‘19
ANNUAL REPORT YEAR ENDED 30 JUNE 2019
1
CONTENTS
3
4
5
13
21
24
42
43
44
Appendix 4E – Year Ended 30 June 2019
Financial Highlights FY19
Chairman and Managing Director’s report
Directors’ report
Introduction to the remuneration
report (unaudited)
Remuneration report
45
46
48
49
94
95
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the financial statements
Directors’ declaration
Independent auditor’s report
Auditor’s independence declaration
100 ASX additional information
Financial report
102 Corporate information
Consolidated statement of profit or loss
and other comprehensive income
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,
effective for financial years beginning on or after 1 July 2014.
The Group’s Corporate Governance Statement for the financial year ending 30 June 2019 is dated as at 30 June 2019 and
was approved by the Board on 26 August 2019. The Corporate Governance Statement is available on HUB24 Limited’s
website at www.hub24.com.au/corporate-governance-statement.
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019 2
HUB24 is leading the change in
the Australian financial services
industry through innovative wealth
management solutions that create
growth and value.
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019 3
APPENDIX 4E – YEAR ENDED 30 JUNE 2019
RESULTS FOR ANNOUNCEMENT TO THE MARKET
Year ended
30 June 2019
$’000
Year ended
30 June 2018
$’000
% change
Revenue from ordinary activities
98,668
86,995
Up
13.4%
Net profit after tax (from ordinary activities)
for the period attributable to members
Basic earnings per share (cents)
Diluted earnings per share (cents)
7,164
11.54
11.30
7,379
12.27
11.91
Down
Down
Down
(2.9)%
(6.0)%
(5.1)%
DIVIDENDS
Interim dividend
Final dividend
Amount
per security
Franked amount
per security at 30%
2.00
2.60
-
-
Subsequent to year end the directors have declared a final dividend of 2.6 cents per share (3.5 cents per share
inaugural annual dividend was paid following the year ended June 2018).
Dates for the dividend are as follows:
Ex-date
Record date
Dividend payment date
EXPLANATION OF RESULTS
16 September 2019
17 September 2019
18 October 2019
Refer to the attached Directors’ Report and review of operations for further explanation.
Net tangible asset (per fully paid ordinary share)
CHANGES IN CONTROLLED ENTITIES
30 June 2019
30 June 2018
$0.44
$0.42
HUB24 Limited has not gained or lost control over any entity during the reporting period.
AUDIT
The report is based on accounts that have been audited by the Group’s auditors, Deloitte Touche Tohmatsu.
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019 4
FINANCIAL HIGHLIGHTS FY19
NETFLOWS FOR THE YEAR
$3.9b £61% ON FY18
FUA OF
$12.9b
£54% ON 30 JUNE 2018
PLATFORM SEGMENT
REVENUE
$54.1m
36% ON FY18
PLATFORM SEGMENT
UNDERLYING EBITDA
$18.0m
52% ON FY18
GROUP
UNDERLYING EBITDA
$14.8m
30% ON FY18
GROUP
UNDERLYING NPAT
$6.8m
27% ON FY18
PLATFORM MARGINS (AS A PERCENTAGE OF REVENUE)
Gross profit
75%
£FROM 72% FY18
Underlying EBITDA
33%
£FROM 30% FY18 (2HFY19 35%)
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019
5
CHAIRMAN
AND MANAGING
DIRECTOR’S
REPORT
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019 6
FY19 Platform Revenue of $54.1 million
up 36% on FY18
1. INTRODUCTION
Dear Shareholders,
FY19 Platform Underlying EBITDA of $18.0m
up 52% on FY18
FY19 Underlying NPAT of $6.8 million
up 27% on FY18
Funds Under Administration (FUA) grew by 54%
to $12.9 billion from $8.3 billion
On behalf of the directors we are pleased to present you
the FY19 Annual Report for HUB24.
HUB24 is leading change in the Australian financial
services industry through innovative wealth
management solutions for financial advisers, advice
practices and stockbroking firms to create growth
opportunities and value for our shareholders.
The 2019 financial year has been another successful year
for our company. Our performance has remained strong
across key financial metrics, our strategy is clear, and we
are benefiting from industry-wide structural reform.
The wealth management industry is undergoing significant
change in the wake of the Financial Services Royal
Commission and as a result we are seeing increasing
demand from customers for the value and choice that
HUB24 offers. Institutions that have been under pressure
and reshaping their wealth strategy are now, in some
cases, exiting financial advice and this is driving dislocation
in the licensee segment. Mid-tier licensees are on the rise
and new advice models are emerging, for example the
aggregators, who are forming communities of advisers
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019 7
During the year, HUB24 achieved the following financial
results:
• FY19 Platform Revenue of $54.1 million
up 36% on FY18
• FY19 Platform Underlying EBITDA of $18.0m
up 52% on FY18
• Funds Under Administration (FUA) grew
by 54% to $12.9 billion from $8.3 billion,
with record net inflows of $3.9 billion
Along with strong financial growth during the financial
year, we have achieved some significant milestones:
• Maintained our position as the fastest
growing platform provider relative to our size
in percentage terms1
• Moved into 2nd place in terms of annual netflows¹
having achieved 1st place for quarterly net flows in
the December quarter2
• Maintained our first-place position for Managed
Accounts functionality3
Our customers continue to be our advocates. In the most
recent Investment Trends Planner Technology report3,
HUB24 maintained its 1st place ranking for adviser primary
platform advocacy and increased its overall adviser
satisfaction ranking to 2nd place. Additionally, HUB24 was
ranked in the top two places for 23 out of 32 categories
and ranked in first place for its range of investments, client
portal, portfolio management tools and for helping advisers
demonstrate value to their clients.
We maintained our position as market-leader in the
managed accounts segment. This segment of the
industry continues to grow as advisers recognise the
tangible benefits managed accounts provide in terms of
client outcomes and business efficiencies and is forecast
to reach $115 billion by 20204. HUB24 continues to
innovate in this area and we recently launched foreign
currency capability in our managed portfolios. This is
a significant enhancement as investment managers
can now choose to settle international securities
transactions and have international income paid in
either foreign currency or Australian dollars, minimising
currency conversions and potentially providing
enhanced outcomes for clients.
to access technology and advice solutions. Additionally,
platform Funds Under Administration (FUA) are in
transition away from traditional platforms as advisers
migrate from institutions, grandfathering of commissions
is phased out and advisers look for more value, flexibility
and choice.
ADVISER MARKET SHARE COMPOSITION*
70%
60%
50%
40%
30%
20%
6
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7
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Institutions (Big 6)
Others
*Bell Potter Data: 2019 Australian Super and Adviser Landscape Reports.
HUB24 is well-positioned in this environment. Advisers are
recognising that our innovative functionality and investment
solutions enable them to deliver superior outcomes to
their clients and their practice. This financial year has seen
us capitalise on these opportunities while continuing our
commitment to constant innovation, growing our team and
delivering outstanding customer service.
The trend towards advisers and clients choosing specialist
platforms accelerated during FY19 with data from the
March 2019 Strategic Insights platform flows report
showing specialist platforms like HUB24 continue to gain
market share from the major institutional platforms1.
ANNUAL NET FLOWS*
400%
300%
200%
100%
0%
-100%
-200%
9
0
c
e
D
0
1
p
e
S
1
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2
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8
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Institutional Platforms
Specialist Platforms
At 30 June 2019 Managed Portfolios represented
$5.6 billion of our FUA having contributed $2 billion of
FUA growth during the year.
*Strategic Insights Analysis of Wrap, Platform & MasterTrust Managed
Funds at March 2019
Advisers and clients are increasingly seeking more choice
when it comes to investment options, this year we added
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019
8
129 new managed portfolios to our menus and increased
the number of international ETFs available to over 50.
Change is continuing in the traditional stockbroking
segment where brokers are looking to broaden their
value proposition and are transitioning to advice led
wealth management. Our market-leading platform and
managed portfolio functionality together with Agility
Applications has led to us being successful in securing
several new stockbroking clients throughout the year.
HUB24 is committed to extending our leadership in the
financial advice, investment management and stockbroking
segments to enable sustainable and enduring wealth
management businesses in the context of profound
industry change where innovation creates value.
2. FINANCIAL PERFORMANCE
Group revenue over the full year was up 15% while group
direct costs increased by only 2%. Platform revenue was
up 36% while platform direct costs increased by 26%.
The Group’s preferred measure of profitability, which is
Underlying Earnings Before Interest, Tax, Depreciation
and Amortisation (Underlying EBITDA), increased 30%
to $14.8 million for FY19 ($11.4 million in FY18), with
Underlying Net Profit After Tax (Underlying NPAT) up
27% to $6.8 million for FY19 ($5.4 million for FY18).
The key items driving the Group Underlying EBITDA
performance for FY19 were:
• FUA growth in the Platform segment from $8.3
billion at 30 June 2018 to $12.9 billion at 30 June
2019, an increase of 54%. Record net inflows of
$3.9 billion were achieved during FY19 highlighting
HUB24’s strength and value proposition in the
context of structural change and distraction
across the industry. Our focus and capability
to assist advisers with bulk FUA transitions has
supplemented organic adviser flows to increase
growth during this period.
• Platform revenue increased by 36% to $54.1 million
for FY19 ($39.7 million for FY18) while platform
expenses (direct, operating and growth expenses)
increased by 30% to $36.0 million ($27.8 million for
FY18). Revenue softened as a result of our growth
focus on assisted FUA transition, which involves the
in-specie transfer of assets, and as a consequence
reduces transaction fees for new accounts. Scale
based pricing for large growth opportunities as well
as cyclically subdued trading markets and lower than
average cash balances on the platform have also
impacted revenue in FY19.
• As previously announced, the Group continued to invest
in the business in order to support the acceleration
of FUA growth. Our operating expenses increased by
28% in the first half and we are pleased to report that
this growth slowed to 5% in the second half of the year
reflecting overall cost growth in line with expectations.
• Our operating expense base increase included
senior appointments in finance, operations, risk and
compliance and the associated recruitment costs.
Operating expenses also included growth investment
expenses, predominantly headcount resources
dedicated to distribution, platform development and
business strategy to drive future growth. In 1HFY19
two senior distribution executives were recruited
to deliver further growth, and strengthen our
pipeline and key client relationships. Our investment
in operating expenses ensures our business is
positioned to reliably take on new FUA and will be
leveraged over a growing FUA base in future periods.
A statutory Net Profit after Tax (NPAT) of $7.2 million was
recorded for FY19 ($7.4 million for FY18 which included
a material non-cash fair value gain).
3. GROWTH
HUB24 has maintained our position as the fastest
growing platform in the market in percentage terms1 and
has achieved a compound annual growth rate (“CAGR”)
in FUA over the past five years of 72%.
NET FLOW SHARE TO UNDERLYING MARKET SHARE RATIO
8
9
10
HUB24
1
2
3
4
Specialist platform
providers
5
7
6
Traditional/Institutional
platforms
According to the latest available market share data
HUB24 has moved into 2nd place in terms of annual
net flows across the industry. Institutional platforms
are now collectively in net outflow which reflects the
acceleration of the trend away from the incumbents
towards market-leading solutions which provide greater
choice for advisers and clients. HUB24’s market share
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019 9
of the platform industry has grown from 0.9% to 1.3%
in the 12 months to 31 March 2019 and we have the
highest growth ratio in terms of net inflow market share
compared to underlying market share1.
The company’s growth in FUA continues to be driven
by organic opportunities from both existing and new
adviser relationships as well as transition opportunities
from other platforms. During FY19 the number of
active licensees on the platform grew by 84 taking the
total number of active licensees to 253. The number of
advisers using the platform also increased by 32% with
398 new advisers joining throughout the year.
FUA across our Investor Directed Portfolio Service (IDPS)
and Super product remains similar with 54.1% in IDPS
and 45.9% in Super. The retail version of the platform
now accounts for 71% of FUA, whilst fully customer
branded white labels consist of 29%. There has been a
trend throughout the year of licensees opting to use the
HUB24 retail offer with flexible pricing options rather
than create their own white label version of the platform.
MONTHLY AVERAGE NET FLOWS
$M
350
300
250
200
150
100
50
0
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
Average monthly net inflows
One-off transition
Market conditions for HUB24’s products and services
present unprecedented opportunity for growth and
we will continue to invest in distribution, product and
technology capabilities to enable us to take advantage of
this unique opportunity.
Platform statistics
FUA ($m)
Flows*
Net inflows ($m)
Gross inflows ($m)
Advisers
Jun ‘18
8,341
Sept ‘18
9,140
739
1,019
638
935
Dec ‘18
10,046
1,480**
1,760**
Mar ‘19
11,475
793
1,156
Jun ‘19
12,870
979
1,475
Growth
on pcp
54.3%
32.4%
44.7%
Number of advisers (#)
1,227
1,319
1,456
1,534
1,625
32.4%
Statistics are for each quarter, have been rounded and are not audited.
*Inflows exclude market movements.
**Includes one-off transition of ~$725 million.
4. OPERATIONS
FY19 has been characterised by consistent product and
investment innovation, using technology as a driver to
deliver greater choice and provide more opportunities
for advisers to build business efficiencies while creating
value for their clients.
The addition of Challenger annuities to the platform
was completed leveraging our ConnectHUB investment
which provides seamless integration of data from
external providers. ConnectHUB has also delivered new
historical performance reporting functionality which aims
to remove a significant barrier to changing platforms
for advisers and their clients. We are continuing to build
our ConnectHUB solution with plans for further product
launches during FY20.
Market conditions for
HUB24’s products and services
present unprecedented
opportunity for growth and
we will continue to invest
in distribution, product and
technology capabilities to enable
us to take advantage of this
unique opportunity.
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019 10
To provide further flexibility for our managed portfolio
offer, licensees and investment managers can now
choose to work with a range of third-party Responsible
Entities to offer Managed Investment Scheme (MIS)
portfolios to their clients via the platform. We also offer
a solution for Managed Discretionary Account (MDA)
providers that choose HUB24. The new functionality
has proved popular with our clients and investment
managers and there are now 69 MIS portfolios available
on the platform.
HUB24’s commitment to provide investment solutions
to all segments of the market has resulted in the launch
of the Sargon Small APRA Fund Service which utilises
HUB24’s platform technology. This innovation provides
an alternative solution for self-managed superannuation
fund (SMSF) clients seeking the flexibility of their own
fund whilst utilising the services of a professional trustee.
In December our operations team successfully
completed our largest transition to date bringing
across the Fitzpatricks Private Wealth inhouse MDA
ahead of schedule providing evidence of both our
technology capability and our expertise in managing
large and complex transitions whilst maintaining growth
momentum across the business.
During the year, Agility Applications extended their
product capability and developed several new products
to support their client needs. In June, we announced
an agreement with Cashwerkz to integrate their term
deposit and cash management platform into Agility’s
functionality and successfully implemented the Open
Markets application and infrastructure solution. Agility
also moved into pilot phase with their Machine Learning/
Artificial Intelligence offer with one of our stockbroking
clients.
Paragem continues to be successful in recruiting new
advice practices as part of the increasing migration
of advisers away from institutional licensees. Nathan
Jacobsen commenced as Managing Director in September
and was joined by Sonya Choi La Rosa as General
Manager in January this year, providing additional strength
to support the growth of the Paragem adviser network.
5. CORPORATE GOVERNANCE
In the midst of significant regulatory change, and
in the interests of customers and shareholders, it
is important to reiterate HUB24’s strong focus on
corporate governance. Both the Board of Directors and
Management recognise our duties and obligations to
maintain a robust system of corporate governance and
are committed to ongoing review and improvement of
these aspects of the business to ensure they continue to
reflect industry best practice.
We are committed to ensuring our Board of Directors
collectively have the requisite skills, experience and
diversity to both support HUB24’s growth and safeguard
shareholders and customers. We commenced the
recruitment process for a new non-executive director
in May and expect this addition to the Board will be
announced in the coming months.
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019 11
During FY19 we enhanced the strength of our risk
and compliance teams, reviewed and refreshed the
company’s risk management framework and undertook
a Board led organisational culture review. Having
a strong risk management culture is core to our
governance approach and is fundamental for building
long-term shareholder value.
growth is now significantly larger and in FY20 we will
be making further strategic investments to leverage
our position and capture this growth. We intend to
grow our distribution footprint nationally and extend
our leadership in managed portfolios with technology
enabled innovation that will deliver enhanced
accessibility and outcomes for clients.
6. OUTLOOK
The future Australian Wealth Management industry is
now taking shape and HUB24 is continuing to move
forward with positive tailwinds and unprecedented
opportunity for growth.
In the 2019 financial year, HUB24 maintained market-
leading growth levels whilst other industry participants
were impacted by structural change and distraction.
As industry level organic flows from financial advisers
to platforms were traditionally softer, we successfully
secured a number of new client relationships and now
have a strong pipeline of contracted opportunities as
well as a growing list of prospective opportunities.
HUB24 continues to benefit from financial advisers
transitioning their clients from competitor platforms to
utilise our market-leading functionality. We expect our
focussed provision of transition assistance for licensees,
advisers and their clients will facilitate ongoing growth
momentum for the company.
As more financial advisers move away from institutional
alignment and the demand for choice, value and
market-leading platforms increases, the contestable
market for HUB24 is expanding. The opportunity for
These investments are expected to increase net flows
to the platform and create a step change in our FUA
growth. As a result, we are now targeting a FUA range of
$22–$26 billion by 30 June 20215. This is an uplift on our
stated target last year when we anticipated FUA levels
between $19–23 billion by the end of FY21.
We are confident we can continue our profitable FUA
growth trajectory based on the broad appeal of our
platform and managed accounts solution, and our ability
to innovate solutions for customers, financial advisers,
stockbrokers and investment managers.
We look forward to meeting shareholders at the Annual
General Meeting and on behalf of the Directors, wish
to thank our team and business partners for their
contribution during FY19 which was once again a
successful year for HUB24. We also thank our customers
for their ongoing support.
Yours sincerely
Bruce Higgins
Chairman
Andrew Alcock
Managing Director
1 Strategic Insights Analysis of Wrap, Platform & MasterTrust Managed
Funds at March 2019
2 Strategic Insights Analysis of Wrap, Platform & MasterTrust Managed
Funds at December 2018
3
Investment Trends Platform Competitive Analysis and Benchmarking
Report February 2019
4
IMAP & Milliman Managed Accounts FUM census as at 30 June 2018
5 Assumes consistent and stable investment markets throughout the period
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019
12
HUB24 is leading change in the
Australian financial services
industry, providing solutions to drive
ongoing transformation and also
creating growth opportunities for
our customers and value for
our shareholders.
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019 13
DIRECTORS’
REPORT
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019 14
Your Directors present their
report on the Group consisting of
HUB24 Limited and the entities it
controlled at the end of, or during,
the year ended 30 June 2019.
DIRECTORS AND COMPANY SECRETARY
BRUCE HIGGINS
The following persons were Directors of HUB24 Limited
during the whole of the financial year and up to the date
of this report:
Mr Bruce Higgins
Mr Andrew Alcock
Mr Ian Litster
Mr Anthony McDonald
Mr Paul Rogan
B Eng CP Eng, MBA, FAICD
CHAIRMAN AND NON-EXECUTIVE DIRECTOR
Bruce has over 20 years’ experience as a senior
executive or CEO, with companies such as Honeywell,
Raytheon and listed technology companies. He is a
specialist in rapid growth entrepreneurial companies,
financial and software services companies, M&A and
corporate governance and has also served on ASX
boards as a Non-Executive Director or Chairman for
over 13 years.
Bruce also currently serves as 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.
Other listed company directorships held in the last
three years:
• Legend Corporation Limited
• Novita Healthcare Limited (resigned 10 May 2018).
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019 15
ANDREW ALCOCK
B Bus, GAICD
MANAGING DIRECTOR
IAN LITSTER
B Sc (Hons)
NON-EXECUTIVE DIRECTOR
Andrew has over 24 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 Group’s Board on
29 August 2014 as Managing Director.
Other listed company directorships held in the last
three years:
• Nil.
Ian Litster has over 12 years experience in designing
and developing software for the financial services
industry, 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.
Other listed company directorships held in the last
three years:
• Nil.
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019 16
ANTHONY MCDONALD
B Comm, LLB
NON-EXECUTIVE DIRECTOR
PAUL ROGAN
B Bus, GAICD, CPA
NON-EXECUTIVE DIRECTOR
Paul is a senior financial services professional with a
background in Accounting and Finance with a proven
track record for delivering results in different regions
and markets. In his executive career he successfully
drove businesses through rapid growth phases including
with Challenger, NAB, MLC, and Lend Lease.
Paul has more than 25 years experience serving on
entity boards and industry groups including 13 years
in the not for profit sector. Paul was appointed to the
HUB24 Limited board on 20 December 2017 and
appointed as Chair of the Audit, Risk and Compliance
Committee on 1 March 2018.
Other listed company directorships held in the last
three years:
• Nil.
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 two global law firms. 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.
Other listed company directorships held in the last
three years:
• 8IP Emerging Companies Limited (appointed 24
September 2015)
• URB Investments Limited (appointed 13 October
2016).
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019 17
COMPANY SECRETARIES
The names and details of the Company Secretaries in
office during the 2019 financial year and at the date of
this report are as follows:
PAUL HOWARD
B Comm LLB, GAICD
COMPANY SECRETARY
Paul is a senior executive and lawyer with over 20 years
of experience in private practice and in-house roles.
Paul was previously General Counsel & Company
Secretary at Rest, one of Australia’s largest
superannuation funds, responsible for the legal and
company secretariat functions. Paul was also a member
of the Executive Team and a trusted advisor to the
Board. Prior to joining Rest, Paul was a senior lawyer
at Challenger Limited, an ASX listed diversified financial
services business, holding various legal roles during his
time there. Before moving in house with Challenger, Paul
was in private practice as a senior corporate lawyer in
Sydney, Hong Kong & New Zealand.
Listed company directorships held in the last three years:
• Nil
Paul was appointed Company Secretary on 31 July 2019.
MARK GOODRICK
B Acc, M App Fin, CA
COMPANY SECRETARY AND CHIEF FINANCIAL OFFICER
Mark has over 15 years of experience in funds
management as well as managing global finance teams
in complex and fast-growing listed companies.
Mark was previously CFO at Atlas Arteria, formerly
known as Macquarie Atlas Roads, a global developer and
operator of private toll roads, which during his tenure as
CFO grew market capitalisation significantly and is now
part of the ASX Top 100 companies. Additionally, Mark
held the role of CFO of Macquarie Infrastructure and
Real Assets (MIRA) Australia which operates a range of
infrastructure funds globally and manages approximately
$13 billion in equity under management.
Listed company directorships held in the last three years:
• Nil.
Mark was appointed Company Secretary on
31 December 2018.
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019 18
WENDY MCINTYRE
BA LLB
MATTHEW HAES
B Ec (Syd), ACA, AGIA ACIS, GAICD
(PREVIOUS COMPANY SECRETARY) GENERAL COUNSEL, COMPLIANCE & RISK
PREVIOUS COMPANY SECRETARY AND CHIEF FINANCIAL OFFICER
Wendy is a specialist financial services lawyer, risk
and compliance professional and has over 20 years’
experience across the financial services industry.
Wendy’s experience includes: wealth management,
platforms (IDPS and super wraps), managed investment
schemes, financial product advice, superannuation, life
insurance and distribution arrangements. Wendy has
worked at top tier law firms, including MinterEllison, with
other financial services providers, such as Challenger
Limited, and with ASIC.
Listed company directorships held in the last three years:
• Nil
Wendy was appointed Company Secretary on
31 December 2018, and resigned on 31 July 2019.
Matthew’s financial services experience spans over
23 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 was a Director of the HUB24 Group’s
subsidiary companies, a Responsible Manager of HUB24
Custodial Services Limited, a member of the executive
committee and served the committees of the Board.
Matthew has a Bachelor of Economics, is a Chartered
Accountant, Chartered Company Secretary and graduate
of the Australian Institute of Company Directors.
Matthew was appointed Company Secretary on
10 September 2012 and resigned on 31 December 2018.
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019 19
GROUP OVERVIEW
HUB24 Limited operates the HUB24 investment and
superannuation platform, provides financial advice to
clients through financial advisers authorised by Paragem
Pty Limited and provides application and technology
products through Agility Applications Pty Limited.
The HUB24 investment and superannuation platform is
a leading 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 portfolio functionality, efficient and
cost effective trading, insurance and comprehensive
reporting for all types of investors - individuals,
companies, trusts or self-managed super funds.
Paragem provides licensee services and is a wholly
owned subsidiary and boutique dealer group. It
comprises a network of 32 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 provides application and technology products
to the financial services industry, currently servicing
approximately 45% of Australia’s stockbroking market.
It earns software license and consulting fees from data,
software and infrastructure.
REVIEW AND RESULTS OF OPERATIONS
The Group recorded a 13.4% increase in revenue from
ordinary activities to $98.7 million for FY19 (revenue of
$87.0 million for FY18).
The Group’s preferred measure of profitability is
Underlying Earnings before Interest, Tax, Depreciation
and Amortisation (Underlying EBITDA), which is up 29.7%
to $14.8 million for FY19 (Underlying EBITDA of
$11.4 million in FY18).
The key items driving the Group Underlying EBITDA
performance for FY19 were:
• FUA Growth in the Platform segment from $8.3 billion
at 30 June 2018 to $12.9 billion at 30 June 2019, an
increase of 54.3%. Record net inflows of $3.9 billion
were achieved during FY19 in the context of structural
change and distraction across the industry. Our
capability to assist advisers with bulk FUA transitions
has supplemented organic adviser flows to maintain
growth in these conditions.
• Platform revenue increased by 36.3% to
$54.1 million for FY19 ($39.7 million for FY18).
Revenue was impacted by higher levels of assisted
FUA transition, which involve the in-specie transfer of
assets, and as a consequence reduced trading margin
revenue for new accounts. We also saw the impact of
subdued markets, as well as lower cash balances on
platform. Platform expenses (direct, operating and
growth expenses) increased by 29.7% to $36.1 million
($27.8 million for FY18).
A statutory Net Profit After Tax (NPAT) of $7.2 million was
recorded for FY19 ($7.4 million for FY18, which included
a material non-cash fair value gain).
In addition to the information disclosed in this Annual
Report, readers are referred to the Group’s disclosures to
the ASX on 27 August 2019 for further detail and analysis
of the Group’s performance and financial position.
PRINCIPAL ACTIVITIES
The principal activities 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
The following options, performance rights and shares
were issued in accordance with schemes approved by
shareholders. These schemes contain ambitious targets,
including FUA targets of up to $26 billion, in order to
incentivise and align key staff towards HUB24 achieving
its growth objectives:
• 389,898 share options were issued to staff and
executives in the financial year ended 30 June 2019
(465,565 in FY18)
• 570,941 performance award rights were issued to
staff, executives and non-executive directors in the
financial year ended 30 June 2019 (143,223 in FY18)
• 709,080 shares were issued for options exercised by
staff and executives in the financial year ended 30
June 2019 (2,351,000 in FY18)
• 31,669 shares were issued for part payment of
consideration in the purchase of Agility Applications in
the financial year ended 30 June 2019 (nil in FY18)
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
There have been no significant changes in the nature or
state of affairs of the Group.
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019 20
DIVIDENDS
DIRECTORS’ INDEMNITY
Subsequent to the end of the year, the directors have
declared a final unfranked dividend of 2.6 cents per
share to be paid on 18 October 2019. This will result
in full year unfranked dividends of 4.6 cents per share
(3.5 cents per share inaugural annual dividend was paid
following the year ended June 2018).
During FY19 the Group paid a premium in respect of
insuring all 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.
SIGNIFICANT EVENTS AFTER THE REPORTING DATE
Other than the declaration of a final dividend noted
above, no other matters or circumstances have arisen
since 30 June 2019 that have significantly affected, or
may significantly affect the Group’s operations, the
results of those operations, or the Group’s state of
affairs in future financial years.
The Group 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 FY19, except
to the extent permitted by law, indemnified or agreed
to indemnify an officer or auditor of the Group or of any
related body corporate against a liability incurred as
such an officer or auditor.
LIKELY DEVELOPMENTS AND EXPECTED RESULTS
With the continued growth in FUA onto the HUB24
investment and superannuation platform and continuing
success of its supporting businesses, the Group expects
its financial results to continue improving with scale.
MEETINGS OF DIRECTORS
The numbers of meetings of the Group’s board of
Directors and of each board committee held during the
year ended 30 June 2019, and the numbers of meetings
attended by each Director were as per the table below:
ENVIRONMENTAL REGULATION AND PERFORMANCE
The Group’s operations are not subject to significant
environmental regulations under Australian legislation in
relation to the conduct of its operations.
Director
Bruce Higgins
Andrew Alcock
Ian Litster
Anthony McDonald
Paul Rogan
Board meetings
Audit, risk & compliance
committee meetings
Remuneration &
nomination committee
meetings
Attended
Held*
Attended
Held*
Attended
Held*
10
10
10
10
10
10
10
10
10
10
4
4
4
-
4
4
4
4
-
4
2
-
2
2
-
2
-
2
2
-
*Number of meetings held during the time the director held office or was a member of the committee.
This report is made in accordance with a resolution of Directors.
Bruce Higgins
Director
Sydney, 26 August 2019
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019 21
INTRODUCTION TO THE REMUNERATION
REPORT (UNAUDITED)
CHANGES FOR FY19
First and foremost, in FY19 we have endeavoured to
improve the Remuneration Report with the inaugural
inclusion of a specific letter from the Chairman of
the Remuneration and Nomination Committee and
by setting out key information, including pictorial
representations of various aspects of the Remuneration
Report. We trust this assists Shareholders with
more readily interpreting the Group’s remuneration
philosophy, structure, implementation and alignment.
We will continue to look for further improvements in the
Remuneration Report over time.
In FY19, we built on the remuneration insights and
best practice gleaned from our engagement with a
specialist remuneration consultancy in FY16 and FY18.
We have also kept abreast of best practice guidelines
such as relevant elements of the Banking Executive
Accountability Regime introduced by APRA in 2018, all
with the aim of better aligning each of remuneration
measures, incentives and retention mechanisms to
Shareholder value and to HUB24’s strategy.
PERFORMANCE ALIGNMENT
A key priority for the Board is to ensure a high degree of
alignment in outcomes between Shareholders, staff and
Management.
Based on the independent advice and market
developments, the Board and its Remuneration and
Nomination Committee approved revised incentive
arrangements for Mr Alcock and other Management
with a view to strengthening alignment. This review
included ensuring the design and operation of the
Group’s Short Term and Long Term Incentives are in line
with Shareholder and market expectations. The Board
and the Remuneration and Nomination Committee also
strive to ensure that the arrangements for all staff in the
organisation are considered appropriate and staff are
meaningfully incentivised.
A summary of the revised arrangements for certain
Management (for FY19) is set out in the following table.
Dear Shareholders,
On behalf of the Board
and its Remuneration and
Nomination Committee, I am
pleased to present HUB24’s 2019
Remuneration Report, for which
we will seek your support at our
Annual General Meeting this
November.
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019 22
Key Remuneration
Component
Revised
Arrangement
Purpose and
Alignment
Fixed Remuneration
Short Term Incentive
(STI)
Forgoing increases in Fixed
Remuneration until 1 September
2020 in return for an issuance of
Special LTI
• STI deferral provisions
• STI claw-back provisions
• Structured scorecards
Long Term Incentive
(LTI)
Issuance of Special LTI in
addition to usual LTI scheme
in return for forgoing increases
in Fixed Remuneration until
1 September 2020
Alignment with cash flow and profitability objectives of
HUB24
• 33.3% of the STI is payable upon approval by the
Board as recommended by the Remuneration
and Nomination Committee, whilst payment of the
remaining amount is deferred with 33.3% payable in
a further six months and the remaining 33.3% in a
further 12 months from the original approval date
• Claw-back in instances of fraud or malfeasance
• Structured scorecard KPIs including:
- Growth and profitability
- Business and operational performance including
risk and compliance
- Building the future foundations of the business
- Product and service innovation
- Leadership and culture
Alignment with cash flow, profitability and Shareholder
return objectives
These changes are more fully described in section 4 of
the Remuneration Report.
REMUNERATION OUTCOMES
The Board views it was another successful year for HUB24
and is satisfied that key FY19 performance indicators were
met. HUB24 has achieved strong growth in Funds Under
Administration (FUA) (up 54%), Platform Revenue (up
36%) and Platform Underlying Earnings Before Interest,
Tax, Depreciation and Amortisation (Underlying EBITDA)
(up 52%). As a result of these strong results, incentives
were awarded to the Managing Director, Mr Alcock, and
to various Management under the FY19 Short Term
and Long Term Incentive plans (STIs and LTIs). The main
FY19 remuneration outcomes for the Managing Director
are summarised below. The Board believes that these
outcomes appropriately align HUB24’s performance,
Shareholder value and market expectations with
Management incentivisation and retention.
ANDREW ALCOCK, MANAGING DIRECTOR TOTAL REMUNERATION SNAPSHOT
FIXED
STI
LTI
TOTAL
FY19
FY18
FY19
FY18
FY19
FY18
FY19
FY18
$
470,695
474,683
203,312
265,000
353,927
282,340
1,027,934
1,022,023
% STI
eligibility
achieved
N/A
60.0%
79.1%
N/A
60.0%
79.1%
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019 23
correlation between overall results and the culture
expected by the Board. The final analysis will be used
to synthesise areas of continuous improvement across
the organisation including risk management and the
alignment of remuneration to culture, organisational
health, desired behaviours and sustainable
Shareholder value.
REMUNERATION FOR 2020
There are no material changes to the overall
remuneration strategy proposed for 2020, and we will
continue to monitor it to ensure it is meeting both best
practice and our strategic objectives.
THE 2019 REMUNERATION REPORT
The Board believes HUB24’s approach to Board and
Management remuneration remains balanced, fair
and equitable and motivates, retains and rewards a
successful and experienced team to deliver ongoing
business growth and manage the risks of the business,
with Shareholder alignment over the short, medium and
longer term.
As mentioned at the outset, the changes to the
FY19 Remuneration Report are intended to assist
Shareholders to more readily review our remuneration
philosophy, structures and alignment and we trust
this is the case. We remain committed to continuous
improvement and to open communication with
Shareholders and other stakeholders, particularly
around our remuneration practices and disclosures. As
such, I welcome any feedback that you may have.
Regards,
Anthony (Tony) McDonald
Chairman, Remuneration and Nomination Committee
Managing Director Remuneration Breakdown 2019
Fixed
45.8%
STI
19.8%
LTI
34.4%
Managing Director Total Remuneration Relative to
Group Underlying EBITDA
$’000
1250
1000
750
500
250
0
$m
15
12
9
6
3
0
FY17
FY18
FY19
MD remuneration
(left axis)
Group Underlying EBITDA
(right axis)
CULTURE AND ORGANISATIONAL HEALTH
The Board and Management believe that culture and
performance are inextricably linked, and that the culture
of an organisation must be tested from time to time and
fully understood in order to ensure that behaviours and
incentives are aligned to the desired culture and ultimately
conducive to creating sustainable Shareholder value.
Accordingly, in FY19 the Board initiated a company-wide
culture and organisational health survey, commissioning
an independent specialist research organisation to assist
with format, content and implementation. The survey
canvassed a number of quantitative and qualitative
(open) questions, intended to test, ascertain and verify
organisational culture and health.
The survey was completed shortly after the close of the
2019 financial year and the results are being carefully
analysed with the assistance of the independent
specialist, noting that initial indicators show a close
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019
24
REMUNERATION REPORT – AUDITED
1. INTRODUCTION
The Directors present the Remuneration Report for
HUB24 and its consolidated entities (the Group) for the
year ended 30 June 2019 (FY19), prepared in accordance
with the Corporations Act 2001. The Remuneration
Report forms part of the Directors’ Report and provides
Shareholders with an understanding of the remuneration
principles in place for Key Management Personnel (KMP).
This Remuneration Report explains the FY19
Remuneration Framework and outcomes for the KMP.
The KMP comprise:
• The Managing Director, certain Group Executives
with operational and/or financial responsibility
(together referred to in this Remuneration Report as
‘Executives’); and
• The Non-Executive Directors.
KMP
Name
Bruce Higgins
Ian Litster
Anthony McDonald
Paul Rogan
Andrew Alcock
Jason Entwistle
Matthew Haes*
Mark Goodrick
Craig Lawrenson
Role in FY19
Non-Executive Director, Chairman
Non-Executive Director
Non-Executive Director
Non-Executive Director
Managing Director
Director, Strategic Development
Chief Financial Officer and Company Secretary
Chief Financial Officer and Joint Company Secretary
Chief Operating Officer
Commencement date in role
19 October 2012
25 September 2012
1 September 2015
20 December 2017
29 July 2013
1 August 2013
26 June 2012
3 December 2018
21 August 2017
*Resigned effective 31 December 2018.
2. REMUNERATION STRATEGY
The overall objective of the Board’s Remuneration
Strategy is to support and drive the strategic agenda of
the Group, and to align remuneration with the creation
of sustainable Shareholder value. The performance of
the Group depends upon the quality of its KMP.
To deliver the Group strategy and Shareholder value the
Group 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 Group embodies the following principles in its
Remuneration Framework:
Remuneration Principles
Attract,
motivate and
retain qualified
staff (at all levels)
to manage the
profitable growth
of HUB24
Focus on
sustained growth
in Shareholder
value
Provide
competitive
& reasonable
rewards to attract,
motivate & retain
high calibre
individuals
Focus the KMP
on key drivers
of Shareholder
value including
capital
management
Simplicity and
transparency
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019 25
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 structure and amount of remuneration on a periodic
basis by reference to relevant employment market
conditions, with the overall objective of delivering sustainable
growth in Shareholder value from the recruitment,
motivation and 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 in the Directors’ Report.
In reviewing KMP performance, the Remuneration and
Nomination Committee conduct an evaluation based
on specific criteria, including the Group’s business
performance, whether strategic objectives are being
achieved, and the development and performance of KMP.
3. REMUNERATION FRAMEWORK
HUB24’s overall Remuneration Framework places
emphasis on rewarding Executives for achieving the
Group’s strategy and creating Shareholder value as follows:
• Fixed Remuneration that attracts and retains Executives
with the skills and experience needed to respond to the
complex challenges facing the Group and the industry;
• Short Term Incentives that drive alignment with the
Group’s current operational strategies including
profitability, product and service innovation, risk
management, change management and laying the
foundations for further growth; and
• Long Term Incentives that align KMP outcomes
over time with the delivery of sustainable
Shareholder value.
HUB24 strives to create a Remuneration Framework that
drives a performance culture, ensuring there is a strong
link between Executive pay and the achievement of the
Group’s performance and sustainable Shareholder value.
The Board reviews the Remuneration Framework regularly
to ensure it continues to be fit-for-purpose and drives
performance outcomes that deliver on the Group’s
strategy and value creation. These regular reviews are also
considered good governance by the Board.
As highlighted in last year’s Remuneration Report,
the Board undertook a review of the Remuneration
Framework in FY16 and FY18, assisted by an
Independent Expert. The reviews included an evaluation
of remuneration practices and frameworks, as well as
remuneration levels for each of Fixed Remuneration,
STIs and LTIs against comparator benchmarks. The
Board has also given consideration to relevant elements
of APRA’s Banking Executives Accountability Regime
(BEAR). The purpose of this evaluation was to determine
whether the Group’s remuneration policies and
practices remain market competitive and best practice.
The outcomes of these reviews have been incorporated
into the Group’s Remuneration Framework. HUB24 will
continue to engage proactively with stakeholders and
our advisers to ensure that any further market practices
and relevant developments in remuneration are fully
understood, that stakeholder concerns are addressed at
the earliest opportunity and that HUB24’s Remuneration
Framework and implementation remain consistent with
its strategy and Shareholder alignment.
At the 19 November 2018 AGM, 99.04% of votes received
supported the adoption of the Remuneration Report for the
year ended 30 June 2018. The Group proactively engages
with Proxy Advisers and did not receive any specific feedback
at the AGM regarding its remuneration practices.
4. FY19 EXECUTIVE REMUNERATION
The Remuneration Framework is designed to reward
the achievement of both short and longer term
objectives which in turn, align Executive and Shareholder
outcomes. The following diagram provides an overview
of the remuneration for Executives for FY19.
Fixed Remuneration
Short Term Incentive (STI)
Long Term Incentive (LTI)
Objectives
To attract and retain Executives with
the right capability and experience
To reward Executives for delivering
financial returns and progress relative
to the Group’s current strategy
To reward KMP for long term
performance, encourage
shareholding and deliver long term
value creation and retention for
Shareholders
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019 26
EXECUTIVE REMUNERATION MIX
The remuneration mix is structured to attract, motivate
and retain Executives (and staff overall) appropriately.
The FY19 remuneration mix for Executives is
summarised below:
Managing Director Remuneration Breakdown 2019
goals which contribute to the creation and growth of
sustained Shareholder value.
STI payments are granted to Executives based upon
structured qualitative and quantitative scorecard
measures being achieved as determined by the Board.
The scorecard measures include “base case” and
“stretch” targets. The allocated weighting between base
case and stretch may vary between Executives.
STI are currently assessed against performance using
the following categories:
Fixed
45.8%
STI
19.8%
• Growth and profitability
• Business and operational performance including risk
and compliance
• Building future foundations of the business
• Product and service innovation
• Leadership and culture
The relative splits are shown in the diagrams below:
LTI
34.4%
Other Executives Remuneration Breakdown 2019
(average)
Managing Director STI Targets
Fixed
55.6%
STI
20.3%
LTI
24.1%
FIXED REMUNERATION
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 internal
and, where appropriate, external advice on policies,
practices and market comparisons. Fixed Remuneration
is received in cash.
STI
Growth &
Profitability
Base
30%
Stretch
35%
Leadership &
Culture
Product &
Service
Innovation
Stretch
13%
Base
6%
Base
8%
Base
8%
Other Executive STI Targets
Growth &
Profitability
Business &
Operational
Performance
Future
Foundations
Business &
Operational
Performance
Leadership &
Culture
Future
Foundations
Product &
Service
Innovation
The objective of STIs is to reward Executives in a manner
that focusses them on achieving individual and business
Note: Weightings vary between each Executive
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019
27
Other STI Conditions
33.3% payable upon approval by the Board as
recommended by the Remuneration and Nomination
Committee
Balance deferred with half payable in a further six
months and the other half in a further twelve months
from the original approval date
“Claw-back” mechanism for certain events such as
fraud and governance failures by the relevant Executive
Ability to convert 50% of STIs achieved and payable in
cash to shares in the Group, with the Board having a
discretion to allow higher levels of conversion
Details of the STIs earned for each relevant Executive are
set out in section 5 of this Remuneration Report.
LTI
KMP may be eligible to participate in the LTI Plans for
the purpose of receiving Options and/or Performance
Award Rights (PARs) over ordinary shares. Additionally,
the Board may, at their discretion and with the approval
of Shareholders (as required), elect to remunerate KMP
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 sustained growth in Shareholder
value and to provide the Group with the ability to attract,
motivate and retain appropriate personnel.
LTIs issued under the LTI Plans currently have two
performance hurdles:
• 50% of the Options and 50% of the PARs - the
Compound Annual Growth Rate (“CAGR”) in Funds
Under Administration (“FUA”) over the three years
from grant of the LTI; and
• 50% of the Options and 50% of the PARs - the
Absolute Total Shareholder Return (“ATSR”)
performance over a three-year period.
The Remuneration and Nomination Committee from time
to time assesses the appropriateness of these hurdles,
including in light of independent advice (including comments
from proxy advisors). For example, with the assistance of an
independent adviser, the Remuneration and Nomination
Committee and the Board have considered alternative
hurdles such as relative Shareholder return compared to
comparators in the market. At this time it was determined
that such a hurdle was not in the best interests of
Shareholders given the very narrow, true listed comparator
set, and that HUB24 is one of the fastest growing companies
in its peer group. This will be monitored.
The current hurdles incentivise KMP to build scale with
appropriate margins in order to deliver business growth
and profitability (as currently measured by the CAGR in
FUA) as well as the success in implementing the Group’s
long term strategic objectives (as currently measured by
the CAGR in ATSR).
Other LTI Conditions
Restrictions on share sales resulting from the exercise
of Options or PARs – twelve months from the date of
exercise except for the purpose of funding the exercise
price of Options or to meet the tax obligations arising
from the exercise of Options or PARs or from the sale
of shares. The sale of shares in such circumstances is
undertaken in accordance with a process overseen by
the Board.
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 circumstances the Board determines, such as
a material misstatement or omission in the financial
statements of the Group and actions by KMP that
seriously damage the Group’s reputation or put the
Group at significant risk.
Upon a change of control event, the LTI awards
vest on a pro rata period of time basis. The Board
has discretion to vest the full grant of Options and
PARs upon a change of control event in appropriate
circumstances.
OTHER SHARE BASED INCENTIVES
The objective of other share based remuneration is to
reward KMP (and staff where applicable) in a manner
that aligns this element of remuneration with the
creation and growth of sustained Shareholder value.
As such, ordinary share and Option/PAR grants may be
made to KMP who are able to influence Shareholder
value and thus have an impact on the Group’s
performance.
Share based KMP remuneration may be delivered in the
form of shares, partly paid shares, PARs 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 ANNUAL REPORT YEAR ENDED 30 JUNE 2019 28
SUPPORTING INFORMATION
In considering the Group’s performance the Board has
regard to the following with respect to the current year
and previous financial years:
$m
20
15
10
5
0
-5
-10
$b
14
12
10
8
6
4
2
0
2015
2016
2017
2018
2019
Underlying EBITDA ($m)
(left axis)
FUA ($b)
(right axis)
The structural changes
occurring in wealth
management and the
growing expectation from
consumers and financial
advisers for modern, flexible
and value enhancing
platforms are providing
favourable conditions
for HUB24 to grow
The factors that are considered to affect Shareholder value are summarised in the table and chart below:
Share price at financial year end ($)
2015
1.2
2016
3.68
2017
6.24
2018
11.55
2019
11.88
S&P ASX 300 (#)*
5,400.50
5,195.50
5,668.80
6,152.30
6,568.40
HUB share price % increase since 2015
S&P ASX 300 % increase since 2015
N/A
N/A
207%
-4%
420%
5%
863%
14%
890%
22%
*HUB24 entered the ASX 200 in the March 2019 rebalancing
HUB24 share price vs ASX 300*
5. REMUNERATION FOR KMP
1000%
900%
800%
700%
600%
500%
400%
300%
200%
100%
0
-100%
2015
2016
2017
2018
2019
HUB share price %
increase since 2015
S&P ASX 300 %
increase since 2015
*HUB24 dividends not included
The table below sets out the percentage of the
maximum available STI for each Executive that was
awarded in relation to FY19 and the percentage
that was forfeited because the Group and individual
performance criteria did not meet the full stretch level of
performance.
Current Year (FY19) STI entitlement
Name
A. Alcock
J. Entwistle
C. Lawrenson
M. Goodrick*
M. Haes**
Entitlement
Awarded
Forfeited
75%
75%
70%
50%
50%
60%
60%
60%
60%
50%
40%
40%
40%
40%
50%
*appointed 3 December 2018
**resigned 31 December 2018
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019 29
Current
Period
Performance
Related
%
0%
0%
0%
0%
20%
20%
22%
19%
15%
Prior
Period
Performance
Related
%
0%
0%
0%
0%
0%
26%
29%
20%
31%
Short term benefits
Salary
and Fees1
$
Bonus
$
Post
employment
benefits
Superannuation
$
Long term
benefits
Long Service
Leave
$
Share based payments
Options &
PARs
$
Shares
$
2019
Non-Executive Directors
B. Higgins
I. Litster
A. McDonald
P. Rogan
Sub-total Non-
Executive Directors
Executives
A. Alcock
J. Entwistle
C. Lawrenson
M. Goodrick2
M. Haes3
180,525
90,263
87,000
90,263
448,051
427,524
351,153
342,439
221,207
138,480
-
-
-
-
-
203,312
166,500
155,129
63,548
35,000
Sub-total Executives
1,480,803
623,489
Total
1,928,854
623,489
-
-
-
-
-
20,451
20,451
20,451
11,977
10,185
83,515
83,515
-
-
-
-
-
22,720
18,383
10,158
3,348
-
54,609
54,609
-
-
-
-
-
-
1,000
1,000
-
1,000
3,000
3,000
Total
$
180,525
90,263
127,318
90,263
-
-
40,318
-
40,318
488,369
353,927
260,778
164,927
27,745
44,019
1,027,934
818,265
694,104
327,825
228,684
851,396
3,096,812
891,714
3,585,181
1. KMP salary and fees includes Fixed Remuneration and movement in annual leave entitlement.
2. Appointed 3 December 2018
3. Resigned 31 December 2018
Short term benefits
Post
employment
benefits
Salary
and Fees1
$
Bonus
$
Superannuation
$
Long term
benefits
Long Service
Leave
$
Share based payments
Options &
PARs
$
Shares
$
–
–
–
–
–
–
2018
Non-Executive Directors
B. Higgins
I. Litster
A. McDonald
V. Webber2
P. Rogan3
167,317
83,658
85,032
56,032
44,596
Sub-total Non-Executive
Directors
436,635
Executives
A. Alcock
J. Entwistle
M. Haes
C. Lawrenson4
446,548
265,000
332,220
225,000
279,557
100,000
318,233
180,000
Sub-total Executives
1,376,558 770,000
Total
1,813,193 770,000
Total
$
167,317
83,658
85,032
56,032
44,596
–
–
–
–
–
–
436,635
282,340
1,022,023
199,930
85,914
60,008
784,778
492,077
576,535
–
–
–
–
–
–
8,194
6,687
5,665
587
–
–
–
–
–
–
–
1,000
1,000
1,000
21,133
3,000
628,192
2,875,413
21,133
3,000
628,192
3,312,048
–
–
–
–
–
–
19,941
19,941
19,941
16,707
76,530
76,530
1. KMP salary and fess includes fixed remuneration and movement in annual leave entitlement.
2. Resigned 28 February 2018.
3. Appointed 20 December 2017.
4. Appointed 21 August 2017.
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019 30
6. SERVICE AGREEMENTS
On appointment to the Board, all Non-Executive
Directors enter into a service agreement with the
Group 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
Executives are formalised in employment agreements.
All Executives have ongoing employment agreements.
The Group may generally terminate the employment
agreement by providing between three 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 Executive remuneration).
The major provisions of the agreements relating to
remuneration are set out below. Salaries set out
below are for FY19 and are subject to review by the
Remuneration and Nomination Committee.
Name
A. Alcock1
Managing Director
J. Entwistle
Director, Strategic Development
C. Lawrenson
Chief Operating Officer
M. Goodrick
Chief Financial Officer
M. Haes
Chief Financial Officer, resigned 31 December 2018
Base Salary
(including
superannuation)
STI
LTI
Term of
agreement
Notice period
– either party
451,805
370,000
369,570
370,000
300,000
Up to 75% of
Base Salary
Up to 75% of
Base Salary
Up to 70% of
Base Salary
Up to 50% of
Base Salary
Up to 50% of
Base Salary
51,186 Options,
104,072 PARs2
Ongoing – commenced
29 July 2013
40,000 Options,
101,000 PARs3
Ongoing – commenced
1 August 2013
15,352 Options,
39,221 PARs3
Ongoing – commenced
21 August 2017
24,667 Options,
26,981 PARs4
Ongoing – commenced
3 December 2018
6 months
6 months
6 months
3 months
N/A
Ceased – resigned
31 December 2018
Not applicable
1. For Andrew Alcock 52% of STI payable upon achieving base case objectives set by the Board. A further 48% payable upon the achievement of stretch
case objectives. For other KMP the allocated weighting between base case objectives and stretch case objectives may vary.
2. Options and PARs for Andrew Alcock have a one-year sale restriction after issue of shares. Special PARs were issued during the year in return for
forgoing increases in Base/Fixed Remuneration until 1 September 2020. See section seven for vesting conditions.
3. Options and PARs for Jason Entwistle and Craig Lawrenson have a one-year sale restriction after issue of shares. Special PARs were issued during the
year in return for forgoing increases in Base/Fixed Remuneration until 1 September 2020. See section seven for vesting conditions.
4. Options and PARs for Mark Goodrick have a one-year sale restriction after issue of shares. Special PARs were issued during the year upon
commencement to create alignment with other Executives. See section seven for vesting conditions.
Executives have no entitlement to termination payments in the event of removal for misconduct.
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019 31
7. 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:
Exercise
Price
($)
Value per
Option at
grant date
($)
Performance
achieved % Vested
Balance
at start of
Year
Issued
during
year
Exercised
during year
Balance
at end of
year
0.98
0.98
2.46
2.46
4.46
7.09
6.25
7.09
12.04
12.04
13.44
0.19
0.20
0.95
1.60
2.33
3.00
3.48
4.06
3.58
4.22
3.79
Yes
Yes
Yes
Yes
No
No
No
No
No
No
No
100%
100%
100%
100%
0%
0%
0%
0%
0%
0%
0%
220,000
200,000
210,000
150,000
222,046
110,644
34,247
78,077
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
57,271
51,186
24,667
60,000
200,000
90,000
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
160,000
Nil
120,000
150,000
222,046
110,644
34,247
78,077
57,271
51,186
24,667
Grant Date
Expiry Date
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 2021
11 Oct 2017
11 Oct 2022
21 Aug 2017
21 Aug 2022
11 Dec 2017
11 Dec 2022
7 Sep 2018
7 Sep 2023
12 Dec 2018
12 Dec 2023
12 Dec 2018
12 Dec 2023
Options granted carry no dividends or voting rights.
Option vesting conditions are as follows:
Grant Date
Granted To
Performance Condition 1
Performance Condition 2
17 October 2014
Executives
2 December 2014 Managing
Director
N/A
N/A
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.
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 Options can
be exercised, subject to satisfaction
of vesting conditions, after the 3rd
anniversary of the date of issue.
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019 32
Grant Date
Granted To
Performance Condition 1
Performance Condition 2
14 October 2015
Executives
7 December 2015 Managing
Director
29 November
2016
Executives
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.
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.
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).
11 October 2017
Executives
The CAGR in FUA over the three-year
period until 30 June 2020 must be at
least 25.88% p.a. Proportional vesting
will occur between a CAGR of 25.88%
(0% vesting) to 33.09% (100% vesting).
N/A
N/A
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 ATSR is inclusive of dividends.
Any unvested Options from the three-year
vesting date will be retested against the
ATSR CAGR hurdles over the cumulative
four-year period and if they remain
unvested after this test will lapse.
The CAGR in the ATSR over the three-year
period until approximately 31 August 2020
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 ATSR is inclusive of dividends.
Any unvested Options from the three-year
vesting date will be retested against the
ATSR CAGR hurdles over the cumulative
four-year period and if they remain
unvested after this test will lapse.
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019 33
Grant Date
Granted To
Performance Condition 1
Performance Condition 2
21 August 2017
Executives
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).
11 December
2017
Managing
Director
The CAGR in FUA over the three-year
period until 30 June 2020 must be at
least 25.88% p.a. Proportional vesting
will occur between a CAGR of 25.88%
(0% vesting) to 33.09% (100% vesting).
7 September 2018 Executives
The CAGR in FUA over the three-year
period until 30 June 2021 must be at
least 29.23% p.a. Proportional vesting
will occur between a CAGR of 29.23%
(0% vesting) to 40.23% (100% vesting).
12 December
2018
Managing
Director
The CAGR in FUA over the three-year
period until 30 June 2021 must be at
least 29.23% p.a. Proportional vesting
will occur between a CAGR of 29.23%
(0% vesting) to 40.23% (100% vesting).
The CAGR in the ATSR over the three-year
period until approximately 31 August 2020
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 ATSR is inclusive of dividends.
Any unvested Options from the three year
vesting date will be retested against the
ATSR CAGR hurdles over the cumulative
four year period and if they remain
unvested after this test will lapse.
The CAGR in the ATSR over the three-year
period until approximately 31 August 2020
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 ATSR is inclusive of dividends.
Any unvested Options from the three-year
vesting date will be retested against the
ATSR CAGR hurdles over the cumulative
four-year period and if they remain
unvested after this test will lapse.
The CAGR in the ATSR over the three-year
period until approximately 31 August 2021
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 ATSR is inclusive of dividends.
Any unvested Options from the three-year
vesting date will be retested against the
ATSR CAGR hurdles over the cumulative
four-year period and if they remain
unvested after this test will lapse.
The CAGR in the ATSR over the three-year
period until approximately 31 August 2021
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 ATSR is inclusive of dividends.
Any unvested Options from the three-year
vesting date will be retested against the
ATSR CAGR hurdles over the cumulative
four-year period and if they remain
unvested after this test will lapse.
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019 34
Grant Date
Granted To
Performance Condition 1
Performance Condition 2
12 December
2018
Executives
The CAGR in FUA over the three-year
period until 30 June 2021 must be at
least 29.23% p.a. Proportional vesting
will occur between a CAGR of 29.23%
(0% vesting) to 40.23% (100% vesting).
The CAGR in the ATSR over the three-year
period until approximately 31 August 2021
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 ATSR is inclusive of dividends.
Any unvested Options from the three-year
vesting date will be retested against the
ATSR CAGR hurdles over the cumulative
four-year period and if they remain
unvested after this test will lapse.
KMP hold the following Options:
Financial
year of
grant
Financial year 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
2019
2018
2017
2016
2015
2019
2018
2017
2016
2015
2019
2018
2018
2019
2018
2017
2016
2015
2022
2021
2020
2019
2018
2022
2021
2020
2019
2018
2022
2021
2021
2022
2021
2020
2019
2018
51,186
78,077
106,464
150,000
200,000
40,000
63,940
87,329
120,000
160,000
15,352
23,417
34,247
24,667
23,286
28,253
90,000
120,000
215,994
317,133
198,449
240,000
39,700
142,880
191,580
203,477
114,000
30,960
54,808
70,163
119,126
93,544
69,770
52,664
85,500
23,220
Nil
Nil
Nil
150,000
200,000
Nil
Nil
Nil
120,000
160,000
Nil
Nil
Nil
Nil
Nil
Nil
90,000
120,000
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
23,286
Nil
Nil
Nil
Name
A. Alcock
A. Alcock
A. Alcock
A. Alcock
A. Alcock
J. Entwistle
J. Entwistle
J. Entwistle
J. Entwistle
J. Entwistle
C. Lawrenson
C. Lawrenson
C. Lawrenson
M. Goodrick*
M. Haes**
M. Haes**
M. Haes**
M. Haes**
*Appointed 3 December 2018
**Resigned 31 December 2018
The assessed fair value at grant date of the Options granted to individuals is allocated over the period from grant date
to expected vesting date and the amount is included in the remuneration tables in section five of this Remuneration
Report. Fair values at grant date are 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.
350,000 Options were exercised by KMP during FY19.
Options granted carry no dividends or voting rights.
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019 35
PERFORMANCE AWARD RIGHTS (PARS)
The terms and conditions of each grant of PARs affecting remuneration of KMP in the current or a future reporting
period are as follows:
Grant Date
Expiry Date
29 Nov 2016
29 Nov 2031
11 Oct 2017
11 Oct 2032
21 Aug 2017
21 Aug 2032
11 Dec 2017
11 Dec 2032
7 Sep 2018
7 Sep 2033
12 Dec 2018
12 Dec 2033
12 Dec 2018
12 Dec 2033
12 Dec 2018
12 Dec 2033
12 Dec 2018
12 Dec 2033
Value per
PAR at
grant date
($)
4.07
5.52
6.35
6.95
10.71
11.16
11.16
11.13
11.16
Performance
achieved
% Vested
Balance at
start of Year
Issued
during year
Exercised/
lapsed
during year
Balance at
end of year
No
No
No
No
No
No
No
No
No
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
72,688
33,864
11,211
23,897
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
15,745
14,072
6,981
235,000
20,000
Nil
7,127
Nil
Nil
Nil
Nil
Nil
Nil
Nil
72,688
26,737
11,211
23,897
15,745
14,072
6,981
235,000
20,000
PAR vesting conditions are as follows:
Grant Date
Granted To
Performance Condition 1
Performance Condition 2
29 November
2016
Executives
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).
11 October 2017
Executives
The CAGR in FUA over the three-year
period until 30 June 2020 must be at
least 25.88% p.a. Proportional vesting
will occur between a CAGR of 25.88%
(0% vesting) to 33.09% (100% vesting).
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 ATSR is inclusive of
dividends.
Any unvested PARs from the three-year
vesting date will be retested against the
ATSR CAGR hurdles over the cumulative
four-year period and if they remain
unvested after this test will lapse.
The CAGR in the ATSR over the three-
year period until approximately 31
August 2020 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 ATSR is inclusive of
dividends.
Any unvested PARs from the three-year
vesting date will be retested against the
ATSR CAGR hurdles over the cumulative
four-year period and if they remain
unvested after this test will lapse.
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019 36
Grant Date
Granted To
Performance Condition 1
Performance Condition 2
11 October 2017
Executives
The CAGR in FUA over the two 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).
11 December
2017
Managing
Director
The CAGR in FUA over the three-year
period until 30 June 2020 must be at
least 25.88% p.a. Proportional vesting
will occur between a CAGR of 25.88%
(0% vesting) to 33.09% (100% vesting).
7 September 2018 Executives
The CAGR in FUA over the three-year
period until 30 June 2021 must be at
least 29.23% p.a. Proportional vesting
will occur between a CAGR of 29.23%
(0% vesting) to 40.23% (100% vesting).
12 December
2018
Managing
Director
The CAGR in FUA over the three-year
period until 30 June 2021 must be at
least 29.23% p.a. Proportional vesting
will occur between a CAGR of 29.23%
(0% vesting) to 40.23% (100% vesting).
The CAGR in the ATSR over the two-
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 ATSR is inclusive of
dividends.
Any unvested PARs from the three-year
vesting date will be retested against the
ATSR CAGR hurdles over the cumulative
four-year period and if they remain
unvested after this test will lapse.
The CAGR in the ATSR over the three-year
period until approximately 31 August 2020
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 ATSR is inclusive of dividends.
Any unvested PARs from the three-year
vesting date will be retested against the
ATSR CAGR hurdles over the cumulative
four year period and if they remain
unvested after this test will lapse.
The CAGR in the ATSR over the three-year
period until approximately 31 August 2021
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 ATSR is inclusive of dividends.
Any unvested PARs from the three-year
vesting date will be retested against the
ATSR CAGR hurdles over the cumulative
four-year period and if they remain
unvested after this test will lapse.
The CAGR in the ATSR over the three-year
period until approximately 31 August 2021
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 ATSR is inclusive of dividends.
Any unvested PARs from the three-year
vesting date will be retested against the
ATSR CAGR hurdles over the cumulative
four-year period and if they remain
unvested after this test will lapse.
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019 37
Grant Date
Granted To
Performance Condition 1
Performance Condition 2
12 December
2018
Executives
The CAGR in FUA over the three-year
period until 30 June 2021 must be at
least 29.23% p.a. Proportional vesting
will occur between a CAGR of 29.23%
(0% vesting) to 40.23% (100% vesting).
The CAGR in the ATSR over the three-year
period until approximately 31 August 2021
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 ATSR is inclusive of dividends.
Any unvested PARs from the three-year
vesting date will be retested against the
ATSR CAGR hurdles over the cumulative
four-year period and if they remain
unvested after this test will lapse.
12 December
2018
Executives
For the performance period from
1 July 2018 to 30 June 2022:
N/A
• Zero vesting will occur if the CAGR
in FUA is below a minimum level of
33% per annum;
• 100% vesting will occur if the CAGR
in FUA reaches 33% per annum;
The hurdle will be tested over a
cumulative four year period to the
test date on 30 June 2022. Any PARs
that are unvested as at the end of the
Performance Period will lapse.
12 December
2018
Director
For the performance period from
1 July 2018 to 30 June 2021:
N/A
• Provide support to the HUB24
Managing Director and KMPs
in relation to the securing and
maintenance of key accounts;
• Directly liaise with key accounts
to facilitate growth and customer
satisfaction, and to assess the
effectiveness of HUB24 corporate
culture and client satisfaction and
provide feedback to the Board.
Measure the improvement in the
company’s customer satisfaction
service levels.
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019 38
KMP hold the following PARs:
Financial
year of
grant
Financial year
in which PARs
may vest
Number
of PARs
granted
Value of
PARs at
grant date
($)
Number of
PARs vested
during the year
Number of PARs
lapsed/forfeited
during the year
2019
2019
2018
2017
2019
2019
2018
2017
2019
2019
2018
2018
2019
2019
2018
2017
2019
2022
2022
2021
2020
2022
2022
2021
2020
2022
2022
2021
2021
2022
2022
2021
2020
2021
90,000
1,001,638
14,072
23,897
34,851
157,034
166,129
113,475
90,000
1,001,638
11,000
19,570
28,587
35,000
4,221
11,211
7,167
117,852
107,966
93,079
389,526
45,219
71,212
39,542
20,000
222,586
6,981
7,127
9,249
77,905
39,320
30,115
20,000
222,586
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
7,127
Nil
Nil
Name
A. Alcock
A. Alcock
A. Alcock
A. Alcock
J. Entwistle
J. Entwistle
J. Entwistle
J. Entwistle
C. Lawrenson
C. Lawrenson
C. Lawrenson
C. Lawrenson
M. Goodrick*
M. Goodrick*
M. Haes**
M. Haes**
A. McDonald
*Appointed 3 December 2018
**Resigned 31 December 2018
The assessed fair value at grant date of the PARs granted to individuals is allocated over the period from grant date
to expected vesting date and the amount is included in the remuneration tables in section five of this Remuneration
Report. Fair values at grant date are independently determined using Hoadley’s 1 Hybrid ESO model that takes into
account the term of the PAR, share price at grant date, probability of service condition being met, expected volatility of
the underlying share price and the risk free rate.
No PARs have been exercised by KMP during FY19. PARs granted carry no dividends or voting rights.
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019 39
8. ADDITIONAL DISCLOSURES RELATING TO KMP
SHARES
The number of Shares in the Group held during the financial year by each Director and other members of KMP of the
Group, including their personally related parties, is set out below:
Balance at
start
of the year
756,883
1,182,408
160
-
177,912
986,811
3,588,751
5,194
25,000
Received due to
tax exempt share
plan issue
Other changes
during the year
Balance at
end of the year
-
83
83
-
83
-
-
-
-
182,800
-
-
-
128,925
(190,000)
(308,074)
4,230
-
939,683
1,182,491
243
-
306,920
796,811
3,280,677
9,424
25,000
Ordinary Shares
A. Alcock
J. Entwistle
C. Lawrenson
M. Goodrick*
M. Haes**
B. Higgins
I. Litster
A. McDonald
P. Rogan
*Appointed 3 December 2018
**Resigned 31 December 2018
OPTIONS
The number of Options over ordinary shares in the Group held during FY19 by each Director and other members of
KMP of the Group, including their personally related parties, is set out below:
Options over
ordinary shares
Balance at start
of the year
A. Alcock
J. Entwistle
C. Lawrenson
M. Goodrick*
M. Haes**
534,541
431,269
57,664
-
201,539
*Appointed 3 December 2018
**Resigned 31 December 2018
PERFORMANCE AWARD RIGHTS (PARS)
Granted
51,186
40,000
15,352
24,667
Exercised
(200,000)
-
-
-
Expired/
forfeited/other
Balance at end
of the year
-
-
-
-
385,727
471,269
73,016
24,667
28,253
-
(150,000)
(23,286)
The number of PARs over ordinary shares in the Group held during FY19 by each Director and other members of KMP
of the Group, 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
A. Alcock
J. Entwistle
C. Lawrenson
M. Goodrick*
M. Haes**
A. McDonald
*Appointed 3 December 2018
**Resigned 31 December 2018
58,748
48,157
18,378
-
16,376
-
104,072
101,000
39,221
26,981
-
20,000
-
-
-
-
-
-
-
-
-
-
(7,127)
-
162,820
149,157
57,599
26,981
9,249
20,000
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019 40
9. NON-EXECUTIVE DIRECTOR REMUNERATION
10. REMUNERATION GOVERNANCE
The Board seeks to set aggregate remuneration at
a level which provides the Group with the ability to
attract, motivate 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 Group in a 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).
RESPONSIBILITY FOR SETTING REMUNERATION
The Remuneration and Nomination Committee is
delegated responsibility by the Board for reviewing
and making recommendations on remuneration
policies for the Group, including policies governing the
remuneration of Executives.
Activities of the Remuneration and Nomination
Committee are governed by its Charter, which is available
on the Company’s website at www.HUB24.com. Amongst
other responsibilities the Remuneration and Nomination
Committee assists the Board in its oversight of:
• Remuneration policy for Executives;
The following fees, including superannuation, apply for
Non-Executive Directors:
• Level and structure of remuneration for Executives,
including Short Term and Long Term Incentive plans;
Chairman (inclusive of committees):
$182,700 p.a.
A. McDonald:
Other Non-Executive Directors:
$75,000 p.a.
$78,750 p.a.
The Chair of the Audit, Risk & Compliance Committee
receives an additional $12,600 per annum and the
Chair of the Remuneration and Nomination Committee
receives an additional $12,000 per annum. Committee
participation other than the role of Chair is set at $6,300
per annum per Non-Executive Director excluding the
Chairman of the Board.
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 the comparative roles in the
external market.
No additional recurring amounts are paid to each
Director other than reimbursements 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 FY19
and FY18 is detailed in section 5 of this Remuneration
Report (including Fixed Remuneration and LTI).
RETIREMENT ALLOWANCES FOR DIRECTORS
There are no retirement schemes or retirement benefits
other than statutory benefits for Non-Executive Directors.
• The Group’s compliance with applicable legal and
regulatory requirements in respect of remuneration
matters; and
• Approval of the allocation of shares and incentives
under HUB24’s schemes.
USE OF REMUNERATION ADVISORS DURING THE YEAR
During FY19 the Group did not use the services of a
remuneration consultant, having previously engaged a
remuneration consultant in prior years (FY16 and FY18).
Historically, the Board sought independent advice on
the restructuring of the Group’s KMP remuneration for
Fixed Remuneration, STIs and LTIs. The Board and its
Remuneration and Nomination Committee approved
revised incentive arrangements for Mr. Alcock and
other KMP with a view to strengthening alignment
between KMP and Shareholders. This review included
benchmarking Executive remuneration against a core
comparator group of companies and ensuring the
design and operation of the Group’s Short Term and
Long Term Incentives are in line with Shareholder and
market expectations.
SHARE TRADING POLICY
All staff are required to comply with HUB24’s Share
Trading Policy at all times and in respect of all HUB24
shares held. Trading is subject to pre-clearance and is
not permitted during designated blackout periods unless
there are exceptional circumstances.
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019 41
Our company provides real choice
through our functionally rich
technology and products that support
the delivery of superior investment
and administration outcomes for
financial advisers and their clients
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019 42
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
Deloitte Touche Tohmatsu
www.deloitte.com.au
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 2, 7 Macquarie Place
Sydney NSW 2000
26 August 2019
The Board of Directors
HUB24 Limited
Dear Board Members
Level 2, 7 Macquarie Place
Sydney NSW 2000
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.
26 August 2019
As lead audit partner for the audit of the consolidated financial statements of HUB24 Limited for the
financial year ended 30 June 2019, I declare that to the best of my knowledge and belief, there have
Dear Board Members
been no contraventions of:
(i) the auditor independence requirements of the Corporations Act 2001 in relation to the
HUB24 Limited
audit; and
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.
(ii) any applicable code of professional conduct in relation to the audit.
As lead audit partner for the audit of the consolidated financial statements of HUB24 Limited for the
financial year ended 30 June 2019, I declare that to the best of my knowledge and belief, there have
been no contraventions of:
Yours sincerely
(i) the auditor independence requirements of the Corporations Act 2001 in relation to the
audit; and
DELOITTE TOUCHE TOHMATSU
(ii) any applicable code of professional conduct in relation to the audit.
Declan O’Callaghan
Partner
Yours sincerely
Chartered Accountant
DELOITTE TOUCHE TOHMATSU
Declan O’Callaghan
Partner
Chartered Accountant
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Asia Pacific Limited and the Deloitte Network
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Asia Pacific Limited and the Deloitte Network
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019
43
FINANCIAL
REPORT
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019 44
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2019
Revenue from continuing operations
Revenue
Fair value gain on contingent consideration
Interest and other income
Expenses
Platform and custody fees
Licensee fees
Employee benefits expense
Property and occupancy costs
Depreciation and amortisation expense
Administrative expenses
Profit before income tax
Income tax (expense)/benefit
Profit after income tax for the year
Other comprehensive income
Total comprehensive income for the year
Total comprehensive income for the year attributable
to ordinary members of HUB24 Limited
Notes
6
15
6
6
6
7
Consolidated
2019
$
2018
$
96,358,115
83,997,822
1,145,336
1,164,132
2,383,850
613,162
98,667,583
86,994,834
(6,122,683)
(5,355,843)
(33,798,356)
(34,209,969)
(32,351,399)
(25,222,020)
(2,203,212)
(1,810,938)
(2,574,321)
(2,015,909)
(10,771,870)
(8,570,321)
87,821,841
77,185,000
10,845,742
9,809,834
(3,681,787)
(2,431,085)
7,163,955
7,378,749
-
-
7,163,955
7,378,749
7,163,955
7,378,749
Cents
Cents
Earnings per share, attributable to ordinary equity members of HUB24 Limited
Basic earnings per share
Diluted earnings per share
22
22
11.54
11.30
12.27
11.91
The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the
accompanying notes.
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019
CONSOLIDATED STATEMENT OF
FINANCIAL POSITION
AT 30 JUNE 2019
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Other current assets
Total current assets
Non-current assets
Deferred tax assets
Office equipment
Intangible assets
Receivables
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Provisions
Deferred income
Total current liabilities
Non-current liabilities
Provisions
Other non-current liabilities
Deferred income
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Profit reserve
Accumulated losses
Total equity
45
Consolidated
2019
$
2018
$
Notes
18
8
7
9
10
11
12
13
14
15
16
17
29
18,465,847
16,958,996
7,565,465
780,997
5,088,028
764,737
26,812,309
22,811,761
9,685,343
1,955,564
37,068,563
2,000,000
50,709,470
77,521,779
3,363,071
5,053,154
259,419
8,675,644
1,001,090
2,146,200
775,303
3,922,593
12,598,237
64,923,542
98,187,400
5,256,545
13,014,445
13,361,288
2,214,341
32,023,318
2,011,220
49,610,167
72,421,928
5,227,744
4,080,145
417,479
9,725,368
881,862
2,926,872
1,022,260
4,830,994
14,556,362
57,865,566
96,183,908
3,942,850
5,088,013
(51,534,848)
(47,349,205)
64,923,542
57,865,566
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019
46
CONSOLIDATED STATEMENT OF
CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2019
Issued
capital
$
96,183,908
96,183,908
Reserves
$
3,942,850
3,942,850
Profit
reserve
$
Retained
earnings
$
Total
equity
$
5,088,013
(47,349,205)
57,865,566
5,088,013
(47,349,205)
57,865,566
Consolidated
Opening balance
Balance at 1 July 2018
Total comprehensive
income for the year
Transfer to Profit reserve
Total comprehensive
income for the year
Transactions with owners in their capacity as owners:
Dividends provided for
or paid
Capital raising costs
Options granted –
Employees
-
(13,630)
-
Share based payments*
1,846,122
Issue of treasury shares
to employees
171,000
2,003,492
Balance at 30 June 2019
98,187,400
-
-
-
-
-
-
-
-
1,655,461
(341,766)
-
1,313,695
5,256,545
-
7,163,955
7,163,955
11,349,598
(11,349,598)
-
11,349,598
(4,185,643)
7,163,955
(3,423,166)
-
-
-
-
(3,423,166)
-
-
-
-
-
-
(3,423,166)
(13,630)
1,655,461
1,504,356
171,000
(105,979)
13,014,445
(51,534,848)
64,923,542
*Share based payments includes $1,093,137 received for the exercise of options by employees, $341,766 transferred from the share based payment
reserve for the options exercised, refer to Note 17 for further details. 411,219 Agility FPO consideration payment, refer to Note 12 for further details.
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019 47
CONSOLIDATED STATEMENT OF
CHANGES IN EQUITY (CONTINUED)
Consolidated
Opening balance
Balance at 1 July 2017
Total comprehensive
income for the year
Transfer to profit reserves
Total comprehensive
income for the period
Issued
capital
$
89,148,977
89,148,977
Reserves
$
4,106,404
4,106,404
-
-
-
-
-
-
Profit
reserve
$
Retained
earnings
$
Total
equity
$
-
-
-
(49,639,941)
43,615,440
(49,639,941)
43,615,440
7,378,749
7,378,749
5,088,013
(5,088,013)
-
5,088,013
2,290,736
7,378,749
Transactions with owners in their capacity as owners:
Shares issued for
acquisition
Capital raising costs
Share based payments*
Share based payments –
Paragem Option holders
Options granted –
Employees
Issue of treasury shares
to employees
3,936,440
(36,282)
2,983,773
-
-
151,000
7,034,931
Balance at 30 June 2018
96,183,908
(718,300)
-
(658,994)
(83,062)
1,296,802
-
(163,554)
3,942,850
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3,218,140
(36,282)
2,324,779
(83,062)
1,296,802
151,000
6,871,377
5,088,013
(47,349,205)
57,865,566
*Share based payments includes $2,324,780 received for the exercise of options by employees and $658,994 transferred from the share based payment
reserve for the options exercised. Refer to Note 17 for further details.
.
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019
48
CONSOLIDATED STATEMENT OF
CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2019
Cash flows from operating activities
Receipts from customers (inclusive of GST)
Payments to suppliers and employees (inclusive of GST)
Interest received
Net cash inflow from operating activities
Cash flows from investing activities
Payments for acquisitions (net of cash acquired)
Payments for office equipment
Payments for intangible assets
Net cash (outflow) from investing activities
Cash flows from financing activities
Notes
18
12
Consolidated
2019
$
2018
$
102,183,621
93,222,547
(91,197,982)
(81,481,922)
645,014
509,966
11,630,653
12,250,591
(411,250)
(458,350)
(2,000,000)
(2,012,169)
(6,904,702)
(4,389,022)
(7,774,302)
(8,401,191)
Proceeds from issues of shares and other equity securities
1,093,137
2,324,780
Dividends paid
Payments for capital raising costs
Net cash (outflow)/inflow from financing activities
Net increase in cash and cash equivalents
(3,423,166)
(19,471)
2,349,500
1,506,851
-
(51,830)
2,272,950
6,122,350
Cash and cash equivalents at the beginning of the financial year
16,958,996
10,836,646
Cash and cash equivalents at end of year
18
18,465,847
16,958,996
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019
CONTENTS OF THE NOTES
TO THE FINANCIAL STATEMENTS
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
Corporate
information
Summary of significant
accounting policies
Financial
risk management
Critical accounting judgements,
estimates and assumptions
Operating
segments
Revenue and expenses from
continuing operations
Income
tax
Current assets –
Trade and other receivables
Non-current assets –
Office equipment
Non-current assets –
Intangible assets
Non-current assets –
receivables
Current liabilities –
Trade and other payables
Current liabilities –
Provisions
Non-current liabilities –
Provisions
Other –
Non-current liabilities
16
17
18
19
20
21
22
23
24
25
26
27
28
29
Issued
capital
Reserves
Reconciliation
of cash flows
Commitments
and contingencies
Share based
payments plan
Significant events after
the reporting date
Earnings
per share
Remuneration
of auditors
Related party
disclosures
Parent entity
financial information
Key management
personnel
Financial
instruments
Business
combination
Profit
reserves
50
50
52
54
54
57
58
62
63
64
69
69
70
71
72
49
73
75
75
76
77
87
87
88
88
89
90
90
92
93
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019 50
1. CORPORATE INFORMATION
The Annual Report of HUB24 Limited and its controlled entities (‘the Group or HUB24’) for the year ended 30 June
2019 was authorised for issue in accordance with a resolution of the Board of Directors on 26 August 2019 and covers
the company as an individual entity as well as the Group consisting of the company and its subsidiaries as required by
the Corporations Act 2001.
HUB24 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 Group 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 Group 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 ACCOUNTING STANDARDS AND INTERPRETATIONS
The Group 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. These Accounting
Standards and Interpretations did not have any significant impact on the financial performance or position of the
Group.
NEW AND AMENDED ACCOUNTING STANDARDS EFFECTIVE FOR THE CURRENT YEAR
The Group’s assessment of the impact of new accounting standards and interpretations is set out below.
(i) AASB 9 Financial Instruments and its consequential amendments
The Group has applied AASB 9 Financial Instruments (as amended) and the related consequential amendments to
other Accounting Standards that are effective for an annual period that begins on or after 1 July 2018. The transition
provisions of AASB 9 allow an entity not to restate comparatives. 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
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019 51
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NEW AND AMENDED ACCOUNTING STANDARDS EFFECTIVE FOR THE CURRENT YEAR (CONTINUED)
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. A provision for doubtful debts is recognised as at 30 June 2019 and our
assessment is that the application of AASB9 does not have a material impact on the amount reported and disclosures
made in the Group’s financial statements.
(ii) AASB 15 Revenue from Contracts with Customers
The Group has applied AASB 15 Revenue from Contracts with Customers (as amended) which is effective for an annual
period that begins on or after 1 January 2018 and supersedes AASB 118. AASB 15 introduced a 5-step approach to
revenue recognition. Details of the new requirements as well as their impact on the Group’s consolidated financial
statements are described below.
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 services, the performance obligation is satisfied when the
service has been provided, typically for promises to transfer services to customers. For performance obligations (set-up
fees), satisfied over time, 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 judgements 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 directors of the Group are satisfied that the application of AASB 15 does not have a material impact on the
amounts reported or disclosures made in the Group’s financial statements as summarised:
Platform – Control is transferred to the customer as soon as funds are transitioned onto the platform. Platform
administration fees are accrued daily, paid monthly in arrears for the ongoing provision of platform services, therefore no
time-value of money adjustments are required. Each revenue stream is identified as a separate performance obligation
within the platform business. Control for white label set up fees, is passed to the customer upon completion, however a
portion of revenue may be recognised prior to completion, the time period typically does not extend beyond 6 months.
As currently this white label revenue stream is immaterial, no changes to revenue recognition are proposed;
Licensee – Control is transferred to the customer as soon as the advisors transact under the contracted licensee terms
and conditions. The transactional price and corresponding income value is recognised per the advisor’s client receipts
as per agreed terms outlined per the individual contracts and underlying fee schedules;
IT services – Control is transferred and revenue is recognised with the agreed performance delivery of the following
services; provision of data, software and IT infrastructure services via software licensing, this is within a period of 1 - 6
months. Clients have the right to terminate and negotiate fees where variable to agreed service delivery however the time
period typically does not extend 1 - 6 month (within the 12-month time period requiring any valuation adjustment).
(iii) AASB 16 Leases
AASB 16 Leases replaces AASB 117 Leases and 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.
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019 52
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NEW AND AMENDED ACCOUNTING STANDARDS EFFECTIVE FOR THE CURRENT YEAR (CONTINUED)
The Group has identified all material leases to the Group and has assessed applicable lease term periods (likelihood of taking
option extensions) and the discount rate to be applied. Under the transition options available within the new Standard, lease
payments will be discounted using incremental borrowing rates determined at 1 July 2019. Further, on transition, the Group will
apply the modified retrospective transition approach, which does not require the restating of comparative periods.
The impact of this new standard upon adoption at 1 July 2019 can be summarised as follows:
• Recognise a $7.0 million right of use asset and a corresponding lease liability of $7.5 million.
• Lease liability provision of $0.5 million previously recognised in respect of the operating leases will be derecognised
and the amount factored into the measurement of the right-to-use asset and lease liabilities.
• The impact on future profit or loss is to decrease operating expenses (property & occupancy costs), increase
depreciation and to increase interest expense.
• Disclosure in the statement of cash flow from FY20 will be to decrease cash outflows from operating activities and to
increase cash used in financing activities by the same amount.
GOING CONCERN
The financial report has been prepared on a going concern basis.
DIVIDENDS
The Board’s dividend policy targets a payout ratio between 40% and 60% of the Group’s underlying net profit after tax
over the medium term subject to prevailing market conditions and alternate uses of capital.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements comprise the financial statements of the Group and its subsidiaries as at 30 June
each year. Refer to Note 24 for a listing of all subsidiaries. There are no interests in associates.
FUNCTIONAL AND PRESENTATION CURRENCY
Items included in the financial statements of each of the Group’s entities are measured using the currency of the
primary economic environment in which the entity operates (‘the functional currency’). The consolidated financial
statements are presented in Australian dollar ($), which is HUB24 Limited’s functional and presentation currency.
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.
3. FINANCIAL RISK MANAGEMENT
The Group’s principal financial instruments comprise receivables, payables and cash and cash equivalents. The Group
does not have debt facilities and does not trade in derivative instruments. The Group is exposed to the following risks
from its use of financial instruments:
• Credit risk
• Liquidity risk
• Market risk
•
Interest risk
• Capital management
This note presents information about HUB24 and the Group’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
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019 53
3. FINANCIAL RISK MANAGEMENT (CONTINUED)
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 Group, 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 Group’s activities. The Group, through training and
management standards and procedures, aims to develop a disciplined and constructive control environment in which
all employees and consultants understand their roles and obligations.
The Group Audit, Risk and Compliance Committee (ARCC) oversees how management monitors compliance with
the company’s and the Group’s risk management policies and procedures and reviews the adequacy of the risk
management framework in relation to risks faced. The ARCC is assisted by external professional advisors from time
to time.
CREDIT RISK
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet
its contractual obligations, and arises from the financial assets of the Group, which comprise cash and cash equivalents
and principally, trade and loan receivables.
Exposure at reporting date is addressed at each particular note. The Group does not hold any credit derivatives to
offset its credit exposure.
It is the Group’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.
In addition, credit risk exposures and receivable balances are monitored on an ongoing basis with the intended result
that the Group’s exposure to bad debts is not significant. Management has assessed the expected credit losses on
trade receivables and have used a provision matrix to assess the Group’s potential impairment losses.
The Group also has credit risk in respect of its debtors. In the case of most transactions, revenue is generally earned
over a period of several months due to the complexity and size of the work involved. The Group manages this risk by
entering into contractual agreements with its counterparties, obtaining external legal advice where necessary, at the
start of each transaction.
The Group policy is to provide financial guarantees only to wholly-owned subsidiaries.
LIQUIDITY RISK
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s
approach to managing liquidity risk is to ensure, as far as possible, that it will always maintain banking/credit facilities
and 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 Group had no debt
facilities or credit lines.
Group forecasts and actual cash flows at balance date are continuously monitored, matching the maturity of
assets and liabilities, to meet its liabilities when due, under both normal and stressed conditions, without incurring
unacceptable losses or risking damage to the Group’s reputation (Refer Note 27).
MARKET RISK
Market risk is the risk that changes in market prices will affect the Group’s income and include price risk.
Refer to Note 27: Financial Instruments for a market risk analysis of the Group’s financial assets and liabilities.
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019 54
3. FINANCIAL RISK MANAGEMENT (CONTINUED)
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 Group, through its subsidiary HUB24 Custodial
Services Limited, fully complied with the minimum capital requirements for IDPS Operators and providers of custodial
services for the year ended 30 June 2019 so as to ensure ongoing capital adequacy.
There were no changes in the Group’s approach to capital management during the year.
INTEREST RATE RISK
Interest rate risk is the risk that the cash rate set by the Reserve Bank of Australia (RBA) changes and will affect the
Group’s income and includes price risk.
Refer to Note 27: Financial Instruments for an interest rate risk analysis of the Group’s financial assets and liabilities.
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 are as follows:
Investment platform estimate of useful life (Note 10)
• Deferred tax assets (Note 7)
•
• Goodwill and other indefinite life intangible assets (Note 10)
• Agility contingent consideration (Note 15)
5. OPERATING SEGMENTS
IDENTIFICATION OF REPORTABLE SEGMENTS
These operating segments are based on the internal reports that are reviewed and used by 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 (Underlying 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 Group’s operations are based in Australia. The principal products and services for each of the operating
segments are as follows:
Platform
Development and provision of investment and superannuation platform services to financial advisers, stockbrokers,
accountants and their clients.
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019 55
5. OPERATING SEGMENTS
KEY ACCOUNTING POLICIES (CONTINUED)
Licensee
Provision of financial advice to clients through financial advisers authorised by Paragem Pty Limited. 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.
Consolidated –
year ended 30 June 2019
Revenue
Platform
$
Licensee
$
IT Services
$
Corporate
S
Total
$
Sales to external customers
54,051,037
35,236,008
6,977,074
-
96,264,119
Expenses
(36,046,427)
(35,477,622)
(7,520,906)
(2,440,170)
(81,485,125)
Underlying EBITDA
18,004,610
(241,614)
(543,832)
(2,440,170)
14,778,994
Other non-operating items
Interest revenue
Non-recurring revenue
Fair value gain –
contingent consideration
Share based payments – Employee
(Including payroll tax)
Discount on contingent consideration
4,982
93,997
-
-
-
Non-recurring costs*
(762,735)
35,764
4,610
599,658
645,014
93,997
-
-
-
-
-
-
-
-
-
-
(2,317)
1,145,336
1,145,336
(2,122,792)
(2,122,792)
(351,756)
(3,678)
(351,756)
(768,730)
Depreciation and amortisation
(2,320,818)
(8,298)
(245,205)
-
(2,574,321)
Profit before income tax
15,020,036
(214,148)
(786,744)
(3,173,402)
10,845,742
Income tax (expense)/benefit
-
-
-
(3,681,787)
(3,681,787)
Profit after income tax
15,020,036
(214,148)
(786,744)
(6,855,189)
7,163,955
Reconciliation to revenue from ordinary activities
Sales to external customers
Interest revenue
Non-recurring revenue
Fair value gain – contingent
consideration
Sub-lease income
Waived service fees*
Revenue from ordinary activities
*Waived Service fees are included within non-recurring costs for segment allocation purposes.
96,264,118
645,014
93,997
1,145,336
202,996
316,122
98,667,583
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019 56
5. OPERATING SEGMENTS
KEY ACCOUNTING POLICIES (CONTINUED)
Consolidated –
year ended 30 June 2018
Revenue
Platform
$
Licensee
$
IT Services
$
Corporate
S
Total
$
Sales to external customers
39,670,243
35,769,463
8,460,153
-
83,899,859
Expenses
(27,800,854)
(35,581,529)
(8,455,922)
(667,789)
(72,506,094)
Underlying EBITDA
11,869,389
187,934
4,231
(667,789)
11,393,765
Other non-operating items
Interest revenue
Non-recurring revenue
Fair value gain – contingent
consideration
Share based payments – Employee
(Including payroll tax)
Share based payments – Paragem
Option holders
Discount on contingent consideration
180,512
98,065
-
-
-
-
27,659
5,154
296,641
509,966
98,065
-
-
-
-
-
-
-
-
-
-
-
2,383,850
2,383,850
(1,594,798)
(1,594,798)
83,062
83,062
(601,891)
(601,891)
Depreciation and amortisation
(1,280,908)
(5,134)
(271,571)
(458,296)
(2,015,909)
Non-recurring costs
387
-
4,687
(451,350)
(446,276)
Profit before income tax
10,867,445
210,459
(257,499)
(1,010,571)
9,809,834
Income tax (expense)/benefit
-
-
-
(2,431,085)
(2,431,085)
Profit after income tax
10,867,445
210,459
(257,499)
(3,441,656)
7,378,749
Reconciliation to revenue from ordinary activities
Sales to external customers
Interest revenue
Non-recurring revenue
Fair value gain – contingent
consideration
Waived service fees
Sub-lease income
Revenue from ordinary activities
MAJOR CLIENTS
83,899,859
509,966
98,065
2,383,850
52,687
50,407
86,994,834
During the year ended 30 June 2019, HUB24’s largest client by gross revenue accounted for approximately 11% or
$11.0 million in revenue to the consolidated group. The client is a financial advice business and is serviced by the
Licensee segment. (During the year ended 30 June 2018, HUB24’s largest client accounted for approximately 13%
or $10.7 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 during the year ended 30 June 2019
or 30 June 2018.
Licensee segment: during the year ended 30 June 2019 one client contributed more than 10% or more to the segment,
with a contribution of 32% or $11.0 million in external revenue. (During the year ended 30 June 2018: one client
contributed more than 10% to the segment, with a contribution of 30% or $10.7 million in external revenue.)
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019 57
5. OPERATING SEGMENTS
MAJOR CLIENTS (CONTINUED)
IT Services: during the year ended 30 June 2019 two clients each contributed more than 10% to the segment, with a
49% or $3.6 million and 21% or $1.6 million external revenue contribution. (During the year ended 30 June 2018 two
clients each contributed more than 10% to the segment, with a 66% or $5.6 million and 15% or $1.3 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 Group recognises revenue when
the amount can be reliably measured, it is probable that future economic benefits will flow to the Group and specific
criteria have been met for each of the activities.
Revenue is recognised for the major business activities as follows:
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.
• Platform fees are accrued daily, paid monthly in arrears for the ongoing provision for agreed services and
transactions.
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.
• Licensee fee revenue is recognised per the advisers’ client receipts as per agreed terms outlined per the individual
contracts and underlying fee schedules.
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. This revenue is recognised in accordance with the performance delivery of
agreed services, within a period of 1–6 months.
• 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. Revenue is recognised on a monthly basis and is
dependent upon time and material usage.
Interest income
•
Interest income comprises interest on cash and short term deposits. Interest income is recognised as it accrues in
profit using the effective interest method.
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019 58
6. REVENUE AND EXPENSES FROM CONTINUING OPERATIONS
KEY ACCOUNTING POLICIES (CONTINUED)
(a) Revenue*
Platform fees
Licensee fees
IT Services fees
Expenses
(b) Employee benefits expenses*
Wages and salaries (Incl. 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
(d) Administrative expenses*
Corporate fees
Professional and consultancy fees
Information services and communication
Travel and entertainment
Transaction costs
Discount on consideration
Superfund administrative fees
Other administrative expenses
2019
$
Consolidated
2018
$
54,145,033
39,768,206
35,236,008
35,769,463
6,977,074
8,460,153
96,358,115
83,997,822
24,749,013
19,943,823
1,826,461
5,775,925
1,447,802
3,830,395
32,351,399
25,222,020
714,864
1,859,457
2,574,321
990,556
1,634,064
2,948,623
1,248,159
733,604
353,093
1,364,798
1,498,973
10,771,870
576,097
1,439,812
2,015,909
478,544
1,457,977
2,304,771
1,122,447
435,340
601,891
1,578,701
590,650
8,570,321
*Prior comparatives have been reclassified for presentation purposes and consistency with the current year.
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 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 tax liabilities are recognised for all
taxable temporary differences except:
• When the deferred 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; and
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019 59
7. INCOME TAX
KEY ACCOUNTING POLICIES (CONTINUED)
• When the 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 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 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; and
• 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 tax assets is reviewed at each reporting date and reduced to the extent that it is no
longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised.
Unrecognised deferred tax assets are reassessed at each reporting date and are recognised to the extent that it has
become probable that future taxable profit will allow the deferred tax asset to be recovered.
Deferred 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; and
• 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 periods 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.
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019 60
7. INCOME TAX
KEY ESTIMATES AND JUDGEMENTS (CONTINUED)
The deferred tax asset continues to be recognised as at 30 June 2019 based on the following management judgements:
• The Group continues to be profitable with consistent growth, margins and profit line trends over the last 5 financial years;
• For the year ended 30 June 2019, the Group has increased profit performance and is expected to remain profitable.
According to management estimates, full tax loss recoupment is probable in the medium term. As a sensitivity
measure, at 60% of these estimates for taxable income, full tax loss recoupment is still estimated to occur in the
medium term.
The Group assumes and will continue to monitor that there will be ongoing compliance with relevant tax legislations.
Research and development expenditure
The income tax calculation for the year ended 30 June 2019, included in the financial statements is based upon a
number of estimates. A material estimate of this calculation relates to Research and Development (R & D) expenditure.
Remuneration expenses of the development team are the largest component of the R & D expenditure, which for the
year ended 30 June 2019, comprise 90% of the total estimated R & D claim. This percentage allocation is consistent
with the actual R & D claim for the year ended 30 June 2018.
(a) Income tax expense/(benefit)
Deferred tax expense/(benefit)
Prior period deferred tax under/(over) provision
Income tax expense/(benefit)
Deferred tax included in income tax expense/(benefit) comprises:
Decrease/(increase) in deferred tax assets
Prior period deferred tax under/(over) provision
(Decrease)/increase in deferred tax liabilities
Deferred tax – debited/(credited) directly to equity
2019
$
Consolidated
2018
$
3,334,833
346,954
3,681,787
3,375,570
346,954
(46,579)
5,842
2,558,403
(127,318)
2,431,085
2,588,504
(127,318)
(45,650)
15,549
3,681,787
2,431,085
2019
$
Consolidated
2018
$
(b) Reconciliation of income tax expense/(benefit) to pre-tax accounting profit/(loss)
Profit from continuing operations before income tax expense
Prima facie income tax at 30%
10,845,742
10,845,742
3,253,723
Tax effect of amounts which are not deductible (taxable) in calculating taxable income:
Entertainment – non-deductible
Other expenses – non-deductible
Employee share plan costs – non-deductible
Other income – non-assessable
33,044
203,367
496,638
(465,106)
3,521,666
9,809,831
9,809,831
2,942,949
31,548
(5,073)
434,341
(741,972)
2,661,793
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019
7. INCOME TAX
KEY ESTIMATES AND JUDGEMENTS (CONTINUED)
Prior period deferred tax under/(over) provision
Temporary differences – research and development
Income tax expense/(benefit)
Other disclosure items
61
2019
$
346,954
(186,833)
160,121
3,681,787
Consolidated
2018
$
(127,318)
(103,390)
(230,708)
2,431,085
Deferred tax – debited/(credited) directly to equity
(5,842)
(15,549)
(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
Sundry DTA
Movements:
Opening balance
Prior period deferred tax under/(over) provision
Intangibles – other
Accrued expenses
Provisions
Carry forward tax losses
Non-refundable carry forward tax offsets
Sundry DTA
Closing balance
(d) Deferred Tax Liability
Deferred tax liability comprises temporary differences attributable to:
DTL on intangibles
Movements:
Opening balance
Other Intangibles
Closing balance
2019
$
Consolidated
2018
$
1,051,116
79,181
1,822,074
2,631,859
4,485,951
38,284
1,120,469
104,817
1,492,015
6,722,820
4,327,016
63,852
10,108,465
13,830,989
13,830,989
16,292,173
(346,954)
(488,081)
(25,636)
330,059
127,318
(539,733)
(34,772)
191,740
(4,012,583)
(3,113,369)
846,239
(25,568)
933,662
(26,030)
10,108,465
13,830,989
2019
$
Consolidated
2018
$
423,122
423,122
469,701
(46,579)
423,122
469,701
469,701
515,351
(45,650)
469,701
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019 62
7. INCOME TAX
KEY ESTIMATES AND JUDGEMENTS (CONTINUED)
(e) Other disclosure items
Capital raising costs in Equity
TAX CONSOLIDATION
2019
$
Consolidated
2018
$
(5,842)
(5,842)
(15,549)
(15,549)
Members of the tax consolidated entity and the tax sharing arrangement
The Group 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 Group have entered into a tax sharing agreement.
Tax effect accounting by members of the tax consolidated Group
The head entity and the controlled entities in the tax consolidated group continue to account for their own current
and deferred tax amounts as per UIG 1052 Tax Consolidation Accounting. The consolidated group has applied the
consolidated group allocation approach in determining the appropriate amount of current taxes and deferred taxes
to allocate to members of the tax consolidated group. 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 and liabilities arising from unused tax losses and unused tax credits (if any)
assumed from controlled entities in the tax consolidated group.
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 under the ‘simplified’ approach is
used to recognise short term trade receivables ‘lifetime expected credit losses’ from the first reporting period. These
are the credit losses expected over the term of the receivable.
The Group’s impairment model calculates expected credit losses on trade receivables using a provision matrix. Under
the model, historic provision rates with current and forward looking estimates are used.
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.
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019 8. CURRENT ASSETS – TRADE AND OTHER RECEIVABLES
KEY ESTIMATES AND JUDGEMENTS (CONTINUED)
Trade receivables
Provision for doubtful debts
Net other receivables
IMPAIRMENT AND RECOVERABILITY
63
2019
$
Consolidated
2018
$
7,604,412
5,080,228
(19,339)
(19,608)
(11,372)
19,172
7,565,465
5,088,028
Balances within trade and other receivables do not contain impaired assets. It is expected that these balances will be
received as and when they fall due. Refer to Note 27 for the maturity analysis.
FAIR VALUE
Due to the short term nature of these receivables, their carrying value is assumed to approximate their fair value.
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
Consolidated
Year ended 30 June 2019
Cost or fair value
Accumulated depreciation
Net book amount
Computer
equipment
$
2,053,399
(1,439,364)
614,035
Office
furniture and
fittings
$
1,935,641
(594,112)
1,341,529
Reconciliations of the carrying amounts at the beginning and end of the financial year:
Opening net book amount
Additions
Disposals
Depreciation charge
Closing net book amount
739,308
262,076
(2,264)
(385,085)
614,035
1,475,033
196,274
-
(329,778)
1,341,529
Total
$
3,989,040
(2,033,476)
1,955,564
2,214,341
458,350
(2,264)
(714,863)
1,955,564
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019 64
9. NON-CURRENT ASSETS – OFFICE EQUIPMENT
KEY ACCOUNTING POLICIES (CONTINUED)
Consolidated
Year ended 30 June 2018
Cost or fair value
Accumulated depreciation
Net book amount
Computer
equipment
$
1,832,488
(1,093,180)
739,308
Office
furniture and
fittings
$
1,752,009
(276,976)
1,475,033
Reconciliations of the carrying amounts at the beginning and end of the financial year:
Opening net book amount
Additions
Disposals
Depreciation charge
Closing net book amount
10. NON-CURRENT ASSETS – INTANGIBLE ASSETS
KEY ACCOUNTING POLICIES
Goodwill
572,212
520,418
(1,003)
(352,319)
739,308
206,056
1,509,040
(16,285)
(223,778)
1,475,033
Total
$
3,584,497
(1,370,156)
2,214,341
778,268
2,029,458
(17,288)
(576,097)
2,214,341
Goodwill acquired in a business combination is initially measured at cost being the excess of the cost of the business
combination over the Group’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 Group’s cash-generating units that are expected to benefit from the synergies of the
combination, irrespective of whether other assets or liabilities of the Group 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
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019 65
10. NON-CURRENT ASSETS – INTANGIBLE ASSETS
KEY ACCOUNTING POLICIES (CONTINUED)
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, for detailed information.
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.
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 Group 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 Group 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 Group capitalises project development costs eligible for capitalisation in relation to the investment platform and
Agility development projects. The capitalised costs are all directly attributable costs necessary to create, produce, and
prepare assets to be capable of operating in the manner intended. Capitalised project costs are amortised over the
project’s useful life.
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019 66
10. NON-CURRENT ASSETS – INTANGIBLE ASSETS
KEY ESTIMATES AND JUDGEMENTS (CONTINUED)
Investment
Platform
$
Goodwill
$
Agility
connect
software
$
Agility
customer
relationship
$
Other*
$
Total
$
Consolidated
Year ended 30 June 2019
At cost
25,924,832
16,325,588
2,540,970
1,284,000
1,580,278
47,655,668
Accumulated amortisation
and impairment
(9,005,850)
-
(778,263)
(200,352)
(602,640)
(10,587,105)
Net carrying amount
16,918,982
16,325,588
1,762,707
1,083,648
977,638
37,068,563
Reconciliations of the carrying amount at the beginning and end of the financial year:
Opening carrying amount
11,842,102
16,325,588
2,083,199
1,163,918
608,511
32,023,318
Other additions
Amortisation charge
6,326,781
(1,249,901)
-
-
-
-
577,921
6,904,702
(320,492)
(80,270)
(208,794)
(1,859,457)
Closing carrying amount
16,918,982
16,325,588
1,762,707
1,083,648
977,638
37,068,563
*Other is comprised of the Dealer network, Managed fund client list and Software intangibles.
Investment
Platform
$
Goodwill*
$
Agility
connect
software
$
Agility
customer
relationship
$
Other**
$
Total
$
Consolidated
Year ended 30 June 2018
At cost
19,598,051
16,325,588
2,540,970
1,284,000
1,008,592
40,757,201
Accumulated amortisation
and impairment
(7,755,949)
-
(457,771)
(120,082)
(400,081)
(8,733,883)
Net carrying amount
11,842,102
16,325,588
2,083,199
1,163,918
608,511
32,023,318
Reconciliations of the carrying amount at the beginning and end of the financial year:
Opening carrying amount
8,540,719
15,336,909
2,365,220
1,241,094
601,488
28,085,430
Other additions
4,239,673
-
Acquisitions through
business combinations
-
988,679
-
-
-
-
149,349
4,389,022
-
988,679
Amortisation charge
(938,290)
-
(282,021)
(77,176)
(142,326)
(1,439,813)
Closing carrying amount
11,842,102
16,325,588
2,083,199
1,163,918
608,511
32,023,318
*Goodwill has arisen from the business combination with DIY Administration Pty Limited, refer to Note 28 for further details
**Other is comprised of the Dealer network, Managed fund client list and Software intangibles.
Intangible assets are allocated to the Group’s cash-generating units (CGUs) as required by AASB 136.
Intangibles are associated with a CGU as listed below:
Investment Platform CGU
Investment Platform
Managed fund client list
Software
Licensee CGU
Dealer network
Software
IT Services CGU
Agility connect software
Agility customer relationship
Software
Goodwill on acquisition of Paragem, Agility and DIY
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019 67
10. NON-CURRENT ASSETS – INTANGIBLE ASSETS
KEY ESTIMATES AND JUDGEMENTS (CONTINUED)
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. Cash flows beyond the 5 year period are
extrapolated using a terminal value.
Goodwill – Paragem (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 5 year projection period. Cash flows beyond the 5 year period are extrapolated using a
terminal value.
Goodwill – Agility (Included within Investment platform CGU)
Goodwill recognised as part of the Agility acquisition has been allocated to the Investment Platform CGU, while the
Agility customer relationship and Agility connect software intangible have been identified as part of the IT Services 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 5 year projection period. Cash flows beyond the 5 year period are extrapolated using a
terminal value.
Agility connect software (Included within IT services CGU)
The fair market value of the Agility connect software intangible has been determined based on a value-in-use
calculation. This calculation uses cash flow projections based on financial budgets approved by directors covering a 5
year period. Cash flows beyond the 5 year period are extrapolated using a terminal value.
The recoverable amount of the Agility connect software intangible has been assessed for indicators of impairment as
at 30 June 2019. Based upon this assessment the carrying value of the intangible is not considered to be impaired.
Agility customer relationships (Included within IT services CGU)
The fair market value of the Agility customer relationships intangible has been determined based on a value-in-use
calculation. This calculation uses cash flow projections based on financial budgets approved by directors covering a 5
year period. Cash flows beyond the 5 year period are extrapolated using a terminal value.
The recoverable amount of the Agility customer relationships intangible has been assessed for indicators of
impairment as at 30 June 2019. Based upon this assessment the carrying value of the intangible is not considered to
be impaired.
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 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 Pty Limited acquisition has been assessed based on the cash
generated from future funds transferred to the platform.
The goodwill recognised as a result of the Agility Applications Pty Limited acquisition has been assessed based on
future funds transferred to the platform from Agility stockbroking clients.
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019 68
10. NON-CURRENT ASSETS – INTANGIBLE ASSETS
KEY ESTIMATES AND JUDGEMENTS (CONTINUED)
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 is a key assumption used in calculating future cashflows. Management have
estimated future funds under administration on the platform at a 5 year compound annual growth rate of 26% 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 Group’s value-in-use calculations is 14% (2018:15.0%)
which equates to the weighted average cost of capital over the reporting period.
3. Terminal growth rate – The terminal growth rate used for the Group’s value-in-use calculations is 2.5% (2018:2.5%).
4. Period over which cashflows have been discounted – Management have used a period of 5 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 (11 years and 5 months from 30 June 2019).
There were no other key assumptions used in the value in use calculation impacting the investment platform
intangible, the goodwill Paragem intangible, the Agility goodwill intangible. Based on the above, there was no
impairment applied to any of the intangibles.
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 3% 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 was 2% higher than management estimates (16% instead of 14%) , there
would be no impairment of the intangible asset.
Key assumptions used for value-in-use calculations – Agility customer relationship and Agility connect software
1. Growth in Connect licenses, consulting income and IT infrastructure support are key assumptions used in
calculating future cash flows. Management have estimated revenue growth of the IT Services CGU as a 5 year CAGR
of 8% with reference to current client license rates, industry data and pipeline monitoring.
2. An EBITDA 5 year average margin of 12% 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% (2018:
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 5 years to discount
projected cashflows for its value-in-use calculations.
5. Terminal growth rate – The terminal growth rate used for the company’s value-in-use calculations is 1.5%.
(2018:1.5%).
There were no other key assumptions used in the value in use calculation impacting the Customer relationships and
Connect software intangibles. Based on the above there would be no impairment of the intangible asset.
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019 69
10. NON-CURRENT ASSETS – INTANGIBLE ASSETS
KEY ESTIMATES AND JUDGEMENTS (CONTINUED)
Impact of possible changes in key assumptions – Customer relationship and Connect software
If the business EBITDA margin was 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 (18% instead of 16%) there
would be no impairment of intangible assets.
Based on the above the value-in-use of the Customer relationship and Connect software intangibles exceed the
carrying value and are not considered impaired.
11. NON-CURRENT ASSETS – RECEIVABLES
ORFR loan facility
Rental bond
ORFR LOAN FACILITY
2019
$
Consolidated
2018
$
2,000,000
2,000,000
-
11,220
2,000,000
2,011,220
HUB24 has advanced a loan of $2 million to Diversa Limited, 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 Limited 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 has been extended to 31 December 2020 under the same commercial terms.
12. 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 Group prior to the end of the financial year that are unpaid and arise when the Group
becomes obliged to make future payments in respect of the purchase of these goods and services.
Trade creditors
Deferred contingent consideration – Agility
Key contract consideration – Agility
Sundry creditors
Total trade and other payables
2019
$
168,648
525,000
300,000
2,369,423
3,363,071
Consolidated
2018
$
1,023,236
1,360,377
300,000
2,544,131
5,227,744
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019 70
12. CURRENT LIABILITIES – TRADE AND OTHER PAYABLES (CONTINUED)
DEFERRED CONTINGENT CONSIDERATION – AGILITY
On 3 January 2017 HUB24 Limited acquired 100% of the issued shares in Agility Pty Limited, 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).
The following payments were made for deferred consideration and were subject to performance conditions and
warranty claims being met:
• $200,000 paid on 14 July 2017
• $1,500,000 paid on 5 January 2018
• $822,469 paid on 2 April 2019 comprised of $411,250 in cash and 31,669 ordinary shares valued at $12.98 per share.
In the circumstances where 10% of performance criteria were not to be met, the following impact would result:
Deferred contingent consideration
Fair value gain
Decrease by $87,500
Increase by $87,500
13. CURRENT LIABILITIES – PROVISIONS
KEY ACCOUNTING POLICIES
Provisions
Provisions are recognised when the Group 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: 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.
• Superannuation 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.
Lease make good
The provision represents the present value of the estimated costs to make good the premises leased by the Group at
the end of the respective lease term.
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019 13. CURRENT LIABILITIES – PROVISIONS
KEY ACCOUNTING POLICIES (CONTINUED)
Employee benefits – Annual leave
Employee benefits – Short term incentive
Lease make good
Rental lease liability
71
2019
$
1,613,540
3,053,086
24,882
361,646
Consolidated
2018
$
1,289,635
2,505,366
45,988
239,156
5,053,154
4,080,145
Movements in each class of provision during the financial year, other than employee benefits, are set out below:
Consolidated
2019
Carrying amount at the start of the year
Additional provisions recognised/(released)
Amounts paid during the year
Carrying amount at the end of the year
Consolidated
2018
Broking claims
$
Lease liability
$
Lease make good
$
Other sundry
$
-
-
-
-
239,156
122,490
-
361,646
45,988
(21,106)
-
24,882
-
-
-
-
Broking
claims
$
Rental lease
liability
$
Lease
make good
$
Other
sundry
$
Carrying amount at the start of the year
Additional provisions recognised/(released)
Amounts paid during the year
Carrying amount at the end of the year
420,150
(420,150)
-
-
38,193
200,963
-
239,156
122,892
197,021
-
(76,904)
45,988
-
(197,021)
-
14. NON-CURRENT LIABILITIES – PROVISIONS
Employee benefits – long service leave
Lease make good provision
Rental lease liability
LEASE MAKE GOOD
2019
$
775,492
115,551
110,047
1,001,090
Consolidated
2018
$
693,936
70,185
117,741
881,862
The provision represents the present value of the estimated costs to make good the premises leased by the Group at
the end of the respective lease term.
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019 72
14. NON-CURRENT LIABILITIES – PROVISIONS (CONTINUED)
MOVEMENTS IN PROVISIONS
Movements in each class of provision during the financial year, other than employee benefits, are set out below:
Consolidated
2019
Carrying amount at start of year
Additional provisions recognised/(released)
Carrying amount at end of period
Consolidated
2018
Carrying amount at start of year
Additional provisions recognised/(released)
Carrying amount at end of period
15. OTHER – NON-CURRENT LIABILITIES
DEFERRED CONTINGENT CONSIDERATION – AGILITY
Lease make good
$
Rental lease liability
$
70,185
45,366
115,551
117,741
(7,694)
110,047
Lease make good
$
Rental lease liability
$
48,066
22,119
70,185
111,575
6,166
117,741
Management’s estimate of the performance over the earnout period until 31 December 2020 against set criteria requires
significant judgement. As at 30 June 2019 management estimate that 53% of the revised performance criteria will be met
over the period until 31 December 2020, resulting in fair value deferred contingent consideration of $2.7 million (30 June
2018, estimated to be $4.3 million in total purchase consideration based on management’s judgement that 66% of the
performance criteria would be met). Refer Note 12 for current deferred contingent consideration $0.5 million.
The impacts upon the financial statements for the period ended 30 June 2019 of the change to management’s
estimate are as follows:
Deferred contingent consideration – Agility
Fair value gain on deferred contingent consideration – Agility
Decrease by $1,145,336
Increase by $1,145,336
In the circumstances where 10% of performance criteria were not to be met, the following impact would result:
Deferred contingent consideration
Fair value gain
Consolidated
2019
Carrying amount at start of year
Amounts reclassified/released during the year
Unwinding of discount
Fair value gain on contingent consideration (profit and loss)
Carrying amount at end of period
Decrease by $511,779
Increase by $511,779
Contingent consideration
$
2,926,872
(525,000)
211,423
(467,095)
2,146,200
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019 73
Contingent consideration
$
5,972,607
(1,360,377)
523,224
(2,208,582)
2,926,872
15. OTHER – NON-CURRENT LIABILITIES
DEFERRED CONTINGENT CONSIDERATION – AGILITY (CONTINUED)
Consolidated
2018
Carrying amount at start of year
Amounts reclassified/released during the year
Unwinding of discount
Fair value gain on contingent consideration (profit and loss)
Carrying amount at end of period
16. 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.
Consolidated
Issued and paid up capital
Ordinary shares, fully paid
Other equity securities
Treasury shares
Total capital
2019
Number
2018
Number
2019
$
2018
$
62,329,415
61,588,666
98,225,656
96,231,758
(56,596)
(70,789)
(38,256)
(47,850)
62,272,819
61,517,877
98,187,400
96,183,908
Movements in issued and paid up capital
Beginning of the financial year
61,588,666
54,980,675
96,231,758
89,213,158
Shares issued
740,749
6,607,991
1,504,356
Transfer from share based payment reserve
Additional paid up capital
Total shares
Capital raising costs
-
-
-
-
341,766
161,406
5,542,919
1,377,294
134,669
62,329,415
61,588,666
98,239,286
96,268,040
-
-
(13,630)
(36,282)
End of the financial year
62,329,415
61,588,666
98,225,656
96,231,758
Movement in other equity securities – treasury shares
Beginning of the financial year
Employee share issue
End of the period
70,789
(14,193)
56,596
94,949
(24,160)
70,789
47,850
(9,594)
38,256
64,181
(16,331)
47,850
Fully paid ordinary shares carry one vote per share and carry the right to dividends.
ORDINARY SHARES – FOR THE YEAR ENDED 30 JUNE 2019
On 22 August 2018, the Group issued 160,000 ordinary shares for options exercised by employees of the Group for
consideration of $156,800.
On 31 August 2018, the Group issued 200,000 ordinary shares for options exercised by employees of the Group for
consideration of $196,000.
On 8 October 2018, the Group issued 80,000 ordinary shares for options exercised by employees of the Group for
consideration of $78,400.
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019 74
16. ISSUED CAPITAL
ORDINARY SHARES – FOR THE YEAR ENDED 30 JUNE 2019 (CONTINUED)
On 12 November 2018, the Group issued 60,000 ordinary shares for options exercised by employees of the Group for
consideration of $147,600.
On 28 November 2018, the Group issued 75,000 ordinary shares for options exercised by employees of the Group for
consideration of $184,500.
On 10 December 2018, the Group issued 15,000 ordinary shares for options exercised by employees of the Group for
consideration of $36,900.
On 31 December 2018, the Group issued 10,000 ordinary shares for options exercised by employees of the Group for
consideration of $24,600.
On 4 January 2019, the Group issued 19,080 ordinary shares for options exercised by employees of the Group for
consideration of $46,937.
On 6 February 2019, the Group issued 90,000 ordinary shares for options exercised by employees of the Group for
consideration of $221,400.
On 26 April 2019, the Group issued 31,669 ordinary shares for consideration of $411,219 for the purchase of Agility
Applications.
ORDINARY SHARES – FOR THE YEAR ENDED 30 JUNE 2018
On 14 July 2017, the Group issued 310,000 ordinary shares for options exercised by employees of the Group for
consideration of $261,424.
On 1 August 2017, the Group issued 680,000 ordinary shares for options exercised by employees of the Group for
consideration of $573,784.
On 6 September 2017, the Group issued 462,333 ordinary shares for options exercised by employees of the Group for
consideration of $514,073.
On 10 October 2017, the Group issued 4,256,991 ordinary shares for final settlement of the Paragem acquisition
earnout consideration of $3,936,440.
On 1 December 2017, the Group issued 240,000 ordinary shares for options exercised by employees of the Group for
consideration of $235,200.
On 11 December 2017, the Group issued 120,000 ordinary shares for options exercised by employees of the Group
for consideration of $117,600.
On 25 January 2018, the Group issued 538,667 ordinary shares for options exercised by employees of the Group for
consideration of $622,699.
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 7 September 2018, the Group transferred 14,193 shares to eligible employees under the HUB24 Employee Share
Ownership Plan.
On 1 September 2017, the Group transferred 24,160 shares to eligible employees under the HUB24 Employee Share
Ownership Plan.
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019 75
2019
$
Consolidated
2018
$
5,256,545
3,942,850
3,942,850
(341,766)
1,826,461
-
(171,000)
5,256,545
4,106,404
(1,377,294)
1,447,802
(83,062)
(151,000)
3,942,850
17. RESERVES
GENERAL RESERVES
Share based payments share reserve
Movements in share based payments share reserves:
Opening balance
Reserve reclassified to share capital through options issued
Employee share based payment expense
Share based payment to Paragem option holders
Shares issued through HUB24 Share Ownership Trust
Closing balance
18. RECONCILIATION OF CASH FLOWS
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.
(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
Share based payment expense – Employee
Share based payment expense – Paragem Option holders
Fair value gain on contingent consideration
Deferred revenue
Loss on disposal of office equipment
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
2019
$
Consolidated
2018
$
7,163,955
7,378,749
2,574,321
1,826,461
-
2,015,909
1,447,802
(83,062)
(1,145,336)
(2,383,850)
(405,017)
(138,424)
2,264
-
(2,477,437)
3,681,787
1,786,598
2,431,085
(5,040)
(2,015,720)
(1,029,297)
1,443,992
163,195
1,648,309
11,630,653
12,250,591
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019 76
18. RECONCILIATION OF CASH FLOWS
KEY ACCOUNTING POLICIES (CONTINUED)
(b) Reconciliation of cash and cash equivalents
Cash and cash equivalents comprises:
Cash on hand and at bank
(c) Terms and conditions
2019
$
Consolidated
2018
$
18,465,847
16,958,996
18,465,847
16,958,996
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
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
2019
$
Consolidated
2018
$
1,772,607
5,916,039
418,451
8,107,097
1,596,200
5,657,060
1,486,155
8,739,415
The above relates to lease commitments for seven premises with lease terms between 1 and 5 years.
Lease payments recognised as an expense in the current year amount to $1,916,546 (2018: $1,636,570).
Security deposits and guarantees for six leased properties amount to $11,649 in rental bonds (2018: $11,649), 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.
CONTINGENCIES
Nil contingencies. (2018: Nil)
Total contingent assets and liabilities
2019
$
-
Consolidated
2018
$
-
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019 77
20. SHARE BASED PAYMENTS PLAN
KEY ACCOUNTING POLICIES
Equity settled transactions
The Group 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 Group receives services that entitle the employee to
receive payment in equity or cash;
• Conditions that are linked to the price of the shares of HUB24.
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.
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 consolidated 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 Group 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 Group in relation to equity-settled awards only represents the expense associated
with grants to employees of the parent. The expense recognised by the Group 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.
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019 78
20. SHARE BASED PAYMENTS PLAN
KEY ACCOUNTING POLICIES (CONTINUED)
If a non-vesting condition is within the control of the Group or the employee, the failure to satisfy the condition is
treated as a cancellation. If a non-vesting condition within the control of the Group 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 Group 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.
Recognised share-based payment expenses
The expense recognised from equity-settled share-based payment transactions during the year is $1,826,461 (2018:
$1,447,802*).
*The 2018 expense relating to employee option plans was offset by a $83,062 credit relating to the Paragem Option holders.
Types of share-based payment plans
1. Share based payment plans issued during the year ended 30 June 2019.
Tax Exempt Share Plan – Employees
Number of Shares Issued
14,193
Issue Date
Issue Price
7 September 2018
$12.04
Vesting Conditions for All Shares Interests held in the shares are not at risk of forfeiture. There is no condition or
Voting
Dividends
Specific Terms
requirement that needs to be satisfied in order to acquire the shares.
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 YEAR ENDED 30 JUNE 2019 79
20. SHARE BASED PAYMENTS PLAN
KEY ESTIMATES AND JUDGEMENTS (CONTINUED)
Options and Rights – Employees
Issue Date
Number Issued
Expiry Date
Expected Vesting Period
Exercise Price
Vesting Conditions
I. Service
II. Market
III. FUA
Share
Ownership
Plan
PARs
(Rights)
Share
Ownership
Plan
PARs
(Rights)
Share
Ownership
Plan
PARs
(Rights)
7 Sep 2018
7 Sep 2018
7 Sep 2018
7 Sep 2018
7 Sep 2018
7 Sep 2018
257,852
70,888
12,000
4,000
30,000
10,000
7 Sep 2023
7 Sep 2033
7 Sep 2023
7 Sep 2033
7 Sep 2023
7 Sep 2033
3 years
$12.04
3 years
nil
2 years
$12.04
2 years
nil
2 years
$11.73
2 years
nil
[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 2.
Absolute Total Shareholder
Return (ATSR) CAGR in
excess of 17.5% over three
years, proportional vesting
between 12.5% and 17.5%.
[III] 50% vesting on
the achievement of
Performance condition 1.
Growth in Funds Under
Administration (FUA) in
excess of 115.8% over
three years, proportional
vesting between 29.23%
and 40.23% p.a. CAGR.
[III] 0% vesting if the
CAGR in FUA was below a
minimum level of 25.88%
p.a (99.5% over three years).
50% vesting will occur if
the CAGR in FUA reaches
29.58% p.a (117.6% over
three years). 100% vesting
will occur if the CAGR in FUA
reaches 33.09% p.a (135.7%
over three years)
[III] 0% vesting if the
CAGR in FUA was below a
minimum level of 25.88%
p.a (99.5% over three years).
50% vesting will occur if
the CAGR in FUA reaches
29.58% p.a (117.6% over
three years). 100% vesting
will occur if the CAGR in FUA
reaches 33.09% p.a (135.7%
over three years)
Disposal Restrictions
Restriction on sale of shares for 12 months from exercise, except to fund options
exercised for associated tax liabilities.
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019 80
20. SHARE BASED PAYMENTS PLAN
KEY ESTIMATES AND JUDGEMENTS (CONTINUED)
Options and Rights – Employees
Issue Date
Number Issued
Expiry Date
Expected Vesting Period
Exercise Price
Vesting Conditions
I. Service
II. Market
III. FUA
Share Ownership
Plan – MD
PARs
(Rights) – MD
Share Ownership
Plan – CFO
PARs
(Rights) – CFO
12 Dec 2018
12 Dec 2018
12 Dec 2018
12 Dec 2018
51,186
14,072
24,667
6,981
12 Dec 2023
12 Dec 2033
12 Dec 2023
12 Dec 2033
3 years
$12.04
3 years
nil
3 years
$13.44
3 years
nil
[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 2. Absolute
Total Shareholder Return (ATSR) CAGR
in excess of 17.5% over three years,
proportional vesting between 12.5% and
17.5%.
[II] 50% vesting on the achievement
of Performance condition 2. Absolute
Total Shareholder Return (ATSR) CAGR
in excess of 17.5% over three years,
proportional vesting between 12.5% and
17.5%.
[III] 50% vesting on the achievement
of Performance condition 1. Growth
in Funds Under Administration (FUA)
in excess of 115.8% over three years,
proportional vesting between 29.23%
and 40.23% p.a. CAGR.
[III] 50% vesting on the achievement
of Performance condition 1. Growth
in Funds Under Administration (FUA)
in excess of 115.8% over three years,
proportional vesting between 29.23%
and 40.23% p.a. CAGR.
Disposal Restrictions
Restriction on sale of shares for 12 months from exercise, except to fund options
exercised for associated tax liabilities.
Options and Rights – Employees
Issue Date
Number Issued
Expiry Date
Expected Vesting Period
Exercise Price
Vesting Conditions
I. Service
II. Market
III. Growth
PARs (Rights) – Director
12 Dec 2018
20,000
12 Dec 2033
3 years
nil
[I] Must be an director from date of issue until options are exercised, unless
considered a good leaver (in which case must exercise within 30 days)
[II] Performance condition (a) stipulates that the director must provide support
to the HUB24 Managing Director and KMPs in relation to the securing and
maintenance of key accounts over the period from 1 July 2018 to 30 June 2021.
[III] Performance condition (b) stipulates that the director must directly liaise with
key accounts to facilitate growth and customer satisfaction as measured by the
improvement in the company’s customer satisfaction service levels over the period
from 1 July 2018 to 30 June 2021
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019 81
PARs (Rights) – Special LTI
12 Dec 2018
445,000
12 Dec 2033
3 years
nil
20. SHARE BASED PAYMENTS PLAN
KEY ESTIMATES AND JUDGEMENTS (CONTINUED)
Options and Rights – Employees
Issue Date
Number Issued
Expiry Date
Expected Vesting Period
Exercise Price
Vesting Conditions
I. FUA
II. Leadership
Disposal Restrictions
[I] Applying to 425,000 performance rights, 100% vesting will occur if the 4 year
CAGR in FUA reaches 33% per annum.
[II] Applying to 20,000 performance rights, vesting will occur based on (a) effective
leadership of the development and operation of the Company’s risk and compliance
framework and policies over the Performance Period; and (b) effective leadership
and management of key legal, risk and compliance matters across the Group.
Restriction on sale of shares for 12 months from exercise, except to fund options
exercised for associated tax liabilities.
2. Share based payment plans issued prior to 1 July 2018.
Tax Exempt Share Plan – Employees
Number of Shares Issued
24,160
Issue Date
Issue Price
1 September 2017
$6.25
Vesting Conditions for All Shares Interests held in the shares are not at risk of forfeiture. There is no condition or
Voting
Dividends
Specific Terms
requirement that needs to be satisfied in order to acquire the shares.
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 YEAR ENDED 30 JUNE 2019 82
20. SHARE BASED PAYMENTS PLAN
KEY ESTIMATES AND JUDGEMENTS (CONTINUED)
Options and Rights – Employees
Issue Date
Number Issued
Expiry Date
Expected Vesting Period
Exercise Price
Vesting Conditions
I. Service
II. Market
III. FUA
Disposal Restrictions
Share
Ownership
Plan
PARs
(Rights)
Share
Ownership
Plan
PARs
(Rights)
Share
Ownership
Plan – MD
PARs
(Rights) –
MD
11 Oct 2017 11 Oct 2017 21 Aug 2017 21 Aug 2017 11 Dec 2017 11 Dec 2017
401,686
122,942
34,247
11,211
78,077
23,897
11 Oct 2022 11 Oct 2032 21 Aug 2022 21 Aug 2032 11 Dec 2022 11 Dec 2032
3 years
$7.09
3 years
nil
3 years
$6.25
3 years
nil
3 years
$7.09
3 years
nil
[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 2.
Absolute Total Shareholder
Return (ATSR) CAGR in
excess of 17.5% over three
years, proportional vesting
between 12.5% and 17.5%.
[II] 50% vesting on
the achievement of
Performance condition 2.
Absolute Total Shareholder
Return (ATSR) CAGR in
excess of 17.5% over three
years, proportional vesting
between 12.5% and 17.5%.
[II] 50% vesting on
the achievement of
Performance condition 2.
Absolute Total Shareholder
Return (ATSR) CAGR in
excess of 17.5% over three
years, proportional vesting
between 12.5% and 17.5%.
[III] 50% vesting on
the achievement of
Performance condition 1.
Growth in Funds Under
Administration (FUA) in
excess of 117.6% over
three years, proportional
vesting between 25.88%
and 33.09% p.a. CAGR.
[III] 50% vesting on
the achievement of
Performance condition 1.
Growth in Funds Under
Administration (FUA) in
excess of 109.7% over
three years, proportional
vesting between 28% and
45% p.a. CAGR.
[III] 50% vesting on
the achievement of
Performance condition 1.
Growth in Funds Under
Administration (FUA) in
excess of 117.6% over
three years, proportional
vesting between 25.88%
and 33.09% p.a. CAGR.
Restriction on sale of shares for 12 months from exercise, except to fund options
exercised for associated tax liabilities.
3. Share based payment plans issued prior to 1 July 2017.
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
Voting
Dividends
Specific Terms
requirement that needs to be satisfied in order to acquire the shares.
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 YEAR ENDED 30 JUNE 2019 83
20. SHARE BASED PAYMENTS PLAN
KEY ESTIMATES AND JUDGEMENTS (CONTINUED)
Options and Rights – Employees
FY2017
Issue Date
Number Issued
Expiry Date
Expected Vesting Period
Exercise Price
Vesting Conditions
I. Service
II. Market
III. FUA
Share Ownership
Plan
PARs
(Rights)
29 Nov 2016
29 Nov 2016
418,639
137,043
29 Nov 2021
29 Nov 2031
3 years
$4.46
3 years
nil
Share Ownership Plan
29 Nov 2016
50,000
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 52%
greater than exercise price for 20
consecutive days in the period between
36 months from the issue date and
expiry of options.
N/A
[III] 50% vesting on the achievement
of Performance condition 2. Growth
in Funds Under Administration (FUA)
in excess of 45% over three years,
proportional vesting between 28% and
45% CAGR.
Disposal Restrictions
Restriction on sale of shares for 12 months from exercise, except to fund options
exercised for associated tax liabilities.
Options and Rights – Employees
FY2016
Issue Date
Number Issued
Expiry Date
Expected Vesting Period
Exercise Price
Vesting Conditions
I. Service
II. Market
Disposal Restrictions
Share Ownership
Plan
PARs
(Rights) – MD
14 Oct 2015
7 Dec 2015
620,000
150,000
14 Oct 2020
7 Dec 2030
3 years
$2.46
3 years
$2.46
Share Ownership Plan
30 Mar 2016
50,000
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.
Restriction on sale of shares for 12 months from exercise, except to fund options
exercised for associated tax liabilities.
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019 84
20. SHARE BASED PAYMENTS PLAN
KEY ESTIMATES AND JUDGEMENTS (CONTINUED)
Options and Rights – Employees
FY2015
Issue Date
Number Issued
Expiry Date
Expected Vesting Period
Exercise Price
Vesting Conditions
I. Service
II. Market
III. Performance
Disposal Restrictions
SUMMARIES OF OPTIONS GRANTED
Share Ownership Plan
Share Ownership Plan – MD
17 Oct 2014
760,000
17 Oct 2019
3 years
$0.98
2 Dec 2014
200,000
17 Oct 2019
3 years
$0.98
[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 in excess
of 60% of the exercise price for 20
consecutive days in the period between 36
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.
As determined by the Board in its sole discretion
Restriction on sale of shares for 12 months from exercise, except to discharge tax
obligations in relation to the issue.
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
2,265,045
-
Number
WAEP
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
375,705
$12.11
-
(139,326)
(709,080)
-
1,792,344
160,000
2019
WASP
-
-
-
Number
WAEP
4,229,639
-
514,010
$7.03
(127,604)
-
2018
WASP
-
-
-
$1.54
$13.40
(2,351,000)
$0.99
$8.00
-
-
-
-
-
-
-
2,265,045
600,000
-
-
-
-
-
-
The outstanding balance as at 30 June 2019 is represented by:
• 160,000 options over ordinary shares with an exercise price of $0.98 each, vested expiring 17 October 2019
• 210,000 options over ordinary shares with an exercise price of $2.46 each, vested expiring 14 October 2020
• 150,000 options over ordinary shares with an exercise price of $2.46 each, vested expiring 7 December 2020
• 50,000 options over ordinary shares with an exercise price of $3.98 each, vested expiring 30 March 2021
• 356,893 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 30 March 2021
• 34,247 options over ordinary shares with an exercise price of $6.25 each, yet to vest expiring 21 August 2022
• 327,422 options over ordinary shares with an exercise price of $7.09 each, yet to vest expiring 11 October 2022
• 78,077 options over ordinary shares with an exercise price of $7.09 each, yet to vest expiring 11 December 2022
• 257,851 options over ordinary shares with an exercise price of $12.04 each, yet to vest expiring 7 September 2023
• 12,000 options over ordinary shares with an exercise price of $12.04 each, yet to vest expiring 7 September 2023
• 30,000 options over ordinary shares with an exercise price of $11.73 each, yet to vest expiring 7 September 2023
• 51,186 options over ordinary shares with an exercise price of $12.04 each, yet to vest expiring 12 December 2023
• 24,667 options over ordinary shares with an exercise price of $13.44 each, yet to vest expiring 12 December 2023
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019 85
20. SHARE BASED PAYMENTS PLAN (CONTINUED)
SUMMARY OF PERFORMANCE RIGHTS GRANTED
The outstanding balance as at 30 June 2019 is represented by:
Number
WAEP
2019
WASP
Number
WAEP
2018
WASP
Outstanding at the beginning of the year
Granted during the year
Forfeited during the year
Exercised during the year
Expired during the year
Outstanding at end of the year
Exercisable at the end of the year
282,784
570,941
(30,633)
-
-
823,092
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
137,043
158,050
(12,309)
-
-
282,784
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
• 116,829 performance rights over ordinary shares, yet to vest expiring 29 November 2031
• 11,211 performance rights over ordinary shares, yet to vest expiring 21 August 2032
• 100,213 performance rights over ordinary shares, yet to vest expiring 11 October 2032
• 23,897 performance rights over ordinary shares, yet to vest expiring 11 December 2032
• 84,889 performance rights over ordinary shares, yet to vest expiring 7 September 2033
• 486,053 performance rights over ordinary shares, yet to vest expiring 12 December 2033
OPTION PRICING MODEL
The fair value of all equity-settled options issued in the year is estimated at the date of grant using the Hoadley’s 1
Hybrid ESO model (Monte Carlo simulation method). The following table lists the inputs to the models used:
1. Share based payment plans issued during the year ended 30 June 2019.
Dividend Yield (%)
Expected Volatility (%)
Risk-free Interest Rate (%)
Expected Life of Options (Months)
Option Exercise Price ($)
Average Share Price at
Measurement Date ($)
Model Used
7 Sep 2018
SOP
7 Sep
2018 PARs
(Rights)
7 Sep 2018
SOP –
Paragem
7 Sep
2018 PARs
(Rights) –
Paragem
7 Sep 2018
SOP
7 Sep
2018 PARs
(Rights)
0.54
41
2.17
36
12.04
12.44
0.54
41
2.17
36
N/A
12.44
0.54
41
2.17
24
12.04
12.44
0.54
41
2.17
24
N/A
12.44
0.54
41
2.17
24
11.73
12.44
0.54
41
2.17
24
N/A
12.44
Hoadleys/
Black Scholes
Hoadleys/
Black Scholes
Hoadleys/
Black Scholes
Hoadleys/
Black Scholes
Hoadleys/
Black Scholes
Hoadleys/
Black Scholes
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019 86
20. SHARE BASED PAYMENTS PLAN
OPTION PRICING MODEL (CONTINUED)
Dividend Yield (%)
Expected Volatility (%)
Risk-free Interest Rate (%)
Expected Life of Options (Months)
Option Exercise Price ($)
Average Share Price at
Measurement Date ($)
Model Used
12 Dec
2018 SOP
– MD
12 Dec
2018 PARs
(Rights) –
MD
12 Dec
2018 SOP –
CFO
12 Dec
2018 PARs
(Rights) –
CFO
12 Dec
2018 PARs
(Rights) –
Director
12 Dec
2018 PARs
(Rights) –
Special LTI
0.54
45
2.12
36
12.04
12.97
0.54
45
2.12
36
N/A
12.97
0.54
45
2.12
36
13.44
12.97
0.54
45
2.12
36
N/A
0.54
45
2.12
36
N/A
0.54
45
2.12
36
N/A
12.97
12.97
12.97
Hoadleys/
Black Scholes
Hoadleys/
Black Scholes
Hoadleys/
Black Scholes
Hoadleys/
Black Scholes
Hoadleys/
Black Scholes
Hoadleys/
Black Scholes
2. Share based payment plans issued prior to 1 July 2018.
Dividend Yield (%)
Expected Volatility (%)
Risk-free Interest Rate (%)
Expected Life of Options (Months)
Option Exercise Price ($)
Average Share Price at
Measurement Date ($)
Model Used
11 Oct
2017 SOP
11 Oct
2017 PARs
(Rights)
21 Aug
2017 SOP
21 Aug
2017 PARs
(Rights)
11 Dec
2017 SOP
11 Dec
2017 PARs
(Rights)
-
45
2.38
36
7.09
8.18
-
45
2.38
36
N/A
8.18
-
45
2.37
36
6.25
8.18
-
45
2.37
36
N/A
8.18
-
45
2.37
36
7.09
9.68
-
45
2.37
36
N/A
9.68
Hoadleys/
Black Scholes
Hoadleys/
Black Scholes
Hoadleys/
Black Scholes
Hoadleys/
Black Scholes
Hoadleys/
Black Scholes
Hoadleys/
Black Scholes
Dividend Yield (%)
Expected Volatility (%)
Risk-free Interest Rate
(%)
Expected Life of
Options (Months)
Option Exercise Price
($)
Average Share Price at
Measurement Date ($)
Model used
17 Oct
2014
SOP
4 Dec
2014
SOP CEO
4 Dec
2014 SOP
Paragem
14 Oct
2015
SOP
7 Dec
2015
SOP MD
30 Mar
2016
SOP
29 Nov
2016
SOP
29 Nov
2016
SOP
29 Nov
2016 PARs
(Rights)
-
35
2.5
36
-
35
2.5
36
-
33
2.5
12-36
-
48
1.8
36
-
48
1.8
36
-
50
-
45
-
45
2.09
2.16
2.16
36
36
36
0.98
0.98
1.156
2.46
2.46
3.98
4.46
5.17
-
45
2.16
36
N/A
0.89
0.89
0.89
2.69
3.52
4.06
5.79
5.79
5.79
Black
Scholes
Black
Scholes
Black
Scholes
Hoadleys Hoadleys Hoadleys Hoadleys/
Black
Scholes
Hoadleys Hoadleys/
Black
Scholes
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019 87
21. SIGNIFICANT EVENTS AFTER THE REPORTING DATE
Subsequent to year end the Board has declared a dividend (unfranked) of 2.6 cents per share (3.5 cents per share inaugural
annual dividend following the year ended June 2018).
No other significant matter or circumstance has arisen since 30 June 2019 that has significantly affected, or may significantly
affect the Group’s operations, the results of those operations, or the Group’s state of affairs in future financial years.
22. EARNINGS PER SHARE
KEY ACCOUNTING POLICIES
Basic EPS is calculated by dividing the result attributable to members of the Group, 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 Agility acquisition, executive shares with a higher vesting share price and special LTI rights with a 0% probability
assessment (2018: Agility acquisition).
The following reflects the income and share data used in the calculations of basic and diluted loss per share:
Earnings per share
Profit/(Loss) after income tax
Profit/(Loss) after income tax attributable to the owners of HUB24 Limited
used in calculating basic and diluted earnings per share
Weighted average number of ordinary shares used
in calculating basic earnings per share
Weighted average number of ordinary shares used
in calculating diluted earnings per share
Basic earnings per share
Diluted earnings per share
2019
$
Consolidated
2018
$
7,163,955
7,378,749
7,163,955
7,378,749
2019
Number
Consolidated
2018
Number
62,097,012
60,145,774
63,398,125
61,931,232
2019
Cents
11.54
11.30
Consolidated
2018
Cents
12.27
11.91
During the year the following fees were paid or payable for services provided by professional service firms:
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019 88
23. REMUNERATION OF AUDITORS
Audit and review of financial statements provided by Deloitte Touche Tohmatsu
Other assurance services
Tax and other services
Total audit and other fees
24. RELATED PARTY DISCLOSURES
SUBSIDIARIES
2019
$
300,000
183,230
71,946
555,776
Consolidated
2018
$
240,500
118,270
172,872
531,642
The consolidated financial statements include the financial statements of HUB24 Limited and the Australian
subsidiaries listed in the following table.
Operating Entities
HUB24 Custodial Services Limited (formerly ANZIEX Limited)
HUB24 Share Ownership Trust
HUB24 Management Services Pty Limited
HUB24 Administration Pty Limited
HUB24 Services Pty Limited
Firstfunds Limited
ConnectHUB Pty Limited
Marketsplus Australia Pty Limited
Paragem Pty Limited
Agility Applications Pty Limited
Non-Operating Entities
HUB24 International Nominees Pty Limited (formerly ANZIEX Nominees Limited)
HUB24 Nominees Pty Limited (formerly Kardinia Nominees Pty Limited)
AT Pty Limited*
Investorfirst Securities Limited *
Researchfirst Pty Limited *
Captain Starlight Nominees Pty Limited *
Findlay & Co Stockbrokers Limited *
% Equity Interest
as at
30 June 2019
as at
30 June 2018
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 HUB24 Limited and its subsidiaries have been eliminated on consolidation and are
not disclosed in this note.
ULTIMATE PARENT
HUB24 Limited is the ultimate parent entity of the Group.
SIGNIFICANT ACCOUNTING POLICIES
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019 89
25. PARENT ENTITY FINANCIAL INFORMATION
The accounting policies of the parent entity are consistent with those of the Group except for investments in
subsidiaries which are accounted for at cost, less any impairment, in the parent entity.
SUMMARY 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
Statement of financial position
Total assets
Total liabilities
Net assets
Total equity
CONTINGENT LIABILITIES
2019
$
2018
$
18,641,334
(8,451,962)
18,641,334
(8,451,962)
61,398,347
44,577,427
3,736,072
5,441,018
57,662,275
39,136,409
57,662,275
39,136,409
The parent entity did not have any contingent liabilities as at 30 June 2019 or 30 June 2018.
CAPITAL COMMITMENTS
The parent entity had no capital commitments as at 30 June 2019 or 30 June 2018.
FINANCIAL COMMITMENTS – LOAN RECEIVABLE
The parent entity entered into a loan agreement for $5 million (of which $2 million was outstanding as at 30 June 2019)
($2 million 30 June 2018) with Diversa Limited, 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 Limited to Diversa Limited. Diversa Limited 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 2020.
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 Group. Refer to Note 7 for further details.
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019 90
26. KEY MANAGEMENT PERSONNEL
KEY MANAGEMENT PERSONNEL COMPENSATION
Short term employment benefits
Post employment benefits
Share based payments
27. FINANCIAL INSTRUMENTS
KEY ACCOUNTING POLICIES
Held to maturity investments
2019
$
Consolidated
2018
$
2,552,344
2,583,193
138,124
894,714
97,663
631,192
3,585,182
3,312,048
The Group’s principal financial instruments comprise cash, receivables, and payables. For the year ended 30 June 2019,
the Group did not utilise derivatives, holds no debt and has not traded in financial instruments including derivatives.
Interest rate risk
The Group’s financial instruments are 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 50 basis point increase and a 50
basis point decrease in interest rates would increase/decrease profit and loss in the Group by:
Cash and cash equivalents at end of period
50 basis points increase in interest rate
50 basis points decrease in interest rate
Net impact on profit after tax
Profit for the year
50 basis points increase in interest rate
50 basis points decrease in interest rate
Credit risk
2019
$
Consolidated
2018
$
18,465,847
16,958,996
92,329
(92,329)
7,163,955
7,256,284
7,071,626
84,795
(84,795)
7,378,749
7,463,544
7,293,954
The Group currently has a loan receivable of $2 million from Diversa Limited. Diversa Limited has received a loan
advance from the Group for the purpose of subscribing for share capital in The Trust Company (Superannuation)
Limited (“The Trustee”). The Group has security over the share capital issued to Diversa Limited 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 Group’s and parent entity’s financial liabilities are:
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019
27. FINANCIAL INSTRUMENTS
KEY ACCOUNTING POLICIES (CONTINUED)
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
MATURITY ANALYSIS OF FINANCIAL ASSETS AND LIABILITIES
91
2019
$
Consolidated
2018
$
2,557,499
3,029,211
280,572
695,522
2,146,200
5,679,793
538,157
980,189
1,463,435
6,010,992
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 Group’s overall liquidity risk.
0–1 month
$
1–3 months
$
4–12 months*
$
1–5 years**
$
Total
$
30 June 2019
Consolidated financial assets:
Cash and cash equivalents
13,381,689
5,084,158
-
-
18,465,847
Trade and other receivables
6,480,170
950,772
134,524
2,000,000
9,565,466
19,861,859
6,034,930
134,524
2,000,000
28,031,313
Consolidated financial liabilities:
Trade and other payables
(2,557,499)
(280,572)
(695,522)
(2,146,200)
(5,679,793)
Net Maturity
17,304,360
5,754,358
(560,998)
(146,200)
22,351,520
(2,557,499)
(280,572)
(695,522)
(2,146,200)
(5,679,793)
*For the 4–12 month period the Agility deferred consideration includes cash components payable 31 December 2019. Refer to Note 12 for further details.
**For the 1–5 year period the Agility deferred consideration includes cash and equity components payable 31 December 2020.
0–1 month
$
1–3 months
$
4–12 months*
$
1–5 years**
$
Total
$
30 June 2018
Consolidated financial assets:
Cash and cash equivalents
11,928,497
5,030,499
-
-
16,958,996
Trade and other receivables
4,510,435
217,665
359,928
2,011,220
7,099,248
16,438,932
5,248,164
359,928
2,011,220
24,058,244
Consolidated financial liabilities:
Trade and other payables
(3,029,211)
(538,157)
(980,189)
(1,463,435)
(6,010,992)
Net Maturity
13,409,721
4,710,007
(620,261)
547,785
18,047,252
(3,029,211)
(538,157)
(980,189)
(1,463,435)
(6,010,992)
*For the 4–12 month period the Agility deferred consideration includes cash and equity components payable.
**For the 1–5 year period the Agility deferred consideration includes cash and equity components payable.
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019 92
27. FINANCIAL INSTRUMENTS
MATURITY ANALYSIS OF FINANCIAL ASSETS AND LIABILITIES (CONTINUED)
The Group 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 Group balance sheet 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
No other financial instruments for the year ended 30 June 2019 required fair value assessment.
In the financial year ended 30 June 2018 the Group had a number of financial instruments which were not measured
at fair value in the statement of financial position. These had the following fair values at 30 June 2018:
Year ended 30 June 2018
Non-Current Assets
Rental bonds and guarantees
28. BUSINESS COMBINATION
Carrying
amount
$
11,220
11,220
Consolidated
Fair value
amount
$
11,220
11,220
The Group made no business acquisitions in the financial year ended 30 June 2019.
SUMMARY OF PRIOR YEAR ACQUISITION
The Group acquired DIY Administration Pty Limited on 3 May 2018, that was previously an outsourced arrangement
providing superannuation administration services for the HUB24 platform.
Details of the purchase consideration, net assets acquired and goodwill are as follows:
Purchase consideration
Cash consideration
Waived service fees
Total purchase consideration
The fair values of the acquisition are as follows:
Employee entitlements
Net identifiable assets acquired
Goodwill
Acquisition related costs of $198,067 are included in administrative expenses in the profit or loss.
Total
$
300,000
632,243
932,243
Fair value
$
(56,436)
(56,436)
988,679
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019 93
29. PROFIT RESERVES
To the extent possible under the Corporations Act 2001 and applicable tax laws, the profits reserve is preserved for
future dividend payments.
Profit reserve
Movement in profit reserves
Opening balance
Transfer to profit reserves
Dividends provided for or paid
Closing balance
2019
$
Consolidated
2018
$
13,014,445
5,088,013
5,088,013
11,349,598
(3,423,166)
-
5,088,013
-
13,014,445
5,088,013
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019 94
DIRECTORS’ DECLARATION
FOR THE YEAR ENDED 30 JUNE 2019
IN THE DIRECTORS’ OPINION:
a. the financial statements and notes set out on pages
44 to 93 are 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 2019 and of its performance
for the financial 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, and
b. the financial statements and notes comply with
International Financial Reporting Standards as
disclosed in Note 2, and
c. there are reasonable grounds to believe that the
Group will be able to pay its debts as and when they
become due and payable, and
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.
Bruce Higgins
Chairman
Sydney
26 August 2019
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019 INDEPENDENT AUDITOR’S REPORT
95
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
Independent Auditor’s Report
to the Shareholders of HUB24 Limited
Deloitte Touche Tohmatsu
DX: 10307SSE
A.B.N. 74 490 121 060
Tel: +61 (0) 2 9322 7000
Fax: +61 (0) 2 9322 7001
Grosvenor Place
www.deloitte.com.au
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
Report on the Audit of the Financial Report
Opinion
Independent Auditor’s Report
to the Shareholders of HUB24 Limited
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 2019, the consolidated statement of
profit or loss and other comprehensive income, the consolidated statement of changes in equity and the
Report on the Audit of the Financial Report
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.
Opinion
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001,
We have audited the financial report of HUB24 Limited (the “Company”) and its subsidiaries (the “Group”) which
including:
comprises the consolidated statement of financial position as at 30 June 2019, the consolidated statement of
profit or loss and other comprehensive income, the consolidated statement of changes in equity and the
giving a true and fair view of the Group’s financial position as at 30 June 2019 and of its financial
(i)
consolidated statement of cash flows for the year then ended, notes comprising a summary of significant
performance for the year then ended; and
accounting policies and other explanatory information, and the directors’ declaration.
(ii)
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001,
Basis for Opinion
including:
complying with Australian Accounting Standards and the Corporations Regulations 2001.
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those
(i)
giving a true and fair view of the Group’s financial position as at 30 June 2019 and of its financial
standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of
performance for the year then ended; and
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
(ii)
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.
Basis for Opinion
complying with Australian Accounting Standards and the Corporations Regulations 2001.
We confirm that the independence declaration required by the Corporations Act 2001, which has been given to
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those
the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor’s
standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of
report.
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
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial
opinion.
report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code.
Key Audit Matters
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
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit
report.
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
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
these matters.
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 Asia Pacific Limited and the Deloitte Network
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Asia Pacific Limited and the Deloitte Network
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019
96
Key Audit Matter
Intangible Assets
As at 30 June 2019 the carrying value of intangible
assets totalling $37.01 million, include the following
as disclosed in Note 10:
Investment platform at $16.92 million;
Agility customer relationships of $1.08
million;
Agility CONNECT software of $1.76 million;
and
Goodwill of $16.33 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 2019, the Company has recorded a
deferred tax asset of $9.68 million, which included
prior periods 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.
How the scope of our audit responded to the Key
Audit Matter
Our procedures included, but were not limited to:
updating our 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 specialists, 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
disclosure in Note 10 to the financial statements.
Our procedures included, but were not limited to:
updating our understanding of the key controls
associated with the preparation and board
approval of budgets supporting the recoverability
of the deferred tax asset;
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 management’s deferred tax calculation
for mathematical accuracy, in accordance with the
relevant accounting standards and Australian tax
legislations.
We also assessed the appropriateness of the
disclosure in Note 7 to the financial statements.
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019
97
Key Audit Matter
Contingent Consideration
How the scope of our audit responded to the Key
Audit Matter
On 3 January 2017, HUB24 Limited acquired Agility
Applications Pty Ltd for consideration of up to $15
million. Consideration comprised $2.8 million cash,
$3.8 million shares, $1.9 million deferred
consideration and $5.7 million contingent
consideration.
Consequently, the Company may be required to
make further payments to the respective vendors in
the event that certain conditions and performance
targets are met, as detailed within the revised Share
sale deed.
Significant judgement is required in determining the
fair value of the contingent consideration which is
dependent on recent and forecasted trading results of
the business and the relative risks of achieving
performance targets.
As at 30 June 2019, management has determined the
fair value of the contingent consideration to be $2.7
million.
Our procedures included, but were not limited to:
obtaining the revised Share sale deed between
the Company and Agility Applications;
reviewing management’s position paper for:
o alignment with the revised Share sale
deed;
o Agility Applications’ performance against
the revised performance hurdles and
targets to date;
o key assumptions relating to the
probability of achieving the revised
performance hurdles and targets as at 30
June 2019; and
the likelihood and magnitude of the
payment estimated by management.
o
inquiring with key executives as to the likelihood
of performance targets being met;
evaluating the reasonableness of management’s
underlying assumptions as outlined within the
position paper; and
updating our understanding of the key controls
associated with the preparation and Board
approval of position paper supporting the fair
value of contingent consideration.
We also assessed the appropriateness of classification
of the liability and the disclosures in Note 12 and 15
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 2019, 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.
Responsibilities of the Directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a true and fair
view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal
control as the directors determine is necessary to enable the preparation of the financial report that gives a true
and fair view and is free from material misstatement, whether due to fraud or error.
In 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.
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019
98
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.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business
activities within the Group to express an opinion on the financial report. We are responsible for the
direction, supervision and performance of the Group’s audit. We remain solely responsible for our audit
opinion.
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.
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.
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019
99
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 24 to 40 of the Directors’ Report for the year ended
30 June 2019.
In our opinion, the Remuneration Report of the HUB24 Limited, for the year ended 30 June 2019, complies with
section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the Remuneration Report
in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the
Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.
DELOITTE TOUCHE TOHMATSU
Declan O’Callaghan
Partner
Chartered Accountants
Sydney, 26 August 2019
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019
100
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 21 August 2019.
DISTRIBUTION OF EQUITY SECURITIES
Ordinary share capital 62,589,415 fully paid ordinary shares are held by 4,054 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 – holding ranges
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and over
Total
OPTIONS
Holders
Total units
%
2,060
1,510
257
188
39
865,669
3,688,149
1,873,486
4,998,083
51,164,028
4,054
62,589,415
1.38%
5.89%
2.99%
7.99%
81.75%
100.00%
1,532,343 options and 823,092 performance rights are held. Options and performance rights do not carry a right to vote.
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019 101
ASX ADDITIONAL INFORMATION (CONTINUED)
TOP TWENTY SHAREHOLDERS – QUOTED ORDINARY SECURITIES
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
PACIFIC CUSTODIANS PTY LIMITED
CITICORP NOMINEES PTY LIMITED
BNP PARIBAS NOMS PTY LTD
UBS NOMINEES PTY LTD
MR IAN JAMES LITSTER
NATIONAL NOMINEES LIMITED
BNP PARIBAS NOMINEES PTY LTD
MRS JASMIN ZHENG-MIN ZHAO LITSTER
BNP PARIBAS NOMINEES PTY LTD HUB24 CUSTODIAL SERV LTD DRP
SKYLYX PTY LTD
CS THIRD NOMINEES PTY LIMITED
LITSTER & ASSOCIATES PTY LTD
JASFORCE PTY LTD
MR BRUCE HIGGINS & MRS RUTH HIGGINS
MATIMO PTY LTD
CITICORP NOMINEES PTY LIMITED
CRAIG APPS & MICHELLE APPS
EGG AU PTY LTD
Total
Number held
21,109,675
5,143,939
3,148,436
2,963,258
2,934,886
1,768,547
1,513,744
1,415,262
1,214,784
1,188,545
937,718
699,793
710,187
578,388
537,904
510,000
394,332
387,823
366,244
362,356
%IC
33.73%
8.22%
5.03%
4.73%
4.69%
2.83%
2.42%
2.26 %
1.94%
1.90%
1.50%
1.12%
1.13%
0.92%
0.86%
0.81%
0.63%
0.62%
0.59%
0.58%
47,885,821
76.51%
DETAILS OF SUBSTANTIAL SHAREHOLDERS – QUOTED ORDINARY SECURITIES
TIGA Trading Pty Ltd
Hyperion Asset Management
The Capital Group Companies, Inc.
ECP Asset Management Pty Ltd
Ian Litster
Date of most recent
substantial shareholder notice
Number held
8/04/2019
8/07/2019
23/07/2018
25/07/2019
18/03/2019
7,338,132
7,172,849
3,839,515
4,116,398
3,280,677
%IC
11.77%
11.51%
6.23%
6.60%
5.24%
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019 102
CORPORATE INFORMATION
HUB24 LIMITED
ACN 124 891 685
DIRECTORS
SECRETARIES
Bruce Higgins (Chairman)
Andrew Alcock (Managing Director)
Ian Litster
Anthony McDonald
Paul Rogan
Mark Goodrick
(appointed 31 December 2018)
Paul Howard
(appointed 31 July 2091)
Wendy McIntyre
(appointed 31 December 2018)
(resigned 31 July 2019)
Matthew Haes
(resigned 31 December 2018)
PRINCIPAL REGISTERED
OFFICE IN AUSTRALIA
Level 2, 7 Macquarie Place
Sydney NSW 2000
Australia
SHARE REGISTRY
Link Market Services Limited
Level 12, 680 George Street
Sydney NSW 2000
HUB24 Limited shares are listed on
the Australian Securities Exchange
(ASX : HUB)
AUDITOR
Deloitte Touche Tohmatsu
Grosvenor Place
225 George Street
Sydney NSW 2000
WEBSITE
www.hub24.com.au
HUB24 ANNUAL REPORT YEAR ENDED 30 JUNE 2019