% 50% 25% 0% < 80% 85% 90% 95% 100% 105% 110% 115% >120% Financial KPI achievement Non-financial KPIs (30% total STI) Non-financial KPIs are assessed and awarded up to a maximum of 100% based on specific outcomes. Hansen Technologies Ltd Annual Report 2021 29 How is performance measured? Performance measures (KPIs) selected reflect financial, strategic and operational objectives relevant to the level and function of the role that are central to achievement of delivering the best possible outcome over the next 12 months given the current economic environment. Financial measures selected are measures against which management and the Board assess the short-term financial performance of the Group. Strategic and operational objectives are assigned to each individual to drive specific outcomes considered to be of strategic importance to the Group within that individual’s level of responsibility. These objectives are determined by the CEO and the Board in accordance with the process set out on page 18. The weightings for each performance measure that comprise the total STI opportunity are set out below: The selection of non-financial KPIs varies depending on each KMP’s roles and responsibilities within the Group. These may include achievement of specific strategic projects that drive the best possible outcome over the next 12 months. Each KMP may have a number of separate non-financial KPIs. Achievement of each individual’s non-financial KPIs is determined by reference to an assigned performance rating determined by the CEO and the Board at the end of the financial year in accordance with the process described on page 18. 30% Achievement of financial KPIs is determined by reference to the Group’s audited accounts for the year in question. No payment is made in respect of financial KPIs to any KMP if the target amount is not met for the Group (set at 93% of budgeted revenue and EBITDA). 70% Financial KPIs (budgeted revenues and EBITDA) Non-financial KPIs What happens if an executive leaves? The Board retains final discretion over incentive payments to ensure outcomes appropriately reflect performance and achieve objectives of the executive incentive scheme. If an eligible executive ceases employment with the Group during the performance period other than by way of dismissal or resignation (e.g., death, total and permanent disablement, redundancy, retrenchment or retirement with prior written consent of the Board) then the cash entitlements will be awarded on a pro-rata basis according to the eligible period of time served up until the termination date. Where termination occurs by way of dismissal or resignation prior to the end of the measurement period, the cash component may be paid on a pro-rata basis. If termination of employment occurs for serious misconduct all vested and unvested rights will be forfeited and will lapse. Changes from the FY21 Enhanced STI Plan The Board has discontinued the enhanced STI plan and has reverted to a remuneration structure to reward the Executive KMP through the STI and LTI plans. For the STI plan, all incentives will be paid in cash upon achievement of specific annual and non-financial KPIs. KPIs are structured in a way that the Group will be in the best position for the next financial year, whilst being mindful of the longer term to ensure the business is optimally placed for future years. (b) Long-term incentive plan Objective To align the rewards attainable by Executive KMP with the achievement of particular long-term objectives of the Group and achievement of increasing shareholder value. Eligibility to participate in the LTI scheme is determined by the Board and is targeted at senior executives whose role contributes significantly to the performance of the Group. How is it paid? LTIs are awarded as performance rights on achievement of certain thresholds reflective of shareholder value delivered. Each performance right entitles the eligible executive to be issued with a share. Hansen Technologies Ltd Annual Report 2021 30 REMUNERATION REPORT CONTINUED How much can executives earn? Performance rights are subject to the service and performance conditions. The target LTI benefit is set as follows: • CEO LTI: 50% of TFR delivered as performance rights subject to vesting conditions; and • KMP LTI: 25% of TFR delivered as performance rights subject to vesting conditions. The number of performance rights issued is based on each Executive’s target LTI benefit divided by the market value of the rights. The market value of rights granted is based on the volume-weighted average price of the Company’s shares during the five-day period before grant date. How is performance measured? LTI benefits of up to 150% of target LTI is payable where performance criteria are exceeded. Vesting of the LTI awards are subject to the following criteria: 1. Three years of continuous employment with the Group from 1 July 2021 to 30 June 2024. 2. Achievement of the thresholds over the same three-year period as set out below: Relative Total Shareholder Return (rTSR) 50% The percentage change in a company’s share price, plus the effect of any dividends paid, over the measurement period, relative on a ranked percentile basis to a comparative group (S&P/ASX Small Ordinaries Index). Relative TSR is a measure widely understood and accepted by shareholders, as it directly measures shareholder value creation. Revenue Based on the achievement of a compounded annual growth rate of 12.5% of revenue over the measurement period. Revenue growth is selected as it is considered a relevant indicator linking financial performance with shareholder value. 50% Revenue Relative Total Shareholder Return (rTSR) The proportion of rights that may vest based on relative TSR performance is determined based on the following vesting schedule: Relative TSR performance < 50th percentile Between 50th to 75th percentile > 75th percentile Percentage of performance rights that will vest None 100% to 150% on a linear basis 150% The proportion of rights that may vest based on Revenue CAGR is determined based on the following vesting schedule: Percentage achievement against 12.5% Revenue CAGR < 93% > 93% < 97% > 97% < 103% >103% <110% Percentage of performance rights that will vest None 0% to 100% on a linear basis 100% 100% to 150% on a linear basis The Board has discretion to change the amount awarded if the Board considers the outcome to be misaligned given the circumstances that prevailed over the relevant measurement period and the experience of shareholders. Performance rights will be forfeited if performance and market conditions are not met. Hansen Technologies Ltd Annual Report 2021 31 What happens if an executive leaves? If an eligible executive ceases employment with the Group during the performance period other than by way of dismissal or resignation (e.g. death, total and permanent disablement, redundancy, retrenchment or retirement with prior written consent of the Board) then the unvested performance rights will vest on a pro-rata basis according to the eligible period of time served up until the termination date. Where termination occurs by way of dismissal or resignation prior to the vesting of the performance rights, unvested rights may vest on a pro-rata basis according to the eligible period of time served up until the termination date at the Board’s discretion. If termination of employment occurs for serious misconduct all vested and unvested rights will be forfeited and will lapse. (c) Changes from FY21 Enhanced STI Plan The Board has discontinued the enhanced STI program and has reverted to a remuneration structure to reward the Executive KMP through STI and LTI plans. For the STI plan, the deferred equity component has been removed and all incentives shall be paid in cash upon achievement of specific annual and non-financial KPIs. KPIs are structured in a way that the Group will be in the best position to manage year ahead, whilst being mindful of the longer term to ensure the business is optimally placed for the recovery ahead. For the LTI plan, all incentives will be paid through equity in the form of performance rights, which will vest and will convert to shares on achievement of thresholds reflective of shareholder value delivered. Previously, one of the financial measurement criteria was EPSa growth. The FY22 LTI scheme removes this measurement and introduces a new revenue measurement criteria based on a revenue CAGR metric aligned with the Group goal of achieving $500 million turnover by 2025. 6. Contractual arrangements with Executive KMP Remuneration and other conditions of employment are set out in each executive’s employment contract. The key elements of these employment contracts are summarised below: Component Total Fixed Remuneration Contract duration Notice by individual/company Termination of employment (without cause) Approach for CEO $928,557 Ongoing 6 months Approach for other Executive KMP Range between $410,000 and $445,000 Ongoing 1 month The Board has discretion to allow some or all STI entitlements to be paid out on a pro- rata basis aligned to time, where termination occurs by way of resignation or dismissal (e.g., death, total and permanent disablement, redundancy, retrenchment or retirement with prior written consent of the Board). In other forms of without cause terminations, the STI will be reduced proportionately to reflect the portion of the Measurement Period, but there is no other impact to the executive’s entitlement. The Board has discretion to allow unvested LTIs to vest on a pro-rate basis aligned to time. Where this discretion is not exercised, such unvested options or rights will lapse. Termination of employment (with cause) STI is forfeited. All unvested LTIs and vested, but unexercised LTIs are forfeited. Hansen Technologies Ltd Annual Report 2021 32 REMUNERATION REPORT CONTINUED 7. Remuneration details: Non-Executive KMP Non-Executive Directors enter into service agreements through a letter of appointment. Non-Executive Director fees are determined with reference to market levels and the need to attract high quality Directors. Non-Executive Directors do not receive any variable or performance-based remuneration. The Non-Executive Director fee pool currently has a maximum value of $630,000 per annum, as approved by shareholders at the 2019 AGM. The annual fees provided to Non-Executive Directors, inclusive of superannuation, are shown below: Board fees Chairman Other Non-Executive Directors Committee fees Audit and Risk Committee – chair Audit and Risk Committee – member Remuneration Committee – chair Remuneration Committee – member Non-Executive Director David Trude Bruce Adams Jennifer Douglas Don Rankin David Osborne David Howell Total 2021 ($) 140,000 80,000 9,000 5,000 9,000 5,000 Fixed Remuneration Non-monetary benefits ($) – – – – – – – – – – – – – – 2020 ($) 127,541 72,000 9,000 5,000 9,000 5,000 Total ($) 134,166 127,541 80,333 75,875 85,333 80,042 92,303 49,150 80,333 75,875 89,333 84,225 561,801 531,397 Year 2021 2020 2021 2020 2021 2020 20211 2020 2021 2020 2021 2020 2021 2020 Salary and Fees ($) 122,526 116,476 73,364 69,293 77,930 73,098 83,866 44,236 73,364 69,293 81,583 76,918 512,633 484,647 Super ($) 11,640 11,065 6,969 6,582 7,403 6,944 8,437 4,914 6,969 6,582 7,750 7,307 49,168 46,750 1. Don Rankin was appointed Chair of the Audit and Risk Committee and member of the Remuneration Committee at the Board Meeting held on 19 December 2019. Hansen Technologies Ltd Annual Report 2021 33 8. Share-based remuneration disclosures (a) Shareholdings of KMP The number of shares in the Company held by each Non-Executive Director and Executive KMP during the year, including their related parties, is summarised below: Non-Executive Directors David Trude Bruce Adams1 Jennifer Douglas Don Rankin David Osborne1 David Howell Executive KMP Andrew Hansen1 Cameron Hunter Darren Meade Graeme Taylor Niv Fernando2 Joint interest1 Total Received during the year on exercise of: Balance 30 June 2020 Options Performance rights Other changes during the year Balance 30 June 2021 103,956 34,891,417 16,000 25,000 35,125,448 33,666 34,967,499 1,105,882 79,783 135,240 76,079 (69,478,226) – – – – – – – 100,000 100,000 100,000 100,000 – – – – – – – 87,729 19,368 18,868 18,652 18,460 – 3,100 107,056 – – – – 34,891,417 16,000 25,000 35,125,448 (376) 33,290 – 35,055,228 (2,191) (504) (65,193) (194,539) 1,223,059 198,147 188,699 – – (69,478,226) 37,081,744 400,000 163,077 (65,164) 37,385,118 1. Each of Bruce Adams, David Osborne and Andrew Hansen has a joint interest in a single parcel of 34,739,113 shares as at the date of this report. 2. Niv Fernando resigned on 31 July 2020. (b) Shares issued on exercise of options and performance rights Options All remaining options on issue as at the beginning of the year have been exercised at $2.67 per share. The below table sets out the value of options under legacy LTI plans that were exercised in FY21. There were no options and rights exercised in FY20. Cameron Hunter Darren Meade Graeme Taylor Niv Fernando Number of shares issued 100,000 Value exercised* $ 136,416 100,000 100,000 100,000 158,169 158,169 280,000 * Represents the intrinsic value of options that were exercised during the financial year 2021, which is the net dollar value of shares realised from the exercise of profitable options. Intrinsic value is calculated as the difference between the exercise price and the underlying share price at the date of the exercise. For example, an option with an exercise price of $2.00 exercised when the underlying share price is $5.00 has an intrinsic value of $3.00. Hansen Technologies Ltd Annual Report 2021 34 REMUNERATION REPORT CONTINUED Performance rights On 31 August 2020 the FY18 (2017) plan vested and therefore, 163,077 shares were issued to Executive KMP on that date. Refer to 3(b) Performance outcomes against FY18 (2017) LTI plan. The share price as at 31 August 2020 was $4.15 per share. The below table sets out the value of performance rights under FY18 (2017) LTI plan that vested on 31 August 2020. Andrew Hansen Cameron Hunter Darren Meade Graeme Taylor Niv Fernando Number of shares issued 87,729 Value exercised* $ 364,075 19,368 18,868 18,652 18,460 80,377 78,302 77,406 76,609 * Represents the intrinsic value of performance rights that were exercised during the financial year 2021, which is the value of shares at the date of the exercise. 9. Other transactions with KMP Rental agreements with the CEO and other KMP The Group leases its Melbourne head office and its York Street (South Melbourne) office from entities in which the CEO is a Director. The terms and conditions of the lease and other property 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. In addition, the Group rents an apartment in New York City, USA, on an as-required basis at a rate favourable to the Group. The apartment is owned by the CEO. The total lease and rental payments during the 2021 financial year related to these arrangements were $1,620,420. Bruce Adams and David Osborne have a joint indirect interest in the entity that is a lessor to the Melbourne and South Melbourne arrangements as described above. The terms and conditions of the lease arrangements have not changed in the current financial year. Signed in accordance with a resolution of the Directors. David Trude Director Melbourne 24 August 2021 Andrew Hansen Director Hansen Technologies Ltd Annual Report 2021 AUDITOR’S INDEPENDENCE DECLARATION 35 Hansen Technologies Ltd Annual Report 2021AUDITOR’S INDEPENDENCE DECLARATIONAs lead auditor for the audit of the financial report of Hansen Technologies Limitedanditscontrolled entitiesforthe year ended 30 June 2021, I declare that, to the best of my knowledge and belief, there have been no contraventions of:(i)the auditor independence requirements of the Corporations Act 2001in relation to the audit; and(ii)any applicable code of professional conduct in relation to the audit.RSM AUSTRALIA PARTNERSM PARAMESWARANPartnerDated: 24 August 2021Melbourne, Victoria 36 Hansen Technologies Ltd Annual Report 2021 FINANCIAL REPORT 37 Consolidated Statement of Comprehensive Income 38 Consolidated Statement of Financial Position 39 Consolidated Statement of Changes in Equity 40 Consolidated Statement of Cash Flows 69 Section D: People 69 16. Employee benefits 71 17. Share-based payments 75 Section E: Capital and Financial Risk Management 75 18. Financial risk management 79 19. Borrowings 81 20. Contributed capital 82 21. Dividends 83 22. Reserves and retained earnings 83 23. Commitments and contingencies 84 Section F: Group Structure 84 24. Parent entity information 86 Section G: Other disclosures 86 25. Related party disclosures 88 26. Auditor’s remuneration 89 27. Deed of cross guarantee 91 28. New and amended accounting standards and interpretations 93 29. Subsequent events 41 Notes to the Financial Statements 41 Section A: Basis of preparation 41 1. Basis of preparation 43 Section B: Performance 43 2. Segment information 47 3. Revenue and other income 50 4. Separately disclosed items 51 5. Profit from continuing operations 52 6. Income tax 55 7. Earnings per share 56 Section C: Working Capital and Operating Assets 56 8. Cash and cash equivalents 57 9. Receivables 58 9. Receivables continued 58 10. Other assets 59 11. Plant, equipment and leasehold improvements 60 12. Intangible assets 63 13. Leases 67 14. Payables 68 15. Other operating provisions CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2021 37 Operating revenue Other income Total revenue and other income Employee benefit 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 Finance costs on borrowings Finance costs on lease liabilities Foreign exchange (losses)/gains Other expenses Total expenses Profit before income tax expense Income tax expense Note 3 3 5 5 5 5 5 5 5 2021 $’000 307,730 2,552 310,282 2020 $’000 301,369 2,320 303,689 (149,046) (168,193) (9,834) (31,053) (3,657) (6,364) (2,573) (11,307) (31,028) (4,324) (9,405) (2,962) (16,964) (15,559) (343) (2,246) (5,378) (4,647) (911) (2,731) (4,403) (6,823) (3,325) (2,827) (8,087) (1,193) 744 (9,559) (240,150) (273,848) 6(a) 70,132 (12,797) 29,841 (4,084) Net profit after income tax expense 57,335 25,757 Other comprehensive (expense)/income Items that may be reclassified subsequently to profit and loss Net gain/(loss) on hedges of net investments Exchange differences on translation of foreign entities, net of tax 22(a) 22(a) 428 (4,720) (802) (13,141) Other comprehensive (expense)/income for the year, net of tax (4,292) (13,943) Total comprehensive income for the year 53,043 11,814 Basic earnings (cents) per share attributable to ordinary equity holders of the Company Diluted earnings (cents) per share attributable to ordinary equity holders of the Company 7 7 28.8 28.5 13.0 12.9 The consolidated statement of comprehensive income is to be read in conjunction with the notes to the financial statements set out on pages 41 to 93. Hansen Technologies Ltd Annual Report 2021 38 CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2021 Current assets Cash and cash equivalents Receivables Accrued revenue Other current assets Total current assets Non-current assets Plant, equipment & leasehold improvements Intangible assets Right-of-use assets Deferred tax assets Other non-current assets Total non-current assets Total assets Current liabilities Payables Borrowings Lease liabilities Current tax payable Provisions Unearned revenue Total current liabilities Non-current liabilities Deferred tax liabilities Borrowings Lease liabilities Provisions Unearned revenue Total non-current liabilities Total liabilities Net assets Equity Share capital Foreign currency translation reserve Share-based payments reserve Retained earnings Total equity Note 8 9 3(a)(ii) 10 11 12 13(a) 6(b) 10 14 19 13(b) 15, 16 3(a)(ii) 6(b) 19 13(b) 15, 16 3(a)(ii) 20 22(a) 22(b) 22(c) 2021 $’000 52,138 77,413 24,303 11,932 2020 $’000 44,492 47,916 21,945 8,357 165,786 122,710 12,590 356,153 16,157 9,404 1,091 11,414 377,660 20,087 9,971 3,681 395,395 422,813 561,181 545,523 37,224 117,507 5,552 10,983 16,352 35,108 222,726 38,038 – 11,322 523 53 24,223 591 5,661 5,632 15,555 24,471 76,133 43,443 157,852 15,384 170 47 49,936 216,896 272,662 293,029 288,519 252,494 145,224 140,952 5,105 7,971 130,219 288,519 9,397 5,404 96,741 252,494 The consolidated statement of financial position is to be read in conjunction with the notes to the financial statements set out on pages 41 to 93. Hansen Technologies Ltd Annual Report 2021 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2021 Contributed Equity $’000 140,952 Reserves $’000 14,801 Balance as at 1 July 2020 Profit after income tax expense for the year Net gain on hedges of net investments Exchange differences on translation of foreign entities, net of tax Total comprehensive income for the year Transactions with owners in their capacity as owners: Employee share options exercised Share-based payment expense – performance rights Equity issued under dividend reinvestment plan Dividends declared Total transactions with owners in their capacity as owners Balance as at 30 June 2021 Balance as at 1 July 2019 Profit after income tax expense for the year Net loss on hedges of net investments Exchange differences on translation of foreign entities, net of tax Total comprehensive income for the year Transactions with owners in their capacity as owners: Employee share options exercised Share-based payment expense – performance rights Equity issued under dividend reinvestment plan Dividends declared Note 22(c) 22(a) 22(a) 20(b) 17(e) 20(b) 22(c) 20, 22 Note 22(c) 22(a) 22(a) 20(b) 17(e) 20(b) 22(c) – – – – 2,363 – 1,909 – 4,272 145,224 Contributed Equity $’000 138,746 – – – – 452 – 1,754 – – 428 (4,720) (4,292) – 2,567 – – 2,567 13,076 Reserves $’000 27,271 – (802) (13,141) 39 Retained Earnings $’000 96,741 57,335 – – Total Equity $’000 252,494 57,335 428 (4,720) 57,335 53,043 – – – 2,363 2,567 1,909 (23,857) (23,857) (23,857) (17,018) 130,219 288,519 Retained Earnings $’000 82,853 25,757 – – Total Equity $’000 248,870 25,757 (802) (13,141) (13,943) 25,757 11,814 – 1,473 – – – – – 452 1,473 1,754 (11,869) (11,869) Total transactions with owners in their capacity as owners 2,206 1,473 (11,869) (8,190) Balance as at 30 June 2020 20, 22 140,952 14,801 96,741 252,494 The consolidated statement of changes in equity is to be read in conjunction with the notes to the financial statements set out on pages 41 to 93. Hansen Technologies Ltd Annual Report 2021 40 CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2021 Cash flows from operating activities Receipts from customers Payments to suppliers and employees Interest received Finance costs on borrowings Finance costs on lease liabilities Income tax paid Net cash provided by operating activities Cash flows from investing activities Proceeds from sale of plant, equipment and leasehold improvements Payments for plant, equipment and leasehold improvements Payments for capitalised software development costs Net cash used in investing activities Cash flows from financing activities Proceeds from options exercised Proceeds from borrowings Repayment of borrowings Repayment of lease liabilities Dividends paid, net of dividend re-investment Net cash used in financing activities Net increase in cash and cash equivalents Cash and cash equivalents at beginning of year Note 3 5 5, 13(b) 8(a) 11 12 20(b) 19(b) 19(b) 13(d) 21 2021 $’000 292,438 (182,914) 19 (3,081) (911) (12,342) 93,209 – (4,927) (12,079) (17,006) 2,363 – (41,673) (6,130) (21,948) (67,388) 2020 $’000 327,443 (243,713) 54 (6,760) (1,193) (6,202) 69,629 616 (5,041) (14,021) (18,446) 452 4,900 (32,733) (6,982) (10,115) (44,478) 8,815 6,705 44,492 38,288 Effects of exchange rate changes on cash and cash equivalents (1,169) (501) Cash and cash equivalents at end of the year 8 52,138 44,492 The consolidated statement of cash flows is to be read in conjunction with the notes to the financial statements set out on pages 41 to 93. Hansen Technologies Ltd Annual Report 2021 41 NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2021 Section A: Basis of preparation This section describes the basis in which the Group’s financial statements are prepared. Specific accounting policies are described in the note to which they relate. The accounting policies have been consistently applied, unless otherwise stated. 1. Basis of preparation (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 the Group, being Hansen Technologies Limited (the Company) and its controlled entities as a consolidated entity. The Company is a company limited by shares, incorporated and domiciled in Australia. The address of the Company’s registered office and principal place of business is 2 Frederick St, Doncaster Victoria 3108 Australia. The Company is a for-profit entity for the purposes of preparing the Group’s financial statements. This Financial Report was authorised for issue by the Directors on 24 August 2021. The Group’s consolidated financial statements have been presented in a streamlined manner to simplify the information disclosed and to make it more relevant for users. Similar notes have been grouped into sections with relevant accounting policies and judgements and estimate disclosures incorporated within the notes to which they relate. Compliance with IFRS The Group’s consolidated financial statements 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 and liabilities as described in the accounting policies. Significant accounting estimates and judgements The preparation of the Financial Report requires the use of certain estimates and judgements in applying the Group’s accounting policies. 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 in each of the affected notes. Those estimates and judgements significant to the Financial Report are disclosed in the following notes: Significant accounting estimate and judgement Provision for expected credit losses of trade receivables Capitalisation of research and development costs Impairment of goodwill Impairment of non-financial assets other than goodwill Determining the lease term of contracts with renewal and termination options – Group as a lessee Estimating the incremental borrowing rate Share-based payments Note 9 Page reference 58 12 12 12 13 13 17 62 63 63 67 67 74 Hansen Technologies Ltd Annual Report 2021 42 1. Basis of preparation continued (b) Principles of consolidation The consolidated financial statements are those of the consolidated Group, comprising the financial statements of the parent Company, 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) Comparatives Where necessary, comparative information has been reclassified and repositioned for consistency with current year disclosures. (d) Rounding amounts The parent Company and the consolidated Group have applied the relief available under ASIC Corporations (Rounding in Financial/ Directors’ Reports) Instrument 2016/191 and, accordingly the amounts in the consolidated financial statements and in the Directors’ Report have been rounded to the nearest thousand dollars, or in certain cases to the nearest dollar. (e) Going concern The Financial Report has been prepared on a going concern basis. Hansen Technologies Ltd Annual Report 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUED30 JUNE 2021 43 Section B: Performance This section explains the operating results of the Group for the year and provides insights into the Group’s results, including results by operating segment, separately disclosed items during the year that affected the Group’s results, components of income and expenses, income tax and earnings per share. 2. Segment information (a) Description of segments Management has determined the Group’s operating segments based on the reports reviewed by the CEO (the Chief Operating Decision Maker). The operating segments are identified based on the types of services provided to the Group’s customers and the type of customer the services are provided to. Discrete financial information about each of these operating businesses is reported to the executive management team on at least a monthly basis. Where operating segments meet the aggregation criteria, these are aggregated into reported segments. Operating segments are aggregated based on similar products and services provided to the same type of customers using the same distribution method. Segment profits, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Inter-segment pricing is determined on an arm’s length basis and are eliminated on consolidation. There are no significant transactions between segments. The Group has identified only one reportable segment as described in the table below. No operating segments have been aggregated to form the below reportable operating segment. The ‘other’ category includes business units that do not qualify as an operating segment, as well as the operating segments which do not meet the disclosure requirements of a reportable segment, including IT Outsourcing and Customer Care services. Reportable segment Billing Description of segment Sale of billing applications and the provision of consulting services related to billing systems. (b) Segment information 2021 Segment revenue Total segment revenue Revenue from external customers Segment profit Total segment profit Segment profit from core operations Items included within the segment profit: Depreciation expense Amortisation expense Total segment assets Additions to non-current assets1 Total segment liabilities 1. This includes additions to intangible assets and plant, equipment and leasehold improvements. Billing $’000 299,642 299,642 74,508 74,508 8,866 30,811 498,311 17,006 264,840 Other $’000 8,088 8,088 881 881 130 6 10,314 – 4,794 Total $’000 307,730 307,730 75,389 75,389 8,996 30,817 508,625 17,006 269,634 Hansen Technologies Ltd Annual Report 2021 44 2. Segment information continued (b) Segment information continued 2020 Segment revenue Total segment revenue Revenue from external customers Segment profit Total segment profit Segment profit from core operations Items included within the segment profit: Depreciation expense Amortisation expense Total segment assets Additions to non-current assets1 Total segment liabilities Billing $’000 291,642 291,642 33,191 33,191 10,693 30,779 482,160 19,062 287,009 Other $’000 9,727 9,727 666 666 138 5 14,284 – 4,938 Total $’000 301,369 301,369 33,857 33,857 10,831 30,784 496,444 19,062 291,947 1. This includes additions to intangible assets and plant, equipment and leasehold improvements. (i) Reconciliation of segment revenue to the consolidated statement of comprehensive income Segment revenue Total operating revenue Geographical segments 2021 $’000 307,730 307,730 2020 $’000 301,369 301,369 In presenting information based on geographical segments, segment revenue is based on the geographical location of customers. Segment assets are based on the geographical location of the assets. The Group’s business segments operate geographically as follows: Geographical segment APAC Americas EMEA Product segments Regions covered Australia, New Zealand and Asia North America, Central America and Latin America Europe, Middle East and Africa In presenting information based on product segments, the Group’s business segments provide the following types of products and services as follows: Product Licence, support and maintenance Services Description of product Recurring billing application licence, support and maintenance services delivered as part of a total billing system solution. Provision of various professional services in relation to customer billing systems and IT outsourced services covering facilities management, systems and operations support, network services and business continuity support. Hardware and software sales Provision of other third-party hardware and software licences to customers of the Group’s billing system solutions. Other Includes reimbursed expenses incurred for servicing the customer contract. Hansen Technologies Ltd Annual Report 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUED30 JUNE 2021 45 (ii) Disaggregation of revenue from contracts with customers by segment Set out below is the disaggregation of the Group’s revenue from contracts with customers: 2021 Products Licence, support and maintenance Services Hardware and software sales Other revenue Total revenue from contracts with customers Revenue by market vertical Energy Communications Other Total revenue from contracts with customers Revenue by geographic segment APAC Americas EMEA Total revenue from contracts with customers Timing of revenue recognition Goods and services transferred at a point in time Services transferred over time Total revenue from contracts with customers 2020 Products Licence, support and maintenance Services Hardware and software sales Other revenue Total revenue from contracts with customers Revenue by market vertical Energy Communications Other Total revenue from contracts with customers Revenue by geographic segment APAC Americas EMEA Total revenue from contracts with customers Timing of revenue recognition Goods and services transferred at a point in time Services transferred over time Total revenue from contracts with customers Billing $’000 Other $’000 Total $’000 177,076 121,361 1,138 67 299,642 141,250 158,392 – 299,642 45,033 75,495 179,114 299,642 67,126 232,516 299,642 6,065 1,856 130 37 8,088 1,773 39 6,276 8,088 6,334 1,754 – 8,088 167 7,921 8,088 183,141 123,217 1,268 104 307,730 143,023 158,431 6,276 307,730 51,367 77,249 179,114 307,730 67,293 240,437 307,730 Billing $’000 Other $’000 Total $’000 155,257 134,894 835 656 291,642 174,354 117,288 – 291,642 49,269 80,639 161,734 291,642 32,001 259,641 291,642 4,871 4,447 295 114 9,727 4,438 – 5,289 9,727 5,307 4,420 – 9,727 295 9,432 9,727 160,128 139,341 1,130 770 301,369 178,792 117,288 5,289 301,369 54,576 85,059 161,734 301,369 32,296 269,073 301,369 Hansen Technologies Ltd Annual Report 2021 46 2. Segment information continued (b) Segment information continued (iii) Reconciliation of segment profit from core operations to the consolidated statement of comprehensive income Segment profit from core operations Interest income Unallocated depreciation and amortisation Separately disclosed items impacting profit Other expense Profit before income tax Income tax expense Net profit after income tax expense Note 3 4 2021 $’000 75,389 19 (1,074) (878) (3,324) 70,132 (12,797) 57,335 2020 $’000 33,857 54 (720) 440 (3,790) 29,841 (4,084) 25,757 In the current financial year, all separately disclosed items have not been allocated to the Billing Segment as they are not directly attributable to the segment. In the previous financial year, $440,000 of income from the sale of a premises in Norway was not allocated to the Billing Segment. (iv) Reconciliation of segment assets to the consolidated statement of financial position Segment assets Unallocated assets – Cash – Other Total unallocated assets Total assets 2021 $’000 508,625 50,170 2,386 52,556 2020 $’000 496,444 44,343 4,736 49,079 561,181 545,523 Total non-current assets attributed to individual geographies is detailed as follows. Unallocated assets include deferred tax assets, which are not allocated to a specific location as they are managed on a group basis: APAC Americas EMEA Unallocated assets Total non-current assets 2021 $’000 54,338 206,786 133,887 384 395,395 (v) Reconciliation of segment liabilities to the consolidated statement of financial position 2020 $’000 55,640 226,847 139,939 387 422,813 2020 $’000 291,947 1,082 1,082 2021 $’000 269,634 3,028 3,028 272,662 293,029 Segment liabilities Unallocated liabilities – Other Total unallocated liabilities Total liabilities Hansen Technologies Ltd Annual Report 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUED30 JUNE 2021 47 2020 $’000 301,369 301,369 54 440 1,826 2,320 Note 2(b)(i) 2(b)(iii) 2(b)(iii), 8(a) 2021 $’000 307,730 307,730 19 – 2,533 2,552 310,282 303,689 3. Revenue and other income Operating revenue Revenue from contracts with customers Total operating revenue Other income From operating activities Interest income Profit from sale of plant, equipment and leasehold improvements Other income Total other income Total revenue and other income (a) AASB 15 Revenue from Contracts with Customers (i) Performance obligations The transaction price allocated to remaining performance obligations represents contracted revenue that has not yet been recognised. They include amounts recognised as unearned revenue and amounts that are contracted but not yet billed or performed. The transaction price allocated to performance obligations that are unsatisfied or partially unsatisfied as at 30 June 2021, is $104,010,000 (2020: $122,710,000). This amount mostly comprises obligations in our long-term contracts to provide software or “software-as-a-service” (SaaS) support and maintenance, open long-term professional services contracts as well as licences contracted but not yet earned as the licence has not yet been deployed. Most of this amount is expected to be recognised as revenue beyond the next 12 months following the respective consolidated statement of financial position date. This estimation is judgemental, as it needs to consider estimates of possible future contract modifications. The amount of transaction price allocated to the remaining performance obligations, and changes in this amount over time, are impacted by, among others, currency fluctuations and the remaining contract period of our billing solution agreements (which, in some cases, are contracted until 5 years after the consolidated statement of financial position date). (ii) Contract balances Accrued revenue Unearned revenue (current and non-current) 2021 $’000 24,303 35,161 2020 $’000 21,945 24,518 Accrued revenue mainly relates to software licences deployed on contract inception but have yet to be billed to the customer. Revenue recognised in the current reporting period that was included in unearned revenue at the beginning of the reporting period was $24,370,000 (2020: $25,681,000), representing support and maintenance performed during the period. (b) Government grants Included in ‘Other income’ during the financial year is $516,000 (2020: $461,000) related to government subsidies received in Canada and $493,000 (2020: $514,000) government grants to compensate for eligible employee expenditure related to research activities performed in Norway and in the United Kingdom. There were no unfulfilled conditions or contingencies attached to these grants. Hansen Technologies Ltd Annual Report 2021 48 3. Revenue and other income continued Significant accounting policies Revenue The Group derives revenues from customer contracts associated with the provision of billing solutions. A typical contract may include various deliverables in consideration for fees. Such deliverables in our contracts include, but are not limited to, the provision of a software licence, support, and maintenance services, as well as professional implementation and customisation services. The nature of fee structures within the contracts varies by customer. The timing and frequency of invoicing depends on the terms and conditions of each contract. Invoices are billed to the customer either in advance or in arrears on normal commercial terms. Where the contract requires invoicing in advance, revenue is initially deferred as unearned revenue until the Group fulfils its performance obligations. Where the contract requires invoicing in arrears, revenue recognised on fulfilment of a performance obligation is brought to account as accrued revenue, until the Group’s right to consideration becomes unconditional and the accrued revenue is then presented as a receivable. The Group’s accounting policies with respect to each of the individual deliverables in the Group’s customer contracts is outlined in sub-sections (i) onwards. (i) Licence, support and maintenance revenue The Group’s contracts for billing solutions regularly include software licences associated with the relevant billing solution provided to the customer. The nature of the licence varies by customer and billing solution. As part of the licence agreement, various support and maintenance services are available to support the customer’s use of the billing solution. This includes the provision of various bug fixes, updates and helpdesk support. Generally, the provision of the software licence is a distinct performance obligation. However, where there are associated implementation, customisation or other professional services in the contract that significantly modify, customise or are highly interrelated with the licence, the software licence and implementation services are combined into a single performance obligation. The determination of whether the licence should be combined with the services is a matter of judgement, depending on the nature of the implementation of the services provided and the licence specifications in the customer contract. How the licence performance obligation is fulfilled depends on the nature of the licence and how the Group provides the licence to the customer, irrespective of whether the licence is provided in perpetuity or for a specified contractual term: • Where the licence is installed and delivered on customer premises, the customer can derive substantial benefits from the licence on its own. Therefore, the performance obligation is fulfilled (and revenue recognised) at the point in time the licence goes live, typically when customer acceptance has been obtained and the licence meets the agreed-upon specifications. • Where the licence is hosted by the Group (for example, in some of our SaaS applications), the customer is dependent on our continual hosting of the licence platform in order to derive and receive substantial benefits from the licence. Therefore, the performance obligation is fulfilled (and revenue recognised) over time, which is typically evenly over the contracted period in which access to the licence is made available to the customer. Licence fees in some pay-TV and telecommunications contracts are dependent on the subsequent usage of the licence by the customer, which is determined by customer-defined metrics such as subscriber counts or end-user numbers. For these contracts, the Group uses the sales/usage-based royalty exception and recognises revenue when the subsequent usage is known, which is typically at the end of each billing period. Support and maintenance services are generally considered a distinct single performance obligation, separately identifiable to the software licence, as all the individual activities that comprise of support and maintenance are highly interrelated with each other. Revenue related to the provision of support and maintenance is recognised evenly over the contracted term in which the customer is entitled to receive support and maintenance. (ii) Services revenue The Group provides various configuration, implementation, customisation and other professional services that the customer is contracted to receive. This may be a part of the overall billing solution, or discrete projects separately agreed with the customer. The various individual activities that form the professional services provided to the customer are highly interrelated with each other and therefore is treated as a single performance obligation. Revenue from these professional services are recognised over time by reference to the stage of completion of the contracts. Stage of completion is measured by reference to labour hours incurred to date as a percentage of total estimated labour hours for each contract, and by reference to any contracted milestones achieved, such as customer acceptance of the final specification. As described above in ‘Licence, support and maintenance revenue’ certain professional services might be combined with the provision of the software licence depending on the nature of the licence and the professional services provided. Hansen Technologies Ltd Annual Report 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUED30 JUNE 2021 49 (iii) Hardware/software sales revenue Some of the Group’s subsidiaries on-sell certain third-party hardware and software products. Revenue is recognised when control over the software has transferred to the customer. Determination of when control has passed depends on whether the customer has legal title over the products, whether the customer has obtained possession of the products or whether the Group has present right to payment. The Group is considered principal in the sales transaction as the Group has procured the products from its various vendors and the Group bears the risk and responsibility for selling those products to the customer. (iv) Other revenue Other revenue consists of reimbursed expenses incurred for servicing the customer contract. Revenue is recognised when the Group has legal enforceability under the contract to have the relevant expenses reimbursed from the customer. (v) Financing components The Group does not expect to have any contracts where the period between the transfer of the promised goods or services to the customer represents a financing component. Therefore, the Group does not adjust any of the transaction prices for the time value of money. (vi) Presentation and disclosure In Note 2(b)(ii) of the financial statements, the Group has disaggregated revenue recognised from contracts with customers into the following categories: • The types of goods and services we provide our customers in our contracts; • The primary market vertical that our customers operate in. ‘Energy’ includes our electricity, gas and water customers, while ‘Communications’ includes our telecommunications and pay-TV customers; and • The key geographic regions where our customers are located, which is consistent with the geographic segments identified for our segment reporting. We believe these categories best depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. AASB 15 uses the terms ‘contract asset’ and ‘contract liability’. To maintain consistency in presentation with prior periods, the Group has retained the use of ‘accrued revenue’ and ‘unearned revenue,’ respectively. In disclosing the amount of the transaction price allocated to unsatisfied or partially satisfied performance obligations, the Group has elected to use the practical expedient available in AASB 15 and disclose only the amounts allocated to performance obligations expected to be satisfied after the next 12 months. Other income Interest income is recognised when it becomes receivable on a proportional basis, taking into account the interest rates applicable to the financial assets. Sales tax (including GST and VAT) Revenues, expenses and assets are recognised net of the amount of sales tax, except where the amount of sales tax incurred is not recoverable from the Tax Office. In these circumstances the sales tax is recognised as part of the acquisition of the asset or as part of an item of the expense. Receivables and payables in the consolidated statement of financial position are shown inclusive of sales tax. Cash flows are presented in the consolidated statement of cash flows on a gross basis, except for the sales tax component of investing and financing activities, which are disclosed as operating cash flows. Government grants Government grants are recognised at their fair value where there is reasonable assurance that the grant will be received and all attached conditions will be complied with. Government grants relating to costs are deferred and recognised in the consolidated statement of comprehensive income over the period necessary to match them with the costs that they are intended to compensate. Government grants received for which there are no future related costs are recognised in the statement of comprehensive income immediately. Hansen Technologies Ltd Annual Report 2021 50 4. Separately disclosed items The Group has disclosed underlying EBITDA and underlying profit after tax, referring to the Group’s trading results adjusted for certain transactions during the year that are not representative of the Group’s regular business activities. The Group considers that these transactions are of such significance to understanding the ongoing results of the Group, that the Group has elected to separately identify these transactions to determine an ongoing result to enable a ‘like-for-like’ comparison. These items are described as ‘separately disclosed items’ throughout this Financial Report. Increase to profit before tax Non-recurring income Gain on final settlement of the Sigma acquisition Profit from sale of an office premises Other income Decrease to profit before tax Non-recurring expenses Other one-off costs Restructuring and one-off costs incurred Total separately disclosed items Note 2(b)(iii) 2(b)(iii) 2021 $’000 1,162 – – (2,040) – (878) 2020 $’000 – 440 679 – (6,153) (5,034) Non-recurring income The Group has separately identified income that is considered not in the normal course of business activities. In the current financial year, included in this is the gain on final settlement of the acquisition of the Sigma group of entities (Sigma) amounting to $1,162,000. Sigma was acquired by Hansen on 1 June 2019. Included in the previous financial year is the profit from the sale of an office premises in Norway for $440,000. The gain on final settlement of the acquisition of Sigma and the profit from sale of an office premises are included within the ‘Other income’ account in the Group’s consolidated statement of comprehensive income. Non-recurring expenses The Group has separately identified expenses recognised in relation to deferred remuneration for former Sigma employees of $2,040,000. This cost arose from the negotiated agreements in relation to the acquisition of Sigma in 2019 financial year and is not considered a transaction that is in the normal course of the Group’s business activities. This amount is included within ‘Employee benefit expenses’ as an amount that is not incurred in the normal course of business activities. In the previous financial year, the Group recognised restructuring and one-off costs relating to redundancy and retention payments of staff amounting to $6,153,000. These costs are part of the Group’s strategy to better integrate the business and align staffing according to customer demand. These costs were included within ‘Employee benefit expenses’ and ‘Other expenses’ in the Group’s consolidated statement of comprehensive income. (a) Reconciliation with Group statutory measures Underlying EBITDA Less separately disclosed items EBITDA1 Underlying net profit after tax Less separately disclosed items Tax effect of separately disclosed items2 Net profit after tax 2021 $’000 120,167 (878) 119,289 56,848 (878) 1,365 57,335 2020 $’000 85,692 (5,034) 80,658 29,479 (5,034) 1,312 25,757 1. EBITDA is a non-IFRS term, defined as earnings before interest, tax, depreciation and amortisation, and excluding net foreign exchange gains (losses). 2. Included within the tax effect of separately disclosed items is the impact on deferred tax adjustments of the final settlement of the acquisition of Sigma group of entities amounting to $824,000. Hansen Technologies Ltd Annual Report 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUED30 JUNE 2021 51 5. Profit from continuing operations Profit from continuing operations before income tax has been determined after the following specific significant expenses: Employee benefit expenses Wages and salaries Superannuation costs Share-based payments and employee share plan expensed Total employee benefit expenses Depreciation expense Plant, equipment and leasehold improvements Right-of-use assets Total depreciation of non-current assets Amortisation of non-current assets Technology and other intangibles Software development costs Total amortisation of non-current assets Property and operating rental expenses Other property-related expenses Total property and operating rental expenses Finance costs Finance costs on borrowings Prepaid borrowing costs Net finance costs on borrowings Finance costs on lease liabilities Total finance costs Net foreign exchange losses/(gains) Realised foreign exchange losses/(gains) Unrealised foreign exchange losses/(gains) Total net foreign exchange losses/(gains) Note 8(a) 8(a), 11 8(a),13(a) 8(a), 12 8(a), 12 8(a),19(b) 13(b) 8(a) 2021 $’000 2020 $’000 138,329 157,695 8,150 2,567 9,025 1,473 149,046 168,193 3,714 6,120 9,834 20,880 10,173 31,053 3,657 3,657 1,566 3,081 911 5,558 1,553 1,178 2,731 4,354 6,953 11,307 22,394 8,634 31,028 4,324 4,324 1,327 6,760 1,193 9,280 (599) (145) (744) Hansen Technologies Ltd Annual Report 2021 52 6. Income tax (a) Components of income tax expense Current tax expense Deferred tax income Over provision in prior years Total income tax expense The prima facie tax payable on profit before income tax reconciled to the income tax expense is as follows: Note 6(b)(iii) 2021 $’000 17,754 (4,838) (119) 12,797 2020 $’000 11,087 (6,217) (786) 4,084 Prima facie income tax payable on profit before income tax at 30% 21,040 8,953 Add/(less) tax effect of: Impact of tax rates on foreign subsidiaries Research and development allowances Non-deductible share-based payments Non-assessable income Over provision in prior years Utilisation of prior year tax losses not brought to account Deferred tax not previously brought to account Amortisation of acquired intangibles Other non-allowable items Income tax expense attributable to profit (b) Deferred tax Deferred tax asset Deferred tax liability Net deferred tax (i) Deferred tax asset The deferred tax asset balance comprises of the following items: Difference in depreciation and amortisation of plant and equipment for accounting and income tax purposes Other payables Employee benefits Temporary difference relating to lease accounting (adoption of AASB 16) Accruals (3,440) (2,059) (83) 494 (763) (119) (2,253) (947) (447) (685) 12,797 2021 $’000 9,404 (38,038) (28,634) 2021 $’000 (607) 1,274 2,244 4,397 2,096 9,404 (105) 300 – (786) (1,054) – (315) (850) 4,084 2020 $’000 9,971 (43,443) (33,472) 2020 $’000 (367) 1,983 2,309 5,190 856 9,971 Hansen Technologies Ltd Annual Report 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUED30 JUNE 2021 (ii) Deferred tax liability The deferred tax liability balance comprises of the following items: Research and development expenditure capitalised Difference in depreciation and amortisation of plant, equipment and intangibles for accounting and income tax purposes Temporary difference relating to lease accounting (AASB 16) Other income not yet assessable Other payables (iii) Reconciliation of net deferred tax balances Opening balance – net deferred tax liability Deferred tax income recognised in profit or loss Closing balance – net deferred tax liability Note 6(a) (iv) Deferred tax assets not brought to account (available tax losses) Gross capital losses Gross operating losses 53 2021 $’000 (6,651) 2020 $’000 (6,529) (26,016) (30,012) (4,164) (1,126) (81) (4,957) (1,885) (60) (38,038) (43,443) 2021 $’000 (33,472) 4,838 (28,634) 2021 $’000 847 1,598 2,445 2020 $’000 (39,689) 6,217 (33,472) 2020 $’000 847 771 1,618 Deferred tax assets have not been recognised in respect of these losses. Realisation of the unrecognised tax losses, temporary differences and offsets is dependent on the future production of sufficient taxable profits in the relevant jurisdictions as well as continued compliance with regulatory requirements for availability. Hansen Technologies Ltd Annual Report 2021 54 6. Income tax continued Significant accounting policies Income tax Current income tax expense 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. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted at the reporting date. 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. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered. Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current income tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority. Tax consolidation The Group is subject to income taxes in Australia and jurisdictions in which it has foreign operations. In some of these jurisdictions, namely Australia and the United States, the immediate parent entity and entities it controls have formed local income tax consolidated groups that are taxed as a single entity in their relevant jurisdiction. The head entity of the Australian tax consolidated group is Hansen Technologies Limited. Each 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. Each 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. Hansen Technologies Ltd Annual Report 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUED30 JUNE 2021 7. 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 earnings per share: Number for basic earnings per share – ordinary shares Number for diluted earnings per share – ordinary shares Basic earnings (cents) per share Diluted earnings (cents) per share 55 2021 $’000 57,335 57,335 2020 $’000 25,757 25,757 2021 No. of Shares 2020 No. of Shares 198,996,780 197,960,854 201,046,313 199,177,904 2021 Cents Per Share 28.8 2020 Cents Per Share 13.0 28.5 12.9 Classification of securities as potential ordinary shares As at 30 June 2021, the securities that have been classified as potential ordinary shares and included in diluted earnings per share are only the rights outstanding under the Employee Performance Rights Plan. The previous financial year included the rights and options. All remaining options from the legacy Employee Share Option Plan have been exercised in the current financial year. Significant accounting policies Earnings per share (EPS) Basic EPS is calculated by dividing the profit for the year attributable to ordinary equity holders of the Company by the weighted average number of ordinary shares outstanding during the year. Diluted EPS is calculated by dividing the profit attributable to ordinary equity holders of the Company by the weighted average number of ordinary shares outstanding during the year, plus the weighted average number of ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares. Hansen Technologies Ltd Annual Report 2021 56 Section C: Working Capital and Operating Assets This section describes the different components of our working capital supporting the operating liquidity of the Group, as well as the long-term tangible and intangible assets supporting the Group’s performance. 8. Cash and cash equivalents Cash at bank and on hand Total cash and cash equivalents 2021 $’000 52,138 52,138 2020 $’000 44,492 44,492 (a) Reconciliation of the net profit after tax to net cash flows from operating activities Net profit after tax Add/(less) items classified as investing/financing activities: Net profit on sale of non-current assets Add/(less) non-cash items: Depreciation and amortisation Share-based payments Unrealised foreign exchange losses/(gains) Recovery of previously charged expected credit loss Expected credit loss charged Amortisation of prepaid borrowing costs Net cash provided by operating activities before change in assets and liabilities Changes in assets and liabilities adjusted for effects of purchase of controlled entities during the year: Note 3 5 5, 17(e) 5 9 9 5, 19(b) Increase in trade receivables (Increase)/decrease in sundry receivables and other assets (Increase)/decrease in accrued revenue Increase in trade payables Increase/(decrease) in other creditors and accruals (Decrease)/increase in bank overdraft Increase in operating and employee benefits provision Decrease in deferred taxes Increase in current tax payable Increase/(decrease) in unearned revenue Net cash provided by operating activities Significant accounting policies 2021 $’000 57,335 2020 $’000 25,757 – (440) 40,887 2,567 1,178 (632) 1,671 1,566 104,572 30,094 (1,708) 2,358 2,805 8,335 (591) 1,150 (4,449) 4,904 10,643 93,209 42,335 1,473 (145) (44) 735 1,327 70,998 (2,364) 1,361 3,851 14,102 (15,086) 457 1,322 (6,217) 4,100 (2,895) 69,629 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 consolidated statement of financial position. Hansen Technologies Ltd Annual Report 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUED30 JUNE 2021 9. Receivables Current Trade receivables Less: provision for expected credit losses Sundry receivables Total trade and other receivables 57 2020 $’000 48,336 (604) 47,732 184 47,916 2021 $’000 75,942 (1,457) 74,485 2,928 77,413 As at 30 June 2021, trade receivables of $14,473,000 (2020: $14,668,000) were past due but not impaired. These relate to a number of independent customers for whom there is no recent history of default. The ageing analysis of the trade receivables is as follows: Trade receivables ageing analysis at 30 June: Not past due Past due 1– 30 days Past due 31– 60 days Past due more than 61 days Gross 2021 $’000 60,012 5,275 2,524 8,131 75,942 Provided 2021 $’000 – – – (1,457) (1,457) Gross 2020 $’000 33,064 4,852 4,468 5,952 48,336 Provided 2020 $’000 – – – (604) (604) The sundry receivables do not contain impaired assets and are not past due. Based on the credit history of these receivables, it is expected that these amounts will be received when due and thus, no provision for impairment has been recorded. The Group does not hold any collateral in relation to these receivables. Movements in provision for expected credit loss: Opening balance at 1 July Expected credit loss charged Recovery of previously charged expected credit loss Amounts written off Others Closing balance at 30 June Significant accounting policies Note 8(a) 8(a) 2021 $’000 604 1,671 (632) (237) 51 1,457 2020 $’000 221 735 (44) (308) – 604 Trade receivables Trade receivables represent amounts owed by our customers and are recognised initially at the amount of consideration where the right to payment is conditional only on the passage of time. The Group holds the trade receivables with the objective of collecting contractual cash flows and therefore measures them subsequently at amortised cost using the effective interest method, less a provision for expected credit loss. Trade receivables are generally due for settlement between 30 and 60 days. The Group recognises a provision for impairment by calculating lifetime expected credit losses (ECLs). In determining the appropriate amount of lifetime ECLs, the Group has established a provision matrix that is based on its historical credit loss experience, adjusted for forward-looking factors specific to the debtors and the economic environment. Individual debts which are known to be uncollectible are written-off by reducing the carrying amount directly. Expected credit losses are recognised in the consolidated statement of comprehensive income within ‘Other expenses’ account. When a trade receivable for which a provision for expected credit loss had been recognised becomes uncollectible in a subsequent period, it is written off against the allowance account. Hansen Technologies Ltd Annual Report 2021 58 9. Receivables continued Critical accounting estimate and judgement Provision for expected credit losses of trade receivables The Group uses a provision matrix to calculate ECLs for trade receivables. The provision rates are based on days past due for groupings of various customer segments that have similar loss patterns (i.e. by geography, product type, customer type and rating, and coverage by letters of credit and other forms of credit insurance). The provision matrix is initially based on the Group’s historical observed default rates. The Group will calibrate the matrix to adjust the historical credit loss experience with forward-looking information. For instance, if forecast economic conditions (i.e., gross domestic product) are expected to deteriorate over the next year which can lead to an increased number of defaults in the energy sector, the historical default rates are adjusted. At every reporting date, the historical observed default rates are updated and changes in the forward-looking estimates are analysed. The assessment of the correlation between historical observed default rates, forecast economic conditions and ECLs is a significant estimate. The amount of ECLs is sensitive to changes in circumstances and of forecast economic conditions. The Group’s historical credit loss experience and forecast of economic conditions may also not be representative of customer’s actual default in the future. As with the previous financial year, the Group has considered the impact of the COVID-19 pandemic on the amount of ECLs and has determined from its assessment that there has been no significant change to the recovery of the customers’ debts. 10. Other assets Prepayments – current Other assets – current Total other current assets Prepayments – non-current Other assets – non-current Total other non-current assets 2021 $’000 7,793 4,139 11,932 1,091 – 1,091 2020 $’000 6,441 1,916 8,357 2,292 1,389 3,681 Hansen Technologies Ltd Annual Report 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUED30 JUNE 2021 11. Plant, equipment and leasehold improvements Plant and equipment $’000 Leasehold improvements $’000 Note Cost At 1 July 2020 Additions Disposals Net foreign currency movements arising from foreign operations At 30 June 2021 Accumulated depreciation and impairment At 1 July 2020 Depreciation charge Disposals Net foreign currency movements arising from foreign operations At 30 June 2021 5 42,461 4,674 (11,735) (503) 34,897 (32,141) (3,319) 11,735 487 (23,238) 4,189 253 (518) (49) 3,875 (3,095) (395) 518 28 (2,944) 59 Total $’000 46,650 4,927 (12,253) (522) 38,772 (35,236) (3,714) 12,253 515 (26,182) Carrying amount at 30 June 2021 11,659 931 12,590 Cost At 1 July 2019 Additions Disposals Net foreign currency movements arising from foreign operations Plant and equipment $’000 Leasehold improvements $’000 Note 38,409 4,958 (724) (182) 4,162 83 (13) (43) Total $’000 42,571 5,041 (737) (225) At 30 June 2020 42,461 4,189 46,650 Accumulated depreciation and impairment At 1 July 2019 Depreciation charge Disposals Net foreign currency movements arising from foreign operations 5 (28,936) (3,853) 548 100 (2,649) (501) 13 42 (31,585) (4,354) 561 142 At 30 June 2020 (32,141) (3,095) (35,236) Carrying amount at 30 June 2020 10,320 1,094 11,414 Hansen Technologies Ltd Annual Report 2021 60 11. Plant, equipment and leasehold improvements continued Significant accounting policies Plant, equipment and leasehold improvements Cost and valuation All classes of plant, equipment and leasehold improvements are stated at cost less depreciation and any accumulated impairment losses. 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 and equipment Leasehold improvements 2021 3 to 15 years 2020 3 to 15 years 3 to 15 years 3 to 15 years An item of plant, equipment and leasehold improvements initially recognised is derecognised upon disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in profit or loss when the asset is derecognised. The residual values, useful lives and methods of depreciation of plant, equipment and leasehold improvements are reviewed at each financial year end and are adjusted prospectively, if appropriate. 12. Intangible assets Cost At 1 July 2020 Additions Net foreign currency movements arising from foreign operations At 30 June 2021 Note Goodwill $’000 Technology and other intangibles at cost $’000 Software development at cost $’000 221,288 188,585 – (2,540) – (55) 218,748 188,530 80,420 12,079 (2,441) 90,058 Total $’000 490,293 12,079 (5,036) 497,336 Accumulated amortisation and impairment At 1 July 2020 Amortisation charge 5 Net foreign currency movements arising from foreign operations At 30 June 2021 (1,593) – (8) (62,243) (20,880) (48,797) (10,173) (112,633) (31,053) 884 1,627 2,503 (1,601) (82,239) (57,343) (141,183) Carrying amount at 30 June 2021 217,147 106,291 32,715 356,153 Hansen Technologies Ltd Annual Report 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUED30 JUNE 2021 Cost At 1 July 2019 Additions Net foreign currency movements arising from foreign operations At 30 June 2020 Note Goodwill $’000 Technology and other intangibles at cost $’000 Software development at cost $’000 229,458 196,264 – – (8,170) (7,679) 221,288 188,585 65,583 14,021 816 80,420 61 Total $’000 491,305 14,021 (15,033) 490,293 Accumulated amortisation and impairment At 1 July 2019 Amortisation charge 5 Net foreign currency movements arising from foreign operations At 30 June 2020 (1,595) – 2 (1,593) (41,466) (22,394) 1,617 (62,243) (39,551) (8,634) (82,612) (31,028) (612) 1,007 (48,797) (112,633) Carrying amount at 30 June 2020 219,695 126,342 31,623 377,660 Significant accounting policies Goodwill Goodwill represents the future economic benefits arising from other assets acquired in a business combination that are not individually identifiable or separately recognised. Goodwill is recognised initially at the excess of: (a) the aggregate of the consideration transferred, the fair value of the non-controlling interests and the acquisition date fair value of the acquirers previously held equity interest; over (b) the net fair value of the identifiable assets acquired and liabilities assumed. Technology and other intangibles Other intangibles consist of trademarks, brand names, customer relationships and non-compete clauses. Technology and other intangibles are recognised at cost and are amortised over their estimated useful lives, which is generally the term of the contract for customer contracts and 5-10 years for technology and other intangibles. Technology and other intangibles 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. Development costs are capitalised when the entity can demonstrate all of the following: the technical feasibility of completing the asset so that it will be available for use or sale; the intention to complete the asset and use or sell it; the ability to use or sell the asset; how the asset will generate probable future economic benefits; the availability of adequate technical, financial and other resources to complete the development and to use or sell the asset; and the ability to measure reliably the expenditure attributable to the asset during its development. Capitalised development expenditure is carried at cost less any accumulated amortisation and any accumulated impairment losses. Amortisation is calculated using a straight–line method to allocate the cost of the intangible asset over its estimated useful life, which is generally 5 years. Amortisation commences when the intangible asset is available for use. Other development expenditure is recognised as an expense when incurred. 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 Impairment of Assets. 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 of disposal and value in use. Hansen Technologies Ltd Annual Report 2021 62 12. Intangible assets continued Critical accounting estimate and judgement Capitalisation of research and development costs 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 an investment in research and development expenditure incurred in relation to the various billing software platforms in the 2021 financial year. Returns are expected to be derived from this investment over the coming year(s). The assets’ residual values, useful lives and amortisation methods are reviewed and adjusted if appropriate at each financial year end. The estimation of useful lives of assets has been based on historical experience and expected product lifecycle, which could change significantly as a result of technological innovation. (a) Impairment test for goodwill For impairment testing, the Group views that its past business combinations giving rise to goodwill on acquisition relate to synergistic opportunities for its billing solutions. Therefore, goodwill is allocated entirely to the Billing CGU, which is also an operating and reportable segment. The recoverable amount of the Billing CGU has been determined based on a value-in-use calculation using cash flow projections over a five-year period. Cash flows beyond the five-year forecast period are extrapolated using the estimated terminal growth rates. Key assumptions used for value-in-use calculations The key assumptions for the Billing CGU supporting the disclosed recoverable value are as follows: • EBITDA for the first year based on financial budgets approved by senior management; • Beyond the first year, profit before tax annual growth rate of 1.5% (2020: 1.5%); • A post-tax discount rate of 6.1% (2020: 6.7%); and • Terminal growth rate of 1.5% (2020: 1.0%) at the end of the forecast period. Both the EBITDA growth rate beyond FY21 and the terminal growth rate ranges are derived from management’s best estimate of revenue and operating expenditure growth, taking into account changes in the industry, customer market prospects, future product developments and technological innovation. Profit before income tax expense is then adjusted for amounts related to tax. Owing to the current global environment, management has maintained the annual and slightly increased the terminal growth rates assumptions to compensate for a fall in the overall risk-free rate. The discount rate is based on the Group’s weighted average cost of capital. Results of impairment testing and sensitivity to changes in assumptions The current year’s calculation of the estimated recoverable amount of the CGU has not moved materially when compared to the prior year’s estimated recoverable amount of the CGU, as changes in annual and terminal growth rates have been offset by a decrease in the risk-free rate; and expected future cash generation has not changed materially from the previous corresponding period. The following table sets out key parameters that need to change for there to be no headroom available when comparing the calculation of the estimated recoverable amount of the CGU against the carrying value of the CGU at 30 June 2021: Change required for carrying amount to equal recoverable amount Discount rate Budgeted EBITDA growth rate 2021 8.70% (42.40%) Hansen Technologies Ltd Annual Report 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUED30 JUNE 2021 63 Critical accounting estimate and judgement Impairment of goodwill The Group tests whether goodwill has been impaired on an annual basis. Management judgement is applied to identify the cash generating units (CGU). The recoverable amount of a cash generating unit (CGU) is determined based on value-in-use calculations which require the use of assumptions and discounting of future cash flows. These assumptions are based on best estimates at the time of performing the valuation. Cash flow projections do not include restructuring activities that the Group is not yet committed to or significant future investments that will enhance the performance of the assets of the CGU being tested. Goodwill is monitored by management at the level of operating segments identified in Note 2. 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. 13. Leases (a) Right-of-use assets Cost Accumulated depreciation Net carrying amount at 30 June 2021 $’000 27,220 (11,063) 16,157 2020 $’000 26,509 (6,422) 20,087 Movements in cost and accumulated depreciation during the year are inclusive of any net foreign currency movements arising from foreign operations. The Group has identified the following classes of right-of-use (ROU) assets: properties, vehicles, office and IT equipment. The largest class of asset recognised is the Group’s property leases, consisting of office buildings, as well as rental apartments for its employees undertaking short-term assignments overseas. Leases of properties generally have lease terms between 6 months and 5 years while leases of office equipment, vehicles and IT equipment, generally have terms between 1 and 3 years. The Group usually has rights to renew the lease arrangement that are reasonably certain to be exercised and therefore may have long effective lease terms. The rental payments associated with each lease varies according to the amount of space rented and the location of the lease. However, in most cases the amount of rental payments is indexed annually in line with the relevant national consumer pricing index. Hansen Technologies Ltd Annual Report 2021 64 13. Leases continued (a) Right-of-use assets continued Reconciliation of the carrying amounts of ROU assets at the beginning and end of the current financial year by class of asset is shown below: Cost Balance as at 1 July 2020 Additions Re-measurement Make good provision Disposals Exchange differences from foreign operations Balance as at 30 June 2021 Accumulated depreciation Balance as at 1 July 2020 Depreciation charge Disposals Exchange differences from foreign operations Balance as at 30 June 2021 Net book value as at 30 June 2021 Cost Balance as at 1 July 2019 Adoption of new accounting standards Additions Re-measurement Disposals Exchange differences from foreign operations Note 13(b) 13(b) 5, 13(c) Note 13(e) 13(b) 13(b) ROU Properties $’000 ROU Office Equipment $’000 ROU Vehicles $’000 ROU IT Equipment $’000 26,197 4,968 (2,877) 457 (1,364) (387) 26,994 (6,338) (6,056) 1,364 72 (10,958) 16,036 114 28 – – (4) – 138 (38) (30) 4 – (64) 74 195 – (65) – (36) (6) 88 (45) (32) 36 – (41) 47 3 – – – (3) – – (1) (2) 3 – – – ROU Properties $’000 ROU Office Equipment $’000 ROU Vehicles $’000 ROU IT Equipment $’000 – 25,933 3,268 (2,148) (585) (271) – 114 – – – – – 82 142 – (30) 1 195 – (77) 30 2 (45) 150 – 149 – – (142) (4) 3 – (97) 95 1 (1) 2 Total $’000 26,509 4,996 (2,942) 457 (1,407) (393) 27,220 (6,422) (6,120) 1,407 72 (11,063) 16,157 Total $’000 – 26,278 3,410 (2,148) (757) (274) 26,509 – (6,953) 176 355 (6,422) 20,087 Balance as at 30 June 2020 Accumulated depreciation Balance as at 1 July 2019 Depreciation charge Disposals Exchange differences from foreign operations Balance as at 30 June 2020 Net book value as at 30 June 2020 26,197 114 – 5, 13(c) (6,741) 51 352 (6,338) 19,859 – (38) – – (38) 76 Re-measurement of the gross value of ROU assets results predominantly from the re-assessment of the estimation of the lease term for various properties within the Group. In the financial year ended 30 June 2021, the cost of variable lease payments amounted to $3,000 (2020: $3,000). These variable lease payments do not depend on an index or a rate. These are included within the ‘Other expenses’ account in the consolidated statement of comprehensive income. Hansen Technologies Ltd Annual Report 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUED30 JUNE 2021 65 2020 $’000 5,661 15,384 21,045 2020 $’000 92 26,628 3,410 (2,148) 1,193 (8,175) 45 21,045 2020 $’000 6,953 1,193 3 (1) (b) Lease liabilities Current Non-current 2021 $’000 5,552 11,322 16,874 Reconciliation of the carrying amounts of lease liabilities and the movements during the financial year is shown below: Balance as at 1 July Adoption of new accounting standards Additions Re-measurement Accretion of finance costs Payments Exchange differences from foreign operations Balance as at 30 June (c) Impact to profit or loss The following are the amounts recognised in the profit or loss: Depreciation expense of ROU assets Finance costs on lease liabilities Variable lease payments Income from sub-leasing of ROU assets Total amount recognised in profit or loss Note 13(e) 13(a) 13(a) 5 Note 5, 13(a) 5 2021 $’000 21,045 – 4,996 (2,942) 911 (7,041) (95) 16,874 2021 $’000 6,120 911 3 – 7,034 8,148 (d) Impact to cashflows The Group had total cash outflows for leases of $7,041,000 for the year ended 30 June 2021 (2020: $8,175,000). Out of the $7,041,000 (2020: $8,175,000) cash outflows, $6,130,000 (2020: $6,982,000) relates to cash outflows from investing activities (principal payments), while the remaining balance relates to cash outflows from operating activities (finance costs on lease liabilities). The Group also had non-cash additions of ROU assets of $5,453,000 (2020: $29,688,000) and lease liabilities of $4,996,000 (2020: $30,038,000) during the financial year. The maturity profile of the undiscounted cash outflows relating to outstanding leases is disclosed in Note 18. The weighted average incremental borrowing rate applied to lease liabilities was 2.16% (2020: 4.7%). (e) Impact on adoption of AASB 16 The Group adopted AASB 16 Leases on 1 July 2019 using a modified retrospective approach, where the cumulative effect of initially applying the standard is recognised as an adjustment to the opening balances on the transition date. The effect of adopting AASB 16 brought an increase in ROU assets of $26,278,000, lease liabilities of $26,628,000 and a decline of $350,000 in provisions. Hansen Technologies Ltd Annual Report 2021 66 13. Leases continued Significant accounting policies Leases The determination of whether an arrangement is (or contains) a lease depends on whether the arrangement conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Control over the use of an identified asset exists when the arrangement involves the use of an identified asset, when the Group obtains substantially all the economic benefits from the use of the asset, and when the Group has the right to direct the use of the asset. The lease term is first determined with reference to the non-cancellable period of the lease contract, adjusted for any periods covered by options to extend the lease and/or to early terminate the lease if the Group is reasonably certain to exercise the options. Judgement is applied by the Group in determining whether the Group is reasonably certain to exercise the options. Lease liabilities are initially recognised and measured based on the total value of fixed and variable contractual lease payments over the lease term, including payments to extend or terminate the lease if the Group is reasonably certain to exercise the option to extend or terminate the lease respectively. The lease payments are discounted to present value based on the incremental borrowing rate implicit in the lease. Lease payments on properties exclude service fees for maintenance, cleaning and other costs as these costs are separated as non-lease components. However, the Group has elected not to separate lease and non-lease components for leases of vehicles, office and IT equipment. Leased assets are capitalised at the commencement date of the lease and comprise of the initial lease liability amount, initial direct costs incurred when entering the lease, less any lease incentives received. Leased assets are depreciated on a straight-line basis over the earlier of the end of the useful life of the right-of-use asset or the end of the lease term, as follows: • ROU properties • ROU office equipment • ROU vehicles • ROU IT equipment Estimated useful lives of right-of-use assets are determined on the same basis as those of plant, machinery and leasehold improvements. The right-of-use asset is also periodically assessed for impairment losses and adjusted for certain re-measurements of the lease liability. The Group does not apply the practical expedients for short-term leases and leases for which the assets are of low value. (i) Presentation and disclosure Depreciation on right-of-use assets is included as part of ‘Depreciation expense’ account in the consolidated statement of comprehensive income, and interest expense on lease liabilities is included as part of ‘Finance costs on lease liabilities’ account in the consolidated statement of comprehensive income. Right-of-use assets are disclosed separately on the consolidated statement of financial position, with Note 13(a) disaggregating the lease assets by class of asset. Lease liabilities are presented as current and non-current in the consolidated statement of financial position depending on the timing of the settlement of contractual cash outflows. The repayment of the principal portion of lease payments is presented as part of financing activities in the consolidated statement of cash flows, and the interest portion is presented as part of operating activities. Hansen Technologies Ltd Annual Report 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUED30 JUNE 2021 67 Critical accounting estimate and judgement Determining the lease term of contracts with renewal and termination options – Group as a lessee The Group determines the lease term as the non-cancellable term of the lease together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised. The Group has several lease contracts that include extension and termination options. The Group applies judgement in evaluating whether it is reasonably certain whether or not to exercise the option to renew or terminate the lease. That is, it considers all relevant factors that create an economic incentive for it to exercise either the renewal or termination. After the commencement date, the Group reassesses the lease term if there is a significant event or change in circumstances that is within its control and affects its ability to exercise or not to exercise the option to renew or to terminate (e.g. construction of significant leasehold improvements or significant customisation to the leased asset). Estimating the incremental borrowing rate The Group cannot readily determine the interest rate implicit in the lease, therefore, it uses its incremental borrowing rate (IBR) to measure lease liabilities. The IBR is the rate of interest that the Group would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment. The IBR therefore reflects what the Group ‘would have to pay’, which requires estimation when no observable rates are available (such as for subsidiaries that do not enter into financing transactions) or when they need to be adjusted to reflect the terms and conditions of the lease (for example, when leases are not in the subsidiary’s functional currency). The Group estimates the IBR using observable inputs (such as market interest rates) when available and is required to make certain entity-specific estimates (such as the subsidiary’s stand-alone credit rating). 14. Payables Trade payables Accrued payables Other payables Total payables 2021 $’000 7,599 15,847 13,778 37,224 2020 $’000 4,794 12,779 6,650 24,223 Significant accounting policies Trade payables Trade payables are initially recognised at their fair value and subsequently carried at amortised cost and are not discounted. These amounts represent liabilities for goods and services provided to the Group prior to the end of financial year which are unpaid. The amounts are unsecured and are paid in accordance with vendor terms, which are usually within 30 to 60 days of recognition. Trade and other payables are presented as current liabilities unless payment is not due within 12 months after the reporting period. Hansen Technologies Ltd Annual Report 2021 68 15. Other operating provisions Current Onerous contract provisions Restructuring provisions Other Non-current Make good provisions Reconciliation of other operating provisions Carrying amount at beginning of year Net provisions/(payments) made during the year Carrying amount at end of year 2021 $’000 1,652 – 108 1,760 457 457 1,181 1,036 2,217 2020 $’000 417 484 280 1,181 – 1,211 (30) 1,181 The movement in operating provisions during the year was largely driven by a contract that the Group has considered onerous due to the nature of the activities involved and the costs of fulfilling or exiting the contract. Significant accounting policies 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. Hansen Technologies Ltd Annual Report 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUED30 JUNE 2021 69 Section D: People This section provides information about our employee benefit obligations, including annual leave, long service leave and post-employment benefits. It also includes details about our share plans and the compensation paid to key management personnel. 16. Employee benefits Current employee benefits1 Non-current employee benefits2 Total employee benefits liability 1. Included within current provisions in the consolidated statement of financial position. 2. Included within non-current provisions in the consolidated statement of financial position. 2021 $’000 14,592 66 14,658 2020 $’000 14,374 170 14,544 Employee Benefits Liability Employee benefits liability represents amounts provided for annual leave and long service leave. The current portion for this provision includes the total amount accrued for annual leave entitlements and the amounts accrued for long service leave entitlements that have vested due to employees having completed the required period of service. Based on past experience, the Group does not expect the full amount of annual leave or long service leave balances classified as current liabilities to be settled within the next 12 months. These amounts are presented as current liabilities since the Group does not have an unconditional right to defer the settlement of these amounts in the event employees wish to use their leave entitlement. The following amounts reflect leave that is not expected to be taken or paid within the next 12 months: Current leave obligations expected to be settled after 12 months 2021 $’000 1,765 2020 $’000 2,212 In calculating the present value of future cash flows in respect of long service leave, the probability of long service leave being taken is based on historical data. (a) Directors’ and executives’ compensation Short term employment benefits Post-employment benefits Share-based payments Detailed remuneration disclosures are provided in the remuneration report on pages 16 to 34. 2021 $ 3,906,967 167,422 1,210,118 2020 $ 3,823,007 171,750 896,658 5,284,508 4,891,415 Hansen Technologies Ltd Annual Report 2021 70 16. Employee benefits continued Significant accounting policies 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. Other long-term employee benefit obligations The provision for other long-term employee benefits, including obligations for long service leave and annual leave, which are not expected to be settled wholly before twelve months after the end of the reporting period, are measured at the present value of the estimated future cash outflow to be made in respect of the services provided by employees up to the reporting date. Expected further payments incorporate anticipated future wage and salary levels, durations of service and employee turnover, and are discounted at rates determined by reference to market yields at the end of the reporting period on high quality corporate bonds that have maturity dates that approximate the terms of the obligations. Any re-measurements for changes in assumptions of obligations for other long-term employee benefits are recognised in profit or loss in the periods in which the change occurs. Other long-term employee benefit obligations are presented as current liabilities in the consolidated statement of financial position if the entity does not have an unconditional right to defer settlement for at least twelve months after the reporting date, regardless of when the actual settlement is expected to occur. All other long-term employee benefit obligations are presented as non-current liabilities in the consolidated statement of financial position. Retirement benefit obligations The consolidated entity makes superannuation and pension contributions to the employee’s defined contribution plan of choice in respect of employee services rendered during the year. These contributions are recognised as an expense in the same period when the related employee services are received. The group’s obligation with respect to employee’s defined contributions entitlements is limited to its obligation for any unpaid superannuation and pension guarantee contributions at the end of the reporting period. All obligations for unpaid superannuation and pension guarantee contributions are measured at the (undiscounted) amounts expected to be paid when the obligation is settled and are presented as current liabilities in the consolidated statement of financial position. 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. Termination benefits The Group recognises an obligation and expense for termination benefits at the earlier of: (a) the date when the Group can no longer withdraw the offer for termination benefits; and (b) when the Group recognises costs for restructuring and the costs include termination benefits. In either case, the obligation and expense for termination benefits is measured on the basis of the best estimate of the number of employees expected to be affected. Termination benefits that are expected to be settled wholly before twelve months after the annual reporting period in which the benefits are recognised are measured at the (undiscounted) amounts expected to be paid and are presented as current liabilities in the consolidated statement of financial position. All other termination benefits are accounted for on the same basis as other long-term employee benefits and are presented as non-current liabilities in the consolidated statement of financial position. Hansen Technologies Ltd Annual Report 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUED30 JUNE 2021 71 17. Share-based payments (a) Employee Share Plan The Employee Share Plan (ESP) is available to all eligible employees each year to acquire ordinary shares in the Company from future remuneration (before tax). Shares to be issued or transferred under the ESP will be valued at the volume-weighted average price of the Company’s shares traded on the Australian Securities Exchange during the five business days immediately preceding the day the shares are issued or transferred. Shares issued under the ESP are not allowed to be sold, transferred or otherwise disposed of until the earlier of the end of an initial three-year period, or the participant ceasing continuing employment with 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 transferred to main share registry and/or disposed of Number of shares at year end 2021 No. of Shares 58,860 2020 No. of Shares 115,792 (32,060) 26,800 (56,932) 58,860 There were no shares issued under the ESP for FY2020 and FY2021 nor there were any amounts of consideration provided by eligible participants at the consolidated statement of financial position date on both years. The market value of the Company’s ordinary shares closed at $6.21 on 30 June 2021 ($2.91 on 30 June 2020). (b) Employee Performance Rights Plan The Employee Performance Rights Plan (the Rights Plan) was approved by shareholders at the Company’s AGM on 23 November 2017 and was re-adopted at the Company’s AGM on 26 November 2020. Under the Plan, awards are made to eligible executives and other management personnel who have an impact on the Group’s performance. Plan awards for long-term incentives (LTI) are granted in the form of performance rights over shares which vest over a period of three years subject to meeting performance measures and continuous employment with the Company. Plan awards for deferred short-term incentives (STI) are deferred for a two-year period of which the employee must remain employed, following the achievement of annual financial and non-financial performance measures. Each performance right is to subscribe for one ordinary share upon vesting and, when issued, the shares will rank equally with other shares. Performance rights issued under the Employee Performance Rights Plan are valued on the same basis as those issued to KMP, which is described in Note 17(d). Performance rights issued and outstanding as at 30 June 2021 Grant date 2 Jul 2017 2 Jul 2018 2 Sep 2019 2 Sep 2019 1 Jul 2020 1 Jul 2020 Total Vesting date 31 Aug 20201,2 31 Aug 20211,3 30 Jun 2022 30 Jun 2022 30 Jun 20234 30 Jun 2023 Type LTI LTI STI LTI STI LTI Fair value per right $ 3.815 No. of rights at 01/07/2020 345,494 3.01 3.11 2.83 480,079 87,218 489,306 – – 1,402,097 Rights granted 83,243 – – – 448,501 239,313 687,814 Rights vested, forfeited or other (428,737) No. of rights at 30/06/2021 – (31,238) 448,841 (8,834) (25,718) 148,873 – 78,384 463,588 448,501 239,313 (411,284) 1,678,627 1. The vesting date for rights granted on 2 July 2017 and 2 July 2018 is the date on which the Board notifies the executive that the rights have vested, after the outcomes for the measurement period have been determined and satisfaction of performance conditions have been assessed. 2. Performance rights in relation to EPSa CAGR measure exceeded the required performance measurement hurdles and vested on an accelerated basis paying 150% of the entitlement on 31 August 2020. Performance rights associated with the TSR hurdle did not meet the market conditions. A total of 259,122 rights vested on the vesting date. 3. Performance rights in relation to EPSa CAGR and TSR measures have exceeded the required measurement hurdles and will vest on an accelerated basis paying 150% of the entitlement on 31 August 2021. Additional rights of 224,427 are expected to vest on the vesting date. 4. Majority of the performance rights in relation to the Enhanced STI Plan granted on 1 July 2020 have exceeded the required measurement hurdles, allowing an accelerated basis paying up to 135% of the entitlement on 30 June 2023. Additional rights of 148,771 are expected to vest on the vesting date. Hansen Technologies Ltd Annual Report 2021 72 17. Share-based payments continued Performance rights issued and outstanding as at 30 June 2020 Grant date 2 Jul 2017 2 Jul 2018 2 Sep 2019 2 Sep 2019 Total Vesting date 31 Aug 20201,2 31 Aug 20211 30 Jun 2022 30 Jun 2022 Fair value per right $ 3.815 3.01 3.11 2.83 Type LTI LTI STI LTI No. of rights at 01/07/2019 355,316 530,652 Rights vested, forfeited or other (9,822) No. of rights at 30/06/2020 345,494 Rights granted – – (50,573) 480,079 – – 95,451 540,007 (8,233) 87,218 (50,701) 489,306 885,968 635,458 (119,329) 1,402,097 1. The vesting date for rights granted on 2 July 2017 and 2 July 2018 is the date on which the Board notifies the executive that the rights have vested, after the outcomes for the measurement period have been determined and satisfaction of performance conditions have been assessed. 2. Performance rights in relation to EPSa CAGR measure exceeded the required performance measurement hurdles and vested on an accelerated basis paying 150% of the entitlement on 31 August 2020. Performance rights associated with the TSR hurdle did not meet the market conditions. A total of 259,122 rights vested on the vesting date. The weighted average contractual life of outstanding performance rights at the end of the financial year is 1.25 years (2020: 1.26 years). (c) Employee Share Option Plan The Employee Share Option Plan (the Option Plan) was approved by shareholders at the Company’s AGM on 9 November 2001 and reaffirmed at the AGM on 24 November 2011. Under the Plan, awards are made to eligible executives and other management personnel who have an impact on the Group’s performance. Plan awards are delivered in the form of options over shares which vest over a period of three years subject to meeting performance measures and continuous employment with the Company. Each option is to subscribe for one ordinary share when the option is exercised and, when issued, the shares will rank equally with other shares. Unless the terms on which an option was offered specified otherwise, an option may be exercised at any time after the vesting date on satisfaction of the relevant performance criteria. Options issued under the Employee Share Option Plan are valued on the same basis as those issued to KMP, which is described in Note 17(d). There were no new options issued under the Option Plan during the 30 June 2021 and 30 June 2020 financial years, as the Option Plan was replaced with the Rights Plan as described in Note 17(b). Movement of options during the year ended 30 June 2021: Grant Date 2 Jul 2015 Total Weighted average exercise price Vesting Date 2 Jul 2018 Expiry Date 2 Apr 20212 1. 885,000 options were exercised on various dates during the current financial year. Exercise Price $ 2.67 No. of Options at Beg. of Year 885,000 Options Exercised, Lapsed or Other (885,000)1 885,000 (885,000) $2.67 No. of Options at End of Year – – – 2. The original expiry date for this tranche of options was 2 July 2020. However, due to the COVID-19 pandemic impact on financial markets, the Board exercised its discretion to extend the expiry date for the remaining options to 2 April 2021. Hansen Technologies Ltd Annual Report 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUED30 JUNE 2021 73 Movement of options during the year ended 30 June 2020: Grant Date 2 Jul 2014 2 Jul 2015 22 Dec 2016 Total Weighted average exercise price Vesting Date 2 Jul 2017 Expiry Date 2 Jul 2019 2 Jul 2018 2 Apr 20211 31 Aug 2019 22 Dec 2021 Exercise Price $ 1.30 No. of Options at Beg. of Year 265,000 Options Exercised, Lapsed or Other (265,000) No. of Options at End of Year – 2.67 3.59 925,000 (40,000) 885,000 1,323,730 (1,323,730) – 2,513,730 (1,628,730) 885,000 $1.48 $2.05 1. The original expiry date for this tranche of options was 2 July 2020. However, due to the COVID-19 pandemic impact on financial markets, the Board exercised its discretion to extend the expiry date for the remaining options to 2 April 2021. The weighted average fair value of options granted during the year was nil (2020: nil) as there were none issued during the year. The weighted average share price for share options exercised during the financial year was $4.84 (2020: $3.86). All outstanding share options have been exercised and as such the weighted average remaining contractual life for the share options as at the end of the financial year is nil (2020: 0.58 years). (d) Fair value of performance rights granted The fair value of Total Shareholder Return (TSR) performance rights at grant date is independently determined using an adjusted form of the Black Scholes Model which includes a Monte Carlo simulation model that takes into account the term of the performance rights, the impact of dilution (where material), the share price at grant date and expected price volatility of the underlying share, the expected dividend yield, the risk-free interest rate for the term of the performance rights and the correlations and volatilities of the peer group companies. The fair value of Earnings Per Share (EPS) and short-term incentive deferred equity (STI) performance rights at grant date is independently determined using a conventional Black Scholes Model. Details of the assessed fair value of the performance rights as well as the model inputs for rights granted, during the year ended 30 June 2021 and for the prior year 30 June 2020, are presented below: Grant date Expected vesting date Measurement period Fair value of performance rights granted – EPS rights Fair value of performance rights granted – TSR rights Fair value of performance rights granted – STI rights Share price at grant date Expected price volatility of the company’s shares Expected dividend yield Risk-free interest rate 2021 1 July 2020 30 June 2023 2020 2 September 2019 30 June 2022 1 July 2020 to 30 June 2023 1 July 2019 to 30 June 2022 $2.70 $2.84 $2.70 $2.90 30% 2.32% 0.26% $3.11 $2.55 $3.11 $3.28 35% 1.88% 0.69% The expected price volatility is based on the historic volatility (based on the life of the performance rights), adjusted for any expected changes to future volatility due to publicly available information. Hansen Technologies Ltd Annual Report 2021 74 17. Share-based payments continued (e) Expenses arising from share-based payment transactions Rights issued under employee performance rights plan FY18 Rights issued under employee performance rights plan FY19 Rights issued under employee performance rights plan FY20 Rights issued under employee performance rights plan FY21 Note 2021 $ – 1,301,080 507,720 758,509 2020 $ 431,479 476,301 564,820 – 8(a), 22(b) 2,567,309 1,472,600 Significant accounting policies Share-based payments The Group operates equity-settled share-based payment employee share, options and rights 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, ending on the date on which the relevant employees become fully entitled to the award (the vesting date). 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 options and rights 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. Share-based payments are subject to two different forms of measurement: • Market-based • Non-market-based These measurement criteria are subject to different accounting treatments under AASB 2 Share-based Payment. Market-based measurement Any awards subject to market conditions will vest irrespective of the condition being met. Where a condition is not met, the expense associated with the award will continue to be recognised over the vesting period. Non-market-based measurement For any non-market-based awards where the condition is not satisfied, the expense incurred to date is reversed and no further charge is recognised over the remaining period. Critical accounting estimate and judgement Share-based payments The fair value of options and rights is estimated on the grant date using an adjusted form of the Black Scholes Model and Monte Carlo simulation model. Estimating fair value for share-based payments requires significant assumptions such as determining the most appropriate inputs to the valuation model, including the expected life of the share option or performance right, volatility in the share price and dividend yield. Hansen Technologies Ltd Annual Report 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUED30 JUNE 2021 75 Section E: Capital and Financial Risk Management This section explains our policies and procedures applied to manage our financing and capital structure, and the associated risks that we are exposed to. The Group manages its financial and capital structure to maximise shareholder return, maintain an optimal cost of capital and provide flexibility for strategic investments. 18. Financial risk management The Group is exposed to a variety of financial risks, principally related to credit, liquidity, interest rate and foreign currency risk. The Group’s risk management framework is aligned with best practices and designed to reduce volatility on our financial performance and to support the delivery of our business objectives. The Board has overall responsibility for identifying and monitoring operational and financial risks. (a) Credit risk Nature of risk The risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations. Credit risk arises principally from the Group’s receivables from customers and our investments in debt securities. Exposure to the risk The Group’s maximum exposure to credit risk at balance date is the carrying amount of financial assets, net of any provisions for impairment and excluding the value of any collateral or other security. The gross trade receivables balance as at 30 June 2021 was $75,942,000 (2020: $48,336,000). The ageing analysis of trade and other receivables is provided in Note 9. As the Group undertakes transactions with a large number of customers and regularly monitors payment in accordance with credit terms, the financial assets that are past due but not impaired, are expected to be received. The Group’s exposure to credit risk is affected by the regions and industries our customers operate in. Set out below shows the concentration of our trade receivables balances by the industry they operate in. FY21 3% FY20 2% 70%* 27% 42% Energy Communications Other 56% * In FY2021, owing to the signing of the deal with Telefonica, $20.1 million is currently outstanding which will be collected in December 2021. If this balance did not exist, the mix of credit risk would be similar to the prior financial year. How is the risk managed? Receivables are managed on an ongoing basis. The Group does not have any material credit risk exposure to any single debtor or group of debtors. Ageing analysis and ongoing collectability reviews are performed and, where appropriate, an expected credit loss provision is raised. Historically, the Group has not had any significant write-offs in our trade receivables. The Group minimises concentrations of credit risk in relation to trade receivables by undertaking transactions with a large number of customers. Credit quality of a customer is assessed based on a variety of factors, including their credit ratings and financial position. Hansen Technologies Ltd Annual Report 2021 76 18. Financial risk management continued (b) Liquidity risk Nature of risk Exposure to the risk The table below categorises the Group’s financial liabilities into their relevant contractual maturities. The risk that the Group will encounter difficulty in meeting its financial obligations as they fall due. Amounts included represent undiscounted cash flows. Note 19 provides additional details on the Group’s borrowing arrangements. How is the risk managed? The Group’s approach is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they are due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation. The Group reviews its minimum levels of cash and cash equivalents on an ongoing basis, and closely monitors rolling cash flow forecasts based on its view on the nature and timing of expected receipts and payments. The Group has historically been able to generate and retain strong positive cash flows. Additionally, multi-currency borrowing facilities have been arranged with the Group’s financiers to provide increased capacity for strategic growth objectives. Contractual maturities of financial liabilities: The table below summarises the maturity profile of the Group’s financial liabilities based on contractual undiscounted payments as at 30 June 2021 and 2020. Financial liabilities Note Less than 6 months 6-12 months 1-2 years 2-3 years > 3 years Total carrying amount Contractual cash flows $’000 2021 Trade and other payables Lease liabilities1 Secured borrowings2 2020 Trade and other payables Bank overdraft Lease liabilities1 Secured borrowings 14 13(d),23 19 14 19 13(d),23 19 37,224 3,233 – 3,068 – 118,762 40,457 121,830 24,223 591 3,266 – – – 2,745 5,200 – 160,394 28,080 2,745 165,594 – 5,390 – 5,390 – – – 3,225 – 3,225 – – 4,646 – 4,646 – 4,600 37,224 19,516 – 118,762 4,600 175,502 – – 6,959 24,223 591 22,816 – 160,394 6,959 208,024 1. Lease liabilities are recognised and disclosed at present value in accordance with AASB 16 and the Group accounting policy. 2. As at 4 August 2021, the loan facility has been extended to 1 September 2023. The contractual cash flows as at that date would be due within 2-3 years. Hansen Technologies Ltd Annual Report 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUED30 JUNE 2021 77 (c) Interest rate risk Nature of risk The risk that the fair value or the future cash flows of a financial instrument will fluctuate as a result of changes in market interest rates. Exposure to the risk The Group’s main exposure to interest rate risk arises from its lease liabilities, borrowings and cash and cash equivalents. No other financial assets or liabilities are expected to be exposed to interest rate risk. The weighted average variable interest rate across all our borrowings at 30 June 2021 is 2.20% (2020: 3.46%). If the interest rate were to increase or decrease by 1%, with all other variables held constant, the impact to pre-tax profit is $1,610,000 (2020: $2,064,000) and the impact to post-tax equity1 is $1,158,000 (2020: $1,482,000). This impact is based on a lower level of interest rates during the financial year compared to the prior year. 1. Post-tax equity is calculated as the net of the blended effective tax rate on pre-tax profit based on where the interest-bearing debt is located (i.e., Australia and Canada) and the prevailing corporate tax rate in each of those jurisdictions (i.e., 30% and 26.5% respectively). How is the risk managed? The Group ensures it has access to diverse sources of funding, including access to foreign currency debt. The Group closely monitors its debt ratios to reduce its risk exposure to uncertainty in the global markets if interest rates will fall or rise. Management is comfortable with the risk associated with using variable interest rates due to the current level of borrowings. (d) Foreign currency risk Nature of risk The risk that the fair value or future cash flows of a financial instrument or forecasted transaction will fluctuate because of changes in foreign exchange rates. Exposure to the risk The Group operates internationally and as such has exposure to foreign currency movements. The Group has expanded its international operations substantially in recent years to the extent that in excess of 83% of its revenue is now earned in foreign currency designated transactions. The Group has a number of offices located internationally and more than 88% of its work force is located overseas and paid in foreign currencies. Changes in foreign currency exchange rates would be limited to the revaluation of foreign currency denominated borrowings, intercompany financing arrangements denominated in foreign currencies, and foreign currency bank balances in the Group at market rates at consolidated statement of financial position date. The Group’s primary foreign currency exposure relates to the movement in US Dollar (USD), British Pound (GBP), Canadian Dollar (CAD) and Euro (EUR) exchange rates. At the reporting date, cash and cash equivalents included $48.1 million (2020: $38.4 million) denominated in foreign currencies. If the foreign currency exchange rate for our primary foreign currencies (being USD, GBP, CAD and EUR) were to move by 10%, with all other variables held constant, the impact to our foreign currency translation reserves (classified as equity in the consolidated statement of financial position) on translation of our foreign currency- denominated cash and cash equivalents is as follows: USD GBP CAD EUR Increase/(decrease) $’000 +10% -10% 2021 1,788 2020 1,679 (1,788) (1,679) 2021 438 (438) 2020 531 (531) 2021 255 (255) 2020 – 2021 1,317 – (1,317) 2020 700 (700) The Group’s exposure to foreign currency changes for all other currencies and other financial statement items is not material, as the Group has natural hedging and designated hedging relationships in place (refer to ‘How is the risk managed?’ for a further explanation). Hansen Technologies Ltd Annual Report 2021 78 18. Financial risk management continued (d) Foreign currency risk continued How is the risk managed? The Group manages its foreign currency risk by evaluating its exposure to fluctuations on an ongoing basis. The Group’s overseas subsidiaries transact in different functional currencies. The effects of any exchange rate movements in respect of the net assets of our foreign subsidiaries are recognised in the foreign currency translation reserve in equity. Accordingly, the Group has an in-built natural hedge against major currency fluctuations and, except for significant sudden change, is protected in part by its corporate structure against currency movements so that the impact is largely limited to the margin. In addition, the Group holds foreign currency borrowings as part of the syndicated facility agreement as disclosed in Note 19, which have been designated as hedging instruments of the net assets of some of the Group’s principal overseas subsidiaries in order to offset our risk exposure arising from the translation of these subsidiaries into Australian dollars. There is no impact to the profit or loss on the translation of the Group’s overseas subsidiaries or foreign currency borrowings to the Australian dollar. The Group’s subsidiaries also enter into various financing and transactional arrangements with each other in accordance with local regulatory requirements. The Group regularly reviews these arrangements to minimise its exposure on the translation of outstanding foreign currency-denominated intercompany balances to the Australian dollar, which impact profit. Significant accounting policies 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 of the Group are presented in Australian dollars, which is the Group’s functional and presentation currency. Foreign currency transactions and balances Transactions in foreign currencies of entities within the consolidated Group are translated into its 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 in profit or loss and presented in the consolidated statement of comprehensive income for the financial year. (e) Fair value measurements Due to their short-term nature, the fair value of receivables and payables approximates their carrying amounts as disclosed in the consolidated statement of financial position and notes to the consolidated financial statements. At 30 June 2021 and 30 June 2020, there are no assets or liabilities carried at fair value on a recurring basis. Hansen Technologies Ltd Annual Report 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUED30 JUNE 2021 19. Borrowings Current Secured Bank overdraft Term facility – gross borrowings Term facility – net prepaid borrowing costs Non-current Secured Term facility – gross borrowings Term facility – net prepaid borrowing costs (a) Loan facilities Loan facility at 1 July Voluntary cancellation of the facility Repayments of non-withdrawable facility Amount utilised Unutilised loan facility at 30 June 79 2021 $’000 2020 $’000 – 118,762 1,255 117,507 – – – 2021 $’000 217,000 (40,000) (24,907) (118,762) 33,331 591 – – 591 160,394 (2,542) 157,852 2020 $’000 225,000 – (8,000) (160,394) 56,606 At the beginning of the year, the Group had a $217,000,000 syndicated multi-currency facility with its external financiers, which was used to fund the acquisition of Sigma Systems in June 2019. The facility also provides additional funding for general corporate and working capital purposes. The facility is secured by 75% of Group assets. On 27 July 2020, the Group voluntarily cancelled $40,000,000 of the facility effective 30 July 2020. As at 30 June 2021, the remaining unutilised portion of the facility is $33,331,000. On 4 August 2021, the existing syndicated facility was amended to have a new expiry date of 1 September 2023 (original expiry date was 1 May 2022). As at 4 August 2021, the borrowings are classified as non-current. As per the amendment, the facility limit is now $151,323,000 and a renegotiated margin pricing grid has delivered a favourable outcome for the Group. Refer to Note 29 (a). (b) Changes in liabilities arising from financing activities Opening balance at 1 July Cash flows from financing activities Net repayment of borrowings Cash flows from non-financing activities Net (repayment of)/draw-down of overdraft facility Prepaid borrowing costs Non-cash changes Amortisation of prepaid borrowing costs Effect of foreign exchange Closing balance at 30 June1 1. Represents long-term facility borrowings of $152,093,000 (2020: $217,000,000). Note 2021 $’000 158,443 2020 $’000 185,808 (41,673) (27,833) (591) (279) 1,566 41 457 – 1,327 (1,316) 117,507 158,443 5 Hansen Technologies Ltd Annual Report 2021 80 19. Borrowings continued (c) Hedge of net investments in foreign operations Included in the ‘Borrowings’ account at the beginning of the financial year are two borrowings of USD4,500,000 and GBP8,500,000 drawn down as part of the syndicated multi-currency facility. Repayments have been made during the year and as at 30 June 2021, the carrying amount of these borrowings are USDnil and GBP2,500,000. Both of these foreign currency-denominated borrowings have been designated as a hedge of the net investments in the Group’s subsidiaries in the United States and the United Kingdom. The borrowings are being used to hedge the Group’s exposure to the USD and GBP foreign exchange risk on these investments. Gains or losses on the retranslation of the borrowings are transferred to other comprehensive income to offset any gains or losses on translation of the net investments in the subsidiaries. The Group’s hedging relationship remains unchanged from prior year for its foreign-currency denominated borrowings. The effects of the foreign currency related hedging instruments on the Group’s financial position and performance are as follows: Carrying amount of the loan – 30 June 2021 (AUD) Carrying amount of the loan – 30 June 2021 (nominated currency) Hedge ratio1 Change in the carrying amount of loan as a result of foreign currency movements since 1 July 2020, recognised in OCI ($) Change in the value of the hedged item used to determine hedge effectiveness ($) Average hedged rate for the year (local currency:1 AUD) Syndicated debt facility ‘000 Note USD loan – GBP loan 4,589 Total 4,589 – 1:1 22(a) (598) 598 0.735 2,500 1:1 170 (170) 0.552 (428) 428 4,589 1. The draw-down loans under the syndicated debt facilities are denominated in the same currency and critical terms as the value of the net investment in the foreign subsidiaries that are being hedged. Therefore, the hedge ratio this year is 1:1 (2020: 1:1). The impact to the foreign currency translation reserve on translation of the Group’s net investment in foreign subsidiaries that are being hedged by the Group’s borrowings was an increase of $428,000 (2020: decrease of $802,000). The hedging income or loss recognised in ‘OCI’ (Other Comprehensive Income) before tax is equal to the change in fair value used for measuring effectiveness. There is no ineffectiveness in the years ended 30 June 2021 and 2020. Significant accounting policies Loans and borrowings Interest-bearing loans and borrowings are initially recognised as financial liabilities at fair value net of directly attributable transaction costs. After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest rate (EIR) method. Gains and losses are recognised in profit or loss when the liabilities are derecognised as well as through the EIR amortisation process. Borrowings are classified as non-current liabilities except for those that mature in less than 12 months from the reporting date, which are classified as current liabilities, unless the borrower has the discretion to refinance or rollover the borrowings. 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, in which case the costs are capitalised until the asset is ready for its intended use or sale. Hansen Technologies Ltd Annual Report 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUED30 JUNE 2021 81 2021 $’000 2020 $’000 145,224 140,952 20. Contributed capital (a) Issued and paid-up capital Ordinary shares, fully paid The ordinary shares have no par value in accordance with the Corporations Act 2001. (b) Movements in shares on issue Balance at beginning of the financial year Shares issued under the dividend reinvestment program Options exercised under the LTI Plan Performance rights vested under the LTI Plan 2021 No. of Shares 198,232,076 2021 $’000 140,952 2020 No. of Shares 197,399,653 469,341 885,000 259,122 1,909 2,363 – 527,423 305,000 – 2020 $’000 138,746 1,754 452 – Balance at end of the financial year 199,845,539 145,224 198,232,076 140,952 (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) Capital risk management The Group’s objectives when managing capital are to safeguard their ability to continue as a going concern, so that they can continue to provide returns for shareholders and benefits for other stakeholders and maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares, increase debt, sell assets to reduce debt or a combination of these activities. The capital risk management policy remains unchanged from the 30 June 2020 Financial Report. Hansen Technologies Ltd Annual Report 2021 82 21. Dividends A final dividend of 5 cents per share has been declared. This final dividend of 5 cents per share, partially franked to 2.70 cents per share, was announced to the market on 24 August 2021. The amount declared has not been recognised as a liability in the accounts of Hansen Technologies Limited as at 30 June 2021. Dividends paid during the year (net of dividend re-investment) 7 cents per share final dividend paid 25 September 2020 – partially franked1 3 cents per share final dividend paid 26 September 2019 – partially franked2 5 cents per share interim dividend paid 25 March 2021 – partially franked3 3 cents per share interim dividend paid 26 March 2020 – partially franked4 Proposed dividend not recognised at the end of the year Dividends franking account 30% franking credits, on a tax paid basis, are available to shareholders of Hansen Technologies Ltd for subsequent financial years 2021 $’000 12,974 – 8,974 – 21,948 9,992 2020 $’000 – 4,904 – 5,211 10,115 13,876 981 27 1. The final dividend paid of 7 cents per share franked to 0.7 cents, comprised of a regular dividend of 5 cents per share and a special dividend of 2 cents per share. 2. The final dividend paid of 3 cents per share franked to 2.6 cents, comprised of a regular dividend of 3 cents per share. 3. The interim dividend of 5 cents per share franked to 1.1 cents, comprised of a regular dividend of 5 cents per share. 4. The interim dividend of 3 cents per share franked to 1.59 cents, comprised of a regular dividend of 3 cents per share. The above available amounts are based on the balance of the dividend franking account at year end adjusted for: • franking credits that will arise from the payment of any current tax liability; • franking debits that will arise from the payment of any dividends recognised as a liability at year end; • franking credits that will arise from the receipt of any dividends recognised as receivables at year end; and • franking credits that the entity may be prevented from distributing in subsequent years. Hansen Technologies Ltd Annual Report 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUED30 JUNE 2021 83 22. Reserves and retained earnings Foreign currency translation reserve Share-based payments reserve Retained earnings Note 22(a) 22(b) 22(c) 2021 $’000 5,105 7,971 2020 $’000 9,397 5,404 130,219 96,741 (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 1 July Net gain/(loss) on hedges of a net investment Exchange differences on translation of foreign operations Balance at 30 June Note 19(c) 2021 $’000 9,397 428 (4,720) 5,105 2020 $’000 23,340 (802) (13,141) 9,397 (b) Share-based payments reserve This reserve is used to record the fair value of options and performance rights issued to employees as part of their remuneration. Movements in reserve Balance at 1 July Share-based payments expensed during the year Balance at 30 June (c) Retained earnings Movements in retained earnings Balance at 1 July Dividends declared during the year (before dividend re-investment) Net profit after income tax expense Balance at 30 June 23. Commitments and contingencies Commitments on leases Lease commitments are disclosed in Note 18. Note 17(e) Note 27(c) 2021 $’000 5,404 2,567 7,971 2021 $’000 96,741 (23,857) 57,335 130,219 2020 $’000 3,931 1,473 5,404 2020 $’000 82,853 (11,869) 25,757 96,741 Contingent assets and liabilities In the previous financial year, there have been various indemnity and warranty claims made to the vendors of the acquired business, Sigma Systems group of entities. The outcome of these claims has been finalised in the current financial year. At 30 June 2021, the Group does not have any contingent assets and liabilities. Hansen Technologies Ltd Annual Report 2021 84 Section F: Group Structure This section provides information about our structure and how this impacts the Group’s results as a whole, including parent entity information and any business acquisitions that impacted the Group’s financial position and performance. 24. Parent entity information Presented below are the summary financial statements of the parent Company, Hansen Technologies Limited: (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 Foreign currency translation reserve Total equity Parent Entity 2021 $’000 230 223,876 224,106 32,876 267 33,143 190,963 145,224 39,109 7,971 (1,341) 2020 $’000 188 232,030 232,218 876 52,044 52,920 179,298 140,952 34,712 5,404 (1,770) 190,963 179,298 Hansen Technologies Ltd Annual Report 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUED30 JUNE 2021 (b) Summarised statement of comprehensive income Profit after income tax expense Total comprehensive income for the year 85 Parent Entity 2021 $’000 28,254 28,681 2020 $’000 23,616 22,763 Dividends of $29,649,000 (2020: $26,183,000) were paid from Hansen Corporation Pty Limited to Hansen Technologies Limited during the financial year. (c) Parent entity guarantees Hansen Technologies Limited, being the parent entity, has entered into a syndicated debt facility (refer to Note 19) of which Hansen Corporation Pty Limited and other subsidiaries of the Company are joint guarantors to that facility agreement. A Deed of Parent Guarantee and Indemnity also exists between Hansen Technologies Limited and Sigma Systems Canada LP, a wholly-owned subsidiary, in favour of a financing company based in Canada for a credit card facility. In addition, there are cross guarantees given by Hansen Technologies Limited and Hansen Corporation Pty Limited as described in Note 27. No deficiencies of assets exist in any of these companies. Significant accounting policies The financial information for the parent Company has been prepared on the same basis as the Group consolidated financial statements, except as set out below: Investments in subsidiaries Investments in subsidiaries are accounted at cost. Dividends received from subsidiaries are recognised in the parent entity’s statement of comprehensive income when its right to receive the dividend is established. Where the parent Company has provided financial guarantees in relation to loans and payables of subsidiaries for no compensation, the fair value of these guarantees is accounted for as contributions and recognised as part of the cost of the investment. Hansen Technologies Ltd Annual Report 2021 86 Section G: Other disclosures This section includes other disclosures not included in the other sections, for example the Group’s auditor’s remuneration, related parties, impact of new accounting standards not yet effective and subsequent events. 25. Related party disclosures (a) List of controlled entities The Group’s consolidated financial statements include the financial statements of Hansen Technologies Limited and the controlled entities below: Name Parent entity Hansen Technologies Limited Subsidiaries of Hansen Technologies Limited Hansen Corporation Pty Limited Hansen Corporation Investments Pty Limited Hansen Holdings (Asia) Pty Limited Utilisoft Pty Limited Hansen Technologies (Shanghai) Company Limited Hansen Technologies Denmark A/S Hansen Technologies CIS Finland Oy (fka. Enoro CIS Finland Oy) Hansen Technologies Finland Oy (fka. Enoro Oy) PEP Finland Oy Enercube Oy Finland Filial Hansen Customer Support India Private Limited Enoro B.V. Hansen New Zealand Limited Hansen Technologies Holdings AS (fka. Enoro Holding AS) Hansen Technologies Norway AS (fka. Enoro AS) Hansen Technologies Sweden AB (fka. Enoro AB) Enoro AG Hansen Corporation Europe Limited Hansen Holdings Europe Limited Hansen Billing Solutions Limited Hansen Operations, LLC Hansen Solutions LLC Hansen Technologies North America, Inc. Hansen ICC, LLC Hansen Banner, LLC Peace Software Inc. Hansen Technologies Vietnam LLC Hansen Technologies Canada, Inc. Sigma Systems Canada Inc.1 Sigma Systems Canada LP Sigma Canada Holdings Inc. Sigma Systems GP Inc. Sigma OSS Systems India Private Limited Sigma Systems Japan K.K. Sigma Systems (U.K.) Limited Sigma Systems (Wales) Limited Sigma Systems Group (USA) Inc. Country of Incorporation Australia Australia Australia Australia Australia China Denmark Finland Finland Finland Finland India Netherlands New Zealand Norway Norway Sweden Switzerland United Kingdom United Kingdom United Kingdom United States United States United States United States United States United States Vietnam Canada Canada Canada Canada Canada India Japan United Kingdom United Kingdom United States 1. Sigma Systems Canada Inc. was amalgamated with Hansen Technologies Canada, Inc. on 1 November 2020. Ordinary Share Entity Interest 2021 % 2020 % 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 – 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 Hansen Technologies Ltd Annual Report 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUED30 JUNE 2021 87 Significant accounting policies Foreign subsidiaries Subsidiaries that have a functional currency different to the presentation currency of the Group 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 consolidated statement of financial position. 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. (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 and revenue contracts for the relevant financial year: Leased premises A related party to the Directors1 – rental payments A related party, Andrew Hansen – rental payments 2021 $ 2020 $ 1,536,126 1,511,495 84,294 22,920 1,620,420 1,534,415 1. Andrew Hansen, Bruce Adams and David Osborne have joint interest to the Melbourne and South Melbourne properties of which the Group pays monthly rental payments. Hansen Technologies Ltd Annual Report 2021 88 26. Auditor’s remuneration The auditor of the Group for the year ended 30 June 2021 is RSM Australia Partners. (a) Amounts paid and payable to RSM Australia Partners for: (i) Audit and other assurance services – an audit and/or review of the Financial Report of the entity and any other entity in the consolidated entity 284,694 298,200 2021 $ 2020 $ (ii) Other non-audit services – taxation services – compliance services – 3,609 3,609 – – – Total remuneration of RSM Australia Partners 288,303 298,200 (b) Amounts paid and payable to related practices of RSM Australia Partners for: (i) Audit and other assurance services – an audit and/or review of the Financial Report of the overseas entities in the consolidated entity1 507,826 597,478 (ii) Other non-audit services – taxation services – compliance services Total remuneration of network firms of the auditor (c) mounts paid and payable to non-related auditors for: (i) Audit and other assurance services – an audit and/or review of the Financial Report of the entity and any other entities in the consolidated entity (ii) Other non-audit services – taxation services – compliance services Total remuneration of non-related auditors Total auditors’ remuneration 135,468 78,817 214,285 722,111 11,537 2,116 – 2,116 13,653 110,275 31,420 141,695 739,173 – – – – – 1,024,067 1,037,373 1. For the financial year ended 30 June 2020, the amount includes fees associated to the audit of the acquisition of the Sigma Group. Hansen Technologies Ltd Annual Report 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUED30 JUNE 2021 89 27. Deed of cross guarantee Hansen Technologies Limited and Hansen Corporation Pty Limited are parties to a deed of cross guarantee under which each company guarantees the debts of the other. By entering into the deed, the wholly-owned entities have been relieved from the requirement to prepare a financial report and directors’ report under ASIC Corporations (Wholly-owned Companies) Instrument 2016/785 issued by the Australian Securities and Investments Commission. The above companies represent a ‘closed group’ for the purposes of the Class Order, and as there are no other parties to the deed of cross guarantee that are controlled by Hansen Technologies Limited, they also represent the ‘extended closed group’. (a) Consolidated statement of comprehensive income Set out below is a consolidated statement of comprehensive income for the year ended 30 June 2021 of the closed group consisting of Hansen Technologies Limited and Hansen Corporation Pty Limited (the Closed Group). Revenue Other income Total revenue and other income Employee benefit 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 Finance costs on borrowings Finance costs on lease liabilities Foreign currency gains/(losses) Other expenses Total expenses Profit before income tax expense Income tax expense Profit after income tax expense Other comprehensive (expense)/income Items that may be reclassified subsequently to profit and loss Net gain/(loss) on hedges of net investments Exchange differences on translation of foreign entities, net of tax Other comprehensive income/(expense) for the year Note 2021 $’000 48,068 44,794 92,862 2020 $’000 43,934 32,834 76,768 (26,754) (26,446) (1,861) (3,976) (1,473) – (1,191) (5,759) (71) (417) (1,782) (2,362) (139) 162 (1,399) (47,022) 45,840 (4,295) 41,545 428 – 428 (2,095) (3,110) (1,645) (27) (1,740) (4,347) (846) (487) (628) (4,022) (169) (414) (1,263) (47,239) 29,529 (1,750) 27,779 (802) (801) (1,603) 27(c) Total comprehensive income for the year 41,973 26,176 Hansen Technologies Ltd Annual Report 2021 90 27. Deed of cross guarantee continued (b) Consolidated statement of financial position Set out below is a consolidated statement of financial position as at 30 June 2021 of the Closed Group: Current assets Cash and cash equivalents Receivables Accrued revenue Current tax asset Other current assets Total current assets Non-current assets Plant, equipment & leasehold improvements Intangible assets Right-of-use assets Other non-current assets Deferred tax assets Total non-current assets Total assets Current liabilities Payables Borrowings Lease liabilities Current tax payable Provisions Unearned income Total current liabilities Non-current liabilities Deferred tax liabilities Borrowings Lease liabilities Other non-current liabilities Provisions Total non-current liabilities Total liabilities Net assets Equity Share capital Foreign currency translation reserve Share-based payments reserve Retained earnings Total equity 2021 $’000 2,779 7,768 2,899 2,905 – 2020 $’000 2,829 5,522 1,283 530 2,528 16,351 12,692 5,869 25,228 2,967 222,194 4,526 260,784 277,135 7,799 28,833 842 2,269 7,597 7,024 54,364 4,687 – 2,331 3,016 67 10,101 64,465 212,670 2,993 25,686 3,826 214,393 4,148 251,046 263,738 3,839 - 784 – 5,776 5,637 16,036 4,803 51,842 3,173 – 170 59,988 76,024 187,714 145,224 140,951 (2,126) 4,494 65,078 (2,554) 1,927 47,390 212,670 187,714 Hansen Technologies Ltd Annual Report 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUED30 JUNE 2021 91 (c) Summary of movements in consolidated retained earnings of the Closed Group Retained earnings at the beginning of the year Profit for the year Dividends declared Retained earnings at the end of the year Note 27(a) 22(c) 2021 $’000 47,390 41,545 (23,857) 65,078 2020 $’000 31,480 27,779 (11,869) 47,390 28. New and amended accounting standards and interpretations (a) Adoption of amended accounting standards that are first operative at 30 June 2021 The Group has adopted the following new and amended accounting standards, applicable and effective for the financial year beginning 1 July 2020: • AASB 2018-6 Amendments to Australian Accounting Standards: Definition of a Business • Amendments to the Conceptual Framework • Amendments to the definition of ‘material’ in AASB 101 Presentation of Financial Statements and AASB 108 Accounting, Policies, Changes in Accounting Estimates and Errors These amendments do not have a significant impact on the financial report and therefore the disclosures have not been made. The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective. Where necessary, comparative information has been reclassified and repositioned for consistency with current year disclosures. (b) Accounting standards and interpretations issued but not operative at 30 June 2021 The following new and revised accounting standards and interpretations have been issued by the Australian Accounting Standards Board at the reporting date, which are considered relevant to the Group but are not yet effective. The Directors’ assessment of the impact of these standards and interpretations is set out below: (i) Amendments to AASB 101: Classification of Liabilities as Current or Non-current These amendments revise AASB 101 to specify the requirements for classifying liabilities as current or non-current. The amendments clarify (a) what is meant by a right to defer settlement; (b) that a right to defer must exist at the end of the reporting period; (c) that classification is unaffected by the likelihood that an entity will exercise its deferral right; (d) that only if an embedded derivative in a convertible liability is itself an equity instrument would the terms of a liability not impact its classification. Group’s assessment performed to date The amendments are effective for annual reporting period beginning 1 July 2023 and must be applied retrospectively. The Group is currently assessing the impact the amendments will have on current practice. (ii) Reference to the Conceptual Framework – Amendments to AASB 3 The AASB has issued amendments to the Conceptual Framework to apply the new definition and recognition criteria to assets and liabilities, and introduces new concepts regarding the measurement, presentation and disclosure and derecognition of assets and liabilities. Group’s assessment performed to date The amendments are effective for annual reporting period beginning 1 July 2022 and apply prospectively. The amendments to the Conceptual Framework are not expected to have a significant impact on the Group’s consolidated financial statements. Hansen Technologies Ltd Annual Report 2021 92 28. New and amended accounting standards and interpretations continued (b) Accounting standards and interpretations issued but not operative at 30 June 2021 continued (iii) Property, plant and equipment: Proceeds before intended use – Amendments to AASB 116 These amendments prohibit entities deducting from the cost of an item of property, plant and equipment, any proceeds from selling items produced while bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by the management. Instead, an entity recognises the proceeds from selling such items, and the costs of producing those items, in profit or loss. Group’s assessment performed to date The amendment is effective for annual reporting period beginning 1 July 2022 and must be applied retrospectively to items of property, plant and equipment made available for use on or after the beginning of the earliest period presented when the entity first applies the amendment. The amendments are not expected to have a material impact on the Group. (iv) Onerous contracts – Costs of fulfilling a contract – Amendments to AASB 137 The amendments specify which costs an entity needs to include when assessing whether a contract is onerous or loss-making. The amendments apply a ‘directly related cost approach’. The costs that relate directly to a contract to provide goods or services include both incremental costs and allocation of costs directly related to contract activities. General and administrative costs do not relate directly to a contract and are excluded unless they are explicitly chargeable to the counterparty under contract Group’s assessment performed to date The amendments are effective for annual reporting periods beginning 1 July 2022 with earlier. The Group will apply these amendments to contracts for which it has not yet fulfilled all of its obligations at the beginning of the annual reporting period in which it first applies the amendments. (v) AASB 9 Financial Instruments – Fees in the ’10 per cent’ test for derecognition of financial liabilities The amendment clarifies the fees that an entity includes when assessing whether the terms of a new or modified financial liability are substantially different from the terms of the original financial liability. These fees include only those paid or received between the borrower and the lender, including fees paid or received by either the borrower or lender on the other’s behalf. An entity applies the amendment to financial liabilities that are modified or exchanged on or after the beginning of the annual reporting period in which the entity first applies the amendment. Group’s assessment performed to date The amendment is effective for annual reporting periods beginning on or after 1 January 2022 with earlier adoption permitted. The Group will apply the amendments to financial liabilities that are modified or exchanged on or after the beginning of the annual reporting period in which the entity first applies the amendment. The amendments are not expected to have a material impact on the Group. Hansen Technologies Ltd Annual Report 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUED30 JUNE 2021 93 29. Subsequent events (a) Loan facility extension On 4 August 2021, the existing syndicated facility was amended to have a new expiry date of 1 September 2023 (original expiry date was 1 May 2022). As per the amendment, the facility limit is now $151,323,000 and a renegotiated margin pricing grid has delivered a favourable outcome for the Group (Note 19 (a)). (b) Dividends The Directors resolved to pay a final dividend of 5 cents per share (franked to 2.70 cents), comprising of a regular dividend of 5 cents per share to be paid on 21 September 2021 (Note 21). (c) Proposal from BGH As announced to the market on 7 June 2021, the Group has received a non-binding conditional proposal from BGH Capital Pty Ltd (“BGH Capital”) to acquire 100% of the outstanding shares in Hansen by way of a Scheme of Arrangement. Hansen due diligence materials have been made available to BGH Capital via a Virtual Data Room. The parties have agreed that due diligence has commenced with the Virtual Data Room suitably populated and unless extended, the Exclusivity Period will end on the 25 August 2021. At the date of signing, the bid remains active. Apart from the above, there has been no other matter or circumstance which has arisen since 30 June 2021 that has significantly affected or may significantly affect: (i) the operations, in financial years subsequent to 30 June 2021, of the Group; or (ii) the results of those operations; or (iii) the state of affairs, in financial years subsequent to 30 June 2021, of the Group. Hansen Technologies Ltd Annual Report 2021 94 DIRECTORS’ DECLARATION The Directors declare that the financial statements and notes set out on pages 41 to 93, 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 of the Group 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 2021 and of its performance for the year ended on that date. In the Directors’ opinion there are reasonable grounds to believe that Hansen Technologies Limited will be able to pay its debts as and when they become due and payable. At the date of this declaration, there are reasonable grounds to believe that the members of the extended closed group identified in Note 27 will be able to meet any obligations or liabilities to which they are, or may become, subject by virtue of the deed of cross guarantee described in Note 27. This declaration has been made after receiving the declarations required to be made by the Chief Executive Officer and Chief Financial Officer to the Directors in accordance with sections 295A of the Corporations Act 2001 for the financial year ended 30 June 2021. This declaration is made in accordance with a resolution of the Directors. David Trude Director Melbourne 24 August 2021 Andrew Hansen Director Hansen Technologies Ltd Annual Report 2021 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF HANSEN TECHNOLOGIES LTD 95 Hansen Technologies Ltd Annual Report 2021INDEPENDENT AUDITOR’S REPORT To the Members of Hansen Technologies LimitedOpinionWe have audited the financial report of Hansen Technologies Limited (the Company) and its controlled entities (the Group), which comprises the consolidated statement of financial position as at 30June 2021, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accountingpolicies, and the directors' declaration. In our opinion the accompanying financial report of the Groupis in accordance with the Corporations Act 2001,including: (i)giving a true and fair view of the Group's financial position as at 30June 2021andof its financialperformance for the year then ended; and(ii)complying with Australian Accounting Standardsand the Corporations Regulations 2001.Basis for OpinionWe conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Reportsection of our report. We are independent of the Groupin accordance with the auditor independence requirements of the Corporations Act 2001and the ethical requirements of the Accounting Professional and Ethical Standards Board's APES 110 Code of Ethics for Professional Accountants(the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilledour other ethical responsibilities in accordance with the Code. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor's report.We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. 96 INDEPENDENT AUDITOR’S REPORT CONTINUED TO THE MEMBERS OF HANSEN TECHNOLOGIES LTD Hansen Technologies Ltd Annual Report 2021Key Audit MattersKey audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.Key Audit MatterHow our audit addressed this matterRecognition of RevenueRefer to Note 3 inthe financial statementsRevenue recognition was considered a key audit matter, asit iscomplex and involves significant management judgements.The Group’s revenue is primarily derived from the provision of billing solution services to customers, maintenance and support, and licences. Revenue determined for some of the service contracts is based on stage of completion, calculated on the proportion of total costs incurred at the reporting date compared to management’s estimation of the total costs of the contract.Our audit procedures in relation to the recognition of revenue included:•Assessing whether the Group’s revenuerecognition policies were in compliance withAustralian Accounting Standards;•Evaluating and testing the operatingeffectiveness of management’s controlsrelated to revenue recognition;•Performing substantive analytical proceduresover key revenue streams;•For a sample of revenue transactions,substantiating transactions by agreeing tosupporting documentation, including contractswith customers;•For a sample of revenue transactions thatwere recognised on apercentage ofcompletion basis, our testing included:–Agreeing the contract price and variationsto customer contracts;–Assessing management’s estimate ofcosts to complete; and–Assessing whether the project waswithinbudgeted margin.•Reviewingsales transactions before and afteryear-end to ensure that revenue wasrecognised in the correct period; and•Reviewing large or unusual transactions duringthe financial year. 97 Hansen Technologies Ltd Annual Report 2021Key Audit Matters(continued)Impairment of Intangible AssetsRefer to Note 12in thefinancial statementsThe Grouphas net book value goodwill of $217million in respect ofacquisitions of subsidiaries as at 30 June 2021. We identified this area as a Key Audit Matter due to the size of the goodwill balance, and because the directors’ assessment of the ‘value in use’ of the cash generating unit (“CGU”) involves significant judgements about the future underlying cash flows of the business, discount rates and terminal growth applied.For the year ended 30 June 2021management have performed an impairment assessment over the goodwill balance by:•calculating the value in use for theCGU usinga discounted cash flow model. The modelused cash flows (revenues, expenses andcapital expenditure) for theCGU for 5 years,with a terminal growth rate applied to the 5thyear. The cash flows were then discounted tonet present value using the Company’sweighted average cost of capital (WACC); and•comparing the resulting value in use of theCGU to its respective bookvalue.Management also performed a sensitivity analysis over the value in use calculations, by varying the WACC and other assumptions.Our audit procedures in relation to management’s impairment assessment involved the assistance of our Corporate Finance team where required, and included:•Assessing management’s determination thatthe goodwill should be allocated to a singleCGU based on the nature of the Group’sbusiness and the manner in which results aremonitored and reported;•Assessing the valuation methodology used;•Challenging the reasonableness of keyassumptions, including the cash flowprojections, exchange rates, discount rates,and sensitivities used; and•Checking the mathematical accuracy of thecash flow model, and reconciling input data tosupporting evidence, such as approvedbudgets and considering the reasonablenessof these budgets.Other Information The directors are responsible for the other information. The other information comprises the information included in the Group's annual report for the year ended 30June 2021, but does not include the financial report and the auditor's report thereon. Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude thatthere is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the Directors for the Financial ReportThe 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 2001and 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 preparing the financial report, the directors are responsible for assessing the ability of the Groupto continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Groupor to cease operations, or have no realistic alternative but to do so. 98 INDEPENDENT AUDITOR’S REPORT CONTINUED TO THE MEMBERS OF HANSEN TECHNOLOGIES LTD Hansen Technologies Ltd Annual Report 2021Auditor's Responsibilities for the Audit of the Financial ReportOur objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud orerror, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance Standards Board website at:https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf.This description forms part of our auditor's report. Report on the Remuneration ReportOpinion on the Remuneration ReportWe have audited the Remuneration Report included in the directors' report for the year ended 30June 2021.In our opinion, the Remuneration Report of Hansen Technologies Limited, for the year ended 30 June 2021,complies with section300A of the Corporations Act 2001.ResponsibilitiesThe directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section300A 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. RSM AUSTRALIA PARTNERSM PARAMESWARANPartnerDated:24 August 2021Melbourne, Victoria 99 AUSTRALIAN SECURITIES EXCHANGE (ASX) SHAREHOLDER INFORMATION The shareholder information set out below was applicable as at 9 July 2021, disclosed pursuant to ASX official listing requirements. Distribution of shares The following table summarises the distribution of our listed shares as at 9 July 2021: Range 100,001 and Over 10,001 to 100,000 5,001 to 10,000 1,001 to 5,000 1 to 1,000 Total Number of holders 76 1,168 1,122 2,847 2,242 Number of Shares held 154,350,805 28,664,125 8,275,440 7,560,572 994,597 % of Issued Capital 77.24 14.34 4.14 3.78 0.50 7,455 199,845,539 100.00 The number of shareholders holding less than a marketable parcel of ordinary shares is 368 holding 4,502 shares (as at the closing market price on 9 July 2021). Twenty largest shareholders The following table sets out the top 20 holders of our shares: Rank Name 1 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 OTHONNA PTY LTD J P MORGAN NOMINEES AUSTRALIA PTY LIMITED CITICORP NOMINEES PTY LIMITED BNP PARIBAS NOMS PTY LTD NATIONAL NOMINEES LIMITED NEWECONOMY COM AU NOMINEES PTY LIMITED MR CAMERON HUNTER BNP PARIBAS NOMINEES PTY LTD HUB24 CUSTODIAL SERV LTD BNP PARIBAS NOMINEES PTY LTD CITICORP NOMINEES PTY LIMITED MR JAMES LUCAS & MS LESLEY DORMER UBS NOMINEES PTY LTD WOODROSS NOMINEES PTY LTD SCOTT WEIR MRS LILIAN REICHENBERG BNP PARIBAS NOMINEES PTY LTD SIX SIS LTD BNP PARIBAS NOMINEES PTY LTD CIC AUSTRALIA BROADGATE INVESTMENTS PTY LTD LAYUTI PTY LTD Total Total other investors Grand total Number of Shares Held 48,142,020 34,739,113 28,902,387 10,245,627 5,989,651 4,899,731 1,717,102 1,223,059 1,111,146 1,011,875 841,000 800,940 645,091 598,666 570,424 546,953 512,767 507,272 400,000 395,686 % of Issued Capital 24.09 17.38 14.46 5.13 3.00 2.45 0.86 0.61 0.56 0.51 0.42 0.40 0.32 0.30 0.29 0.27 0.26 0.25 0.20 0.20 143,800,510 56,045,029 199,845,539 71.96 28.04 100.00 Hansen Technologies Ltd Annual Report 2021 100 AUSTRALIAN SECURITIES EXCHANGE (ASX) CONTINUED SHAREHOLDER INFORMATION Substantial shareholdings The following table shows holdings of substantial voting rights in the Company’s shares as notified to the Company under the Corporations Act 2001 as at 9 July 2021: Holder Mr David Osborne* Mr Andrew Hansen* Mr Bruce Adams* Long Path Partners Vinva Investment Mgt Number of Shares Held 35,125,448 35,055,228 34,891,417 13,334,660 9,213,677 % of Total Voting Rights 17.58% 17.54% 17.46% 6.67% 4.61% * Each of these named persons has a joint interest in a single parcel of 34,739,113 shares as at the date of this report. For further details, please refer to the substantial shareholding notices lodged with the ASX dated 16 August 2019. Voting rights Refer to Note 20(c) of the financial statements. Unquoted equity securities Unquoted equity securities issued pursuant to the Hansen Technologies Limited Employee Performance Rights Plan: Unquoted Equity Securities Performance rights Number of Employees Participating 32 Number of Securities 1,678,627 Hansen Technologies Ltd Annual Report 2021 Hansen Technologies Ltd Annual Report 2021 101 CORPORATE DIRECTORY Directors David Trude, Chairman Andrew Hansen, Managing Director and CEO Bruce Adams, Non-Executive Jennifer Douglas, Non-Executive Don Rankin, Non-Executive David Osborne, Non-Executive David Howell, Non-Executive Company secretary Julia Chand Principal registered office 2 Frederick Street Doncaster Victoria 3108 T (03) 9840 3000 F (03) 9840 3099 Share registry Link Market Services Limited Tower 4, 727 Collins Street Melbourne Victoria 3008 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 RSM Australia Partners Level 21, 55 Collins Street Melbourne Victoria 3000 Solicitors GrilloHiggins Level 20, 31 Queen Street Melbourne Victoria 3000 Other information Hansen Technologies Ltd ABN 90 090 996 455, incorporated and domiciled in Australia, is a publicly listed company limited by shares.