ANNUAL
REPORT
2017
1
CONTENTS
Results for announcement to the market
2
Consolidated statement of financial position
41
Corporate information
3
Corporate highlights
4
Consolidated statement of changes in equity
42
Consolidated statement of cash flows
43
Chairman and Managing Director’s report
5
Notes to the financial statements
44
Directors’ report
11
Auditor’s independence declaration
38
Financial statements
39
Consolidated statement of profit or loss
and other comprehensive income
40
Directors’ declaration
90
Independent auditor’s report
91
ASX additional information
96
CORPORATE GOVERNANCE
The Board is committed to achieving and demonstrating the highest standards of corporate governance. As such, HUB24
Limited and its Controlled entities (‘the Group’) have adopted the third edition of the Corporate Governance Principles and
Recommendations which was released by the ASX Corporate Governance Council on 27 March 2014 and became effective
for financial years beginning on or after 1 July 2014.
The Group’s Corporate Governance Statement for the financial year ending 30 June 2017 is dated as at 30 June 2017 and
was approved by the Board on 28 August 2017. The Corporate Governance Statement is available on HUB24 Limited’s
website at www.hub24.com.au/corporate-governance-statement.
HUB24 Annual Report 2017 2
RESULTS FOR ANNOUNCEMENT
TO THE MARKET
Appendix 4E
From continuing operations
Year ended
30 June 2017
$’000
Year ended
30 June 2016
$’000
% change
Revenue from ordinary activities
63,769
From
43,657
Increase
46%
Net profit (loss) after tax for the year
attributable to members
18,874
From
(1,187)
Increase
1690%
Basic earnings per share
34.95 cents
From
(2.26) cents
Increase
1647%
Diluted earnings per share
33.15 cents
From
(2.26) cents
Increase
1567%
DIVIDENDS
The directors have not declared a final dividend for the
year ended 30 June 2017 ( 2016: Nil).
EXPLANATION OF RESULT
ENTITIES OVER WHICH CONTROL HAS BEEN
GAINED OR LOST DURING THE PERIOD
HUB24 Limited has gained control over Agility
Applications Pty Ltd (“Agility”) and has not lost control
over any entity during the reporting period.
Refer to the Chairman and Managing Director’s Report
and Directors’ Report for further explanation.
AUDITOR REVIEW
Net tangible assets per fully paid
ordinary share 30 June 2017
Net tangible assets per fully paid
ordinary share 30 June 2016
$0.282
$0.099
The report is based on accounts that have been audited
by the company’s auditors, Deloitte Touche Tohmatsu.
HUB24 Annual Report 2017 3
CORPORATE
INFORMATION
HUB24 LIMITED
ACN 124 891 685
REGISTERED OFFICE
AND PRINCIPAL
PLACE OF BUSINESS
Level 8, The Exchange Centre
20 Bridge Street
Sydney NSW 2000
AUDITORS
Deloitte Touche Tohmatsu
Grosvenor Place
225 George Street
Sydney NSW 2000
DIRECTORS
SHARE REGISTRY
BANKERS
Bruce Higgins (Chairman)
Andrew Alcock (Managing Director)
Ian Litster
Vaughan Webber
Anthony McDonald
Link Market Services Limited
Level 12, 680 George Street
Sydney NSW 2000
HUB24 Limited shares are listed on
the Australian Securities Exchange
(ASX : HUB)
Australia and New Zealand
Banking Group Limited
20 Martin Place
Sydney NSW 2000
COMPANY SECRETARY
SOLICITORS
Matthew Haes
Minter Ellison
Governor Macquarie Tower
1 Farrer Place
Sydney NSW 2000
INTERNET ADDRESS
www.hub24.com.au
HUB24 Annual Report 2017
4
HIGHLIGHTS
HUB24’s focus on investing in platform innovation
and growth has delivered its first year of profit.
SHAREHOLDER VALUE
70%
Share price
increase
of 70%
34.95c
Basic EPS of 34.95
cents (underlying
EPS of 7.3 cents)
FINANCIAL RESULTS
$5.1m
Underlying
EBITDA
of $5.1m1
$3.9m
Underlying
NPAT
of $3.9m2
$5.5b
FUA increase
of $2.2b
(now $5.8b)
INDUSTRY RECOGNITION
1st
First in
overall platform
satisfaction3
1st
First in
managed
portfolios4
BUILDING FOR GROWTH
Acquisition
of
Agility
Launch of international
direct shares and account
opening API’s
Targeting greater
than $12b FUA in
the next 3 years
$12b
1. Underlying EBITDA represents Earnings Before Interest, Tax, Depreciation and Amortisation before other significant items.
2. Underlying NPAT is a non-IFRS measure used internally by management and by some in the investment community to assess the operating
performance of the business. Underlying NPAT represents Net Profit After Tax excluding non-recurring items.
3. Equal first from Investment Trends 2017 Planner Technology report for overall platform satisfaction.
4. Awarded first for Managed Accounts in the December 2016 Platform Competitive Analysis and Benchmarking
Report based upon extensive analyst reviews of 19 platforms across 526 functional points.
HUB24 Annual Report 2017 5
Andrew
Alcock
Bruce
Higgins
CHAIRMAN AND MANAGING
DIRECTOR’S REPORT
KEY POINTS
First full year of profit with
underlying NPAT of
$3.9 million and underlying
EBITDA of $5.1 million
$5.5 billion in FUA
First place for overall client
satisfaction and Managed
Accounts functionality
Progressing our expansion
strategy via the acquisition
of Agility
Dear Shareholders,
On behalf of the directors we are pleased to announce the maiden profit result for
HUB24 for the financial year ended 30 June 2017 (FY17). Our company is leading
change in the Australian wealth management landscape where our innovative
solutions and technology continue to create opportunities for industry participants
and more importantly our customers. The directors, in our financial statements,
have recognised the remaining unused prior period tax losses and R&D offsets as a
deferred tax asset for the first time and accordingly our Net Profit After Tax (NPAT) is
shown as $18.9million and our underlying NPAT for the business of $3.9million.
During the year HUB24 has continued its strong growth and achieved several
significant milestones:
• our first full year of profit with underlying NPAT of $3.9 million and
underlying Earnings Before Interest, Tax, Depreciation and Amortisation
(EBITDA) of $5.1 million;
• reaching $5.5 billion in Funds Under Administration (FUA) which is an
increase of $2.2 billion during FY17;
• being awarded first place for overall platform satisfaction1 and first place for
our Managed Accounts functionality2; and
• progressing our expansion strategy via the acquisition of Agility.
1 Equal first from Investment Trends 2017 Planner Technology report for overall platform satisfaction.
2 Awarded first for Managed Accounts in the December 2016 Platform Competitive Analysis and
Benchmarking Report based upon extensive analyst reviews of 19 platforms across 526 functional points.
HUB24 Annual Report 2017 6
Our focus upon innovation,
product development and
outstanding service delivery
has been widely recognised
In FY17 HUB24 achieved positive annual NPAT, EBITDA
and operating cashflows for the first time as well as
attaining record gross and net inflows. Our FUA reached
$5 billion at the end of May 2017 and increased to
$5.5 billion during the month of June. This resulted in an
annual increase of 66% amounting to $2.2 billion.
We continue to receive welcome industry and customer
recognition of both our innovative platform technology
and our service proposition at a time when our industry
is undergoing significant structural change.
HUB24 operates in the fastest growing segment of the
personal investments market where wrap platforms,
including managed portfolios, are expected to increase
fourfold over the next 15 years3. The anticipated growth
in managed portfolios is now materialising as adviser
adoption transforms their business performance and
customer value proposition. HUB24 is at the forefront of
this market, has launched 83 new managed portfolios
from 24 portfolio managers during the year and has been
recognised as having the best platform managed portfolio
functionality4 in the market.
We are growing our market share in an environment where
the dominant incumbent participants are rethinking their
wealth management business models and their industry
participation. Our success is illustrated by our achievement
of 10.47% of industry annual net inflows which is a run rate
of some 16 times our underlying market share of 0.62%5.
While delivering considerable growth during FY17,
our focus upon innovation, product development and
outstanding service delivery has been widely recognised.
We are now ranked first for overall platform satisfaction
having achieved the top position in 16 of the possible
24 categories as researched by Investment Trends. Our
aim is to continue to make a difference in our customers
lives through positive change and connecting them to
innovative solutions that assist them to create wealth.
Across Australia an increasing number of advisers are
choosing to become self-licensed or join more flexible
dealer groups as they move away from institutionally
3 Rice Warner’s Personal Investments Market Projections 2015.
4
Investment Trends 2016 Platform Competitive Analysis and
Benchmarking Report – Awarded Best Platform Managed Accounts
Functionality.
5 Strategic Insights. Analysis of Wrap, Platform and Master Trust
Managed Funds at March 2017.
owned licensing models. Our subsidiary Paragem Pty
Ltd (“Paragem”) has recruited an additional five of
these advice practices during 2HFY17 and our group is
well positioned to capitalise on this trend with advice
businesses seeking greater choice, transparency and
engagement with new technology platforms.
Structural change is also occurring across traditional
stockbroking and advisory firms where there is an increasing
transition towards holistic wealth management and the
provision of new and valuable services to their loyal client
base. HUB24’s strategy to support this convergence of the
traditional stockbroking and financial planning sectors
resulted in the acquisition of Agility on 3 January 2017.
Work was completed on corporate integration activities
during the period and joint development and sales initiatives
have already resulted in significant new client activity.
Agility provides a financial services data hub between advice
licensees, product providers and technology partners, which
collectively represents over $250 billion of client assets and
drives many of the applications and reporting tools available
within the Agility adviser desktop used by over 2,600 users.
Overall we are pleased that HUB24 is continuing to grow
and succeed. Our commitment is to embrace change and
maximise the opportunities to create real value for our
customers, advisers, licensees and investment managers.
Financial performance
HUB24 achieved an underlying NPAT of $3.9 million
and an underlying EBITDA of $5.1 million for FY17.
The company delivered a statutory EBITDA of
$4.7 million and with the recognition of prior period
tax losses a statutory NPAT of $18.9 million.
The profit performance of the platform segment is
continuing to grow over time, having achieved an
underlying EBITDA of $5.1 million for FY17. The
underlying EBITDA result for 2HFY17 of $3.2 million is an
increase of 71% above the 1HFY17 result of $1.9 million.
The record net inflows achieved in the last quarter of the
year are expected to further support ongoing increases in
profit performance for the platform segment.
Revenue from ordinary activities increased by 46% to
$63.8 million for FY17, which included $4.7 million
revenue from the acquired Agility business (for the period
from 3 January 2017 to 30 June 2017). The platform
segment revenue increased by 71% to $26.3 million
over the prior year, driven by a 66% increase in FUA
to $5.5 billion as at 30 June 2017.
Scale benefits continue to emerge as a result of growing
FUA and revenues, with platform expenses rising by
only 33% over the year. Margin improvements have been
made across the profit lines in our platform segment
and we expect further margin expansion and increased
profitability moving forward.
HUB24 Annual Report 2017 7
Platform – revenue, gross profit and underlying
EBITDA trends
HUB24 share of industry FUA and annual net inflows –
last 3 years6
$m
30
25
20
15
10
5
0
-5
-10
FY13
FY14
FY15
FY16
FY17
Revenue
Gross profit
Underlying EBITDA
Growth
HUB24 is currently the fastest growing platform in
the market relative to its size6 and has achieved a
compound annual growth rate (“CAGR”) in FUA over
the past 4 years of 95%.
Our growth is well distributed across 108 active licensees,
including 15 white label relationships with 3 new white labels
joining the platform during FY17. Our inflows from white
labels continue to increase and at the same time there has
been a trend for an increasing number of smaller licensees
choosing the HUB24 retail version of the platform. These
products now account for 65% of net flows which reflects the
broadening adoption of HUB24 across the market.
During the year the number of advisers using the platform
has increased by 39% to 917. At the same time, the
average FUA per adviser using HUB24 has now risen to
$6 million as advisers continue to choose the platform
for more of their clients. Whilst the company continues
to secure new adviser relationships there remains within
our existing client base considerable opportunities to
increase FUA given the industry average FUA per adviser
is approximately $40 million7.
Our share of market net inflows has increased over
the last three years and was 10.47%6 for the year ended
31 March 2017. For that period HUB24 achieved the fifth
highest net inflows in dollar terms ahead of several well
established traditional competitors.
6 Strategic Insights. Analysis of Wrap, Platform and Master Trust
Managed Funds at March 2017.
7 Source: ASIC Adviser Register.
FUA
%
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
Net flows
%
12
10
8
6
4
2
0
Mar 2015
Mar 2016
Mar 2017
Share of industry FUA
Share of industry net flows
The final quarter of FY17 saw HUB24 achieve record
gross and net inflows of $1,090 million and $841 million
respectively. In addition to strong underlying flows the
business benefited from the realisation of long term sales
opportunities and regulatory superannuation changes.
Monthly average retail net inflows by financial years to
date have continued to rise with the average for FY17
being $160 million per month ($133 million per month for
the prior year which included a large client transition).
This is an increase of 20%.
Average monthly net inflows
$m
180
160
140
120
100
80
60
40
20
0
Large client
transition
FY12
FY13
FY14
FY15
FY16
FY17
HUB24 Annual Report 2017 8
Our market presence and brand
recognition is increasing within
our target client segments
As the industry continues to acknowledge HUB24, our
market presence and brand recognition is increasing within
our target client segments. This is generating additional
opportunities and strengthening our already solid pipeline
that is expected to support ongoing growth during FY18.
PLATFORM STATISTICS
JUN 2016
SEPT 2016
DEC 2016
MAR 2017
JUN 2017
GROWTH**
FUA - retail
RETAIL FLOWS
Net fund inflows (Qtr)
Gross inflows (Qtr)
Number of advisers
$3,313m
$3,770m
$4,149m
$4,652m
$5,515m
66.5%
$579m
$688m*
659
$366m
$496m
690
$328m
$475m
737
$418m
$568m
802
$841m
$1,090m
917
45.3%
58.4%
39.2%
Statistics are for each quarter, have been rounded and are not audited. Inflows do not include market movement.
*
Inclusive of large client transition.
** Growth is the percentage increase on prior year corresponding quarter.
Operations
HUB24 won three of six categories in the Investment Trends
2016 Platform Competitive Analysis and Benchmarking
report8 and won the award for the best managed accounts
functionality. HUB24 moved up from third to second place
in terms of overall functionality and is now ranked ahead
of all traditional institutional platforms in the market. The
other awards received were:
• Best Navigation and User Interface; and
• Best Tablet/Smartphone Access.
Additionally, HUB24 was ranked first for overall platform
satisfaction in the 2017 Investment Trends Planner
Technology Report. We achieved the highest client
satisfaction score in 16 of 24 categories assessed with
advisers who use HUB24 as their primary platform.
The categories include business development manager
support, online functionality, comprehensiveness of data
feeds to planning software, quality of reports, ease of use/
navigation and mobile access.
Our superannuation fund was also recognised at the
2016 Super Ratings Fund of the Year Awards, which
acknowledged the highest achieving superannuation
funds. HUB24 received the Fast Mover award, for
demonstrating the fastest growth in FUA and was also
a finalist for the Rising Star award.
Throughout FY17 HUB24 launched a number of new
product developments.
8 Results from Investment Trends December 2016 Platform
Competitive Analysis and Benchmarking Report based on
extensive analyst reviews of 19 platforms across 526
functional points.
Our recent industry leading account opening interface
(HUB24 Account Open API) facilitates third party
applications, such as financial planning software, SMSF
software, robo advice channels and licensee adviser
desktops. This automatically creates HUB24 Investment
and Superannuation account applications without the need
for advisers to re-enter client information they have already
captured. Importantly this interface will also be available to
customers of Agility, allowing a HUB24 platform account to
be opened at the same time as an equity trading account.
The innovation makes it simpler for advisers to run their
business and implement their client recommendations.
We enhanced our international equities offering to allow
advisers and their clients to invest directly in individual
international shares across 15 exchanges and take
advantage of global investment opportunities. This is
in addition to the 12 leading international managed
portfolios now available on the platform. HUB24 is leading
the market by providing real choice for advisers and their
clients for gaining exposure to international markets. Our
solution creates opportunities for clients to benefit from
direct ownership of international equities with or without
the overlay of professional investment management.
HUB24’s non-custody reporting solution is fully integrated
with our investment and superannuation platform. We
have extended the integration of this with Agility’s services
which will complement our market offer and accelerate the
provision of enhancements that support stockbrokers, as
they increasingly choose to transition into wealth managers.
The company has made a number of recent senior
appointments across sales and marketing, risk and
compliance, and finance, including Chief Operating Officer,
Craig Lawrenson, who joined the company in August. Given
the company’s growth and prospects, further investment
will also be made in 1HFY18 in order to fit out the new head
office premises for the business in Sydney.
HUB24 Annual Report 2017
9
Acquisitions – Agility
HUB24 completed the acquisition of Agility in early
January. Agility is a specialist technology services provider
to the financial services industry with a focus on the
stockbroking sector.
The integration of the Agility business into HUB24’s
operations was completed and contributed $4.7 million
in revenue during the period. The Agility executives and
staff have worked closely with their HUB24 colleagues
since acquisition on a range of joint development and
sales initiatives. These have resulted in improved data
integration for existing clients of HUB24 and Agility and
significant new client activity amongst a broadening
market of financial advisers and stockbrokers.
Aligned with HUB24’s strategy to support the convergence
of traditional stockbroking and financial planning sectors,
Agility has been engaged by a key wealth management
and stockbroking client to provide its Connect data
warehouse and Adviser Desktop solutions. Working with
HUB24, this will deliver a single consolidated view of
all products and services available for their advisers,
including a fully integrated white label version of the
HUB24 platform.
This is the first joint client initiative undertaken by HUB24
and Agility since the acquisition, with a strong pipeline of
further opportunities.
Corporate governance
The Board of HUB24 is committed to achieving and
demonstrating standards of corporate governance
that are best practice and compliant with the
Australian Stock Exchange (ASX) regulations
of good corporate governance. Our goal is to
ensure that we protect the rights and interests of
shareholders and ensure the company is properly
managed through the implementation of sound
strategies and action plans. We achieve this through
the management team of our company and by
supervising an integrated framework of controls
over the company’s resources to ensure our
commitment to high standards of ethical behaviour.
During the year, and commensurate with the
growth of the company, we have strengthened
our governance resources with the addition of a
new Risk and Compliance Manager to support our
General Counsel and Head of Compliance.
Our remuneration report is enclosed in the annual
report and outlines the group remuneration
policies, Board performance and the senior
executive remuneration policies and compensation.
Our solution creates opportunities
for clients to benefit from direct
ownership of international
equities with or without the
overlay of professional
investment management
Outlook
As our industry continues to shift we believe HUB24 has a
great opportunity to lead change, connect customers with
innovative solutions and create increasing value for our
shareholders.
We have recorded our first year of profit built on
continuing rapid growth and the company has delivered
improved margins as a result of our platform operations.
From our position as the platform market leader for
managed accounts we are planning further growth and
aim to more than double FUA on the platform in the next
three years to over $12 billion.
HUB24 is well positioned to take advantage of market
trends and the structural changes occurring in wealth
management. We anticipate these changes in the industry
offer HUB24 enhanced opportunities within and beyond
our traditional market segments. Our profitability, growth,
industry recognition and engagement with our clients is
supporting our investment to enhance our market position
and explore broader market opportunities such as those
now available via the acquisition of Agility.
We will continue to develop new platform functionality
and products and invest in growing the company targeted
towards accelerating FUA onto the HUB24 platform.
On behalf of the Directors, we wish to thank our entire
team for their commitment, contribution and customer
focus during another exciting year for HUB24. We also
wish to thank our customers for their ongoing support.
Yours sincerely,
Bruce Higgins
Chairman
28 August 2017
Andrew Alcock
Managing Director
HUB24 Annual Report 2017
10
As our industry continues to shift
we believe HUB24 has a great
opportunity to lead change,
connect customers with innovative
solutions and create increasing
value for our shareholders.
HUB24 Annual Report 2017 11
DIRECTORS’
REPORT
Your Directors present their report together with the financial statements, on the consolidated entity (referred to
hereafter as “the consolidated entity” or “HUB24 consolidated entity”) consisting of HUB24 Limited (referred to hereafter
as “the company”) and the entities it controlled for the year ended 30 June 2017 (“FY17”). In order to comply with the
provisions of the Corporations Act 2001, the directors report as follows.
Directors
The names and details of the company’s directors in office during FY17 are as follows.
HUB24 Annual Report 2017 12
Bruce Higgins
B Eng CP Eng, MBA, FAICD
Andrew Alcock
B Bus, GAICD
CHAIRMAN AND NON-EXECUTIVE DIRECTOR
MANAGING DIRECTOR
Bruce is currently Chairman and Non-Executive Director
of Legend Corporation. Bruce was awarded the Ernst
& Young Entrepreneur of the Year award in Southern
California in 2005 and has a Bachelor Degree in Electronic
Engineering and an MBA in Technology Management. He
is a Chartered Professional Engineer and Fellow of the
Australian Institute of Company Directors.
Bruce was appointed as Chairman of the Board on
19 October 2012.
Previous listed company directorships held in the last
three years:
• Q Technology consolidated entity (resigned
December 2014)
• Legend Corporation Limited.
Andrew has over 22 years experience across wealth
management encompassing advice, platforms, industry
superannuation, insurance and information technology.
Andrew was formerly Chief Operating Officer of Genesys
Wealth Advisers, overseeing the authorisation of over
300 financial planners and Head of the Genesys Equity
Program, where he was a director of over 20 financial
planning practices across Australia.
Prior to this, Andrew was CEO of Australian
Administration Services, a subsidiary of Link Market
Services, providing superannuation administration for
some of Australia’s largest superannuation funds. He
was also previously general manager for Asteron’s wealth
management business.
Andrew’s extensive financial services experience solidly
underpins his role as Managing Director of HUB24
Limited.
Andrew was appointed to the company’s Board on
29 August 2014 as Managing Director.
Previous listed company directorships held in the last
three years:
• Nil.
HUB24 Annual Report 2017 13
Ian Litster
B Sc (Hons)
Vaughan Webber
B Ec
NON-EXECUTIVE DIRECTOR
NON-EXECUTIVE DIRECTOR
Ian Litster has over 11 years experience in designing
and developing software for the financial services
industries, particularly in the area of financial planning.
He has been the founder of the companies behind the
VisiPlan and COIN software packages, two of the leading
financial planning systems in Australia. His main areas of
expertise are the management of information technology
organisations and software development. Ian has a
Bachelor Degree in Science (Honours in Mathematics).
Ian was appointed to the Board on 25 September 2012
and is a member of the Remuneration and Nomination
Committee and the Audit, Risk and Compliance
Committee.
Vaughan Webber is an experienced finance professional
with a background in chartered accounting at a major
international accountancy firm. Recently, Vaughan has
had extensive financial public markets experience,
having spent over 15 years in corporate finance at leading
Australian mid-sized stockbrokers focussing on creating,
funding and executing strategies for mid to small cap
ASX listed companies. Vaughan also has experience as a
director with ASX listed public companies and is currently
non-executive director of Anchor Resources Limited.
Vaughan has a Bachelor Degree in Economics.
Vaughan was appointed to the company’s Board on
19 October 2012 and is the Chairman of the Audit, Risk
and Compliance Committee.
Previous listed company directorships held in the last
three years:
• Money3 Corporation Limited (resigned 6 October 2016).
HUB24 Annual Report 2017 14
Company Secretary
The name and details of the Company Secretary in office
during FY17 and at the date of this report is as follows:
Matthew Haes
B Ec (Syd) ACA AGIA
CHIEF FINANCIAL OFFICER AND COMPANY SECRETARY
Matthew Haes’ financial services experience spans
over 21 years in senior finance roles, covering
wealth management, securitisation, capital markets,
stockbroking and funds management. He spent eight
years as Finance Manager and Company Secretary at
Centric Wealth Limited (now part of Findex Group Limited)
where he developed the finance function and integrated
businesses resulting from the company’s merger and
acquisition activities. Matthew is a Director of the HUB24
Group’s subsidiary companies, a Responsible Manager of
HUB24 Custodial Services Ltd, a member of the executive
committee and serves the committees of the Board.
Matthew has a Bachelor of Economics, and is a Chartered
Accountant and Chartered Company Secretary.
Matthew was appointed Company Secretary on
10 September 2012.
Anthony McDonald
B Comm LLB
NON-EXECUTIVE DIRECTOR
Anthony McDonald co-founded financial planning firm
Snowball Group Limited in 2000, which merged with
Shadforth in 2011 to become ASX-listed SFG Australia
Limited.
Anthony is also a former director of The Investment Funds
Association of Australia (now Financial Services Council) and
currently Chairman of a leading not-for-profit organisation.
He is currently non-executive director of 8IP Emerging
Companies Limited and was appointed as non-executive
director of URB Investments Limited on 13 October 2016.
As a financial services executive, Anthony worked in a
variety of senior roles with the Snowball Group, SFG, Jardine
Fleming Holdings Limited (Hong Kong) and Pacific Mutual
Australia Limited. Prior to entering the financial services
industry, Anthony worked as a solicitor with the two global
law firms, Baker & McKenzie and Coudert Brothers.
He holds a Bachelor of Laws (LLB) and a Bachelor of
Commerce (Marketing) from the University of NSW.
Anthony was appointed to the HUB24 board on
1 September 2015 and is the Chair of the Remuneration
and Nomination Committee.
Previous listed company directorships held in the last
three years:
• 8IP Emerging Companies Limited (appointed
24 September 2015)
• URB Investment Limited (appointed 13 October 2016).
There were no other directors holding office during FY17
that were not company directors at the date of this report.
HUB24 Annual Report 2017 15
Directors’ interests
As at the date of this report, the interests of the Directors
in the shares of the company were:
DIRECTOR
NUMBER OF ORDINARY SHARES
Bruce Higgins
Andrew Alcock
Ian Litster
Vaughan Webber
Anthony McDonald
986,811
756,883
3,588,751
Nil
Nil
Consolidated entity overview
HUB24 Limited operates the HUB24 investment and
superannuation platform, provides financial advice to
clients through financial advisers authorised by Paragem
and provides application and technology products through
Agility, both wholly owned subsidiaries of HUB24.
The HUB24 investment and superannuation platform is
recognised as a leading independent portfolio administration
service that provides financial advisers with the capability
to offer their clients access to a wide range of investments
including market leading managed portfolios, efficient
and cost effective trading, insurance and comprehensive
reporting for all types of investors – individuals, companies,
trusts or self-managed super funds.
HUB24 was established in 2007 by a team with a very
strong track record of delivering market-leading solutions
in the financial services industry.
Paragem (the licensee) provides licensee services and is
a wholly owned subsidiary and boutique dealer group.
It comprises a network of 30 financial advice businesses
which deliver high quality, goals-based advice. It
provides compliance, software, education and support
to the practices enabling advisers to provide clients with
financial advice across a range of products.
Agility (IT Services) provides a financial services data
hub between advice licensees, product providers and
technology partners, which collectively represents over
$250 billion of client assets and drives many of the
applications and reporting tools available within the
Agility adviser desktop accessed by over 2,600 users. It
earns software license and consulting fees from data,
software and infrastructure and is a wholly owned
subsidiary. having been acquired by HUB24 Limited on
3 January 2017. Agility has its head office in Brisbane.
Principal activities
The principal activities of the company during the year
were the provision of investment and superannuation
portfolio administration services, the provision of Licensee
services to financial advisers and software license and IT
consulting services.
Corporate
On 28 November 2016, the company announced to
the market an agreement to acquire 100% of Agility
subject to conditions precedent. The acquisition was
completed on 3 January 2017. Consideration for the
acquisition comprised $6.5 million on completion
made up of $2.7 million in cash and $3.8 million
in HUB24 ordinary shares with up to a further
$3.5 million in cash and $3.5 million in HUB24
ordinary shares subject to performance hurdles to
be met over the next three years. Refer to Note 28.
468,639 share options and 137,043 performance
rights (“PAR’s”) were issued to staff and executives
on 29 November 2016. 21,525 ordinary shares, in lieu
of a short-term incentive payment of $96,002, were
issued to the Managing Director on 29 November
2016 after being approved by shareholders at the
Annual General Meeting of the company held
29 November 2016.
1,284,000 share options were exercised by directors,
executives and staff during the year and a further
880,000 share options exercised by executives since
30 June 2017.
Approximately 4.6 million shares are currently
expected to be issued during October 2017 to the
Paragem vendors and option holders in accordance
with the terms of the Share Sale Deed executed
19 August 2014.
Review of financial results
The consolidated entity recorded revenue from
ordinary activities of $63.8 million for FY17 (revenue
from ordinary activities of $43.7 million for FY16), an
increase of 46%).
A statutory NPAT of $18.9 million was recorded for FY17
(loss of $1.2 million for FY16).
Underlying NPAT* for FY2017 was $3.9 million (loss of
$1.5 million for FY16) after adjusting for:
• non-recurring corporate costs of $0.5 million
associated with the acquisition of Agility
• a fair value gain on contingent consideration of
$0.9 million and credit to share based payment
expense of ($0.2 million) relating to the Paragem
acquisition. For further information refer to Note 11
of the Financial Statements
• the initial recognition of prior period tax losses, R&D
offsets and intangibles of $14.3 million.
HUB24 Annual Report 2017 16
The key items driving the underlying NPAT performance
for the year were:
• platform revenue increased by 71% to $26.3 million for
the year ($15.4 million for FY16) and platform expenses
increased by 33% to $21.3 million ($16 million for FY16)
• licensee (Paragem) revenue increased by 13% to
$30.8 million for the year ($27.3 million for FY16)
• the acquisition of Agility on 3 January 2017
contributing $4.7 million to the increase in revenue
for the period and $0.4 million in legal and due
diligence costs associated with the transaction were
expensed.
The following representation of the financial
performance of the consolidated entity is based upon
the internal reports that are reviewed and used by
management and the board in assessing performance
and determining the allocation of resources.
Management and the Board review underlying
EBITDA and underlying NPAT.
FINANCIAL PERFORMANCE
Income
Platform
Licensee
IT Services
Total revenue
Direct costs
Gross profit
Operating expense
Growth resources expense
Underlying EBITDA
Other significant items
Non-recurring revenue
Fair value gain – contingent consideration
Payroll tax – employee options
Share based payment expense – employees
Share based payment expense – Paragem option holders
Non-recurring corporate costs
EBITDA
Interest revenue
Other interest expense
Depreciation and amortisation
Profit/(loss) before income tax
Income tax benefit
FY17
$
FY16
$
26,348,718
15,410,448
30,810,493
27,254,746
4,701,436
-
61,860,647
42,665,194
(41,051,882)
(31,786,555)
20,808,765
10,878,639
(10,535,689)
(5,153,447)
5,119,629
(7,210,769)
(4,508,101)
(840,231)
107,917
925,407
(337,018)
(800,435)
221,027
(549,066)
607,350
-
-
(754,760)
(557,667)
(220,902)
4,687,463
(1,766,210)
875,289
(387,886)
(1,423,529)
3,751,338
15,122,793
383,962
(145,705)
(784,324)
(2,312,277)
1,125,149
Profit/(loss) after income tax from continuing operations
18,874,131
(1,187,128)
Discontinued operations
Profit/(loss) after income tax
Underlying NPAT adjustments*
Fair value gain – contingent consideration
Share based payments – Paragem option holders
Non-recurring corporate costs
Recognition of deferred tax asset
Underlying NPAT*
-
-
18,874,131
(1,187,128)
(925,407)
(221,027)
549,066
-
557,667
220,902
(14,333,884)
(1,158,403)
3,942,878
(1,566,963)
VAR
%
71%
13%
-
45%
29%
91%
46%
14%
6%
149%
128%
166%
81%
1244%
149%
1137%
* Underlying NPAT is a non-IFRS measure used by the company which is relevant because it is consistent with measures used internally by management
and by some in the investment community to assess the operating performance of the business.
HUB24 Annual Report 2017
17
VAR
%
45%
(82%)
128%
46%
FINANCIAL PERFORMANCE
Revenue from ordinary activities
Operating revenue
Non-recurring revenue
Fair value gain – contingent consideration
Interest revenue
FY17
$
FY16
$
61,860,647
42,665,194
107,917
925,407
875,289
607,350
-
383,962
63,769,260
43,656,506
Revenue due to ordinary activities from continuing
operations comprises operating revenue, non-recurring
revenue and interest revenue.
Operating and growth resource
expenses
Revenue
Record net inflows of $2 billion into the HUB24 platform
have driven platform revenue of $26.4 million for FY17,
an increase of 71% over the prior corresponding period.
The Licensee (Paragem) has contributed $30.9 million in
revenue for FY17 ($27.3 million for FY16, an increase of
13% over the prior corresponding period) having recruited
five additional financial planning practices during the year.
IT Services (Agility) has contributed $4.7 million in
revenue from software licensing and consulting services
since acquisition for the period from 3 January 2017 to
30 June 2017. Revenue is sensitive to movements in equity
markets given a significant proportion of client funds
are in either directly held or managed assets with equity
market exposure.
Gross profit
Strong net inflows, FUA growth, trading activity on
the platform and continuing scale benefits together
with the recruitment of adviser practices have driven a
strong gross profit result of $20.8 million for FY17
($10.9 million for FY16), an increase of 91%.
Platform direct costs include custody, trustee,
superannuation administration and headcount resources
to service current client accounts while Licensee
(Paragem) direct costs include payments to advisers for
advice fees and suppliers of compliance, software and
training services.
IT Services (Agility) direct costs, contributing $3 million for
the period from 3 January 2017 to 30 June 2017, include
headcount and infrastructure resources to support
existing customer consulting arrangements and software
license needs.
The company has increased FUA and client accounts by
greater than 220% over the past two years and began
increasing its operating expense base during FY16 to
support the expected growth of the business. Investment
in the operating expense base has continued in FY17 with
recent senior staff appointments in the areas of risk and
compliance, finance and marketing, and will continue into
the 2018 financial year with the appointment of the Chief
Operating Officer and the company’s move of its head
office premises in 1HFY18.
Growth resource expenses are predominantly headcount
resources dedicated to future platform development,
business strategy (inclusive of M&A activity) and to
accelerate additional FUA onto the platform. They include
resources across sales, development and transition
functions.
Growth resource expenses of $2 million were capitalised
during FY17 relating to specific projects including the
development of functionality for international equities,
non-custodial assets and the HUB24 Account Open API
($1.3 million for FY16).
Other significant items
A fair value gain on contingent consideration of $0.9
million relating to the Paragem acquisition. For further
information refer to Note 11 of the financial statements.
Share based payment expenses includes $0.8 million for
employee payments and $0.3 million for payroll tax, total
$1.1 million due to the issue of options to executives and
staff during the past three years ended FY17 ($0.8 million
for FY16).
Record net inflows of $2 billion
into the HUB24 platform have
driven platform revenue of
$26.3 million for FY17
HUB24 Annual Report 2017
18
The company recorded positive
cashflow from operating
activities of $4.1 million
for FY17
FY17 includes a credit to the profit and loss of $0.2 million
with respect to remuneration for post transaction services
for Paragem option holders relating to the acquisition of
Paragem ($0.6 million expense for FY16).
Transaction due diligence and integration costs of
$0.4 million associated with the acquisition of Agility, which
was completed on 3 January 2017, were incurred during
FY17. A further $0.1 million was incurred relating to the
evaluation of potential business opportunities.
Cash and cash flows
The company recorded positive cashflow from operating
activities of $4.1 million for FY17 compared with
$1.3 million for FY16.
Cash and cash equivalents at 30 June 2017 were
$10.8 million, an increase of $1.6 million for the year after
the inclusion of the net payment for the Agility acquisition
of $1.26 million (Refer Note 28), the exercise of staff
options contributing $1.1 million and the capitalisation of
development expenditure of $2.1 million.
Operating segments
The principal products and services for each of the
operating segments are as follows:
PLATFORM
The provision and ongoing development of
investment and superannuation platform services
to financial advisers, stockbrokers, accountants
and their clients.
LICENSEE
The provision of financial advice to clients through
financial advisers authorised by Paragem Pty
Ltd. The Licensee provides compliance, software,
education and business support to adviser
practices, enabling advisers to provide clients with
financial advice over a range of products.
IT SERVICES
The provision of data, software and IT
infrastructure services via software licensing and
consulting to the financial services industry.
CORPORATE
The provision of corporate services to the
operating segments including allocation of costs
of the Managing Director, finance and compliance,
and strategic support.
Platform segment
FULL YEAR
Platform
FUA
Revenue
Direct costs
Gross profit
Operating expenses
Growth investment expenses
Underlying EBITDA
Other significant items
Other revenue
EBITDA
Interest revenue
Depreciation and amortisation
Profit before income tax
FY17
$
FY16
$
5,515,000
3,313,000
26,348,718
15,410,448
(9,914,280)
16,434,438
(6,333,645)
(5,032,317)
5,068,476
(6,838,147)
8,572,301
(4,759,251)
(4,389,976)
(576,926)
107,917
607,350
5,176,393
30,424
451,796
170,484
(1,229,982)
4,398,207
(781,047)
(580,139)
VAR
%
66%
71%
45%
92%
33%
15%
Lge
165%
57%
HUB24 Annual Report 2017 19
Platform – annual revenue, gross profit and
underlying EBITDA trends
$m
30
25
20
15
10
5
0
-5
-10
FY13
FY14
FY15
FY16
FY17
Revenue
Gross profit
Underlying EBITDA
Licensee segment (Paragem)
Paragem, the Licensee, provides licensing for financial
planning practices with above industry average funds
under advice per adviser. The practices seek the freedom
to exert their independence through a broad choice of
investment and insurance options as they embrace the
changing shape of the advice industry. The licensee
provides assistance to practices wishing to implement
managed portfolios for their clients, assisting them to
deliver contemporary investment solutions and improving
the efficiency of their business such that operational
scale and professional fees are the primary drivers of
profitability.
In summary for FY17:
• gross revenue (adviser fees and commissions) grew by
$3.5 million to $30.7 million;
• gross profit grew by $0.4 million to $2.7 million;
• number of practices licensed by Paragem grew by 5 to 30;
• number of individual advisers licensed by Paragem
grew by 10 to 70; and
• FUA increase to circa $3.8 billion.
While Paragem advisers continue to be free to choose
whatever platform best suits their clients’ needs, we’ve
been particularly pleased with the way Paragem advisers
have embraced HUB24 to blend more contemporary
portfolio construction options, such as managed portfolios
and SMAs, with their traditional investment solutions.
This has enabled them to develop more efficient service
offerings at lower cost and no additional licensee charges
paid to Paragem.
The platform segment recorded significant improvements
in Revenue, Gross Profit and underlying EBITDA for FY17
due to record increases in FUA with expanding margins.
Positive Platform underlying EBITDA and Profit Before
income Tax (PBT) were recorded for the first time in FY17.
The result was driven by an increase in FUA of $2.2 billion
to HUB24’s investment and superannuation platform,
the platform’s largest annual FUA increase to date. The
company is positioning itself for the future by continuing
to invest to extend the breadth of its functionality into
international managed portfolios and direct shares,
multibroker capabilities, software integration with
advice licensees and other suppliers and non-custodial
reporting.
Platform revenue and FUA
FUA
$m
6,000
5,000
4,000
3,000
2,000
1,000
0
Revenue
$m
25
20
15
10
5
0
FY13
FY14
FY15
FY16
FY17
Revenue
FUA
Platform direct, operating and growth resource expenses
increased by 33% for FY17 compared with the prior
corresponding period while revenue increased 71%,
showing continuing margin improvements in gross profit
and underlying EBITDA.
The following chart demonstrates the dual impact of
increasing volumes and margin expansion on the dollar
value of gross profit and underlying EBITDA when
comparing the annual periods FY13 to FY17.
Continuing margin
improvements were made
in FY17 for gross profit and
underlying EBITDA
HUB24 Annual Report 2017 20
Licensee
Total revenue
Direct costs
Gross profit
Operating expenses
Underlying EBITDA
Other significant items
Depreciation and amortisation
Profit before income tax
FY17
$
FY16
$
30,810,493
27,254,746
(28,150,983)
(24,948,408)
2,659,510
2,306,337
(2,344,417)
(2,104,167)
315,093
202,170
(2,131)
312,962
(3,277)
198,893
VAR
%
13%
13%
15%
11%
56%
35%
57%
IT Services segment (Agility)
IT Services provides software license and consulting
services from data, software and infrastructure to the
financial services industry and stockbroking market in
particular. Agility’s market leading CONNECT Desktop has
over 2,600 users, predominately stockbrokers, reporting
on over $250 billion of client assets.
The IT Services segment has contributed to six months
earnings during the period and has focussed on the
following activities:
• an increase of 250 licensed users of the Connect
software over the period
• investment in headcount to support new business and
new client initiatives
• corporate integration activities completed during the
period.
Joint development and sales initiatives with the
platform business have resulted in a strong pipeline of
opportunities that will support the convergence of the
traditional stockbroking and financial planning sectors.
IT services
Operating revenue
Total revenue
Direct costs
Gross profit
Operating expenses
Growth resources expensed
Underlying EBITDA
Other significant items
Interest revenue
Depreciation and amortisation
Other interest expense
Profit before income tax
Period from
3 January 2017
to 30 June 2017
4,701,436
4,701,436
(2,986,619)
1,714,817
(1,471,131)
-
243,687
4,757
(191,416)
(2,112)
54,915
HUB24 Annual Report 2017
21
VAR
%
11%
3%
9%
96%
6%
FY17
$
(386,496)
(121,130)
(507,626)
418,737
925,407
(337,018)
(800,435)
221,027
(549,066)
(385,774)
FY16
$
(347,350)
(118,124)
(465,474)
213,478
-
-
(754.760)
(557,667)
(220,902)
(145,706)
(1,014,746)
(1,931,031)
15,122,793
1,125,149
14,108,047
(805,882)
47%
1244%
Likely developments and expected
results
The company has recorded its first year of profitability.
With the continued growth in FUA onto the HUB24
investment and superannuation platform and
continuing success of its supporting businesses, the
company expects its financial results to continue
improving with scale.
Management and the Board are confident the
company will continue to grow into the foreseeable
future.
Environmental regulation and
performance
The consolidated entity’s operations are not subject
to significant environmental regulations under
Australian legislation in relation to the conduct of its
operations.
Corporate
Operating expenses
Growth Investment expenses
Underlying EBITDA
Other significant items
Interest revenue
Fair value gain – contingent consideration
Payroll tax – employee options
Share based payment expense – employees
Share based payment expense – Paragem option holders
Non-recurring corporate costs
Other interest expense
Profit before income tax
Income tax benefit
Profit after income tax
A portion of operating expenses and growth resources
were allocated to the Corporate segment in FY17. These
expenses predominantly relate to corporate headcount
overheads that cannot be directly attributed to one
of the operating segments (Platform, Licensee,
IT Services).
The consolidated entity has brought to account a deferred
tax asset (“DTA”) relating to previously unrecognised
prior period tax losses, resulting in a credit to income tax
expense of $15.1 million. Refer Note 7 of the financial
statements for further information.
Significant changes in the
state of affairs
On 3 January 2017, the acquisition of Agility was
completed (refer to Note 28). There have been no other
significant changes in the nature or state of affairs of the
consolidated entity.
Significant events after the
reporting date
No matters or circumstances have arisen since 30 June
2017 that have significantly affected, or may significantly
affect the consolidated entity’s operations, the results
of those operations, or the consolidated entity’s state of
affairs in future financial years.
Prior period tax losses have
been brought to account as an
income tax benefit in FY17
HUB24 Annual Report 2017
22
Directors’ indemnity
During FY17 the consolidated entity paid a premium
in respect of a contract, insuring all the directors and
officers against liability, except wilful breach of duty, of
a nature that is required to be disclosed under section
300(8) of the Corporations Act 2001. In accordance with
commercial practice, the amount of the premium has not
been disclosed.
The company has indemnified officers and directors to the
extent permitted by law against any liability that arises
as a result of actions as an officer or director and has
not otherwise, during or since the end of FY17, except
to the extent permitted by law, indemnified or agreed to
indemnify an officer or auditor of the company or of any
related body corporate against a liability incurred as such
an officer or auditor.
Meetings of directors
The number of meetings of directors (including meetings
of committees of directors) held during the year and the
number of meetings attended by each Director was as per
the table below.
Director
Bruce Higgins
Andrew Alcock
Ian Litster
Anthony McDonald
Vaughan Webber
BOARD MEETINGS
AUDIT, RISK & COMPLIANCE
COMMITTEE MEETINGS
REMUNERATION &
NOMINATION COMMITTEE
Attended
Held*
Attended
Held*
Attended
Held*
10
10
9
10
10
10
10
10
10
10
4
-
3
-
4
4
-
4
-
4
3
-
3
3
-
3
-
3
3
-
*Number of meetings held during the time the director held office or was a member of the committee.
HUB24 Annual Report 2017 23
Our profitability, growth, industry
recognition and engagement
with our clients has given us the
confidence to invest to enhance
our market position and explore
broader opportunities
HUB24 Annual Report 2017 24
REMUNERATION
REPORT – AUDITED
This remuneration report, which has been audited,
outlines the remuneration arrangements for directors
and Key Executives (collectively KMP) in relation to the
consolidated entity, in accordance with the requirements
of Section 300A of the Corporations Act 2001 and its
Regulations.
The remuneration report is set out under the following
main headings:
A – Principles used to determine the nature and amount
of remuneration
B – Details of remuneration
C – Service agreements
D – Share based compensation
E – Additional information
F – Additional disclosures relating to KMP
A. Principles used to determine the
nature and amount of remuneration
For the purposes of this remuneration report, KMP of the
consolidated entity are defined as those persons having
authority and responsibility for planning, directing and
controlling the major activities of the company and the
consolidated entity, directly or indirectly, including any
director (whether executive or otherwise) of the company.
REMUNERATION PHILOSOPHY
The performance of the consolidated entity depends upon the
quality of its KMP. To deliver shareholder value and its strategy
from time to time, the consolidated entity must attract,
motivate and retain highly skilled KMP and ensure reward for
performance is competitive and appropriate for the results
achieved. To this end, the consolidated entity embodies the
following principles in its remuneration framework:
• attract and retain qualified staff to manage the
profitable growth of HUB24 as one of the leading
investment platforms in Australia
• focus on sustained growth in shareholder value,
consisting of share price growth
• provide competitive and reasonable rewards to attract
high calibre individuals
• focus the executive on key drivers of value including
capital management
• transparency and acceptability to shareholders.
REMUNERATION AND NOMINATION COMMITTEE
The Remuneration and Nomination Committee is
responsible for making recommendations to the Board
on the remuneration arrangements for KMP. The
Remuneration and Nomination Committee assesses
the appropriateness of the nature and amount of
remuneration on a periodic basis by reference to relevant
employment market conditions, with the overall objective
of delivering maximum stakeholder value from the
retention of high performing KMP.
The current members of the Remuneration and
Nomination Committee are Anthony McDonald (Chair),
Bruce Higgins and Ian Litster. Their qualifications and
experience are set out earlier in this report.
In reviewing performance, the Remuneration and
Nomination Committee conducts an evaluation based on
specific criteria, including the consolidated entity’s business
performance, whether strategic objectives are being
achieved and the development and performance of KMP.
REMUNERATION STRUCTURE
In accordance with best practice corporate governance,
the structure of non-executive director and other KMP
remuneration are separate and distinct from each other.
During FY16, the company engaged the services of a
specialist remuneration consultancy firm to provide
independent advice on the remuneration structure,
including any re-structuring that was considered
necessary to better achieve the remuneration principles
referred to in this remuneration report. The Board sought
advice in relation to Fixed Remuneration, Short Term
Incentives (STI) and Long Term Incentives (LTI) in relation
to the KMP and to meet the needs of the company. The
advice was taken into consideration in a re-structuring of
the remuneration for KMP in FY17.
The Board and its Remuneration and Nomination
Committee approved revised incentive arrangements
for Mr Alcock and other KMP with a view to
HUB24 Annual Report 2017 25
strengthening alignment between executives and
shareholders. This review included benchmarking
executive remuneration against a core comparator
group of companies and ensuring the design and
operation of the company’s STIs and LTIs are in line
with market expectations.
Following the advice provided and after consideration by
the Remuneration and Nomination Committee as well
as the Board, the Board has implemented a Perfomance
Rights Plan (PARs), in conjunction with the company’s
existing ESOP (LTI Plans), which was approved by
shareholders at the Annual General Meeting of the
company on 29 November 2016.
The following table summarises the key outcomes
following the advice and determination made by the
Board including changes to the remuneration structure.
INCENTIVE TYPE
INCENTIVE
FEATURE
Fixed remuneration FY17 amount
STI
Structure
Balance between
STIs and LTIs
STI claw-back
STI deferral
LTI
Structure
CHANGE
Adjustment to reflect findings from comparator benchmarking by
independent adviser.
The STI has a base weighting of 50% and a stretch weighting of a further
50% on the KMPs potential STI.
Up to 50% of the STI may be paid by way of issue of shares in the company at
the election of the executive, subject to agreement by the Board.
For FY17, the Managing Director has elected to reduce the STI incentive to
a maximum of 75% of Fixed Remuneration and LTI incentive increased to
75% of Fixed Remuneration to better align remuneration with longer term
shareholder value.
A claw-back on STIs earned was introduced in certain events such as fraud
and governance failures by the relevant KMP.
50% of KMP STIs are deferred for six months to better align with market
practice.
Introduction of PARs, for KMP eligible for LTIs comprising 50% PARs and
50% options coupled with a reset of expectations with KMP regarding a
focus on a growing shareholder value via the hurdles (see below).
Variation of existing option terms with an approval process for enabling KMP
to sell shares to fund the exercise price.
LTI claw-back/
cancellation
A claw-back on LTIs vested was introduced in certain events such as fraud
and governance failures by the relevant KMP.
The LTI terms have been structured to improve the ability of the company to
clawback LTI incentives on departure of the relevant KMP.
Hurdles
Two hurdles were applied to better align LTIs with longer term shareholder
value (allocated 50/50 as between the hurdles).
Performance Condition #1, up to 50% vesting of options and PARs based on
a Compound Annual Growth Rate (“CAGR”) in FUA growth over three years
with a minimum increase of 28% p.a. up to 45% p.a for full vesting, (204.8%
over three years or $10 billion in FUA).
Performance Condition #2, up to 50% vesting of options and PARs based on
Absolute Total Shareholder Return (“ATSR”) improvement over three years
commencing at a minimum of 12.5% p.a. ($6.35) to a maximum of 17.5% p.a
($7.24) for full vesting.
Upon a change of control event, the LTI awards vest on a pro rata period of
time basis only. The Board has discretion to make the full grant of options
or PARs vest upon a change of control event whereas for prior grants full
vesting occurs.
Change of control
HUB24 Annual Report 2017
26
The expectation of LTIs for executives has been
reset based on benchmarking, overall compensation
assessments and a growing shareholder value. For
instance the option grants for the Managing Director have
been 600,000 options in FY14, 200,000 options in FY15,
150,000 in FY16, and in FY17 106,464 options and 34,851
PARs (noting that the Managing Director has elected
for FY17 that his STI will decrease from 100% of Fixed
Remuneration to 75%, in exchange for that amount added
to the LTI program). The LTI program is now part of the
calculation for total remuneration for key management
personel based on the three parts of our remuneration
structure, fixed remuneration, STI and LTI which is
benchmarked to HUB24 peer group and the executives
experience and performance.
EXECUTIVE REMUNERATION
Objective
The consolidated entity aims to reward KMP with a level
and mix of remuneration commensurate with their
position and responsibilities to:
• align the interests of executives with those of
shareholders
• link reward with the strategic goals and performance
of the KMP and the consolidated entity
• ensure total remuneration is competitive by market
standards.
Structure
The Remuneration and Nomination Committee may
from time to time receive advice from independent
remuneration consultants to ensure executive
remuneration is appropriate and in line with market.
Remuneration may consist of the following key elements:
• fixed remuneration
• STIs
• LTIs
• share based incentives.
FIXED REMUNERATION
Objective and structure
The level of fixed remuneration is set in order to provide a
base level of remuneration, which is both appropriate to
the position and is competitive in the market.
Fixed salaries are reviewed annually by the Board
and the process consists of a review of company-wide
business unit and individual performances, relevant
comparative remuneration in the market and, where
appropriate, external advice on policies, practices
and market comparisons. KMP receive their fixed
remuneration in cash.
SHORT TERM INCENTIVES (STIs)
Objective and structure
The objective of STIs is to reward KMP who are
remunerated with fixed remuneration in a manner that
focusses them on achieving personal and business
goals which contribute to the creation of sustained
shareholder value.
STI payments are granted to executives based upon
qualitative and quantitative scorecard measures being
achieved as determined by the Board. The scoreboard
measures include “stretch” targets for KMPs.
50% of the STI is payable upon approval by the Board
as recommended by the Remuneration and Nomination
Committee, whilst payment of the remaining 50% is
deferred for a further six months. There is a “claw-back”
mechanism applied to STIs in the event of certain events
such as fraud and governance failures by the relevant
KMP. Further, KMPs are able to convert 50% of STIs
achieved and payable in cash to shares in the company,
with the Board having a discretion to allow higher levels of
conversion, if appropriate.
Details of the STIs earned for each relevant KMP are
detailed in Part C of this remuneration report.
LONG TERM INCENTIVES (LTIs)
Objective and structure
KMP’s may be eligible to participate in the LTI Plans
for the purposes of receiving options and/or PARs over
ordinary shares. Additionally, the Board may, at their
discretion and with the approval of shareholders, (as
required) elect to remunerate KMPs through the issue of
options or PARs outside of these plans.
The objective of the LTI Plans is to provide KMP with the
incentive to deliver growth and value to shareholders
and to provide the company with the ability to attract and
retain such people.
LTIs have two key performance hurdles to balance the
needs of the company with relevant incentives.
50% of the options and 50% of the PARs are subject to
the first performance condition which incentivises KMP
to build scale with appropriate margins in order to deliver
business growth and profitability. At the current stage of
the company’s development the performance condition is
measured against the CAGR in FUA over the three years
from grant of the LTI.
50% of the options and 50% of the PARs are also subject
to the second performance condition which measures
HUB24 Annual Report 2017 27
the success in implementing the company’s long term
strategic objectives with reference to ATSR performance
over a three year period.
Sales restrictions on shares resulting from the exercise
of options or PARs are imposed for 12 months except for
the purpose of funding the exercise price of options or
to meet the tax obligations arising from the exercise of
options or sales of shares.
Options and PARs will expire upon resignation or
termination of KMP employment unless KMP are
determined by the Board to be a Good Leaver based upon
special circumstances such as death, disablement or
such other circumstances as the Board determines.
LTI awards may be forfeited in particular circumstances,
or other circmstances the Board determines, such as
a material misstatement or omission in the financial
statements of the consolidated entity and actions by KMP
that seriously damage the company’s reputation or put
the company at significant risk.
Upon a change of control event, the LTI awards vest
on a pro rata period of time basis only. The Board has
discretion to make the full grant of Options and PARs vest
upon a change of control event.
SHARE BASED INCENTIVES
Objective
The objective of share based remuneration is to reward
KMP and staff (where applicable) in a manner that
aligns this element of remuneration with the creation of
shareholder value. As such, ordinary share and share
option grants may be made to executive KMP who are able
to influence the generation of shareholder wealth and
thus have an impact on the company’s performance.
Structure
Share based remuneration to KMP may be delivered in the
form of shares, partly-paid shares, rights or grants under
the Employee Share Plan or as share option grants, as
the Board recommends in its discretion, on a case by case
basis. Recipients of share based remuneration may be
required to meet vesting or exercise conditions, including
business performance, length-of-service, and market
and non-market performance based criteria, including
sustained share price targets.
HUB24 PERFORMANCE AND LINK TO REMUNERATION
Remuneration of certain KMP is directly linked to the
performance of the consolidated entity. 50% of the
amount potentially payable under STIs is based on the
performance of the executive against KPIs relating to
the company’s business plan, while 50% of the amount
potentially payable under the STI is based on the
performance of the executive against KPIs relating to
stretch objectives associated with growth or profitability
and product innovation.
USE OF REMUNERATION CONSULTANTS
During FY17 the company did not use the services of a
remuneration consultant, having engaged a remuneration
consultant during FY16 whose advice was relevant to the
FY17 year.
The Board sought independent advice on the restructuring
of the the company’s executive remuneration for
fixed remuneration, STIs and LTIs. The Board and its
Remuneration and Nomination Committee approved
revised incentive arrangements for Mr Alcock and
other company executives with a view to strengthening
alignment between executives and shareholders. This
review included benchmarking executive remuneration
against a core comparator group of companies and
ensuring the design and operation of the company’s
short and long term incentives are in line with market
expectations.
The Board has implemented a Performance Rights Plan,
in conjunction with the company’s existing Employee
Share Option Plan, which was approved by shareholders
at the Annual General Meeting of the company on
29 November 2016.
The structural changes made to KMP remuneration as
a result of this review are outlined in the section entitled
‘Remuneration Structure’ earlier in this report.
VOTING AND COMMENTS MADE AT THE COMPANY’S
2016 ANNUAL GENERAL MEETING
At the 29 November 2016 AGM, 84.34% of votes received
supported the adoption of the remuneration report for the
year ended 30 June 2016. The company did not receive any
specific feedback at the AGM regarding its remuneration
practices.
B. Details of remuneration
SUMMARY OF KEY TERMS OF MANAGING DIRECTOR’S
EMPLOYMENT AGREEMENT
The details of Mr Alcock’s service agreement are set out
in part C of this remuneration report.
REMUNERATION OF KMP
Details of the nature and amount of each element of the
remuneration of KMP of the consolidated entity are set
out in Part C of this remuneration report.
For FY17, the Managing Director has a maximum STI
opportunity of 75% of fixed remuneration and other
HUB24 Annual Report 2017 28
members of the executive team have an STI opportunity
ranging from 0% to 100% of fixed remuneration. For the
Managing Director, 50% of the STI is for meeting base case
objectives, while 50% is for meeting stretch case objectives.
For other KMP the allocated weighting between base case
objectives and stretch case objectives may vary. Up to 50%
of the STI may be paid by way of issue of shares in the
company subject to agreement by the Board and at the
election of the executive. The Board may take account of
business objectives in making a sole determination if the
offer to issue shares in any particular year will be made
in lieu of cash payment of STI. 50% of the STI is payable
upon approval by the Board as recommended by the
Remuneration and Nomination Committee, whilst 50% is
deferred for a further six months.
STI awards for the executive team in FY17 were based upon
scorecard measures and weightings.
The scorecard measures are both qualitative and
quantitative in nature and measurement. These have
been assessed as being central to business performance,
efficiency, and sustainability. These measures included:
• growth and profitability
• business/operational performance
• building the future foundations of the business
• product and service innovation
• leadership and culture.
These targets are set by the Remuneration and
Nomination Committee at the beginning of the financial
year and align to the company’s strategic and business
objectives. The mix and weighting of these measures will
vary to reflect relevant KMP areas of accountability and
expertise.
The table below sets out the percentage of the maximum
available STI for each KMP that was awarded in relation
to FY17 and the percentage that was forfeited because the
group and individual strectch performance criteria did not
meet the agreed stretch targets.
Name
A. Alcock
M. Ballinger
J. Entwistle
W. Gillett
J. Gioffre
M. Haes
Entitlement
Awarded
Forfeited
CURRENT YEAR STI ENTITLEMENT
75%
30%
75%
100%
Discretionary
Discretionary
85.4%
68.9%
87.1%
48.9%
% of salary
24.2%
39.9%
14.6%
31.1%
12.9%
51.1%
-
-
HUB24 Annual Report 2017 29
REMUNERATION EXPENSES FOR KMP
2017
$
Non-executive directors
B. Higgins
I. Litster
V. Webber
A. McDonald
Subtotal non-executive
directors
Key management personnel
A. Alcock
M. Ballinger
J. Entwistle
W. Gillett
J. Gioffre
M. Haes
SHORT
TERM
BENEFITS
POST
EMPLOYMENT
BENEFITS
LONG
TERM
BENEFITS
SHARE BASED
PAYMENTS
Salary
and fees1
Bonus
Super-
annuation
Long
Service
Leave Shares
Options
& Rights
TOTAL
PERFORMANCE
RELATED
%
132,275
66,137
74,277
74,612
347,302
-
-
-
-
-
401,089
265,487
210,751
50,000
329,765
222,105
252,114
130,000
227,436
55,000
250,562
100,000
-
-
-
-
-
19,565
19,565
19,565
19,565
19,565
19,565
-
-
-
-
-
-
-
-
-
-
150,406
66,137
74,277
74,612
-
-
-
18,131
365,433
6,236
3,298
5,085
4,642
4,791
9,351
-
181,551
873,929
1,000
38,646
323,260
1,000
120,394
697,913
1,000
1,000
1,000
68,552
475,871
37,351
345,142
54,197
434,675
0%
0%
0%
0%
30%
15%
32%
27%
16%
23%
Subtotal key management
personnel
1,671,718
822,592
117,390
33,403
5,000
500,691 3,150,790
Total
2,019,019
822,592
117,390
33,403
5,000
518,822 3,516,223
1 KMP salary and fees includes fixed remuneration and movement in annual leave entitlement.
HUB24 Annual Report 2017 30
REMUNERATION EXPENSES FOR KMP
2016
$
Non-executive directors
B. Higgins
I. Litster
H. Robertson2
V. Webber
A. McDonald3
Subtotal non-executive
directors
Key management personnel
A. Alcock
M. Ballinger
J. Entwistle
W. Gillett
J. Gioffre
M. Haes
SHORT
TERM
BENEFITS
POST
EMPLOYMENT
BENEFITS
LONG
TERM
BENEFITS
SHARE BASED
PAYMENTS
Salary
and fees1
Bonus
Super-
annuation
Long
Service
Leave Shares
Options
TOTAL
PERFORMANCE
RELATED
%
121,191
-
-
-
-
72,541
193,732
63,120
41,453
69,786
59,893
355,443
-
-
-
-
-
349,734
320,000
188,880
55,000
290,766
260,000
249,489
170,000
205,169
55,000
233,260
87,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
63,120
41,453
69,786
59,893
72,541
427,984
19,220
19,220
19,220
19,220
19,220
19,220
2,812
-
153,165
844,931
1,631
1,000
18,675
284,406
2,235
1,000
114,422
687,643
2,056
1,000
85,817
527,582
2,162
1,000
18,549
301,100
2,430
1,000
27,758
370,668
0%
0%
0%
0%
0%
38%
19%
38%
32%
18%
23%
Subtotal key management
personnel
1,517,298
947,000
115,320
13,326
5,000
418,386
3,016,330
Total
1,872,741
947,000
115,320
13,326
5,000
490,927 3,444,314
1 KMP salary and fees includes fixed remuneration and movement in annual leave entitlement.
2 H Robertson resigned as a Director on 29 February 2016.
3 A. McDonald was appointed as a Director on 1 September 2015.
The proportion of remuneration linked to performance and the fixed proportion are as follows:
Non-executive directors
Bruce Higgins
Ian Litster
Anthony McDonald
Vaughan Webber
Other KMP
Andrew Alcock
Mark Ballinger
Jason Entwistle
Wes Gillett
Joseph Gioffre
Matthew Haes
FIXED REMUNERATION
AT RISK – STI
AT RISK – LTI
2017
2016
2017
2016
2017
2016
88%
100%
100%
100%
49%
70%
51%
59%
89%
88%
63%
100%
100%
100%
32%
63%
33%
36%
94%
92%
-
-
-
-
30%
19%
32%
27%
-
-
-
-
-
-
55%
31%
55%
53%
-
-
12%
37%
-
-
-
21%
11%
17%
14%
11%
12%
-
-
-
13%
6%
12%
11%
6%
8%
HUB24 Annual Report 2017 31
C. Service agreements
On appointment to the Board, all non-executive directors
enter into a service agreement with the company in the
form of a letter of appointment. The letter summarises
the Board policies and terms, including compensation
relevant to the office of director.
Remuneration and other terms of employment for KMP
are formalised in employment agreements.
All KMP have ongoing employment agreements. The
company may generally terminate the employment
agreement by providing between one and six
months’ written notice depending on the agreement
or providing payment in lieu of the notice period
(based on the fixed component of the relevant KMP
remuneration).
The major provisions of the agreements relating to
remuneration are set out below. Salaries set out below
are for FY17 and are subject to review annually by the
Remuneration and Nomination Committee. There are no
termination payment benefits other than the contracted
notice periods.
NAME
Andrew Alcock
Chief Executive Officer
BASE SALARY
(INCLUDING
SUPERANNUATION)
STI
LTI
$414,500
Up to 75% of
base salary1
106,464 options,
34,851 rights2
Mark Ballinger
Head of Business Program
$242,000
Up to 30% of
base salary
20,719 options,
6,783 rights3
Jason Entwistle
Director, Strategic
Development
Wesley Gillett
Head of Product and
Distribution
Joseph Gioffre
Head of Operations
Matthew Haes
Chief Financial Officer and
Company Secretary
$340,000
Up to 75% of
base salary1
87,329 options,
28,587 rights3
$266,000 Up to 100% of
base salary1
27,329 options,
8,946 rights3
$245,000 Discretionary
$275,000 Discretionary
20,976 options,
6,783 rights3
28,253 options,
9,249 rights3
NOTICE
PERIOD
– EITHER
PARTY
6 months
3 months
6 months
3 months
1 month
1 month
TERM OF
AGREEMENT
Ongoing –
commenced
29 July 2013
Ongoing –
commenced
10 September 2013
Ongoing –
commenced
1 August 2013
Ongoing –
Commenced
19 April 2013
Ongoing –
commenced
3 July 2012
Ongoing –
commenced
26 June 2012
Note 1 50% of STI payable upon achieving base case objectives set by the Board. A further 50% payable upon the achievement of stretch case objectives.
Note 2 Options and PARs for Andrew Alcock granted in November 2016, have a one year sale restriction after date of issue of shares. Vesting is no earlier
than 36 months from date of issue subject to achieving two performance conditions (1. Absoute Total Shareholder return target; and 2. Growth in
Funds Under Administration target).
Note 3 Options and PARs for Jason Entwistle, Wesley Gillett, Matthew Haes, Joseph Gioffre and Mark Ballinger granted in November 2016 have a one
year sale restriction after vesting and exercise. Vesting is no earlier than 36 months from the date of issue subject to achieving two performance
conditions (1. Absoute Total Shareholder return target; and 2. Growth in Funds Under Administration target).
KMP have no entitlement to termination payments in the event of removal for misconduct.
HUB24 Annual Report 2017 32
D. Share based compensation
OPTIONS
The terms and conditions of each grant of options affecting remuneration of KMP in the current or a future reporting
period are as follows:
GRANT DATE
EXPIRY
DATE
EXERCISE
PRICE
7 Aug 2013
14 Oct 2017
$0.8424
8 Aug 2013
8 Aug 2017
$0.8438
8 Aug 2013
8 Aug 2017
$0.8438
17 Oct 2014
17 Oct 2019
2 Dec 2014
17 Oct 2019
14 Oct 2015
14 Oct 2020
7 Dec 2015
7 Dec 2020
29 Nov 2016
29 Nov 2016
29 Nov 2016
29 Nov 2016
$0.98
$0.98
$2.46
$2.46
$4.46
$5.17
VALUE PER
OPTION
AT GRANT
DATE
PERFORMANCE
ACHIEVED
%
VESTED
BALANCE
AT START
OF YEAR
ISSUED
DURING
YEAR
EXERCISED
DURING
YEAR
BALANCE
AT END
OF YEAR
$0.45
$0.45
$0.43
$0.19
$0.20
$0.95
$1.60
$2.33
$2.34
Yes
Yes
Yes
No
No
No
No
No
No
100%
165,000
100%
1,440,000
100%
510,000
580,000
200,000
420,000
150,000
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
100,000
65,000
360,000
680,000
510,000
Nil
Nil
Nil
Nil
Nil
Nil
Nil
580,000
200,000
420,000
150,000
418,639
50,000
Nil
Nil
418,639
50,000
Options granted carry no dividends or voting rights.
Options granted 7 August 2013 under the HUB24 Employee
Share Option Plan are fully vested. These options can be
exercised after the 2nd anniversary of the date of issue.
Options granted 8 August 2013 to executives fully vested
during FY17 and all options have been exercised as at the
date of this report.
Sale of shares are restricted for a period of 2 years after
issue, with the exception that the sale of a portion of shares
to fund taxation obligations directly arising from the exercise
of the options will be permitted, subject to compliance with
legal obligations in respect of the sale of HUB24 shares.
Options granted 8 August 2013 to the Chairman fully
vested during FY17 and were exercised.
Sale of shares are restricted for a period of 2 years after
issue, with the exception that the sale of a portion of shares
to fund taxation obligations directly arising from the exercise
of the options will be permitted, subject to compliance with
legal obligations in respect of the sale of HUB24 shares.
Options granted 17 October 2014 under the HUB24
Employee Share Option Plan vest subject to the following
share price hurdle:
• the closing sale price of the Shares traded on the
Australian Securities Exchange must have increased
by at least 60% of the Exercise Price of the options
for each day in any 20 consecutive trading day period
starting on or after the 3rd anniversary of the date of
issue of the Options. These options can be exercised,
subject to satisfaction of vesting conditions, after the
3rd anniversary of the date of issue.
Options granted 2 December 2014 to the Managing
Director vest subject to the following:
• the closing sale price of the shares traded on the
Australian Securities Exchange must have increased
by at least 60% of the Exercise Price of the options
for each day in any 20 consecutive trading day
period starting on or after 36 months after the
17 October 2014. These option can be exercised,
subject to satisfaction of vesting conditions, after the
3rd anniversary of the date of issue.
Options granted 14 October 2015 to executives vest
subject to the following:
• the closing sale price of the shares traded on the
Australian Securities Exchange must have increased
by at least 52% of the Exercise Price of the options
for each day in any 20 consecutive trading day period
starting on or after 36 months after the date of issue
of the options. These option can be exercised, subject
to satisfaction of vesting conditions, after the 3rd
anniversary of the date of issue.
Options granted 7 December 2015 to the Managing
Director vest subject to the following:
• the closing sale price of the shares traded on the
Australian Securities Exchange must have increased
by at least 52% of the Exercise Price of the options
for each day in any 20 consecutive trading day period
starting on or after 36 months after the date of issue
of the options. These options can be exercised, subject
to satisfaction of vesting conditions, after the 3rd
anniversary of the date of issue.
HUB24 Annual Report 2017 33
Options granted 29 November 2016 to executives and staff
vest subject to the following two performance conditions:
PERFORMANCE CONDITION 1
• The CAGR in FUA over the three year period until
PERFORMANCE CONDITION 2
• The CAGR in the ATSR over the three year period until
approximately 31 August 2019 must be at least 12.5%
p.a. Proportional vesting will occur between a CAGR of
12.5% (0% vesting) to 17.5% (100% vesting).
30 June 2019 must be at least 28% p.a. Proportional
vesting will occur between a CAGR of 28% (0% vesting)
to 45% (100% vesting).
• Any unvested options from the three year vesting date
will be retested over a four year period and if remain
unvested after this test will lapse.
FINANCIAL
YEAR OF
GRANT
FINANCIAL
YEARS IN
WHICH
OPTIONS
MAY VEST
NUMBER
OF OPTIONS
GRANTED
VALUE OF
OPTIONS AT
GRANT DATE
NUMBER
OF OPTIONS
VESTED
DURING THE
YEAR
NUMBER OF
OPTIONS LAPSED/
FORFEITED DURING
THE YEAR
2017
2016
2015
2014
2017
2016
2015
2017
2016
2015
2014
2017
2016
2015
2014
2017
2016
2015
2014
2017
2016
2015
2014
2014
2020
2019
2018
2017
2020
2019
2018
2020
2019
2018
2017
2020
2019
2018
2017
2020
2019
2018
2015
2020
2019
2018
2015
2017
106,464
150,000
200,000
600,000
20,719
60,000
100,000
87,329
120,000
160,000
480,000
27,329
90,000
120,000
360,000
20,976
60,000
80,000
80,000
28,253
90,000
120,000
115,000
510,000
$198,449
$240,000
$39,700
$269,600
$38,620
$57,000
$19,350
$203,477
$114,000
$30,960
$215,680
$50,941
$85,500
$23,220
Nil
Nil
Nil
200,000
Nil
Nil
Nil
Nil
Nil
Nil
160,000
Nil
Nil
Nil
$161,760
120,000
$39,099
$57,000
$15,480
$35,760
$52,664
$85,500
$23,220
$51,405
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
$220,405
170,000
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
NAME
Andrew Alcock
Mark Ballinger
Jason Entwistle
Wes Gillett
Joseph Gioffre
Matthew Haes
Bruce Higgins
HUB24 Annual Report 2017 34
The assessed fair value at grant date of the options
granted to individuals is allocated equally over the
period from grant date to expected vesting date and the
amount is included in the remuneration tables in Part
B of this remuneration report under the heading “share
based payments – options”. Fair values at grant date are
independently determined using Hoadley’s 1 Hybrid ESO
model that takes into account the exercise price, term
of the option, share price at grant date, probability of
service condition being met, expected price volatility of the
underlying share price and the risk free rate for the term
of the option.
1,170,000 options have been exercised by KMP during FY17.
Options granted carry no dividends or voting rights.
PERFORMANCE RIGHTS (PARS)
PARs granted 29 November 2016 to executives and
staff vest subject to the following two performance
conditions:
PERFORMANCE CONDITION 1
• The CAGR in FUA over the three year period until
30 June 2019 must be at least 28% p.a. Proportional
vesting will occur between a CAGR of 28% (0% vesting)
to 45% (100% vesting).
PERFORMANCE CONDITION 2
• The CAGR in the ATSR over the three year period until
approximately 31 August 2019 must be at least 12.5%
p.a. Proportional vesting will occur between a CAGR of
12.5% (0% vesting) to 17.5% (100% vesting).
The terms and conditions of each grant of PARs affecting
remuneration of KMP in the current or a future reporting
period are as follows:
• Any unvested PARs from the three year vesting date
will be retested over a four year period and if remain
unvested after this test will lapse.
Grant date
Expiry date
Value per right at grant date
Performance achieved
% vested
Balance at start of year
Issued during year
Exercised during year
Balance at end of year
29 Nov 16
Nil
$4.07
No
Nil
Nil
137,043
Nil
137,043
FINANCIAL
YEAR OF
GRANT
FINANCIAL
YEARS IN
WHICH RIGHTS
MAY VEST
NUMBER
OF RIGHTS
GRANTED
VALUE OF
RIGHTS AT
GRANT DATE
NUMBER
OF RIGHTS
VESTED
DURING THE
YEAR
NUMBER OF
RIGHTS LAPSED/
FORFEITED DURING
THE YEAR
2017
2017
2017
2017
2017
2017
2020
2020
2020
2020
2020
2020
34,851
6,783
28,587
8,946
6,867
9,249
$113,475
$22,085
$93,079
$29,128
$22,359
$30,115
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
NAME
Andrew Alcock
Mark Ballinger
Jason Entwistle
Wes Gillett
Joseph Gioffre
Matthew Haes
HUB24 Annual Report 2017 35
The assessed fair value at grant date of the PARs granted
to individuals is allocated equally over the period from
grant date to expected vesting date and the amount is
included in the remuneration tables in Part B of this
remuneration report under the heading “share based
payments – options and rights”. Fair values at grant date
are independently determined using Hoadley’s 1 Hybrid
ESO model that takes into account the term of the right,
share price at grant date, probability of service condition
being met, expected volatility of the underlying share price
and the risk free rate.
Underlying
EBITDA* ($m)
Funds Under
Administration* ($b)
Profit/(loss) after
income tax ($m)
*Unaudited
2017
2016
2015
2014
restated
5,119
(840)
(4,385)
(7,236)
5.5
3.3
1.7
0.9
18,874 (1,187)
(6,457)
(8,548)
No PARs have been exercised by KMP during FY17.
PARs granted carry no dividends or voting rights.
The factors that are considered to affect shareholder
value are summarised below:
E. Additional information
In considering the company’s performance the Board has
regard to the following with respect to the current year
and previous financial years:
$’000
Share price at
financial year end
Basic earnings
per share
2017
6.24
2016
2015
3.68
1.20
2014
0.82
0.349
(0.026)
(0.133)
(0.196)
F. Additional disclosures relating to KMP
SHARES
The number of shares in the company held during the financial year by each director and other members of KMP of the
consolidated entity, including their personally related parties, is set out below:
BALANCE AT START
OF THE YEAR
RECEIVED DUE TAX
EXEMPT SHARE
PLAN ISSUE
OTHER CHANGES
DURING THE YEAR
BALANCE AT END
OF THE YEAR
165,400
21,833
1,048,235
77,470
41,336
42,421
566,811
3,588,751
-
224
224
224
224
224
-
-
191,483
2,638
(148,622)
297,601
33,543
51,424
420,000
-
356,883
25,695
899,837
375,295
75,103
94,069
986,811
3,588,751
NAME
Andrew Alcock
Mark Ballinger
Jason Entwistle
Wes Gillett
Joseph Gioffre
Matthew Haes
Bruce Higgins
Ian Litster
OPTIONS
The number of options over ordinary shares in the company held during FY17 by each director and other members of
KMP of the consolidated entity, including their personally related parties, is set out below:
HUB24 Annual Report 2017 36
OPTIONS OVER
ORDINARY SHARES
BALANCE AT START
OF THE YEAR
GRANTED
EXERCISED
EXPIRED/
FORFEITED/OTHER
BALANCE AT END
OF THE YEAR
Bruce Higgins
Andrew Alcock
Mark Ballinger
Jason Entwistle
Wes Gillett
Joseph Gioffre
Matthew Haes
510,000
950,000
160,000
760,000
570,000
190,000
325,000
-
106,464
20,719
87,329
27,329
20,976
28,253
510,000
200,000
-
-
360,000
50,000
50,000
-
-
-
-
-
-
-
-
856,464
180,719
847,329
237,329
160,976
303,253
PERFORMANCE RIGHTS (PARS)
The number of PARs over ordinary shares in the company held during FY17 by each director and other members of KMP
of the consolidated entity, including their personally related parties, is set out below:
PARS OVER
ORDINARY SHARES
BALANCE AT START
OF THE YEAR
GRANTED
EXERCISED
EXPIRED/
FORFEITED/OTHER
BALANCE AT END
OF THE YEAR
Andrew Alcock
Mark Ballinger
Jason Entwistle
Wes Gillett
Joseph Gioffre
Matthew Haes
-
-
-
-
-
-
34,851
6,783
28,587
8,946
6,867
9,249
-
-
-
-
-
-
-
-
-
-
-
-
34,851
6,783
28,587
8,946
6,867
9,249
NON-EXECUTIVE DIRECTOR REMUNERATION
RETIREMENT ALLOWANCES FOR DIRECTORS
Objective and structure
The Board seeks to set aggregate remuneration
at a level which provides the company with the ability
to attract and retain directors of the highest calibre,
whilst incurring a cost which is acceptable to
shareholders.
The amount of fixed remuneration is established for
individual non-executive directors by resolution of the
full Board, at its discretion. The annual aggregate non-
executive remuneration may not exceed the amount fixed
by the company in General Meeting for that purpose
(currently fixed at a maximum of $600,000 per annum as
approved by shareholders at the Annual General Meeting
held on 29 November 2016).
The following fees, including superannuation, apply for
non-executive directors:
Chairman
Other non-executive directors
$133,900 p.a.
$66,950 p.a.
The Chair of the Audit, Risk and Compliance
Committee and the Chair of the Remuneration and
Nomination Committee each receive an additional
$8,240 p.a.
There are no retirement schemes or retirement benefits
other than statutory benefits for non-executive directors.
The Remuneration and Nomination Committee may
from time to time receive advice from independent
remuneration consultants or utilise market based
comparative data or indices to ensure non-executive
directors’ fees and payments are appropriate and in
line with market. The Chairman’s fees are determined
independently to the fees of other non-executive directors
based on comparative roles in the external market.
No additional fees are paid for each Board committee
on which a director sits, other than as chair for each
committee, however directors are also entitled to be
reimbursed for reasonable travel, accommodation and
other expenses incurred as a consequence of their
attendance at Board meetings and otherwise in the
execution of their duties as directors.
The remuneration of non-executive directors for FY17 and
FY16 is detailed in the Remuneration of KMP section of
this remuneration report.
Directors’ total compensation in aggregate decreased by
2.3% over the prior financial year due to movements in the
number of directors.
This concludes the remuneration report which has been
audited.
HUB24 Annual Report 2017 37
NON-AUDIT SERVICES
Tax, compliance and consulting services of $370,015
were paid to Deloitte Touche Tohmatsu (2016: $108,475).
The directors are satisfied that the provision of non-
audit services is compatible with the general standard
of independence for auditors as set out in APES 110
Code of Ethics for Professional Accountants as they did
not involve reviewing or auditing the auditor’s own work,
acting in a management or decision-making capacity
for the consolidated entity, acting as an advocate for the
consolidated entity or jointly sharing rights and rewards.
Refer to Note 23: Auditors Remuneration of the financial
statements for details of the remuneration that the
auditors received or are due to receive for the provision of
audit and other services.
PROCEEDINGS ON BEHALF OF THE COMPANY
No person has applied to the Court under section
237 of the Corporations Act 2001 for leave to bring
proceedings on behalf of the company, or to intervene in
any proceedings to which the company is a party, for the
purpose of taking responsibility on behalf of the company
for all or part of those proceedings.
No proceedings have been brought or intervened in on
behalf of the company with leave of the Court under
section 237 of the Corporations Act 2001.
Auditor independence
A copy of the independence declaration by the lead auditor
under section 307C is included on page 38 of this annual
report.
Signed in accordance with a resolution of the Directors.
Bruce Higgins
Chairman of Directors
Sydney, 28 August 2017
HUB24 Annual Report 2017 38
AUDITOR’S INDEPENDENCE
DECLARATION
Deloitte Touche Tohmatsu
A.B.N. 74 490 121 060
Grosvenor Place
225 George Street
Sydney NSW 2000
PO Box N250 Grosvenor Place
Sydney NSW 1220 Australia
DX 10307SSE
Tel: +61 (0) 2 9322 7000
Fax: +61 (0) 2 9322 7001
www.deloitte.com.au
The Board of Directors
HUB24 Limited
Level 8, Exchange Centre
20 Bridge Street
Sydney NSW 2000
28 August 2017
Dear Board Members
HUB24 Limited
In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following
declaration of independence to the directors of HUB24 Limited.
As lead audit partner for the audit of the consolidated financial statements of HUB24 Limited for the
financial year ended 30 June 2017, 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 2001 in relation to the
audit; and
(ii) any applicable code of professional conduct in relation to the audit.
Yours sincerely
DELOITTE TOUCHE TOHMATSU
Declan O’Callaghan
Partner
Chartered Accountant
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Touche Tohmatsu Limited
HUB24 Annual Report 2017 39
FINANCIAL
STATEMENTS
HUB24 Annual Report 2017 40
STATEMENT OF PROFIT OR LOSS AND
OTHER COMPREHENSIVE INCOME
for the year ended 30 June 2017
Revenue from continuing operations
Revenue
Fair value gain on contingent consideration
Interest and other income
Expenses
Platform and custody fees
Licensee fees
IT services
Employee benefits expenses
Property and occupancy costs
Depreciation and amortisation expense
Administrative expenses
Profit/(loss) before income tax expense from continuing operations
Income tax benefit
Profit/(loss) after income tax from continuing operations
Profit/(loss) after income tax from discontinued operations
Profit/ (loss) after income tax for the year
Other comprehensive income
Total comprehensive profit/(loss) for the year
Total comprehensive profit/(loss) for the year attributable to ordinary
equity members of HUB24 Limited
Note
6(a)
11
CONSOLIDATED
2017
$
2016
$
61,968,564
43,272,544
925,407
875,289
-
383,962
63,769,260
43,656,506
(4,458,085)
(3,111,928)
(29,527,490)
(26,161,096)
(2,986,619)
-
6(b)
(14,703,184)
(11,265,041)
6(c)
6(d)
7(a)
(795,501)
(1,423,529)
(6,123,514)
(560,713)
(784,324)
(4,085,681)
(60,017,922)
(45,968,783)
3,751,338
15,122,793
18,874,131
-
(2,312,277)
1,125,149
(1,187,128)
-
18,874,131
(1,187,128)
-
18,874,131
18,874,131
-
(1,187,128)
(1,187,128)
Cents
Cents
Earnings per share from continuing operations, attributable to ordinary equity members of HUB24 Limited
Basic earnings per share
Diluted earnings per share
22
Earnings per share for profit attributable to ordinary equity members of HUB24 Limited
Basic earnings per share
Diluted earnings per share
22
34.95
33.15
34.95
33.15
(2.26)
(2.26)
(2.26)
(2.26)
The above Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the
accompanying notes.
HUB24 Annual Report 2017
STATEMENT OF
FINANCIAL POSITION
at 30 June 2017
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Other current assets
Total current assets
Non-current assets
Office equipment
Deferred tax assets
Intangible assets
Security deposits and guarantees
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Current provisions
Deferred revenue from research and development claim
Total current liabilities
Non-current liabilities
Non-current provisions
Other non-current liabilities
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Issued capital
Reserves
Accumulated losses
Total equity
41
CONSOLIDATED
2017
$
2016
$
Note
18
8
9
7c
10
19
11
12
13
14
15
16
10,836,646
6,874,626
644,566
9,267,163
4,018,262
491,396
18,355,838
13,776,821
778,268
15,776,822
28,085,430
115,670
44,756,190
63,112,028
8,104,155
3,747,617
88,897
11,940,669
729,543
6,826,376
7,555,919
19,496,588
43,615,440
152,414
943,875
13,716,522
259,036
15,071,847
28,848,668
1,792,076
2,457,095
88,897
4,338,068
359,114
5,188,953
5,548,067
9,886,135
18,962,533
89,148,977
4,106,404
83,080,332
4,396,272
(49,639,941)
(68,514,071)
43,615,440
18,962,533
The above Statement of Financial Position should be read in conjunction with the accompanying notes.
HUB24 Annual Report 2017
42
STATEMENT OF
CHANGES IN EQUITY
for the year ended 30 June 2017
As at 1 July 2016
Total comprehensive profit for the year
Issued
capital
$
83,080,332
-
Reserves
$
4,396,272
-
-
-
-
Accumulated
losses
$
(68,514,071)
18,874,131
-
-
-
-
-
CONSOLIDATED
Total
$
18,962,533
18,874,131
3,807,766
(8,223)
1,399,827
63,000
737,435
(221,028)
Transactions with equity members in their capacity as equity members
Shares issued for Agility acquisition
3,807,766
Cost of share issue expense (net of tax)
(8,223)
Shares issued to employees
– Share based payments*
– Share ownership plan
Options granted – employees
Share based payments –
Paragem option holders
As at 30 June 2017
2,206,102
63,000
-
-
(806,275)
-
737,435
(221,028)
* Share based payments includes shares issued to the executive team in lieu of short term incentive bonus payments of $297,002 for the year ended 30 June 2016.
Also included is $1,102,826 received for the exercise of options by employees and $806,275 transferred from the share based payment reserve for the options
exercised. Refer to Note 15 for further details.
89,148,977
4,106,404
(49,639,941)
43,615,440
As at 1 July 2015
82,090,453
3,133,845
(67,326,943)
Total comprehensive loss for the year
-
Transactions with equity members in their capacity as equity members
-
-
939,879
50,000
-
704,760
-
-
557,667
(1,187,128)
-
-
-
-
-
17,897,355
(1,187,128)
-
704,760
939,879
50,000
557,667
Capital raising
Options granted – employees
Shares issued to employees
– Share based payments*
– Share ownership plan
Share based payments –
Paragem option holders
As at 30 June 2016
83,080,332
4,396,272
(68,514,071)
18,962,533
* Share based payments includes shares issued to the executive team in lieu of short term incentive bonus payments of $518,750 for the year ended 30 June 2015.
The above Statement of Changes in Equity should be read in conjunction with the accompanying notes.
HUB24 Annual Report 2017
43
STATEMENT OF
CASH FLOWS
for the year ended 30 June 2017
Cash flows from operating activities
Receipts from customers (inclusive of GST)
Payments to suppliers and employees (inclusive of GST)
Interest received
Receipts from superfund expense recovery
CONSOLIDATED
2017
$
2016
$
Note
65,195,263
47,200,662
(61,882,882)
(46,867,316)
622,999
127,427
407,590
563,297
Net cash inflow/(outflow) from operating activities
18
4,062,807
1,304,233
Cash flows from investing activities
Receipts from return of security deposits
Payments for office equipment
Payments for acquisition of shares in subsidiary
Cash received from acquisitions
Payments for intangible assets
Payments for security deposits
28
28
253,866
(339,321)
(2,793,335)
1,538,755
(2,133,866)
(110,500)
-
(102,794)
(1,000,000)
-
(1,461,647)
(2,582)
Net cash inflow/(outflow) from investing activities
(3,584,401)
(2,567,023)
Cash flows from financing activities*
ORFR loan facility advance
Payments for capital raising costs
Proceeds from share options exercised by employees
Net cash inflow/(outflow) from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
-
(2,000,000)
(11,750)
1,102,826
1,091,076
1,569,483
9,267,163
18
10,836,646
-
421,128
(1,578,872)
(2,841,662)
12,108,825
9,267,163
* Shares issued to the executive team in lieu of short term incentive bonus payments for $297,002 ($518,750 for the year ended 30 June 2016) are non-cash
transactions and excluded from financing activities..
The above Statement of Cash Flows should be read in conjunction with the accompanying notes.
HUB24 Annual Report 2017
44
NOTES TO THE
FINANCIAL STATEMENTS
for the year ended 30 June 2017
1. Corporate information
The Annual Report of HUB24 Limited (the company or parent entity) for the year ended 30 June 2017 was authorised for
issue in accordance with a resolution of the Directors on 28 August 2017 and covers the company as an individual entity
as well as the consolidated entity consisting of the company and its subsidiaries as required by the Corporations Act 2001.
The company is limited by shares and incorporated and domiciled in Australia whose shares are publicly traded on the
Australian Securities Exchange (ASX: HUB).
The nature of the operations and principal activities of the company are described in the Directors Report.
2. Summary of significant accounting policies
BASIS OF PREPARATION
These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and
Interpretations issued by the Australian Accounting Standards Board (AASB) and the Corporations Act 2001, as appropriate for
profit oriented entities. The financial statements have also been prepared under the historical cost convention, except for, where
applicable, the revaluation of certain classes of assets and liabilities. The financial report is presented in Australian dollars.
PARENT ENTITY INFORMATION
In accordance with the Corporations Act 2001, these financial statements present the results of the consolidated entity
only. Supplementary information about the parent entity is disclosed in Note 25.
COMPLIANCE WITH IFRS
The financial report complies with Australian Accounting Standards and International Financial Reporting Standards
(IFRS) as issued by the International Accounting Standards Board.
NEW, REVISED OR AMENDING ACCOUNTING STANDARDS AND INTERPRETATIONS ADOPTED
The consolidated entity has adopted all of the new, revised or amending Accounting Standards and Interpretations issued
by the Australian Accounting Standards Board (AASB) that are mandatory for the current reporting period.
Any new, revised or amended Accounting Standards or interpretations that are not yet mandatory have not been early adopted.
In the current year, the Group has applied the following amendment to AASBs issued by the Australian Accounting
Standards Board (AASB) that are mandatorily effective for an accounting period that begins on or after 1 July 2015, and
therefore relevant for the current year end. The adoption of these Accounting Standards and Interpretations did not have
any significant impact on the financial performance or position of the consolidated entity.
AASB 2015-3 ‘Amendments to Australian Accounting Standards arising from the Withdrawal of AASB 1031 Materiality’
This amendment completes the withdrawal of references to AASB 1031 in all Australian Accounting Standards and
Interpretations, allowing that Standard to effectively be withdrawn.
The application of these amendments does not have any material impact on the disclosures or the amounts recognised in
the Group’s consolidated financial statements.
HUB24 Annual Report 2017 45
2. Summary of significant accounting policies (continued)
GOING CONCERN
The financial report has been prepared on a going concern basis.
The consolidated entity has raised capital in prior years from multiple sources for acquisition, regulatory capital
requirements, investment platform development and working capital purposes. Accordingly, the directors of the company
are confident of sourcing additional capital as and when required.
BASIS OF CONSOLIDATION
The consolidated financial statements comprise the financial statements of the company and its subsidiaries (the
consolidated entity) as at 30 June each year. There are no interests in associates.
Subsidiaries are all those entities over which the consolidated entity has the power to govern the financial and operating
policies so as to obtain benefits from their activities. The existence and effect of potential voting rights that are currently
exercisable or convertible are considered when assessing whether a consolidated entity controls another entity.
The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using
consistent accounting policies.
In preparing the consolidated financial statements, all intercompany balances and transactions, income and expenses
and profit and losses resulting from intra-consolidated entity transactions have been eliminated in full.
Subsidiaries are fully consolidated from the date on which control is obtained by the consolidated entity and cease to be
consolidated from the date on which control is transferred out of the consolidated entity. There were no transfers out of
the consolidated entity during the year.
Investments in subsidiaries held by the company are accounted for at cost in the separate financial statements of the
parent entity less any impairment charges.
The acquisition of subsidiaries is accounted for using the acquisition method of accounting. The acquisition method
of accounting involves recognising at acquisition date, separately from goodwill, the identifiable assets acquired, the
liabilities assumed and any non-controlling interest in the acquiree. The identifiable assets acquired and liabilities
assumed are measured at the acquisition date fair values. The difference between the above items and the fair value of
the consideration is goodwill or a discount on acquisition.
After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of
impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the
consolidated entity’s cash-generating units that are expected to benefit from the combination, irrespective of whether
other assets or liabilities of the acquiree are assigned to those units.
FOREIGN CURRENCY TRANSLATION
Functional and presentation currency
Both the functional and presentation currency of the consolidated entity is Australian dollars ($).
COMPARATIVES
Where required by the Accounting Standards and/or for improved presentation purposes, certain comparative figures
have been adjusted to conform to changes in presentation for the current year. There has been no prior year restatement
of the financial statements.
NEW ACCOUNTING STANDARDS AND INTERPRETATIONS NOT YET MANDATORY OR EARLY ADOPTED
Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet
mandatory, have not been early adopted by the consolidated entity for the annual reporting period ended 30 June 2017.
The consolidated entity’s assessment of the impact of these new or amended Accounting Standards and Interpretations,
most relevant to the consolidated entity, are set out below.
HUB24 Annual Report 2017 46
2. Summary of significant accounting policies (continued)
AASB 9 Financial Instruments and its consequential amendments
This standard is applicable to annual reporting periods beginning on or after 1 January 2018. The standard replaces
all previous versions of AASB 9 and completes the project to replace IAS 39 ‘Financial Instruments: Recognition and
Measurement’. AASB 9 introduces new classification and measurement models for financial assets. A financial asset
shall be measured at amortised cost, if it is held within a business model whose objective is to hold assets in order
to collect contractual cash flows, which arise on specified dates and solely principal and interest. All other financial
instrument assets are to be classified and measured at fair value through profit or loss unless the entity makes an
irrevocable election on initial recognition to present gains and losses on equity instruments (that are not held-for-trading)
in other comprehensive income (‘OCI’). For financial liabilities, the standard requires the portion of the change in fair
value that relates to the entity’s own credit risk to be presented in OCI (unless it would create an accounting mismatch).
New simpler hedge accounting requirements are intended to more closely align the accounting treatment with the risk
management activities of the entity. New impairment requirements will use an ‘expected credit loss’ (‘ECL’) model to
recognise an allowance. Impairment will be measured under a 12-month ECL method unless the credit risk on a financial
instrument has increased significantly since initial recognition in which case the lifetime ECL method is adopted. The
standard introduces additional new disclosures. The consolidated entity will adopt this standard from 1 July 2018. The
directors of the Company anticipate that the application of AASB 9 in the future may not have a material impact on the
amounts reported and disclosures made in the Company’s financial statements. However, it is not practicable to provide a
reasonable estimate of the effect of AASB 9 until the company performs a detailed review.
AASB 16 ‘Leases’
AASB 16 provides a comprehensive model for the identification of lease arrangements and their treatment in the
financial statements of both lessees and lessors. The accounting model for lessees will require lessees to recognise
all leases on balance sheet, except for short-term leases and leases of low value assets. AASB 16 applies to annual
periods beginning on or after 1 January 2019. The directors of the Company anticipate that the application of AASB
16 in the future may not have a material impact on the amounts reported and disclosures made in the Company’s
financial statements. However, it is not practicable to provide a reasonable estimate of the effect of AASB 16 until the
company performs a detailed review.
AASB 15 Revenue from Contracts with Customers
This standard is applicable to annual reporting periods beginning on or after 1 January 2018. The standard provides a
single standard for revenue recognition. The core principle of the standard is that an entity will recognise revenue to
depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the
entity expects to be entitled in exchange for those goods or services. The standard will require: contracts (either written,
verbal or implied) to be identified, together with the separate performance obligations within the contract; determine
the transaction price, adjusted for the time value of money excluding credit risk; allocation of the transaction price to
the separate performance obligations on a basis of relative stand-alone selling price of each distinct good or service, or
estimation approach if no distinct observable prices exist; and recognition of revenue when each performance obligation
is satisfied. Credit risk will be presented separately as an expense rather than adjusted to revenue. For goods, the
performance obligation would be satisfied when the customer obtains control of the goods. For services, the performance
obligation is satisfied when the service has been provided, typically for promises to transfer services to customers. For
performance obligations satisfied over time, an entity would select an appropriate measure of progress to determine
how much revenue should be recognised as the performance obligation is satisfied. Contracts with customers will be
presented in an entity’s statement of financial position as a contract liability, a contract asset, or a receivable, depending
on the relationship between the entity’s performance and the customer’s payment. Sufficient quantitative and qualitative
disclosure is required to enable users to understand the contracts with customers; the significant judgments made in
applying the guidance to those contracts; and any assets recognised from the costs to obtain or fulfil a contract with a
customer. The consolidated entity will adopt this standard from 1 July 2018. The directors of the Company anticipate that
the application of AASB 15 in the future may not have a material impact on the amounts reported and disclosures made in
the Company’s financial statements. However, it is not practicable to provide a reasonable estimate of the effect of AASB
15 until the company performs a detailed review.
.
HUB24 Annual Report 2017 47
3. Financial risk management objectives and policies
The consolidated entity’s principal financial instruments comprise receivables, payables, finance leases and cash
and cash equivalents. The company and consolidated entity do not have debt facilities and do not trade in derivative
instruments, other than where listed and unlisted options over ordinary shares may be received as a part consideration
for corporate fees earned.
The consolidated entity has exposure to the following risks from its use of financial instruments:
• credit risk
• liquidity risk
• market risk.
This note presents information about the company’s and the consolidated entity’s exposure to each of the above risks,
their objectives, policies and processes for measuring and managing risk, and the management of capital. Further
quantitative disclosures are included throughout this financial report. The Board of Directors has overall responsibility for
the establishment and oversight of the risk management framework.
Risk management policies are established to identify and analyse the risks faced by the company and the consolidated
entity, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies
and systems are reviewed regularly to reflect changes in market conditions and the company’s and consolidated entity’s
activities. The company and consolidated entity, through their training and management standards and procedures, aim
to develop a disciplined and constructive control environment in which all employees and consultants understand their
roles and obligations.
The consolidated entity Audit, Risk and Compliance Committee oversees how management monitors compliance with the
company’s and the consolidated entity’s risk management policies and procedures and reviews the adequacy of the risk
management framework in relation to risks faced. The Committee is assisted by external professional advisers from time to time.
CREDIT RISK
Credit risk is the risk of financial loss to the consolidated entity if a customer or counterparty to a financial instrument
fails to meet its contractual obligations, and arises from the financial assets of the consolidated entity, which comprise
cash and cash equivalents and principally, trade receivables. For the company it arises from receivables due from
subsidiaries.
Exposure at reporting date is addressed at each particular note. The consolidated entity does not hold any credit
derivatives to offset its credit exposure.
It is the consolidated entity’s policy that all customers who wish to trade on credit terms are subject to credit verification
procedures including an assessment of their independent credit worthiness, financial position, past experience and
industry reputation. Risk limits are set for each individual customer in accordance with parameters set by the Board.
These risk limits are regularly monitored.
In addition, credit risk exposures and receivable balances are monitored on an ongoing basis with the intended result that
the consolidated entity’s exposure to bad debts is not significant.
The consolidated entity also has credit risk in respect of its corporate income debtors. In the case of most transactions
involving corporate income, revenue is generally earned over a period of several months due to the complexity and
size of the work involved. The consolidated entity manages this risk by entering into contractual agreements with its
counterparties, obtaining external legal advice where necessary, at the start of each transaction. The Board has direct
involvement with the counterparties during the engagement phase of each transaction in order to assess their suitability.
The consolidated entity policy is to provide financial guarantees only to wholly-owned subsidiaries.
LIQUIDITY RISK
Liquidity risk is the risk that the consolidated entity will not be able to meet its financial obligations as they fall due. The
consolidated entity’s approach to managing liquidity risk is to ensure, as far as possible, that it will always have sufficient
liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable
losses or risking damage to the consolidated entity’s reputation.
HUB24 Annual Report 2017 48
3. Financial risk management objectives and policies (continued)
The consolidated entity typically ensures that it has sufficient cash on demand to meet operational expenses for a
period of 90 days, excluding the potential impact of extreme circumstances that cannot be reasonably predicted. The
consolidated entity has no debt facilities or credit lines.
Refer to Note 27: Financial Instruments for a maturity analysis of the consolidated entity’s financial assets and liabilities maturity.
MARKET RISK
Market risk is the risk that changes in market prices will affect the consolidated entity’s income and include price risk.
The company no longer carries on principal trading activities.
CAPITAL MANAGEMENT
The Board’s policy is to maintain a sufficient capital base so as to maintain investor, creditor and market confidence
and to sustain future development of the business. It is noted that the company, through its subsidiary HUB24 Custodial
Services Limited, fully complied with the minimum capital requirements for IDPS Operators and providers of custodial
services so as to ensure ongoing capital adequacy.
There were no changes in the consolidated entity’s approach to capital management during the year.
4. Critical accounting judgements, estimates and assumptions
The preparation of the financial statements requires management to make judgements, estimates and assumptions that
affect the reported amounts in the financial statements. Management continually evaluates its judgements and estimates
in relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements,
estimates and assumptions on historical experience and on other various factors, including expectations of future events,
management believes to be reasonable under the circumstances. The resulting accounting judgements and estimates
will seldom equal the related actual results. The judgements, estimates and assumptions that have a significant risk of
causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are included
within the respective note as follows:
• deferred tax assets (Note 7)
• investment platform estimate of useful life (Note 10)
• goodwill and other indefinite life intangible assets (Note 10)
• Paragem contigent consideration (Note 11)
• business combination (Note 28).
5. Operating segments
IDENTIFICATION OF REPORTABLE SEGMENTS
The consolidated entity is organised into three operating segments: platform, licensee and IT services.
These operating segments are based on the internal reports that are reviewed and used by the Board and the executive
management team (identified as the Chief Operating Decision Makers hereafter CODM) in assessing performance and in
determining the allocation of resources.
The CODM reviews segment profits (Segment EBITDA) on a monthly basis.
KEY ACCOUNTING POLICIES
The accounting policies adopted for internal reporting to the CODM are consistent with those adopted in the financial statements.
All of the companies operations are based in Australia. The principal products and services for each of the operating
segments are as follows:
HUB24 Annual Report 2017 49
5. Operating segments (continued)
Platform
Development and provision of investment and superannuation platform services to financial advisers, stockbrokers,
accountants and their clients.
Licensee
Provision of financial advice to clients through financial advisers authorised by Paragem. The Licensee provides
compliance, software, education and business support to adviser practices enabling advisers to provide clients with
financial advice over a range of products.
IT services
Provision of application and technology products for the financial services sector. Fees are generated from license and
consulting services relating to data management, software and infrastructure.
Corporate
The provision of corporate services supports these three operating segments and includes an allocation of overhead
headcount costs.
Revenue
Sales to external customers
26,348,718
30,810,493
4,701,436
-
61,860,647
Platform
$
Licensee
$
IT Services
$
Corporate
$
Total
$
CONSOLIDATED – 2017
Total revenue
Segment result
Other non-operating items
Interest revenue
Non-recurring revenue
Fair value gain – contingent consideration
Share based payments – employees
Share based payments –
Paragem option holders
Other interest expense
Depreciation and amortisation
Payroll tax – employee options
Transaction costs
Profit before income tax
Income tax benefit
Profit after income tax
Reconciliation to revenue from ordinary activities
Sales to external customers
Non-recurring revenue
Fair value gain on contingent consideration
Interest revenue
Revenue from ordinary activities
26,348,718
30,810,493
4,701,436
-
61,860,647
5,068,476
315,093
243,687
(507,626)
5,119,629
451,796
107,917
-
-
-
-
-
-
-
-
4,757
418,737
-
925,407
-
-
-
875,289
107,917
925,407
(800,435)
(800,435)
221,027
221,027
(2,112)
(385,774)
(387,886)
(1,229,982)
(2,131)
(191,416)
-
(1,423,529)
-
-
-
-
-
-
(337,018)
(549,066)
(337,018)
(549,066)
4,398,207
312,962
54,915
(1,014,746)
3,751,338
-
-
-
15,122,793
15,122,793
4,398,207
312,962
54,915
14,108,047
18,874,131
61,860,647
107,917
925,407
875,289
63,769,260
HUB24 Annual Report 2017 50
5. Operating segments (continued)
Platform
$
Licensee
$
IT Services
$
Corporate
$
Total
$
CONSOLIDATED – 2016
Revenue
Sales to external customers
15,410,448
27,254,746
-
Total sales revenue
Total revenue
Segment result
Other non-operating items
Interest revenue
Non-recurring revenue
Share based payments – employees
Share based payments – Paragem option holders
Non-recurring corporate costs
Other interest expense
Depreciation and amortisation
Profit before income tax
Income tax benefit
Profit after income tax
Reconciliation to revenue from ordinary activities
Sales to external customers
Non-recurring revenue
Interest revenue
Revenue from ordinary activities
MAJOR CLIENTS
15,410,448
27,254,746
-
15,410,448 27,254,746
-
-
-
-
42,665,194
42,665,194
42,665,194
(576,927)
202,171
-
(465,475)
(840,231)
170,484
607,350
-
-
-
-
-
-
-
-
-
-
(781,047)
(580,140)
-
(3,277)
198,894
-
(580,140)
198,894
-
-
-
-
-
-
-
-
-
-
213,478
-
(754,760)
(557,667)
(220,902)
(145,705)
-
383,962
607,350
(754,760)
(557,667)
(220,902)
(145,705)
(784,324)
(1,931,031)
(2,312,277)
1,125,149
1,125,149
(805,882)
(1,187,128)
42,665,194
607,350
383,962
43,656,506
During the year ended 30 June 2017, HUB24’s largest client accounted for approximately 16% or $9.9 million in revenue to
the consolidated group. The client is a financial advice business and is serviced by the Licensee segment.
Platform segment: no client contributed 10% in external revenue to the segment.
Licensee segment: one client contributed more than 10% to the segment, with a contribution of 32% or $9.9 million in
external revenue.
IT Services: two clients each contributed more than 10% to the segment, with a 65% or $3.1 million and 10.3% or
$0.5 million external revenue contribution.
6. Revenue and expenses from continuing operations
KEY ACCOUNTING POLICIES
Revenue is measured at the fair value of the consideration received or receivable. The consolidated entity recognises
revenue when the amount can be reliably measured, it is probable that future economic benefits will flow to the
consolidated entity and specific criteria have been met for each of the activities.
Revenue is recognised for the major business activities as follows:
HUB24 Annual Report 2017 51
6. Revenue and expenses from continuing operations (continued)
Platform fees
• FUA fee revenue is recognised and measured at the fair value of the consideration received or receivable on the value
of client account balances.
• Transaction fee revenue is recognised and measured at the fair value of the consideration received or receivable on the
date of execution of the transaction.
Licensee fees
• Licensee fee revenue is measured at the fair value of the consideration received or receivable on advice provided to
clients and payments from product providers.
IT service fees
• Licence fee revenue is measured at the fair value of the contracted consideration received or receivable on licensed
software services provided to clients.
• Consulting IT Services fee revenue is measured at the fair value of the consideration received or receivable on advice
provided to clients on a time and materials basis.
Finance income
Finance income comprises interest income on funds invested. Interest income is recognised as it accrues in profit using
the effective interest method.
(a) Revenue
Platform fees
Licensee fees
IT services fees
Expenses
(b) Employee benefits expenses
Wages and salaries (including super and payroll tax)
Share based payments expense – employees
Other employee benefits expenses
(c) Depreciation and amortisation
Depreciation of office equipment
Amortisation of intangible assets
CONSOLIDATED
2017
$
2016
$
26,456,635
30,810,493
16,017,798
27,254,746
4,701,436
-
61,968,564
43,272,544
10,465,966
800,435
3,436,783
8,198,987
754,760
2,311,294
14,703,184
11,265,041
325,683
1,097,846
1,423,529
78,982
705,342
784,324
HUB24 Annual Report 2017
52
6. Revenue and expenses from continuing operations (continued)
(d) Administrative expenses
Corporate fees
Professional and consultancy fees
Information services and communication
Travel and entertainment
Share based payments – Paragem option holders
Transaction costs
Other interest expense
Superfund administrative fees
Other administrative expenses*
CONSOLIDATED
2017
$
2016
$
354,144
1,187,445
1,016,290
716,923
(221,027)
549,066
387,886
1,340,434
792,353
6,123,514
270,953
709,560
659,381
327,557
557,667
220,902
145,706
613,033
580,922
4,085,681
* Prior comparatives have been reclassified for presentation purposes and consistency with the current year disclosure.
7. Income tax
KEY ACCOUNTING POLICIES
Current tax assets and liabilities for the current and prior years are measured at the amount expected to be recovered
from or paid to the taxation authorities based on the current year’s taxable income. The tax rates and tax laws used to
compute the amount are those that are enacted or substantively enacted by the reporting date.
Deferred income tax is provided on all temporary differences at the reporting date between the tax bases of assets and
liabilities and their carrying amounts for financial reporting purposes. Deferred income tax liabilities are recognised for
all taxable temporary differences except:
• when the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability in a
transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting
profit nor taxable profit or loss
• when the taxable temporary difference is associated with investments in subsidiaries, associates or interests in joint
ventures, and the timing of the reversal of the temporary difference can be controlled and it is probable that the
temporary difference will not reverse in the foreseeable future.
Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax credits
and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible
temporary differences and the carry-forward of unused tax credits and unused tax losses can be utilised, except:
• when the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition
of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects
neither the accounting profit nor taxable profit or loss
• when the deductible temporary difference is associated with investments in subsidiaries, associates or interests in
joint ventures, in which case a deferred tax asset is only recognised to the extent that it is probable that the temporary
difference will reverse in the foreseeable future and taxable profit will be available against which the temporary
difference can be utilised.
The carrying amount of deferred income 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 income tax asset to be utilised.
HUB24 Annual Report 2017
53
7. Income tax (continued)
Unrecognised deferred income tax assets are reassessed at each reporting date and are recognised to the extent that it
has become probable that future taxable profit will allow the deferred tax asset to be recovered.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when
the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively
enacted at the reporting date.
Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current tax assets against
current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity and the same taxation authority.
Other taxes
Revenues, expenses and assets are recognised net of the amount of GST except:
• when the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which
case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable
• receivables and payables, which are stated with the amount of GST included (UIG 1031.8). The net amount of GST recoverable
from, or payable to, the taxation authority is included as part of receivables or payables in the statement of financial position
• cash flows are included in the statement of cash flow on a gross basis and the GST component of cash flows arising
from investing and financing activities, which is recoverable from, or payable to, the taxation authority is classified as
part of operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority.
KEY ESTIMATES AND JUDGEMENTS
Recovery of deferred tax assets
Deferred tax assets are recognised for prior period income tax losses, research and development tax offsets and
deductible temporary differences to the extent that Directors consider that it is probable that future taxable profits will be
available to offset these amounts.
The deferred tax asset has been recognised as at 30 June 2017 based on the following management judgements:
• the company has experienced its first full year of profitability with consistent growth, margins and profit line trends
over the last 4 years;
• acquisition of Agility and increased profitability potential and access to broader markets;
• for the year ended 30 June 17 the company has met its internal targets and with increasing exposure and industry
recognition it expects its growth trajectory to continue.
The company assumes there will be ongoing compliance with relevant tax legislation.
(a) Income tax expense/(benefit)
Recognition of opening DTA
Recognition of opening DTL
Deferred tax expense/(benefit)
Other adjustments
Income tax expense/(benefit)
CONSOLIDATED
2017
$
2016
$
-
-
(15,122,793)
-
(836,037)
226,240
(186,039)
(329,313)
(15,122,793)
(1,125,149)
HUB24 Annual Report 2017 54
7. Income tax (continued)
Deferred tax included in income tax expense/(benefit) comprises:
Decrease/(increase) in deferred tax assets
(Decrease)/increase in deferred tax liabilities
Deferred tax – debited/(credited) directly to goodwill on acquisition
Deferred tax – debited/(credited) directly to equity
(b) Reconciliation of income tax expense/(benefit) to pre tax accounting profit/(loss)
Profit/(loss) from continuing operations before income tax
Prima facie income tax at 30%
Tax effect of amounts which are not deductible (taxable) in calculating taxable income
Research and development government grant
Entertainment – non-deductible
Fines and penalties – non-deductible
Other expenses – non-deductible
Employee share plan costs – non-deductible
Other income – non-assessable
Research and development rebate benefit
Recognition of opening DTA
Recognition of opening DTL
Temporary differences brought to account
Temporary difference movement variance
Movement in balance of non-refundable carry forward tax offsets
Non-recognition of deferred tax asset
Other adjustments
Income tax expense/(benefit)
Other disclosure items
CONSOLIDATED
2017
$
2016
$
(15,005,666)
172,722
(293,374)
3,525
(189,531)
3,492
-
-
(15,122,793)
(186,039)
3,751,338
3,751,338
1,125,401
-
34,009
781
98,412
240,131
(304,291)
-
1,194,443
-
-
(16,031,954)
505,375
(790,657)
-
-
(16,317,236)
(2,312,277)
(2,312,277)
(693,684)
(28,271)
19,690
1,860
-
393,728
-
(133,987)
253,020
(836,037)
226,240
-
-
-
254,625
(329,313)
(684,485)
(15,122,793)
(1,125,149)
Deferred tax – debited/(credited) directly to equity
(3,525)
-
HUB24 Annual Report 2017
7. Income tax (continued)
(c) Deferred tax asset
Deferred tax asset comprises temporary differences attributable to:
Intangibles – other
Accrued expenses
Provisions
Carry forward tax losses
Non-refundable carry forward tax offsets
Capital raising costs (S40-8880)
Non-recognition of deferred tax asset
Other adjustments
Movements
Opening balance
Other adjustments Dealer Network
Recognition of opening deferred tax asset
Recognition of opening deferred tax asset in equity
Intangibles – other
Accrued expenses
Provisions
Carry forward tax losses
Non-refundable carry forward tax offsets
Capital raising costs
Acquired DTA on current year acquisition
Closing balance
55
CONSOLIDATED
2017
$
2016
$
1,660,201
139,589
1,300,275
9,927,855
3,174,370
89,883
-
-
16,292,173
1,286,506
-
-
-
1,512,161
8,141
363,586
9,927,855
3,174,370
(72,272)
91,826
2,296,636
131,448
844,863
13,836,991
-
162,155
(16,133,626)
148,040
1,286,506
-
148,040
836,037
174,326
-
-
-
-
-
128,103
-
16,292,173
1,286,506
HUB24 Annual Report 2017 56
7. Income tax (continued)
(d) Deferred tax liability
Deferred tax liability comprises temporary differences attributable to:
Accounts receivable – other
DTL on intangibles
Non-recognition of deferred tax liability (Section 40-880)
Movements
Opening balance
Recognition of other deferred tax liability
Accounts receivable – other
DTL on acquired Customer Relationships
Other intangibles
Credited/(charged) to profit or loss
Non-recognition of deferred tax liability
Closing balance
(e) Other disclosure items
Capital raising costs in equity (S40-8880)
Closing balance
TAX CONSOLIDATION
CONSOLIDATED
2017
$
2016
$
-
515,351
-
515,351
81,692
148,040
112,898
342,630
342,630
-
-
226,240
(81,691)
372,328
(5,017)
(112,899)
-
515,351
(3,525)
(3,525)
-
-
3,492
112,898
342,630
-
-
Members of the tax consolidated entity and the tax sharing arrangement
The company and its 100% owned Australian resident subsidiaries have formed a tax consolidated entity. HUB24 Limited
is the head entity of the tax consolidated entity. Members of the consolidated entity have entered into a tax sharing
agreement.
Tax effect accounting by members of the tax consolidated entity
The head entity and the controlled entities in the tax consolidated entity continue to account for their own current and
deferred tax amounts as per UIG 1052 Tax Consolidation Accounting. The consolidated entity has applied the consolidated
entity allocation approach in determining the appropriate amount of current taxes and deferred taxes to allocate to
members of the tax consolidated entity. The current and deferred tax amounts are measured in a systematic manner that
is consistent with the broad principles in AASB 112 Income Taxes.
In addition to its own current and deferred tax amounts, the head entity also recognises current tax liabilities (or assets)
and the deferred tax assets arising from unused tax losses and unused tax credits (if any) assumed from controlled
entities in the tax consolidated entity.
HUB24 Annual Report 2017
57
8. Current assets – trade and other receivables
KEY ACCOUNTING POLICIES
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective
interest method, less an allowance for impairment.
Collectability of trade receivables is reviewed on an ongoing basis at an operating unit level. Individual debts that are
known to be uncollectible are written off when identified. An impairment provision is recognised when there is objective
evidence that the consolidated entity will not be able to collect the receivable. Financial difficulties of the debtor,
default payments or debts more than 60 days overdue are considered objective evidence of impairment. The amount of
the impairment loss is the receivable carrying amount compared to the present value of estimated future cash flows,
discounted at the original effective interest rate.
KEY ESTIMATES AND JUDGEMENTS
Estimation of bad debts and provisioning
Receivables are assessed by management for recoverability based on days past due or pending legal actions and other
counter party information.
Trade receivables
ORFR loan facility
Other receivables
ORFR loan facility
CONSOLIDATED
2017
$
4,859,911
2,000,000
14,715
2016
$
1,585,579
2,000,000
432,683
6,874,626
4,018,262
HUB24 has advanced a loan of $2 million to Diversa Ltd, the parent entity of The Trust Company (Superannuation) Limited
as Trustee for the HUB24 Super Fund (“The Fund”), under a $5 million Loan Agreement entered into on 10 June 2016 on
an arms length basis and on commercial terms at an interest rate of 17% pa.
Diversa Ltd has applied the advance for the purpose of subscribing for capital in The Trust Company (Superannuation)
Limited (“The Trustee”) whereby the capital received by the Trustee will be reserved for the purpose of meeting the
Operational Risk Financial Requirement (ORFR) for the Fund in accordance with APRA Prudential Standard SPS114.
The facility expires on 31 December 2017.
IMPAIRMENT AND RECOVERABILITY
Balances within trade and other receivables do not contain impaired assets and are not past due. It is expected that these
balances will be received when due.
FAIR VALUE
Due to the short term nature of these receivables, their carrying value is assumed to approximate their fair value.
HUB24 Annual Report 2017 58
9. Non-current assets – office equipment
KEY ACCOUNTING POLICIES
Office equipment is stated at historical cost less accumulated depreciation and any accumulated impairment losses.
Such cost includes the cost of replacing parts that are eligible for capitalisation when the cost of replacing the parts is
incurred. Similarly, when each major inspection is performed, its cost is recognised in the carrying amount of the office
equipment as a replacement only if it is eligible for capitalisation. All other repairs and maintenance are recognised in
profit or loss as incurred.
The assets’ residual values, useful lives and amortisation methods are reviewed, and adjusted if appropriate, at each
reporting date.
Depreciation is calculated on a straight-line basis over the estimated useful life of the specific assets as follows:
• office furniture and fittings – over 2.5 to 5 years
• computer equipment – 3 years
• leased assets – over the term of the lease.
Impairment
The carrying values of office equipment are reviewed for impairment when events or changes in circumstances indicate
the carrying value may not be recoverable. For an asset that does not generate largely independent cash inflows, the
recoverable amount is determined for the cash generating unit to which the asset belongs. If any such indication exists
and where the carrying values exceed the estimated recoverable amount, the assets or cash generating units are written
down to their recoverable amount.
The recoverable amount of office equipment is the greater of fair value less costs to sell and value in use. In assessing
value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of money and risks specific to the asset.
De-recognition and disposal
An item of office equipment is derecognised upon disposal or when no further future economic benefits are expected
from its use.
(a) Impairment tests for intangible assets
Investment platform
Goodwill
Dealer network
Managed fund client list
Software
Agility client book
Agility Connect software
CONSOLIDATED
2017
$
2016
$
8,540,719
15,336,909
433,041
43,703
124,744
1,241,094
2,365,220
7,261,779
5,852,019
493,466
58,271
50,987
-
-
28,085,430
13,716,522
HUB24 Annual Report 2017
9. Non-current assets – office equipment (continued)
59
CONSOLIDATED
2017
$
2016
$
Computer equipment
At cost
Accumulated depreciation
Office furniture and fittings
At cost
Accumulated depreciation
Total office equipment
Cost
Accumulated depreciation
Total net carrying amount
1,326,401
(754,189)
572,212
371,703
(165,647)
206,056
1,698,104
(919,836)
778,268
RECONCILIATIONS OF THE CARRYING AMOUNTS AT THE BEGINNING AND END OF THE FINANCIAL YEAR:
Computer equipment
Carrying amount at beginning
Acquisitions through business combinations
Other additions
Disposals
Depreciation expense
Net carrying amount
Office furniture and fittings
Carrying amount at beginning
Acquisitions through business combinations
Other additions
Depreciation expense
Net carrying mount
Leased assets
Carrying amount at beginning
Acquisitions through business combinations
Other additions
Disposals
Depreciation
Net carrying amount
77,935
493,561
239,057
(73)
(238,269)
572,211
74,479
118,654
100,337
(87,414)
206,056
152,414
612,215
339,394
(73)
(325,683)
778,267
246,262
(168,327)
77,935
146,466
(71,987)
74,479
392,728
(240,314)
152,414
49,893
-
67,819
-
(39,777)
77,935
78,709
-
34,975
(39,205)
74,479
128,602
-
102,794
-
(78,982)
152,414
HUB24 Annual Report 2017
60
10. Non-current assets – intangible assets
KEY ACCOUNTING POLICIES
Goodwill
Goodwill acquired in a business combination is initially measured at cost being the excess of the cost of the business combination
over the consolidated entity’s interest in the net fair value of the acquirer’s identifiable assets, liabilities and contingent liabilities.
Following initial recognition, goodwill is measured at cost less any accumulated impairment losses.
For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date,
allocated to each of the consolidated entity’s cash-generating units that are expected to benefit from the synergies of the
combination, irrespective of whether other assets or liabilities of the consolidated entity are assigned to those units.
When the recoverable amount of the cash-generating unit is less than the carrying amount, an impairment loss is
recognised. When goodwill forms part of a cash-generating unit and an operation within that unit is disposed of, the
goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining
the gain or loss on disposal of the operation. Goodwill disposed of in this manner is measured based on the relative
values of the operation disposed of and the portion of the cash-generating unit retained. Impairment losses recognised
for goodwill are not subsequently reversed.
Intangibles
Intangible assets acquired separately or in a business combination are initially measured at cost. The cost of an intangible
asset acquired in a business combination is its fair value as at the date of acquisition. Following initial recognition,
intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses.
Internally generated intangible assets, excluding capitalised development costs, are not capitalised and expenditure is
recognised in profit or loss in the year in which the expenditure is incurred.
The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets with finite lives are
amortised over the useful life and tested for impairment whenever there is an indication that the intangible asset may be
impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life is reviewed
at least at each reporting date. Changes in the expected useful life or the expected pattern of consumption of future
economic benefits embodied in the asset are accounted for prospectively by changing the amortisation period or method,
as appropriate, which is a change in accounting estimate. The amortisation expense on intangible assets with finite lives
is recognised in profit or loss in the expense category consistent with the function of the intangible asset. Refer to note
below, Investment Platform estimate of useful life.
Intangible assets with indefinite useful lives are tested for impairment annually either individually or at the cash-
generating unit level consistent with the methodology outlined for goodwill above. Such intangibles are not amortised.
The useful life of an intangible asset with an indefinite life is reviewed each reporting period to determine whether
indefinite life assessment continues to be supportable. If not, the change in the useful life assessment from indefinite to
finite is accounted for as a change in an accounting estimate and is thus accounted for on a prospective basis.
KEY ESTIMATES AND JUDGEMENTS
Investment Platform estimate of useful life
Management have assessed the remaining useful life of the investment platform based upon the useful life of its separate
platform components.
The three components with different useful lives are:
• core database with a useful life of 20 years
• applications with a useful life of 10 years
• user interface with a useful life of 5 years.
The assessment of useful life is a key management judgement and the useful lives adopted could change significantly as
a result of technical innovations or some other event. The amortisation charge will increase where the useful lives are
less than previously estimated lives, or technically obsolete or non-strategic assets that have been abandoned or sold will
be written off or written down.
HUB24 Annual Report 2017 61
10. Non-current assets – intangible assets (continued)
Goodwill and other indefinite life intangible assets
The carrying value of intangible assets (including goodwill) is assessed annually for indications that the asset has been impaired in
accordance with the accounting policy under the heading Goodwill and Intangibles. The recoverable amounts of cash generating
units have been determined based on value-in-use calculations. These calculations require the use of assumptions including
estimated discount rates based on the current cost of capital and growth rates of the estimated future cash flows. Details of these
assumptions and the potential impact of changes to these assumptions can be found later in this note.
Impairment of non-financial assets other than goodwill and other indefinite life intangible assets
The consolidated entity assesses impairment of non-financial assets other than goodwill and other indefinite life intangible
assets at each reporting date by evaluating conditions specific to the consolidated entity and to the particular asset that may
lead to impairment. If an impairment trigger exists, the recoverable amount of the asset is determined. This involves fair
value less costs of disposal or value-in-use calculations, which incorporate a number of key estimates and assumptions.
Capitalisation of development costs
The consolidated entity capitalises project development costs eligible for capitalisation in relation to the investment
platform. The capitalised costs are all directly attributable costs necessary to create, produce, and prepare the asset to be
capable of operating in the manner intended. Capitalised project costs are amortised over the project’s useful life.
Investment platform
At cost
Accumulated amortisation and impairment
Net carrying amount
Goodwill
At cost
Net carrying amount
Dealer network
At cost
Accumulated amortisation and impairment
Net carrying amount
Managed fund client list
At cost
Accumulated amortisation and impairment
Net carrying amount
Software
At cost
Accumulated amortisation
Net carrying amount
Agility client book
At cost
Accumulated amortisation and impairment
Net carrying amount
Agility Connect software
At cost
Accumulated amortisation and impairment
Net carrying amount
Total net carrying amount
CONSOLIDATED
2017
$
2016
$
28,868,467
(20,327,748)
8,540,719
26,814,812
(19,553,033)
7,261,779
15,336,909
15,336,909
5,852,019
5,852,019
604,244
(171,203)
433,041
72,839
(29,136)
43,703
191,629
(66,885)
124,744
1,284,000
(42,906)
1,241,094
2,540,970
(175,750)
2,365,220
604,244
(110,778)
493,466
72,839
(14,568)
58,271
80,693
(29,706)
50,987
-
-
-
-
-
-
28,085,430
13,716,522
HUB24 Annual Report 2017 62
10. Non-current assets – intangible assets (continued)
RECONCILIATIONS OF THE CARRYING AMOUNT AT THE BEGINNING AND END OF THE FINANCIAL YEAR:
CONSOLIDATED
2017
$
2016
$
Investment platform
Opening carrying amount
Other additions
Amortisation charge
Closing carrying amount
Goodwill
Opening carrying amount
Acquisitions through business combinations
Closing carrying amount
Dealer network
Opening carrying amount
Amortisation charge
Closing carrying amount
Managed fund client list
Opening carrying amount
Other additions
Amortisation charge
Closing carrying amount
Software
Opening carrying amount
Acquisitions through business combinations
Other additions
Amortisation charge
Closing carrying amount
Customer relationships
Opening carrying amount
Acquisitions through business combinations
Amortisation charge
Closing carrying amount
Connect software
Opening carrying amount
Acquisitions through business combinations
Amortisation charge
Closing carrying amount
7,261,779
2,053,655
(774,715)
6,538,107
1,339,661
(615,989)
8,540,719
7,261,779
5,852,019
9,484,890
5,846,822
5,197
15,336,909
5,852,019
493,466
(60,425)
433,041
58,271
-
(14,568)
43,703
50,987
23,030
80,211
(29,484)
124,744
-
1,284,000
(42,906)
1,241,094
-
2,540,970
(175,750)
2,365,220
553,890
(60,424)
493,466
-
72,839
(14,568)
58,271
33,362
-
31,986
(14,361)
50,987
-
-
-
-
-
-
-
-
HUB24 Annual Report 2017 63
10. Non-current assets – intangible assets (continued)
Intangible assets are allocated to the consolidated entity’s cash-generating units (CGUs) as required by AASB136.
INVESTMENT PLATFORM (INCLUDED WITHIN INVESTMENT PLATFORM CGU)
The recoverable amount of the Investment Platform is determined based on a value-in-use calculation. This calculation
uses cash flow projections based on financial budgets approved by directors covering a seven year period. Cash flows
beyond the seven year period are extrapolated using a terminal value.
DEALER NETWORK (INCLUDED WITHIN LICENSEE CGU)
The recoverable amount of the Dealer Network intangible is determined based on a value-in-use calculation using a discounted
cash flow over a five year projection period. Cash flows beyond the five year period are extrapolated using a terminal value.
CUSTOMER RELATIONSHIPS (INCLUDED WITHIN IT SERVICES CGU)S
The fair market value of the Customer Relationships intangible has been determined based on a multi-period excess
earnings methodology using a discounted cash flow. Customer relationships has been allocated to the IT Services CGU
with an implied useful life of 16 years.
The recoverable amount of the Customer Relationships intangible has been assessed for indicators of impairment as at
30 June 2017. Based upon this assessment the carrying value of the intangible is not considered to be impaired.
CONNECT SOFTWARE (INCLUDED WITHIN IT SERVICES CGU)
The fair market value of the Connect Software intangible has been determined based on a multi-period excess earnings
methodology using a discounted cash flow. Connect Software has been allocated to the IT Services CGU with an implied
useful life of 8 years.
The recoverable amount of the Connect Software intangible has been assessed for indicators of impairment as at 30 June
2017. Based upon this assessment the carrying value of the intangible is not considered to be impaired.
GOODWILL – LICENSEE (INCLUDED WITHIN INVESTMENT PLATFORM CGU)
Goodwill recognised as part of the Paragem acquisition was allocated to the Investment Platform CGU, while the Dealer
Network intangible was identified as part of the Licensee CGU with a finite life.
The recoverable amount of the goodwill generated has been determined based on a value-in-use calculation using a discounted
cash flow over a five year projection period. Cash flows beyond the five year period are extrapolated using a terminal value.
GOODWILL – IT SERVICES (INCLUDED WITHIN INVESTMENT PLATFORM CGU)
Goodwill recognised as part of the Agility acquisition has been allocated to the Investment Platform CGU, while the
Customer Relationships and Connect Software intangible has been identified as part of the IT Services CGU with a
finite life.
KEY ASSUMPTIONS USED FOR VALUE-IN-USE CALCULATIONS – INVESTMENT PLATFORM CGU
The cash generated by the Investment Platform CGU has been segregated between the cash generated by the Paragem
dealer group, the cash expected to be generated by the acquisition of Agility and the cash generated by all other dealer
groups on the platform, in order to assess the recoverable amount associated with each intangible.
The Investment Platform has been assessed based on the cash generated by all dealer groups excluding the Paragem
dealer group.
The goodwill recognised as a result of the Paragem acquisition, has been assessed based on the cash generated by the
Paragem dealer group on the platform.
HUB24 Annual Report 2017 64
10. Non-current assets – intangible assets (continued)
The goodwill recognised as a result of the Agility acquisition has been assessed for indicators of impairment as at
30 June 2017. Based upon this assessment the carrying value of goodwill associated with the acquisition of Agility is
not considered to be impaired.
KEY ASSUMPTIONS USED FOR VALUE-IN-USE CALCULATIONS – INVESTMENT PLATFORM INTANGIBLE
1. Growth in funds under administration on the platform – Growth in the number of client accounts and hence funds
under administration on the platform are a key assumption used in calculating future cashflows. Management have
estimated future funds under administration on the platform at a 7 year compound annual growth rate of 22% with
reference to current client transition rates, industry data and pipeline monitoring.
2. Pre-tax discount rate – The pre-tax discount rate used for the company’s value-in-use calculations is 15.5%.
(2016:16.5%) which equates to the weighted average cost of capital over the reporting period.
3. Terminal growth rate – The terminal growth rate used for the company’s value-in-use calculations is 2.5%. (2016:2.5%).
4. Period over which cashflows have been discounted – Management have used a period of seven years to discount
projected cashflows for its value-in-use calculations. This period is considered reasonable given the stage of platform
development and the remaining useful life of the core database. (13 years and 5 months from 30 June 2017.)
There were no other key assumptions used for the investment platform intangible value in use calculation.
Based on the above assessment there was no impairment of the investment platform intangible.
IMPACT OF POSSIBLE CHANGES IN KEY ASSUMPTIONS – INVESTMENT PLATFORM INTANGIBLE
If the projected earnings on client account balances used in the value-in-use calculation for the investment platform
CGU are 2% lower than management estimates over the period of the value-in-use calculation, there would be no
impairment of the intangible asset.
If the pre-tax discount rate for this intangible had been 2% higher than management estimates (17.5% instead of
15.5%), there would be no impairment of the intangible asset.
KEY ASSUMPTIONS USED FOR VALUE-IN-USE CALCULATIONS - GOODWILL INTANGIBLE LICENSEE
1. Growth in funds under administration on the platform - Growth in the number of client accounts and hence funds
under administration on the platform are a key assumption used in calculating future cashflows. The transition of
funds under administration is currently estimated at 85% of performance targets (refer Note 11). Management have
estimated the future transfer of funds to the platform with reference to current client transition rates and pipeline
monitoring.
2. Net Incremental cashflow – The incremental cash flow is an estimate of the fee derived from the funds under
administration of the Paragem dealer group on the HUB24 platform. Management have estimated the incremental
cashflow based on historical and forecast platform margins.
3. Pre-tax discount rate – The pre-tax discount rate used for the company’s value-in-use calculations is 15.5%.
(2016:16.5%) which equates to the weighted average cost of capital over the reporting period.
4. Terminal growth rate - The terminal growth rate used for the company’s value-in-use calculations is 2.5%. (2016:2.0%).
5. Period over which cashflows have been discounted – Management have used a period of five years to discount
projected cashflows for its value-in-use calculations.
There were no other key assumptions used for the Paragem goodwill intangible value in use calculation.
Based on the above, there was no impairment applied to the goodwill arising from the Paragem acquisition.
HUB24 Annual Report 2017 65
10. Non-current assets – intangible assets (continued)
IMPACT OF POSSIBLE CHANGES IN KEY ASSUMPTIONS – GOODWILL INTANGIBLE LICENSEE
If the projected earnings on client account balances used in the value-in-use calculation for the goodwill intangible are
2% lower than management estimates over the period of the value-in-use calculation, there would be no impairment
of intangible assets.
If the pre-tax discount rate for this CGU had been 2% higher than management estimates (17.5% instead of 15.5%)
there would be no impairment of intangible assets.
KEY ASSUMPTIONS USED FOR VALUE-IN-USE CALCULATIONS – DEALER NETWORK
1. Growth in revenue is estimated at 3% for the licensee CGU and a key assumption used in calculating future cashflows.
Management have estimated a 5% attrition factor for departing practices and/or advisers, applied against the growth
rate of 3%, which is believed to be conservative and appropriate. Ongoing monitoring of actual revenue growth since
acquisition (3 September 2014), has indicated growth in excess of the projection and no practice attrition has taken
place since acquisition.
2. An EBIT margin of 1.0% is estimated for the licensee CGU and is also considered a key assumption used in calculating
future cashflows. The rate has been determined based upon the average EBIT margin on a five year projection of revenue
and expenses and is considered by management to be reasonable based upon the actual performance since acquisition.
3. Pre-tax discount rate – The pre-tax discount rate used for the company’s value-in-use calculations is 16.6%. This has
been determined based on the weighted average cost of capital for the licensee.
4. Terminal growth rate – The terminal growth rate used for the company’s value-in-use calculations is 3.0%.
Management believes the 3.0% growth rate to be prudent and is consistent with the general market.
5. Period over which cashflows have been discounted – Management have used a period of seven years to discount
projected cashflows for its value-in-use calculations. This period is considered reasonable given the early stage of the
licensee CGU.
There were no other key assumptions used in the Dealer Network Intangible value-in-use calculation.
Based on the above, the value-in-use of the Dealer Network exceeds the carrying value and is not considered impaired.
IMPACT OF POSSIBLE CHANGES IN KEY ASSUMPTIONS - DEALER NETWORK
If the projected revenue used in the value-in-use calculation for the licensee CGU were 2% lower than management
estimates over the period of the value-in-use calculation, there would be no impairment of the intangible asset.
If the pre-tax discount rate for this CGU had been 2% higher than management estimates (18.6% instead of 16.6%)
there would be no impairment of the intangible asset.
KEY ASSUMPTIONS USED FOR VALUE-IN-USE CALCULATIONS – CUSTOMER RELATIONSHIP
1. The long term growth in revenue is estimated at 3% reflecting that the contractual element of this revenue is in line with CPI.
2. An EBITA margin of 10.0% is estimated and is also considered a key assumption used in calculating future cashflows. The
rate is considered by management to be reasonable based upon the actual and anticipated performance of the asset.
3. Pre-tax discount rate – The pre-tax discount rate used for the company’s value-in-use calculations is 16%. This has
been determined based on the weighted average cost of capital for the IT Services CGU.
4. Period over which cashflows have been discounted – Management have used a period of 16 years to discount projected
cashflows for its value-in-use calculations.
There were no other key assumptions used in the Customer Relationship value-in-use calculation prepared at the date
of acquisition. Indicators of impairment have been reviewed as part of the financial year end with no issues noted.
Based on the above the value-in-use of the Customer Relationship Intangible exceeds the carrying value and is not
considered impaired.
HUB24 Annual Report 2017 66
10. Non-current assets – intangible assets (continued)
KEY ASSUMPTIONS USED FOR VALUE-IN-USE CALCULATIONS – CONNECT SOFTWARE
1. Growth in revenue is estimated at 5% based on license fees and a key assumption used in calculating future cashflows.
2. An EBITA margin of 15.0% is estimated for the Connect Software Intangible and is also considered a key assumption
used in calculating future cashflows. The rate is considered by management to be reasonable based upon the actual
and anticipated performance of the asset.
3. Pre-tax discount rate – The pre-tax discount rate used for the company’s value-in-use calculations is 16.0%. This has
been determined based on the weighted average cost of capital for IT Services CGU.
4. Period over which cashflows have been discounted – Management have used a period of 8 years to discount projected
cashflows for its value-in-use calculations. This period is considered reasonable given industry practice.
There were no other key assumptions used in the Connect Software Intangible value-in-use calculation. Indicators of
impairment have been reviewed as part of the financial year end with no issues noted.
Based on the above the value-in-use of the Connect Software Intangible exceeds the carrying value and is not considered
impaired.
11. Current liabilities – trade and other payables
KEY ACCOUNTING POLICIES
Trade, Deferred Consideration and other payables are carried at amortised cost and represent liabilities for goods and
services provided to the consolidated entity prior to the end of the financial year that are unpaid and arise when the
consolidated entity becomes obliged to make future payments in respect of the purchase of these goods and services.
Trade creditors
Deferred contingent consideration – Paragem
Deferred contingent consideration – Agility
Unwind of discount on deferred consideration – Agility
Sundry creditors
2017
$
592,441
3,383,099
1,876,113
61,944
2,190,559
8,104,155
CONSOLIDATED
2016
$
858,174
-
-
-
933,902
1,792,076
The reduction in the Paragem deferred contingent consideration has resulted in a fair value gain of $925,407 for the year
ended 30 June 2017.
CONTINGENT CONSIDERATION – PARAGEM
Contingent consideration – Paragem has been reclassified from a non-current liability at 30 June 2016 to a current
liability as at 30 June 2017 as the consideration is due on 30 September 2017.
On 3 September 2014 HUB24 Limited acquired 100% of the issued shares in Paragem, an Australian Financial Services
licensee, for consideration of up to $8 million in cash and shares, comprising $2 million in upfront consideration and up
to $6 million in contingent consideration.
The contingent consideration arrangement relating to the Vendor and Option holders requires the company to issue the
former equity owners of Paragem up to 6,488,591 HUB24 ordinary shares subject to performance criteria being met
over the three years to 30 September 2017. The fair value of the contingent consideration arrangement has been, until
30 June 2016, estimated to be $4.3 million in purchase consideration and $1.7 million remuneration for post transaction
services based on management’s judgement that 100% of the performance criteria will be met.
HUB24 Annual Report 2017 67
11. Current liabilities – trade and other payables (continued)
Management’s estimate of the performance over the earnout period until 30 September 2017 against set criteria requires
significant judgement. As at 30 June 2017 management estimate that 85% of the performance criteria will be met over
the three years to 30 September 2017 resulting in deferred contingent consideration of $4.7 million ($3.9 million in
purchase consideration and $0.9 million remuneration for post transaction services).
The impact upon the financial statements for the year ended 30 June 2017 of the change to management’s estimate are as follows:
Contingent consideration – Paragem
Fair value gain on contingent consideration (profit and loss)
Share based payments reserve
Share based payment expense - Option Holders (profit and loss)
Decrease by $925,407
Increase by $925,407
Decrease by $221,027
Decrease by $221,027
CONTINGENT CONSIDERATION – AGILITY
Refer to Note 28 for further details on the Agility contingent consideration.
12. Current liabilities – provisions
KEY ACCOUNTING POLICIES
Provisions
Provisions are recognised when the consolidated entity has a present obligation (legal or constructive) as a result of
a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the
obligation and a reliable estimate can be made of the amount of the obligation.
Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the
present obligation at the reporting date. If the effect of the time value of money is material, provisions are discounted
using a current pre-tax rate that reflects the risks specific to the liability. When discounting is used, the increase in the
provision due to the passage of time is recognised as a borrowing cost.
EMPLOYEE BENEFITS
Short-term benefits
Liabilities for wages and salaries, including non-monetary benefits and annual leave expected to be settled within
12 months of the reporting date are recognised in respect of employees’ services up to the reporting date. They are
measured at the amounts expected to be paid when the liabilities are settled.
Long-term benefits
The liability for long service leave is recognised and measured as the present value of expected future payments to be
made in respect of services provided by employees up to the reporting date. Consideration is given to expected future
wage and salary levels, experience of employee departures, and periods of service. Expected future payments are
discounted using market yields at the reporting date of national government bonds with terms to maturity and currencies
that match, as closely as possible, the estimated future cash outflows.
Pensions and other post employment benefits
All Australian employees are entitled to varying levels of benefits on retirement, disability or death. The superannuation
plans provide accumulated benefits. Employees contribute to the plans at various percentages of their wages and
salaries.
HUB24 Annual Report 2017 68
12. Current liabilities – provisions (continued)
KEY ESTIMATES AND JUDGEMENTS
Broking claim provision
The consolidated entity estimates the provision for adviser client claims arising from financial advice provided before
1 March 2013 from the discontinued stockbroking business as being claims reported during the year and an estimate of
future claims and associated legal costs.
Employee benefits – annual leave
Employee benefits – short term incentive
Lease make good
Rental lease liability
Broking claims – discontinued stockbroking operation
Employee benefits – payroll tax Options
Other sundry provisions
2017
$
932,813
1,947,265
122,892
38,193
420,150
89,283
197,021
CONSOLIDATED
2016
$
564,716
1,449,026
-
-
443,353
-
-
3,747,617
2,457,095
Movements in provisions
Movements in each class of provision during the financial year, other than employee benefits, are set out below:
Discontinued stockbroking operation
Carrying amount at the start of the year
Additional provisions recognised
Amounts paid during the year
Carrying amount at the end of the year
13. Non-current liabilities – provisions
Employee benefits – long service leave
Lease make good
Rental lease liability
Lease make good
CONSOLIDATED
2016
$
680,219
184,845
(421,711)
443,353
CONSOLIDATED
2016
$
194,209
102,948
61,957
359,114
2017
$
443,353
-
(23,203)
420,150
2017
$
569,903
48,066
111,574
729,543
The provision represents the present value of the estimated costs to make good the premises leased by the consolidated
entity at the end of the respective lease term.
Movements in provisions
Movements in each class of provision during the financial year, other than employee benefits, are set out below:
HUB24 Annual Report 2017
13. Non-current liabilities – provisions (continued)
2017
Carrying amount at the start of the year
Additional provisions recognised
Carrying amount at the end of the year
14. Non-current liabilities – other
Contingent consideration – Agility
Contingent consideration – Paragem
Unwind of discount on deferred consideration – Agility
Deferred revenue from research and development claim
69
CONSOLIDATED
Lease make
good
$
Rental lease
liability
$
102,948
68,010
170,958
61,957
87,810
149,767
CONSOLIDATED
2017
$
5,710,995
2016
$
-
-
4,246,287
261,612
853,769
6,826,376
-
942,666
5,188,953
CONTINGENT CONSIDERATION – PARAGEM
Contingent consideration – Paragem has been reclassified from a non-current liability at 30 June 2016 to a current
liability as at 30 June 2017, as the consideration is due on 30 September 2017.
CONTINGENT CONSIDERATION – AGILITY
Refer to note 28 for further details.
DEFERRED REVENUE FROM RESEARCH AND DEVELOPMENT CLAIM
The provision represents revenue which has been deferred to be recognised against development costs at the same rate and
timing as the amortisation of the asset to which the grant relates.
HUB24 Annual Report 2017 70
15. Issued capital
KEY ACCOUNTING POLICIES
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new equity instruments are
shown in equity as a deduction, net of GST, from the proceeds.
2017
Number
2016
Number
CONSOLIDATED
2017
$
2016
$
(a) Issued and paid up capital
Ordinary shares, fully paid
54,980,675
52,890,711
89,213,158
83,154,042
(b) Other equity securities
Treasury shares
Total capital
Movements in issued and paid up capital
(94,949)
(109,061)
(64,181)
(73,720)
54,885,726
52,781,650
89,148,977
83,080,322
Beginning of the financial year
52,890,711
52,058,181
83,154,042
82,164,163
Shares issued
2,089,964
832,530
5,207,603
Transfer from share based payment reserve
Additional paid up capital
Total shares
Capital raising costs
End of the financial year
806,275
53,461
961,543
-
28,336
54,980,675
52,890,711
89,221,381
83,154,042
-
-
(8,223)
-
54,980,675
52,890,711
89,213,158
83,154,042
Movement in other equity securities – treasury shares
Beginning of the financial year
Employee share issue
End of the financial year
ORDINARY SHARES
109,061
(14,112)
94,949
141,111
(32,050)
109,061
73,720
(9,539)
64,181
95,384
(21,664)
73,720
Fully paid ordinary shares carry one vote per share and carry the right to dividends.
On 2 September 2016, the company issued 45,067 ordinary shares to the Executive team in lieu of $201,000 short term
incentive bonus payments authorised for the year ended 30 June 2016.
On 7 October 2016, the company issued 510,000 ordinary shares for options exercised by the Chairman of the company for
consideration of $430,338.
On 17 October 2016, the company issued 15,000 ordinary shares for options exercised by employees of the company for
consideration of $12,636.
On 29 November 2016, the company issued 21,525 ordinary shares to the Managing Director in lieu of a $96,002 short term
incentive bonus payment authorised for the year ended 30 June 2016 and approved at the Annual General Meeting of the company.
On 5 December 2016, the company issued 439,000 ordinary shares for options exercised by employees of the company for
consideration of $389,836.
On 3 January 2017, the company issued 739,372 ordinary shares for the acquisition of Agility for consideration of
$3,807,766.
HUB24 Annual Report 2017
71
15. Issued capital (continued)
On 19 April 2017, the company issued 200,000 ordinary shares for options exercised by the Managing Director of the
company for consideration of $168,760.
On 2 May 2017, the company issued 120,000 ordinary shares for options exercised by employees of the company for
consideration of $101,256.
TREASURY SHARES
Treasury shares are shares in HUB24 Limited that are held by HUB24 Employee Share Ownership Trust (ESOT) for the
purpose of issuing shares under HUB24 Employee Share Ownership Plan.
On 1 September 2016, the company assigned 14,112 shares to eligible employees under the HUB24 Employee Share
Ownership Plan.
16. Reserves
Share based payments share reserve
Represents the share based payments expense under the employee and adviser share plans.
Movements in share based payments share reserves
Opening balance
Reserve reclassified to share capital through options issued
Employee share based payment expense
Share based payments to Paragem advisers
Shares issued through HUB24 Share Ownership Trust
Closing balance
17. Dividend franking account
CONSOLIDATED
2017
$
2016
$
4,106,404
4,396,272
4,396,272
(806,276)
800,435
(221,027)
(63,000)
3,133,845
-
754,760
557,667
(50,000)
4,106,404
4,396,272
Franking credits available to shareholders of the company for subsequent financial years are $nil (2016: $nil).
18. Reconciliation of cashflows
KEY ACCOUNTING POLICIES
Cash and cash equivalents
Cash and cash equivalents in the statement of financial position comprise cash at bank and in hand and short-term
deposits with an original maturity of three months or less that are readily convertible to known amounts of cash and
which are subject to an insignificant risk of changes in value.
For the purposes of the statement of cash flows, cash and cash equivalents consist of cash and cash equivalents as
defined above, net of outstanding bank overdrafts.
HUB24 Annual Report 2017 72
18. Reconciliation of cashflows (continued)
(a) Reconciliation of the net profit/(loss) after tax to cash flow from operations
Net profit/(loss) after tax for the year
Non-cash items
Depreciation and amortisation
Fair value gain on contingent consideration
Deferred revenue
Share based payment expense – employee
Share based payment expense – Paragem option holders
Shares issued to executive for short term incentive
Changes in operating assets and liabilities
(Increase)/decrease in trade and other receivables
(Increase)/decrease in deferred tax assets
(Increase)/decrease in other assets
Increase/(decrease) in trade and other payables
Increase/(decrease) in provisions
Net cash flow from operating activities
(b) Reconciliation of cash and cash equivalents
Cash and cash equivalents comprises:
Cash on hand and at bank
CONSOLIDATED
2017
$
2016
$
18,874,131
(1,187,128)
1,423,529
(925,407)
(88,897)
800,435
(221,027)
297,002
(2,856,364)
(15,122,793)
(153,170)
3,253,475
(1,218,108)
4,062,806
784,324
-
(157,646)
754,760
557,667
518,750
174,117
(943,875)
(77,599)
544,755
336,107
1,304,233
10,836,646
10,836,646
9,267,163
9,267,163
(c) Terms and conditions
For the purposes of the Statement of cash flows, cash and cash equivalents includes cash on hand and at bank, deposits held at
call with financial institutions, other short term, highly liquid investments with maturities of three months or less, that are readily
convertible to known amounts of cash and which are subject to an insignificant risk of changes in value and bank overdrafts.
19. Commitments and contingencies
(A) COMMITMENTS
Future minimum rentals payable under non-cancellable operating leases:
Within 1 year
After 1 year and less than 5 years
More than 5 years
Total minimum lease payments
CONSOLIDATED
2017
$
675,502
886,023
-
2016
$
477,773
316,581
-
1,561,525
794,354
HUB24 Annual Report 2017
73
19. Commitments and contingencies (continued)
The above relates to lease commitments for five premises with lease terms between 1 and 3 years. The remaining
commitments relate to office equipment with lease terms between 3 and 5 years
Lease payments recognised as an expense in the current year amount to $747,847 (FY16 $477,773).
Security deposits and guarantees for five leased properties amount to $115,670 in rental bonds (FY16 $259,036), which
will be repaid at the end of each tenancy provided that no money is owed and the property is restored in accordance with
the lease agreement.
(B) CONTINGENCIES
Contingent assets and liabilities
Nil (2016: Nil)
20. Share based payments plan
KEY ACCOUNTING POLICIES
Equity settled transactions
CONSOLIDATED
2017
$
-
2016
$
-
The consolidated entity provides benefits to employees (including Directors) in the form of share-based payments,
whereby services are rendered in exchange for shares or rights over shares (equity settled transactions).
There are currently three plans in place to provide these benefits:
• the Employee Share Option Plan (ESOP);
• the Performance Rights (PARs); and
• the Employee Share Plan (ESP).
The cost of these equity-settled transactions with employees is measured by reference to the fair value of the equity
instruments at the date at which they are granted. The fair value is determined by reference to the active market for the
shares which trade on the Australian Securities Exchange, at grant date.
In valuing equity settled transactions, no account is taken of any vesting conditions, other than (if applicable):
• non-vesting conditions that do not determine whether the consolidated entity or company receives services that entitle
the employee to receive payment in equity or cash
• conditions that are linked to the price of the shares of the company.
The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period
in which the performance and/or service conditions are fulfilled, ending on the date on which the relevant employees
become entitled to the award (the vesting period). The cumulative expense recognised for equity-settled transactions at
each reporting date until the vesting date reflects the extent to which the vesting period has expired and the entity’s best
estimate of the number of equity instruments that will ultimately vest. The income statement expense or credit for a
period is recorded in Employee Benefits Expense and represents the movement in cumulative expense recognised as at
the beginning and end of that period.
HUB24 Annual Report 2017 74
20. Share based payments plan (continued)
At each subsequent reporting date until vesting, the cumulative charge to the statement of profit or loss and other
comprehensive income is the product of:
• the grant date fair value of the award;
• the current best estimate of the number of awards that will vest, taking into account such factors as the likelihood of
employee turnover during the vesting period and the likelihood of non-market performance conditions being met; and
• the expired portion of the vesting period.
The charge to the statement of profit or loss and other comprehensive income for the period is the cumulative amount as
calculated above less the amounts already charged in previous periods. There is a corresponding entry to equity.
Equity settled awards granted by the company to employees of subsidiaries are recognised in the parent’s separate
financial statements as an additional investment in the subsidiary with a corresponding credit to equity. As a result, the
expense recognised by the company in relation to equity-settled awards only represents the expense associated with
grants to employees of the parent. The expense recognised by the consolidated entity is the total expense associated with
all such awards.
Until an award has vested, any amounts recorded are contingent and will be adjusted if more or fewer awards vest than
were originally anticipated to do so. Any award subject to a market condition or non-vesting condition is considered to vest
irrespective of whether or not that market condition or non-vesting is fulfilled, provided that all other conditions are satisfied.
If a non-vesting condition is within the control of the consolidated entity, company or the employee, the failure to satisfy
the condition is treated as a cancellation. If a non-vesting condition within the control of the consolidated entity, company
or employee is not satisfied during the vesting period, any expense for the award not previously recognised is recognised
over the remaining vesting period, unless the award is forfeited.
If the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms had not been
modified. An additional expense is recognised for any modification that increases the total fair value of the share-based
payment arrangement, or is otherwise beneficial to the employee, as measured at the date of modification.
If an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet
recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award and
designed as a replacement award on the date that it is granted, the cancelled and new award are treated as if they were a
modification of the original award, as described in the previous paragraph.
The dilutive effect, if any, of outstanding options is reflected as additional share dilution in the computation of diluted
earnings per share.
KEY ESTIMATES AND JUDGEMENTS
The consolidated entity measures the cost of equity-settled transactions by reference to the fair value of the equity
instruments at the date at which they were granted. The fair value is determined using a monte carlo simulation method.
The accounting estimates and assumptions relating to the equity-settled share-based payments would have no impact on
the carrying amounts of assets or liabilities within the next annual reporting period but may impact expenses and equity.
(a) Recognised share-based payment expenses
The expense recognised from equity-settled share-based payment transactions during the year is $579,408, $800,435
relating to employee option plans was offset by $221,027 credit relating to the Paragem Option holders. (2016: $1,312,427).
The share-based payment plans are described below.
HUB24 Annual Report 2017 75
20. Share based payments plan (continued)
(b) Types of share-based payment plans
1. Share based payment plans issued during the year ended 30 June 2017
Number of options
Issue Date
Expiry Date
Expected Vesting Period
Exercise Price
Vesting conditions
I. Service
II. Market
29 November 2016
SOP
29 November 2016
PRP (Rights)
29 November 2016
SOP
418,639
29 Nov 2016
29 Nov 2021
3 years
$4.46
137,043
29 Nov 2016
29 Nov 2031
3 years
N/A
50,000
29 Nov 2016
29 Nov 2021
3 years
$5.17
[I] Must be an employee from date of issue until options are exercised, unless considered a
good leaver (in which case must exercise within 30 days).
[II] 50% vesting on the achievement of Performance
condition 1. Absolute Total Shareholder Return (ATSR)
CAGR in excess of 17.5% over three years, proportional
vesting between 12.5% and 17.5%.
[II] Achieve share price
hurdle of greater than 52%
greater than exercise price
for 20 consecutive days
in the period between 36
months from the issue date
and expiry of options.
III. FUA
[III] 50% vesting on the achievement of Performance
condition 2. Growth in Funds Under Administration (FUA)
CAGR in excess of 45% over three years, proportional
vesting between 28% and 45%.
N/A
Disposal restrictions
Restriction on sale of shares for 12 months from exercise, without Board approval and no
trading in ‘blackout’ periods.
Tax exempt share plan – employees
Number of Shares Issued
14,112
Issue Date
Issue Price
1 September 2016
$4.46
Vesting Conditions for All Shares
Interests held in the shares are not at risk of forfeiture. There is no condition or
requirement that needs to be satisfied in order to acquire the shares.
Voting
Dividends
Specific terms
Shareholders are entitled to vote.
The shares provide entitlement to dividends or other distributions paid to ordinary
shareholders.
The Shares must not be sold, transferred or otherwise disposed of, or
mortgaged, charged or otherwise encumbered, on or before the 3rd anniversary
of the date employees acquired the Shares or the date they cease to be employed,
whichever occurs first.
HUB24 Annual Report 2017 76
20. Share based payments plan (continued)
2. Share based payment plans issued prior to 1 July 2016
Number of options
Issue Date
Expiry Date
Expected Vesting Period
Exercise Price
Vesting conditions
I. Service
II. Market
14 October 2015
SOP
7 December 2015
SOP CEO
620,000
14 Oct 2015
14 Oct 2020
3 years
$2.46
150,000
7 Dec 2015
7 Dec 2020
3 years
$2.46
30 March 2016
SOP
50,000
30 Mar 2016
30 Mar 2021
3 years
$3.98
[I] Must be an employee from date of issue until options are exercised, unless considered a
good leaver (in which case must exercise within 30 days).
[II] Achieve share price hurdle of greater than 52% of exercise price for 20 consecutive days
in the period between 36 months from the issue date and expiry of options.
Disposal restrictions
Restriction on sale of shares for 12 months from exercise, without Board approval and no
trading in ‘blackout’ periods.
Tax exempt share plan – employees
Number of Shares issued
32,050
Issue Date
Issue Price
15 September 2015
$1.56
Vesting conditions for all shares
Interests held in the shares are not at risk of forfeiture. There is no condition or
requirement that needs to be satisfied in order to acquire the shares.
Voting
Dividends
Specific terms
Number of options
Issue Date
Expiry Date
Expected Vesting
Period
Exercise price
Vesting conditions
I. Service
Shareholders are entitled to vote.
The shares provide entitlement to dividends or other distributions paid to ordinary
shareholders.
The Shares must not be sold, transferred or otherwise disposed of, or
mortgaged, charged or otherwise encumbered, on or before the 3rd anniversary
of the date employees acquired the Shares or the date they cease to be employed,
whichever occurs first.
7 August
2013
SOP
1,010,000
7 Aug 2013
14 Oct 2017
1 year
17 October
2014
SOP
760,000
17 Oct 2014
17 Oct 2019
3 years
4 December
2014
SOP CEO
200,000
4 Dec 2014
17 Oct 2019
3 years
$0.8424
$0.98
$0.98
4 December
2014
SOP Paragem
1,000,000
4 Dec 2014
4 Dec 2019
24 Dec 2015
24 Dec 2016
24 Dec 2017
$1.156
[I] Must be an employee from date of issue until options are exercised, unless considered a good
leaver (in which case must exercise within 30 days).
HUB24 Annual Report 2017 77
20. Share based payments plan (continued)
7 August
2013
SOP
17 October
2014
SOP
4 December
2014
SOP CEO
4 December
2014
SOP Paragem
II. Market
[II] Achieve share price
hurdle in excess of 20%
of the exercise price for
20 consecutive days in
the period between 12
months from issue and
expiry of options.
[II] Achieve share price hurdle in excess of 60%
of the exercise price for 20 consecutive days in
the period between 36 months from issue and
expiry of options.
Share price hurdle*
III. Performance
As determined by the Board in its sole discretion
Disposal restrictions
Restriction on sale of
shares for 12 months
from exercise, without
Board approval and no
trading in ‘blackout’
periods.
Restriction on sale of shares for 12 months from exercise, except to
discharge tax obligations in relation to the issue.
Share Option Plan 4 December 2014 – Paragem Executive remuneration
* Market – Share price hurdle in 3 tranches:
a. 4 Dec 15 – 4 Dec 19: 1/3 of options subject to 20% share price hurdle
b. 4 Dec 16 – 4 Dec 19: 1/3 of options subject to 40% share price hurdle
c. 4 Dec 17 – 4 Dec 19: 1/3 of options subject to 60% share price hurdle.
Number of options
Issue Date
Expiry Date
Expected Vesting Period
Exercise Price
Vesting conditions
I. Service
8 August 2013
SOP Executive
1,440,000
8 Aug 2013
8 Aug 2017
8 August 2013
SOP Chairman
510,000
8 Aug 2013
8 Aug 2017
28 Aug 2014, 28 Aug 2015, 28 Aug 2016
$0.8438
[I] Must be an employee from date of
issue until options are exercised, unless
considered a good leaver (in which case
must exercise within 30 days).
[I] Subject to forfeiture on termination,
unless considered to be a good leaver.
II. Market
a. For 1/3 of options subject to share price
a. For 1/3 of options subject to share price
hurdle in excess of 20% of exercise price for
20 consecutive days in the period between
12months from issue and expiry of options.
hurdle in excess of 30% of exercise price for
20 consecutive days in the period between
12 months from issue and expiry of options.
b. For 1/3 of options subject to share price
b. For 1/3 of options subject to share price
hurdle in excess of 40% of exercise price for
20 consecutive days in the period between
24 months from issue and expiry of options.
hurdle in excess of 60% of exercise price for
20 consecutive days in the period between
24 months from issue and expiry of options.
c. For 1/3 of options subject to share price
c. For 1/3 of options subject to share price
hurdle in excess of 60% of exercise price for
20 consecutive days in the period between
36 months from issue and expiry of options.
hurdle in excess of 90% of exercise price for
20 consecutive days in the period between
36 months from issue and expiry of options.
Disposal restrictions
Restriction on sale of shares for 24months from exercise, except to discharge tax
obligations in relation to the issue.
HUB24 Annual Report 2017 78
20. Share based payments plan (continued)
Tax exempt share plan – employees
Number of Shares issued
44,000
Issue Date
Issue Price
9 September 2014
$1.00
Vesting conditions for all shares
Interests held in the shares are not at risk of forfeiture. There is no condition or
requirement that needs to be satisfied in order to acquire the shares.
Voting
Dividends
Specific terms
Shareholders are entitled to vote.
The shares provide entitlement to dividends or other distributions paid to ordinary
shareholders.
The Shares must not be sold, transferred or otherwise disposed of, or
mortgaged, charged or otherwise encumbered, on or before the 3rd anniversary
of the date employees acquired the Shares or the date they cease to be employed,
whichever occurs first.
(c) Summaries of options granted
The following table illustrates the number, weighted average exercise prices (WAEP) and weighted average share prices
(WASP) of, and movements in, share options issued during the year:
Outstanding at the beginning of the year
5,045,000
-
Granted during the year
Forfeited during the year
Exercised during the year
Expired during the year
Outstanding at the end of the year
Exercisable at the end of the year
Number
WAEP
WASP
Number
WAEP
2017
468,639
$4.56
-
-
1,284,000
$0.86
$5.31
-
4,229,639
1,679,000
-
-
-
-
-
-
-
-
-
5,296,375
820,000
10,000
500,000
561,375
5,045,000
1,625,000
2016
WASP
-
-
-
-
$2.55
-
$0.84
$3.19
-
-
-
-
-
-
The outstanding balance as at 30 June 2017 is represented by:
• 175,000 options over ordinary shares with an exercise price of $0.8424 each, fully vested expiring 14 October 2017.
• 880,000 options over ordinary shares with an exercise price of $0.8438 each, fully vested expiring 8 August 2017.
• 960,000 options over ordinary shares with an exercise price of $0.98 each, yet to vest expiring 17 October 2019.
• 936,000 options over ordinary shares with an exercise price of $1.156 each, 2/3 vested expiring 4 December 2019.
• 610,000 options over ordinary shares with an exercise price of $2.46 each, yet to vest expiring 14 October 2020.
• 150,000 options over ordinary shares with an exercise price of $2.46 each, yet to vest expiring 7 December 2020.
• 50,000 options over ordinary shares with an exercise price of $3.98 each, yet to vest expiring 30 March 2021.
• 418,639 options over ordinary shares with an exercise price of $4.46 each, yet to vest expiring 29 November 2021.
• 50,000 options over ordinary shares with an exercise price of $5.17 each, yet to vest expiring 29 November 2021.
HUB24 Annual Report 2017 79
20. Share based payments plan (continued)
(d) Summary of performance rights granted
Outstanding at the beginning of the year
Granted during the year
Forfeited during the year
Exercised during the year
Expired during the year
Outstanding at end of the year
Exercisable at the end of the year
Number
WAEP
2017
WASP
-
137,043
-
-
-
137,043
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
The outstanding balance as at 30 June 2017 is represented by:
• 137,043 performance rights over ordinary shares, yet to vest expiring 29 November 2031.
(e) Option pricing model
The fair value of all equity-settled options issued in the year is estimated at the date of grant using the Hoadley’s 1 Hybrid
ESO model (monte carlo simulation method).
The following table lists the inputs to the models used:
1. Share based payment plans issued during the year ended 30 June 2017
Dividend yield (%)
Expected volatility (%)
Risk-free interest rate (%)
Expected life of Options/Rights (months)
Option exercise price ($)
Average Share price at measurement date ($)
Model used
2. Share based payment plans issued prior to 1 July 2016
29 Nov 2016
SOP
29 Nov 2016
SOP
29 Nov 2016
PRP (Rights)
-
45
2.16
36
4.46
$5.79
Hoadleys/
Black Scholes
-
45
2.16
36
5.17
$5.79
Hoadleys
-
45
2.16
36
N/A
$5.79
Hoadleys/
Black Scholes
Dividend yield (%)
Expected volatility (%)
Risk-free interest rate (%)
Expected life of Options (months)
7 Aug
2013
SOP
9 Aug
2013
SOP Exec
8 Aug
2013
SOP
Chairman
-
80
2.4
26
-
80
2.4
28
-
80
2.4
28
Option exercise price ($)
0.8424
0.8438
0.8438
Average Share price at measurement date ($)
0.91
0.91
0.91
17 Oct
2014
SOP
-
35
2.5
36
0.98
0.89
4 Dec
2014
SOP
CEO
4 Dec
2014
SOP
Paragem
-
35
2.5
36
0.98
0.89
-
33
2.5
12–36
1.156
0.89
Model used
Black
Scholes
Black
Scholes
Black
Scholes
Black
Scholes
Black
Scholes
Black
Scholes
HUB24 Annual Report 2017 80
20. Share based payments plan (continued)
Dividend yield (%)
Expected volatility (%)
Risk-free interest rate (%)
Expected life of Options (months)
Option exercise price ($)
Average Share price at measurement date ($)
Model used
(f) Contingent consideration
14 Oct
2015
SOP
7 Dec
2015
SOP CEO
30 Mar
2016
SOP
-
48
1.8
36
2.46
2.69
-
48
1.8
36
2.46
3.52
-
50
2.09
36
3.98
4.06
Hoadleys Hoadleys Hoadleys
6,488,591 ordinary shares with a nil exercise price which are yet to vest, have been deferred as part of the contingent
consideration for the Paragem acquisition. Refer to note 11 for further details.
Deferred Share issue – Paragem vendor
Number of Deferred Shares
2,162,864
Expiry Date
Exercise Price
Vesting conditions for
Deferred Shares
Voting
Dividends
Specific terms
30 September 2017
Nil
Subject to the achievement of performance targets by 30 September 2017.
Additional Peformance condition – each Principal must not be a bad leaver when
the shares vest.
Rights holders are not entitled to vote.
The rights do not provide any entitlement to dividends or other distributions paid
to ordinary shareholders.
If at any time before 30 September 2017 the performance targets are achieved
the rights will vest and be paid within 20 business days of achievement. 50% of
the shares to be issued will be escrowed until 30 September 2017 and an escrow
agreement must be issued subject to the reasonable terms as required by HUB24.
If performance targets are not achieved, the shares to be issued will be adjusted to
reflect the achieved percentage on 30 September 30 2017.
No rights have vested or lapsed since being issued.
Cash settlement will occur if the necessary shareholder approvals are not obtained to issue shares within three months
of the payment date. The cash payment being equal to the value of shares calculated by reference to the VWAP of HUB24
shares in the 60 days preceding the vesting date.
Deferred Share issue – Paragem Adviser Equity Scheme
Number of Deferred Shares
4,325,727
Expiry Date
Exercise Price
30 September 2017
Nil.
Vesting Conditions for Deferred Shares Subject to the achievement of performance targets by 30 September 2017.
Voting
Dividends
Specific terms
Rights holders are not entitled to vote.
The rights do not provide any entitlement to dividends or other distributions paid
to ordinary shareholders.
If at any time before 30 September 2017 the performance targets are achieved
the rights will vest.
No rights have vested or lapsed since being issued.
HUB24 Annual Report 2017 81
20. Share based payments plan (continued)
Cash settlement will occur if the necessary shareholder approvals are not obtained to issue shares within three months
of the payment date. The cash payment being equal to the value of shares calculated by reference to the VWAP of HUB24
shares in the 60 days preceding the vesting date.
21. Significant events after the reporting date
No significant matter or circumstance has arisen since 30 June 2017 that has significantly affected, or may significantly
affect the consolidated entity’s operations, the results of those operations, or the consolidated entity’s state of affairs in
future financial years.
22. Earnings per share
The following reflects the income and share data used in the calculations of basic and diluted loss per share:
Earnings per share from continuing and discontinuing operations
Profit/(loss) after income tax
Profit/(loss) after income tax attributable to the owners of HUB24 Ltd used in
calculating basic and diluted earnings per share
CONSOLIDATED
2017
$
2016
$
18,874,131
18,874,131
(1,187,128)
(1,187,128)
Number
Number
Weighted average number of ordinary shares used in calculating basic and diluted earmings per share
Basic earnings per share
Diluted earnings per share
Basic earnings per share
Diluted earnings per share
Earnings per share
Profit/(loss) after income tax
Profit/(loss) after income tax attributable to the owners of HUB24 Ltd used in
calculating basic and diluted earnings per share
53,996,742
56,927,452
52,696,338
52,696,338
Cents
34.95
33.15
$
Cents
(2.26)
(2.26)
$
18,874,131
18,874,131
(1,187,128)
(1,187,128)
Weighted average number of ordinary shares used in calculating basic earnings per share
53,996,742
Weighted average number of ordinary shares used in calculating diluted earnings per share
56,927,452
Number
Basic earnings per share
Diluted earnings per share
Cents
34.95
33.15
Number
52,696,338
52,696,338
Cents
(2.26)
(2.26)
HUB24 Annual Report 2017 82
22. Earnings per share (continued)
KEY ACCOUNTING POLICIES
Basic EPS is calculated by dividing the result attributable to members of the company, adjusted for the after-tax effect
of preference dividends on preference shares classified as equity, by the weighted average number of ordinary shares
outstanding during the financial year, adjusted for bonus elements in ordinary shares during the year. The weighted
average number of issued shares outstanding during the financial year does not include shares issued as part of the
Employee Share Loan Plan that are treated as in-substance options.
Diluted EPS is calculated by adjusting the basic earnings by the after-tax effect of dividends and interest associated with
dilutive potential ordinary shares. The weighted average number of shares used is adjusted for the weighted average number of
ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares.
Diluted earnings per share exclude shares that will be issued in the future relating to the deferred consideration from the
Paragem and Agility acquisition.
All options on issue are considered anti-dilutive for FY16, as the entity was loss-making. Refer to Note 20 for details of
options on issue.
23. Auditors’ remuneration
Amounts received or due and receivable by Deloitte Touche Tohmatsu
Audit and review of financial statements and other regulatory returns
Tax and other services
Total audit and other fees
CONSOLIDATED
2016
$
120,000
108,475
228,475
2017
$
200,000
370,015
570,015
HUB24 Annual Report 2017 83
24. Related party disclosures
(A) SUBSIDIARIES
The consolidated financial statements include the financial statements of HUB24 Limited and the Australian subsidiaries
listed in the following table.
Name
Operating entities
HUB24 Custodial Services Limited (formerly ANZIEX Ltd)
Firstfunds Ltd
HUB24 Share Ownership Trust
HUB24 Management Services Pty Ltd
HUB24 Administration Pty Ltd
HUB24 Services Pty Ltd
Marketsplus Holdings Pty Ltd
Marketsplus Australia Pty Ltd
Paragem Pty Ltd
Agility Applications Pty Ltd
Non-operating entities
AT Pty Ltd*
HUB24 International Nominees Pty Ltd (formerly ANZIEX Nominees Ltd)
Investorfirst Securities Ltd*
HUB24 Nominees Pty Ltd (formerly Kardinia Nominees Pty Ltd)
Researchfirst Pty Ltd*
Captain Starlight Nominees Pty Ltd*
Findlay & Co Stockbrokers Ltd*
HTH Nominees Pty Ltd
% equity interest
2017
2016
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
* These companies are no longer trading and there is no intention that they will resume activities. The process to deregister these entities has commenced.
Balances and transactions between the company and its subsidiaries have been eliminated on consolidation and are not
disclosed in this note.
(B) ULTIMATE PARENT
HUB24 Limited is the ultimate parent entity of the consolidated entity.
25. Parent entity financial information
Set out below is the supplementary information about the parent entity.
Statement of profit or loss and other comprehensive income
Profit/(loss) after income tax
Total comprehensive income
CONSOLIDATED
2017
$
2016
$
16,273,144
(6,089,578)
16,273,144
(6,089,578)
HUB24 Annual Report 2017
84
25. Parent entity financial information (continued)
Statement of financial position
Total current assets
Total non-current assets
Total assets
Total current liabilities
Total non-current liabilities
Total liabilities
Equity
Issued capital
Reserves
Accumulated losses
Total equity
CONTINGENT LIABILITIES
CONSOLIDATED
2017
$
2016
$
12,381,298
41,432,912
12,351,939
12,222,568
53,814,210
24,574,507
5,880,760
6,888,321
12,769,081
41,045,129
431,528
5,188,952
5,620,480
18,954,027
89,213,482
3,163,081
83,105,657
3,452,949
(51,331,434)
(67,604,579)
41,045,129
18,954,027
The parent entity had no contingent liabilities as at 30 June 2017 and 30 June 2016.
CAPITAL COMMITMENTS – OFFICE EQUIPMENT
The parent entity had no capital commitments as at 30 June 2017 and 30 June 2016.
FINANCIAL COMMITMENTS – LOAN RECEIVABLE
The parent entity entered into a loan agreement for $5 million with Diversa Ltd the parent entity of The Trust Company
(Superannuation) Limited as Trustee for the HUB24 Super Fund (“The Fund”), on 10 June 2016 on an arms length basis
and on commercial terms at an interest rate of 17%.
$2 million has been advanced by HUB24 Ltd to Diversa Ltd. Diversa Ltd has received these funds for the purpose of
subscribing to capital in The Trust Company (Superannuation) Limited (“The Trustee”) whereby the capital received by the
Trustee will be reserved for the purpose of meeting the Operational Risk Financial Requirement (ORFR) for the Fund in
accordance with APRA Prudential Standard SPS114.
Further advances may be called upon subject to the growth experienced by the Fund for the purpose of meeting the ORFR
for the Fund in accordance with APRA Prudential Standard SPS114.
The agreement has been extended under the same terms and conditions to 31 December 2017.
DEFERRED TAX ASSET
In addition to its own current and deferred tax amounts, the parent entity also recognises current tax liabilities (or assets)
and the deferred tax assets arising from unused tax losses and unused tax credits (if any) assumed from controlled
entities in the tax consolidated entity. Refer to Note 7 for further details.
SIGNIFICANT ACCOUNTING POLICIES
The accounting policies of the parent entity are consistent with those of the consolidated entity except for investments in
subsidiaries which are accounted for at cost, less any impairment, in the parent entity.
HUB24 Annual Report 2017 85
CONSOLIDATED
2017
$
2016
$
2,841,611
2,819,741
150,793
523,822
128,646
495,927
3,516,226
3,444,314
26. Key management personnel
KEY MANAGEMENT PERSONNEL COMPENSATION
Short term employment benefits
Post employment benefits
Share based payments
Total compensation
27. Financial instruments
KEY ACCOUNTING POLICIES
Non-derivative financial instruments
Non-derivative financial instruments comprise investments in equity, trade and other receivables, cash and cash
equivalents and trade and other payables.
Non-derivative financial instruments are recognised initially at fair value plus, for instruments not at fair value through
the profit or loss, any directly attributable transaction costs. Subsequent to initial recognition, non-derivative financial
instruments are measured as described below.
A financial instrument is recognised if the consolidated entity becomes a party to the contractual provisions of the
instrument. Financial assets are derecognised if the consolidated entity’s contractual rights to the cash flows from the
financial assets expire or if the consolidated entity transfers the financial asset to another party without retaining control
or substantially all risks and rewards of the asset. Regular way purchases and sales of financial assets are accounted for
at trade date, i.e., the date that the consolidated entity commits itself to purchase or sell the asset. Financial liabilities are
derecognised if the consolidated entity’s obligations specified in the contract expire or are discharged or are cancelled.
Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable on demand
and form an integral part of the consolidated entity’s cash management are included as a component of cash and cash
equivalents for the purpose of the statement of cash flows.
Held to maturity investments
If the consolidated entity has the positive intent and ability to hold debt securities to maturity, then they are classified as
held-to-maturity. Held-to-maturity investments are measured at amortised cost using the effective interest method, less
any impairment losses.
The fair values of investments that are actively traded in organised financial markets are determined by reference to
quoted market bid prices at the close of business on the reporting date. For investments with no active market, fair values
are determined using valuation techniques. Such techniques include: using recent arm’s length market transactions;
reference to the current market value of another instrument that is substantially the same; discounted cash flow analysis
and option pricing models making as much use of available and supportable market data as possible and keeping
judgemental inputs to a minimum.
The company’s principal financial instruments comprise cash, receivables, and payables. For the year ended 30 June
2017, the consolidated entity does not utilise derivatives, holds no debt and has not traded in financial instruments
including derivatives other than listed and unlisted securities and options over listed and unlisted securities, where
received as corporate fee income. The company has other financial assets and liabilities such as trade receivables and
trade and other payables, which arise directly from its operations and are non-interest bearing.
HUB24 Annual Report 2017 86
27. Financial instruments (continued)
Interest rate risk
The consolidated entity is not materially exposed to movements in short-term variable interest rates on cash and cash
equivalents. All other financial assets and liabilities are non-interest bearing. The Directors believe a 50 basis point
decrease is a reasonable sensitivity given current market conditions. A 100 basis point increase and a 50 basis point
decrease in interest rates would increase/decrease profit and loss in the consolidated entity and the company by:
Cash and cash equivalents at end of period
100 basis points increase in interest rate
50 basis points decrease in interest rate
Net impact on profit/(loss) after tax
Profit/(loss) for the year
100 basis points increase in interest rate
50 basis points decrease in interest rate
Credit risk
CONSOLIDATED
2017
$
2016
$
10,836,646
9,267,163
108,366
(54,183)
92,672
(46,336)
18,874,131
18,982,497
18,819,948
(1,187,128)
(1,094,456)
(1,233,463)
The consolidated entity currently has a loan receivable of $2 million from Diversa Ltd. Diversa Ltd has received a
loan advance from the consolidated entity for the purpose of subscribing for share capital in The Trust Company
(Superannuation) Limited (“The Trustee”). The consolidated entity has security over the share capital issued to Diversa Ltd
and therefore considers the credit risk to be low on this receivable.
Liquidity risk
The table below reflects all contractually fixed pay-offs for settlement resulting from recognised financial liabilities. Cash
flows are undiscounted. The remaining contractual maturities of the consolidated entity’s and parent entity’s financial
liabilities are:
Not later than one month
Later than 1 month not later than 3 months
Later than 3 months not later than 1 year
Later than 1 year
2017
$
2,628,991
154,010
5,321,154
-
CONSOLIDATED
2016
$
1,340,113
101,275
350,689
-
8,104,155
1,792,077
Maturity analysis of financial assets and liabilities
The risk implied from the values shown in the table below is based on best estimates and reflect a balanced view of cash
inflows and outflows. Leasing obligations, trade payables and other financial liabilities mainly originate from the financing
of assets used in our ongoing operations such as office equipment, platform development and investments in working
capital e.g. receivables. These assets are considered in the consolidated entity’s overall liquidity risk.
HUB24 Annual Report 2017
87
27. Financial instruments (continued)
0–1 MONTH
$
1–3 MONTHS
$
4–12 MONTHS
$
1–5 YEARS*
$
TOTAL
$
30 June 2017
Consolidated financial assets
Cash and cash equivalents
Trade and other receivables
Consolidated financial liabilities
Trade and other payables
Net maturity
30 June 2016
Consolidated financial assets
Cash and cash equivalents
Trade and other receivables
Consolidated financial liabilities
Trade and other payables
Net maturity
10,836,646
4,386,137
15,222,783
2,628,991
2,628,991
12,593,792
9,267,163
1,899,665
11,166,828
1,340,112
1,340,112
9,826,717
-
475,190
475,190
154,010
154,010
321,181
-
102,231
102,231
101,275
101,275
-
2,013,299
2,013,299
5,321,154
5,321,154
(3,307,856)
-
2,016,366
2,016,366
350,689
350,689
956
1,665,677
-
-
-
-
-
-
-
-
-
-
-
-
10,836,646
6,874,626
17,711,272
8,104,155
8,104,155
9,607,116
9,267,163
4,018,262
13,285,425
1,792,076
1,792,076
11,493,349
* For the 1–5 year period the Agility deferred contingent consideration includes equity components payable 3 January 2020. Refer to Note 28 for further details.
The consolidated entity monitors rolling forecasts of liquidity reserves on the basis of expected cash flow and aims to
maintain a minimum equivalent of 90 days worth of operational expenses in cash reserves.
Market risk
The consolidated entity is not materially exposed to movements in market prices.
The net fair value of financial assets and liabilities approximates their carrying values and the methods for estimating fair
values are outlined in the relevant notes to the financial statements.
Fair value measurement
The consolidated entity has a number of financial instruments which are not measured at fair value in the statement of
financial position. These had the following fair values at 30 June 2017:
Non-current assets
Rental bonds and guarantees
CONSOLIDATED
Fair value
amount
$
115,670
115,670
Carrying
amount
$
115,670
115,670
HUB24 Annual Report 2017 88
27. Financial instruments (continued)
The consolidated entity has a number of financial instruments which are not measured at fair value in the statement of
financial position. These had the following fair values at 30 June 2016:
Non-current assets
Rental bonds and guarantees
28. Business combination
CONSOLIDATED
Fair value
amount
$
259,036
259,036
Carrying
amount
$
259,036
259,036
On 3 January 2017 HUB24 Limited acquired 100% of the issued shares in Agility, a specialist provider of application, data
exchange and technology products and services to the financial services industry, for consideration of up to $15 million in
cash and shares, (fair value $14,188,209).
Details of the purchase consideration, the net assets acquired and goodwill are as follows:
Purchase consideration
Cash paid – at completion
Shares issued – at completion
Deferred consideration
Contingent consideration – 1st performance period (31 December 2018)
Contingent consideration – 2nd performance period (31 December 2019)
Total purchase consideration
Total
$
2,793,335
3,807,766
1,876,113
2,938,667
2,772,328
14,188,209
Deferred consideration refers to cash payments of up to $2 million to be paid on 3 January 2018 subject to performance
conditions and warranty claims.
Contingent consideration refers to capped earnout consideration of up to $3.5 million in cash and $3.5 million in HUB24 ordinary
shares subject to certain conditions and performance hurdles to be met progressively over the next two and a half years.
The provisional fair values of the acquisition are as follows:
Cash and cash equivalents
Plant and equipment
Working capital
Deferred tax liability
Customer relationships
Connect software
Net identifiable assets acquired
Add: goodwill
Fair value
$
1,538,755
612,215
(910,451)
(385,200)
1,284,000
2,564,000
4,703,319
9,484,890
14,188,209
HUB24 Annual Report 2017 89
28. Business combination (continued)
The goodwill recognised reflects the value that is expected to be created on the HUB24 platform following the acquisition
of Agility. HUB24’s investment platform integrated with Agility’s solution will assist stockbrokers to transition their clients
and business model to a scalable and flexible wealth management offering.
ACQUISITION RELATED COSTS
Agility acquisition related costs of $404,196 are included in administrative expenses in the profit or loss.
CONTINGENT CONSIDERATION
The contingent consideration arrangement requires the company to issue the former equity owners of Agility up to
$3.5 million in cash and $3.5 million in HUB24 ordinary shares subject to certain conditions and performance hurdles.
The fair value of the contingent consideration arrangement is estimated to be $5.7 million which assumes 100% of
performance criteria will be met.
In the circumstances where 90% of performance criteria were to be met, the following impact would result.
Contingent purchase consideration
Goodwill
REVENUE AND PROFIT CONTRIBUTION
Decrease by $571,100
Decrease by $571,100
The acquired business contributed revenues of $4,701,436 and EBITDA of $243,687 to the group for the period from
3 January 2017 to 30 June 2017.
HUB24 Annual Report 2017 90
DIRECTORS’
DECLARATION
for the year ended 30 June 2017
In the opinion of the Directors:
a. the financial statements and notes of the consolidated
entity are in accordance with the Corporations Act
2001, including:
i. giving a true and fair view of the consolidated
entity’s financial position as at 30 June 2017 and of
its performance for the year ended on that date; and
ii. complying with Australian Accounting
Standards (including the Australian Accounting
Interpretations), the Corporations Regulations
2001 and other mandatory professional reporting
requirements.
c. there are reasonable grounds to believe that the
company will be able to pay its debts as and when they
become due and payable.
d. this declaration has been made after receiving the
declarations by the Chief Executive Officer and Chief
Financial Officer required by section 295A of the
Corporations Act 2001.
Signed in accordance with a resolution of directors.
b. the financial statements and notes comply with
International Financial Reporting Standards as
disclosed in Note 2.
Bruce Higgins
Chairman
Sydney, 28 August 2017
HUB24 Annual Report 2017 91
INDEPENDENT
AUDITOR’S REPORT
Deloitte Touche Tohmatsu
A.B.N. 74 490 121 060
Grosvenor Place
225 George Street
Sydney NSW 2000
PO Box N250
Sydney NSW 1217 Australia
DX: 10307SSE
Tel: +61 (0) 2 9322 7000
Fax: +61 (0) 2 9322 7001
www.deloitte.com.au
Independent Auditor’s Report
to the Shareholders of HUB24 Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of HUB24 Limited (the “Company”) and its subsidiaries (the “Group”)
which comprises the consolidated statement of financial position as at 30 June 2017, the consolidated
statement of profit or loss and other comprehensive income, the consolidated statement of changes in
equity and the consolidated statement of cash flows for the year then ended, notes comprising a summary
of significant accounting policies and other explanatory information, and the directors’ declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act
2001, including:
(i)
giving a true and fair view of the Group’s financial position as at 30 June 2017 and of its financial
performance for the year then ended; and
(ii)
complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We 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 Report section
of our report. We are independent of the Group in accordance with the auditor independence requirements
of the Corporations Act 2001 and 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 fulfilled our 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.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our
audit of the financial report for 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.
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Touche Tohmatsu Limited
HUB24 Annual Report 2017 92
Key Audit Matter
Intangible Assets
How the scope of our audit responded to the
Key Audit Matter
As at 30 June 2017 the carrying value of
intangible assets totalling $28 million which
include the following as disclosed in note 10:
•
•
investment platform valued at $8.5
million;
goodwill of $15.4 million.
Evaluation of the recoverable amount of intangible
assets requires significant judgement due to the
estimation of future cash flows, discount and
terminal growth rates, and the period over which
cash flows have been discounted.
Deferred tax asset relating to tax losses
As at 30 June 2017 the Company has recorded a
deferred tax asset of $14.7 million relating to prior
period tax losses incurred by the Company as
disclosed in note 7.
Significant judgement is required in determining
the recoverability of this deferred tax asset which
is dependent on the generation of sufficient future
taxable profit to utilise these tax losses.
Our procedures included, but were not limited to:
obtaining an understanding of the key controls
associated with the preparation of the value-
in-use models;
evaluating management’s methodologies and
their documented basis for key assumptions,
as outlined in note 10;
in conjunction with our valuation experts, we
assessed and challenged the:
-
reasonableness of long-term growth rates
used in the forecast cash flows by
comparing them to historical results,
economic and industry forecasts; and
- discount rate applied.
testing the mathematical accuracy and
integrity of the value-in-use models;
assessing the consistency of forecast cash flow
models and Board approved budget;
performing sensitivity analysis around the key
drivers of growth rates used in the cash flow
forecasts and the discount rate used; and
assessing managements’ consideration of the
sensitivity to a change in key assumptions that
both individually or collectively would be
required for assets to be impaired and
considered the likelihood of such a movement
in those key assumptions.
We also assessed the appropriateness of the
disclosures in note 10 to the financial statements.
Our procedures included, but were not limited to:
challenging the appropriateness of
management’s assumptions relating to the
forecasts of future taxable profits;
evaluating the reasonableness of the
assumptions underlying the preparation of
these forecasts, including the consistency of
the assumptions used with those used to
evaluate the recoverable amount of intangible
assets; and
reviewing the management’s deferred tax
calculation for mathematical accuracy, in
accordance with the applicable Australian
Accounting Standards and Australian tax
legislations.
We also assessed the appropriateness of the
disclosures in note 7 to the financial statements.
HUB24 Annual Report 2017 93
Key Audit Matter
Purchase Price Accounting
On 3 January 2017, HUB24 Limited acquired Agility
Applications Pty Ltd for consideration of $15 million.
Consideration comprises $2.8 million cash, $3.8
million shares, $1.9 deferred consideration and $5.7
million contingent consideration, as disclosed in note
28.
Management determined the fair value of net
identifiable assets acquired to be $4.7 million, with
$3.8 million relating to intangibles including the
CONNECT reporting and interface software, and
customer relationships in relation to licensing access
fees.
The identification and valuation of intangible assets
on acquisition, valuation methodology, inputs and
assumptions of the valuation model require significant
judgement. In addition, the goodwill arising from the
acquisition is highly dependent on the fair value of the
identifiable asset acquired and liabilities assumed
from Agility Applications Pty Ltd. at the acquisition
date.
How the scope of our audit responded to
the Key Audit Matter
In conjunction with our internal corporate
finance specialists, our procedures included,
but were not limited to:
reviewing management’s appointed expert
valuation reports;
evaluating the independence, competence
and objectivity of management’s
appointed expert;
obtaining management’s assessment of
the purchase price allocation and
assessing that the transaction is eligible to
be treated as a business combination and
is recorded in accordance with the
applicable Australian Accounting
Standards;
evaluating the sales deed for significant
clauses, to ensure it is consistent with
management’s treatment;
assessing the appropriateness of
identifiable assets acquired and the
liabilities assumed at the acquisition date;
challenging management’s methodologies
and calculations used to determine the fair
value of assets acquired and liabilities
acquired; and
reviewing the goodwill calculation for
mathematical accuracy.
We also assessed the appropriateness of the
disclosure in note 28 to the financial
statements.
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 30 June 2017, but does not include the financial
report and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and 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 that there is a material misstatement of this other information, we
are required to report that fact. We have nothing to report in this regard.
HUB24 Annual Report 2017 94
Responsibilities of the Directors for the Financial Report
The directors of the Entity are responsible for the preparation of the financial report that gives a true and
fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such
internal control as the directors determine is necessary to enable the preparation of the financial report
that gives a true and fair view and is free from material misstatement, whether due to fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to
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 Group or to cease operations,
or has no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes
our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with 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.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional
judgement and maintain professional scepticism throughout the audit. We also:
•
Identify and assess the risks of material misstatement of the financial report, whether due to fraud
or error, design and perform audit procedures responsive to those risks, and obtain audit evidence
that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a
material misstatement resulting from fraud is higher than for one resulting from error, as fraud
may involve collusion, forgery, intentional omissions, misrepresentations, or the override of
internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Group’s internal control.
•
•
•
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the directors.
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If
we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s
report to the related disclosures in the financial report or, if such disclosures are inadequate, to
modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of
our auditor’s report. However, future events or conditions may cause the Group to cease to
continue as a going concern.
Evaluate the overall presentation, structure and content of the financial report, including the
disclosures, and whether the financial report represents the underlying transactions and events in
a manner that achieves fair presentation.
We communicate with the directors regarding, among other matters, the planned scope and timing of the
audit and significant audit findings, including any significant deficiencies in internal control that we identify
during our audit.
We also provide the directors with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, related safeguards.
HUB24 Annual Report 2017 95
From the matters communicated with the directors, we determine those matters that were of most
significance in the audit of the financial report of the current period and are therefore the key audit matters.
We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about
the matter or when, in extremely rare circumstances, we determine that a matter should not be
communicated in our report because the adverse consequences of doing so would reasonably be expected
to outweigh the public interest benefits of such communication.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report of HUB24 Limited included in pages 24 to 36 of the
Directors’ Report for the year ended 30 June 2017.
In our opinion, the Remuneration Report of the HUB24 Limited, for the year ended 30 June 2017, complies
with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Entity are responsible for the preparation and presentation of the Remuneration Report
in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion
on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing
Standards.
DELOITTE TOUCHE TOHMATSU
Declan O’Callaghan
Partner
Chartered Accountants
Sydney, 28 August 2017
HUB24 Annual Report 2017 96
ASX ADDITIONAL
INFORMATION
Additional information required by the Australian Securities Exchange Limited and not shown elsewhere in this report is
as follows. This information is current as at 18 August 2017.
Distribution of equity securities
Ordinary share capital – 55,231,303 fully paid ordinary shares are held by 1,993 individual security holders.
All issued ordinary shares carry one vote per share without restriction and carry the rights to dividends. The number of
security holders, by size of holding, in each class are:
Fully paid ordinary shares – holdings ranges
Holders
Total units
1–1,000
1,001–5,000
5,001–10,000
10,001–100,000
100,001 and over
Totals
664
763
291
234
41
284,521
2,194,915
2,202,208
6,180,818
44,368,841
%
0.52
3.97
3.99
11.19
80.33
1,993
55,231,303
100.000
Holding less than a marketable parcel of shares, based on the closing price $6.29 on 18 August 2017, are 143 shareholders.
Options
5,239,639 options and 137,043 performance rights are held. Options and performance rights do not carry a right to vote.
Substantial shareholders – quoted ordinary securities
Thorney Holdings Pty Ltd & Related Parties
Acorn Capital Ltd
Ian Litster & Related Parties
Number fully paid
9,480,000
4,517,957
3,588,751
%
17.16
8.18
6.50
HUB24 Annual Report 2017
97
HUB24 Limited fully paid Ordinary Shares – Top 20 holdings as at 18 August 2017
Rank Name
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
NATIONAL NOMINEES LIMITED
J P MORGAN NOMINEES AUSTRALIA LIMITED
UBS NOMINEES PTY LTD
BNP PARIBAS NOMS PTY LTD
PACIFIC CUSTODIANS PTY LIMITED
CITICORP NOMINEES PTY LIMITED
FINOOK PTY LTD
LITSTER & ASSOCIATES PTY LTD
CITICORP NOMINEES PTY LIMITED
WEALTHPLAN TECHNOLOGIES PTY LTD
JASFORCE PTY LTD
BNP PARIBAS NOMINEES PTY LTD
SKYLYX PTY LTD
MIRRABOOKA INVESTMENTS LIMITED
MATIMO PTY LTD
LITSTER & ASSOCIATES PTY LTD
EGG AU PTY LTD
MR BRUCE HIGGINS & MRS RUTH HIGGINS
LITSTER & ASSOCIATES PTY LTD
Total
Balance of register
Grand total
18 Aug 2017
10,666,343
5,858,193
3,471,732
3,063,603
2,800,240
2,218,611
1,464,083
1,400,000
1,376,023
1,259,446
1,188,545
1,102,845
1,040,846
774,793
601,065
569,332
537,888
517,356
510,000
486,296
%IC
19.31
10.61
6.29
5.55
5.07
4.02
2.65
2.53
2.49
2.28
2.15
2.00
1.88
1.40
1.09
1.03
0.97
0.94
0.92
0.88
40,907,240
14,324,063
55,231,303
74.07
25.93
100.00
HUB24 Annual Report 2017 98
NOTES
HUB24 Annual Report 2017 hub24.com.au