2 0 1 9
A N N U A L R E P O R T
For the year ended 30 June 2019
IncentiaPay Ltd
ABN 43 167 603 992
INCENTIAPAY IS AN INTEGRATED LOYALTY
SOLUTIONS PROVIDER USING DIGITAL AND
MARKETING PROGRAMS THAT ENABLE
BUSINESSES TO ATTRACT AND ENGAGE
CONSUMERS ACROSS MULTIPLE OUTLETS.
IncentiaPay has several associated lifestyle brands
offering savings across dining, travel, leisure, retail
and services. Memberships are sold through its
primary channel – fundraisers, and secondary
Entertainment Publications has a 25-year
history and is a fundraising tool for more
than 16,000 community organisations. It is a
unique word of mouth marketing tool for the
hospitality industry, and a way for consumers to
experience new lifestyle opportunities through
valuable offers. Entertainment creates value
via a unique three-way relationship between
consumers, fundraiser groups and lifestyle
merchants. Entertainment offers promotions
and incentives for dining, travel, leisure
activities, retail and services. Memberships
are currently available in two formats; the
Entertainment Digital Membership as a
smartphone app; and the iconic Entertainment
channels – direct or affiliate, that all contribute a
Book in print.
portion of membership sales to fundraisers.
It is also sold to corporate organisations as a
loyalty offering, via its Frequent Values program.
My Bookings brings hotels, resorts, airlines,
rental car companies and cruises, a closed end
user group of influential and travel oriented
consumers. Over 30 countries are featured; with
more than 2,000 hotels and resorts profiled
online; 10 per cent off the best available online
promotional rates for flights; and 100 per cent
of payments made directly with the hotel.
Entertainment Traveller provides all inclusive
Fly, Stay, Eat, Play, travel packages with both
local Australian and international offers, across
Hawaii, Fiji, Bali, Samoa, Maldives, Vanuatu and
more. These are available to Entertainment
Members and Frequent Values Members.
The Corporate Marketing Solutions group
delivers bespoke marketing and value
add solutions to help corporate clients
drive customer acquisition, retention and
engagement. Corporate Marketing Solutions
provides tailored incentive offerings to closed
loop consumer groups for dining and travel
programs. Included in the Corporate Marketing
Solutions group is the Frequent Values
program, offering white labelled solutions to
large corporates in the form of a mobile app
or books. Also included is the Entertainment
Corporate Platform that sells gift cards from
major business chains.
C O N T E N T S
Chair’s Introduction ...........................................................................2
Operating and Financial Review ..................................................3
The Board of Directors .................................................................... 9
Business Risks ......................................................................................11
Directors’ Report ..............................................................................15
Remuneration Report ...................................................................23
Auditor’s Independence Declaration ....................................33
Financial Statements .....................................................................35
Directors’ Declaration ...................................................................97
Independent Auditor’s Report ................................................ 99
ASX Additional Information .................................................... 106
Corporate Directory ................................................................... 109
N OTI C E O F A N N UA L G E N E R A L M E E TI N G
The Annual General Meeting of IncentiaPay Ltd
will be held on Wednesday, 27 November 2019
at 2.30pm at KPMG - Tower Three, Level 38, 300
Barangaroo Ave Sydney NSW 2000.
IncentiaPay Ltd ABN 43 167 603 992
Chair’s
Introduction
1
Dear Shareholders,
On behalf of the Board of Directors of IncentiaPay, and as
your newly appointed Chair, I am pleased to present to you
the 2019 Annual Report.
During FY2019, the Company announced a strategic review
of operations and organisational structure. Over the past
eight months, we have made significant progress in our
strategy to refocus the business, having sold the Bartercard
operations, including the UK and US businesses, and the
Government, Enterprise and Performance Management
business streams of Gruden. The pursuit of international
2019; Dr Charles Romito was
appointed as a Non-Executive
Director in June 2019; and
Dean Palmer was appointed
as a Non-Executive Director
in August 2019. The current
Board structure now represents
each of the Company’s major
shareholders.
Over the course of the year,
the Company received several
operations was also scaled back to focus on new growth
expressions of interest, including non-binding indicative
and market opportunities across Australia, New Zealand
proposals to recapitalise or consider change of control
and Bali.
Furthermore, we restructured the Senior Management
Team and invested in capabilities across the Company,
specifically in marketing, product and development. The
Company redeployed capital resources to refocus on core
and profitable growth areas across Entertainment and
corporate sales and operations.
While there has been momentum, there is still significant
progress to be made - specifically on the Company’s
digital transformation strategy, which requires overarching
investment in software development, coupled with new
employees for emerging and income generating areas of
the business.
There has also been significant change across both the
Executive Team and the Board, with the resignation of
Darius Coveney from his role as Chief Financial Officer in
November 2018, followed by Iain Dunstan (previous Chief
Executive Officer) leaving in December 2018. During his
notice period, Darius took on the position of Acting Chief
Executive Officer in December 2018, as well as becoming
an Executive Director of the Company, a position he held
until May 2019. Darius has been instrumental in managing
transactions. A number of these led to due diligence
being undertaken on the business. In February 2019, both
Hayaat Group (represented by Mr Mohammad Ikhlaq),
and Skybound Capital Ltd (represented firstly by New
Gold Coast Holdings Ltd, and more recently Suzerain
Investments Holdings Limited (Suzerain)), joined the share
register as new substantial shareholders. In May this year,
IncentiaPay entered into a short-term funding arrangement
with Suzerain Investments Holdings Limited, borrowing
$4.0 million in unsecured debt. This has been used to repay
the Company’s term debt and overdraft facilities from its
bank lender.
While the Company announced a proposed pro-rata rights
issue in May 2019, IncentiaPay resolved not to move forward
following conversations with major shareholders and
advisers. After considering the future capital requirements
of the Company, the Board have agreed with Suzerain that
they will fund the short-term strategies and value creation
initiatives of the Company by way of a Convertible Note.
The specifics of this funding were announced to the market
on 9 August 2019 and will be presented for approval at the
Company’s AGM in November 2019.
the Company over the past eight months and we thank him
Entertainment is a well-respected brand with a 25-year
for his commitment. The Board is currently conducting a
history. It has a corporate channel that presents significant
search for a new Chief Executive Officer.
growth opportunity, book to digital transformation that is
Executive General Manager - Retail, Heidi Halson, leaves
after 25 years with the Company and we wish her all the
best.
In September 2018, Murray d’Almeida resigned as Chair of
well underway, a growing and quality merchant database
that improves year on year, an engaged current member
database, an active drive to acquire new members and a
core business that is returning to profit.
the Board. Naseema Sparks was appointed as Chair but
On behalf of the Board, I would like to thank our
resigned from the position in June 2019. Chris Berkefeld
shareholders, our clients and our employees for their
also resigned from his position as Non-Executive Director in
support and contribution.
June 2019. We thank them for their service during a difficult
period of transition and wish them well.
There were four new appointments to the Board this
calendar year; I, Stephen Harrison, was appointed to the
Board as a Non-Executive Director in February 2019, and
appointed as Interim Executive Chair in June 2019; Jeremy
Thorpe was appointed as a Non-Executive Director in May
S TE P H E N H A R R I S O N
I N T E R I M E X E C U TI V E C H A I R
SECTION 0 | CHAIR’S INTRODUCTION
2
Operating &
Financial Review
SECTION
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O P E R ATI N G R E S U LT S OV E RV I E W
IncentiaPay has continued to undergo significant
change during FY2019, with the Company
restructuring to focus on the Entertainment business.
In November 2018, we completed the sale of
Bartercard including all its wholly owned subsidiaries.
In September 2018, we divested our minority stake
in Now Book It Pty Ltd, and in December 2018
completed the sale of non-core assets from the
Gruden acquisition. With that, the Company moved
to a single operating division – Entertainment.
These divestments simplified the Group’s corporate
structure, removing 15 entities.
Within the Entertainment business, the Company
operates in two main product groupings;
Memberships (sold via the fundraising channel) and
Corporate. These product groupings are supported
by central functions, including merchant acquisition,
production, marketing, product development, finance,
human resources and legal.
M E M B E R S H I P S
We have continued to see a shift of customer
field account managers. This resulted in fewer field
account managers and provided us with learnings
to better manage fundraisers under this revised
approach. In addition, with smaller fundraisers no
longer taking book inventory on consignment, it
de-risked the business in terms of book returns and
provided those fundraisers with an improved level of
service. This model will be further refined and rolled
out for the 2020|21 membership season.
During the year, we also improved operational
efficiencies across the business through the
automation of several manual processes. Stock
management and publishing were the two areas that
saw the greatest improvements, with many more
projects in the pipeline.
As we move forward into the 2020|21 membership
season and beyond, our strategy is to focus on our
members, offering them an improved user experience
and hyper personalisation enabled via technology.
While this has taken us longer than originally
anticipated, we are confident that we are now
focussed on the right initiatives to support product
evolution in the digital world, as well as revenue
preference to the Entertainment Digital Membership,
growth.
reporting at 57 per cent of purchases versus 52
These initiatives for growth include:
per cent at the same time last year (16/08/2019).
• Continuing to evolve our digital marketing
Noting this trend, and our continued drive to reduce
capabilities, both for our fundraising channel, and
operating costs, the Company decided to trial a
for our direct channel and prospect funnel.
digital-only approach within a test market, forgoing
the printing of Entertainment books. Given the City of
Darwin’s #SmartDarwin initiative, it was the obvious
choice as the test market for the 2019|20 membership
season. Being a business that runs to an annual cycle,
the learnings from Darwin are currently assisting with
our planning for future markets and their digitisation
in the next fundraising season.
For the 2019|20 membership sales season, the
Company transitioned to a new Entertainment website.
Over the coming twelve months, we will be undertaking
additional development to better utilise this channel.
The intention is to create a personalised member
• A focus on generating incremental revenue within
our existing product set, by finding new and
innovative ways to combine and sell our existing
product capabilities, for example, by launching
our Explorer Membership in 2019, which allows
members to access all our offers across Australia,
New Zealand and Bali. Further product research and
development is currently under way.
CO R P O R AT E
FY2019 saw the Corporate area focus on several
initiatives to help build longer-term relationships with
our corporate partners. The Corporate team have:
experience, delivering offers that are more closely
• Created an internal “customer success” team,
aligned, and better resonate with individual members.
focussed on assisting corporate loyalty partners
The Company has also taken a new approach to
the management of smaller fundraising groups this
season. The creation of a phone based inside sales
model saw 4,900 of our smaller fundraisers being
to effectively embed our Frequent Values product
within their loyalty solution, and drive their customers
to use the product. This drives further loyalty from
both the customer and the corporate partner.
supported by inside sales executives, rather than
• Developed an API solution to deliver our Frequent
SECTION 1 | OPERATING AND FINANCIAL REVIEW
44
Values product to corporate partners in a manner
announced its intention to divest non-core portions
that allows them to control the end user experience.
of this asset. On 12 December 2018, IncentiaPay
Our corporate partners can now obtain a feed
completed the sale of the Gruden Government Services
of offers from Entertainment’s Frequent Values
business stream for a total consideration of $1.7 million
database and display them within their own UI/UX/
in cash to a wholly owned subsidiary of The Citadel
App experience.
During FY2020, the business intends to continue to
iterate its API model, to create opportunities with blue
Group Limited (ASX:CGL) by way of the sale of all the
shares in Gruden Pty Ltd. On completion, 75 per cent
was paid, with the balance paid subject to a working
chip clients who want to control what their end user
capital adjustment.
sees, and their brand experience. We will continue to
Subsequently, on 12 April 2019, IncentiaPay announced
work closely with our core corporate partners to ensure
the sale of the Performance Marketing business stream to
that our loyalty solution provides measurable value to
OpenDNA Limited (ASX:OPN). The sale was structured
their customers, helping to further drive business loyalty.
as a share sale of all the shares in Blackglass Pty Ltd and
M & A AC TI V IT Y
FY2019 saw a significant level of M&A activity across
IncentiaPay, as the Company worked to create a more
focussed business with the best possible chance of
creating long-term value for shareholders. Whilst this
has been a challenging exercise at times, and the work
that has gone into this is yet to be reflected in the
Company’s share price, the leadership team strongly
believe that creating this focus will result in a stronger
business over the medium to long term.
D I V E S T M E N T O F B A R T E R C A R D
In December 2017, IncentiaPay announced its intention
to sell non-core operations. On 14 September
2018, IncentiaPay entered into a binding Share Sale
Agreement with TCM Investments Australia Pty Ltd
relating to the sale of the Company’s Bartercard
business. The transaction was by way of a sale of all
the shares held in Bartercard Group Pty Ltd, Trade
Exchange Software Services Pty Ltd, BPS Financial
Limited and Bucqi Australia Pty Ltd, and all their wholly
owned subsidiaries (the “Sale Entities”). In total
13 entities were divested as part of the transaction.
The Sale Entities were sold for a total consideration of
$5.0 million, made up of $2.0 million cash payable on
completion and a further $3.0 million of cash payable
over a 30-month period – with no performance hurdles
related to receipt of this $3.0 million.
G R U D E N
On 11 May 2018, IncentiaPay acquired Gruden, a marketing
and transactional payment company that operated
across four business streams: Performance Marketing,
Government Services, Digital Services and MobileDEN.
On 19 November 2018, at the AGM, the Company
was sold for a total consideration of $0.3 million with
$0.1 million payable on completion, and the balance
subject to a working capital adjustment. The transaction
completed on 23 April 2019.
During the period, the Digital Services business was
wound down, and the MobileDEN team utilised as an
internal development arm for the Entertainment division.
Prior MobileDEN contracts continue to be serviced,
and the MobileDEN technology is being assessed for
integration into the Entertainment digital experience.
F I N A N C I A L R E S U LT S OV E RV I E W
Gross revenue for FY2019 was $64.6 million, Underlying
EBITDA for FY2019 was a loss of $7.4 million, with
$7.1 million of this amount realised in the second half of
the financial year, and negative operating cash flow was
$13.3 million. Net loss after tax (NLAT) from ordinary
activities in FY2019 was $37.9 million, compared to
a NLAT from ordinary activities of $62.2 million in
FY2018. One of the main reasons for the decrease
in NLAT was the reduction of impairment charges in
FY2019 compared to FY2018 of $31.6 million. Due to
the decision to divest certain parts of the business
during FY2019, impairment charges booked in FY2018
for those entities disposed of in FY2019 have been
reclassified in the FY2018 comparative figures and are
now included in the line item described as “Loss for
the period from discontinued operations”. In addition,
there was a $5.6 million or 14.9 per cent decline in
Entertainment membership revenue and corporate
sales revenue, from $37.5 million in FY2018 to $31.9
million in FY2019.
This consisted of $28.6 million of membership sales
revenue and $3.3 million in corporate sales revenue
(2018:$32.8 million membership and $4.7 million
corporate).
5
G R O S S R E V E N U E
With the removal of discontinued operations, FY2018
N E T LO S S A F T E R TA X A N D
I M PA I R M E N T S
gross revenue has been restated from $106.8 million
Reported net loss after tax (NLAT) from ordinary
to $75.8 million. Overall gross revenue for FY2019 was
activities in FY2019 was $37.9 million compared to a
$64.6 million, a 14.8 per cent decrease from FY2018.
net loss after tax from ordinary activities in FY2018
This included $5.4 million, or 8.3 per cent from fee
income (restated 2018:$3.7 million), $28.6 million,
or 44.3 per cent from membership sales (restated
of $62.2 million. The net loss was predominantly
attributed to a reduction in underlying revenue of
$11.2 million (as discussed above), impairments of
2018:$32.8 million), $3.3 million or 5.1 per cent from
$14.6 million related to non-cash assets on the balance
corporate sales (restated 2018:$4.7 million) and
$27.3 million, or 42.3 per cent from gift card sales
sheet and losses from discontinued operations of
$9.8 million. In addition, significant one-off costs
(2018:34.6 million).
The overall decrease of $11.2 million was due to a
decline in both membership renewals and corporate
sales revenue, as well as a $7.3 million or 21.1 per cent
decrease in gift card sales. Gift card sales declined
mainly due to the move away from offering David
Jones gift cards, which were not providing a positive
return on capital. Corporate sales revenue decreased
principally due to a change in the revenue recognition
assumptions in 2019.
G E O G R A P H I C R E V E N U E
were incurred: restructure, acquisition and divestment
activities ($1.3 million), provision for onerous leases
relating to branches and head office locations ($0.6
million), recapitalisation of the Group ($0.6 million), and
other one-off expenses ($0.5 million).
During FY2019, and in the months since 30 June 2019,
the Group completed a key organisational restructure
of the business and secured the necessary funding to
ensure appropriate support of operations in the short
term. This funding was secured with a view to transform
the business through a structured and dedicated
transformation program, focused on achieving
Australian revenue accounted for $59.2 million, or
revenue growth and increased profitability through
91.8 per cent and New Zealand revenue accounted for
cost reduction. The outcome of this transformation
$5.3 million, or 8.2 per cent. With the gift card sales and
is expected to result in increased revenue from
the impact of the corporate revenue amendments being
product innovation, changes in product distribution
predominantly related to Australia, revenue for Australia
channels and a reduced cost base structured around
decreased from FY2018 by 16.0 per cent, whereas New
productivity and efficiency. The removal of the printed
Zealand remained materially unchanged.
product offering is a key part of this transformation
program.
In finalising FY2019 results, the Directors have assessed
the future profitability of the business using conservative
revenue growth predictions and the necessary costs of
implementing a transformation program. An impairment
charge against goodwill has therefore been taken.
T R A N SAC TI O N , I N T E G R ATI O N A N D
R E S T R U C T U R I N G CO S T S
During the year several entities within the Group were
disposed of as part of the restructure program that
commenced in 2018. The entities disposed of were
predominantly part of the Bartercard businesses,
but also included the Government and Performance
Marketing businesses of the Gruden group of
companies. Costs incurred during FY2019 amounted to
$0.7 million for restructure and divestment activities, and
$0.6 million for acquisition related initiatives.
In the second half of the year, the Group commenced a
SECTION 1 | OPERATING AND FINANCIAL REVIEW
6
series of activities related to recapitalising the business.
In May this year, IncentiaPay executed a loan agreement
Ultimately this recapitalisation did not proceed and was
for short-term funding with Suzerain, it’s largest
replaced with shareholder loan funding from a significant
shareholder. This agreement provided the Group with a
shareholder. Costs associated with recapitalisation and
$4.0 million unsecured debt facility. This loan has been
new funding amounted to $0.6 million.
The Group currently has leases for office space in
various towns and cities across Australia and New
Zealand. As a result of the recent decisions made by
the Board to streamline the operations of the business,
certain leases have become surplus to requirements. The
Group has assessed those leases to be onerous and has
recognised an additional cost of $0.6 million in FY2019.
D I S CO N TI N U E D O P E R ATI O N S
used to assist with the repayment of the Company’s
term debt and overdraft facilities from the CBA. The
CBA term and overdraft debts were fully repaid before
30 June 2019.
Although the Company announced a proposed pro-rata
rights issue in May 2019, following ongoing conversations
with major shareholders and advisers, IncentiaPay
resolved not to pursue the rights issue, but to continue to
assess the future capital requirements of the Company.
Subject to the achievement of certain milestones,
As previously noted, the Bartercard business and
Suzerain has agreed to fund the short-term strategies and
divisions of the Gruden business were exited during
value creation initiatives of the Company.
the year. As required by the Australian Accounting
Standards, the results of these discontinued operations
have been reported separately within the FY2019 result.
D E B T M A N AG E M E N T A N D B A N K I N G
COV E N A N T S
During FY2019, IncentiaPay continued to review, assess
and manage its funding and capital requirements. This
has been a particular focus for both the Board and
management, given the divestment of various parts of the
business, as well as the focus on rebuilding the operating
results of the core business over the medium term.
In December 2018, IncentiaPay signed a Deed with
its senior financier, the Commonwealth Bank of
Australia (CBA), whereby the CBA agreed to amend
the repayment terms of the Group’s debt facilities,
with agreed principal repayments to be made between
31 March and 28 June 2019. This Deed also amended
the Group’s debt covenants and demonstrated the
lender’s support of IncentiaPay, allowing the Company
to focus on production of its 2019|20 Entertainment
membership.
In April 2019, an updated repayment schedule was
agreed whereby, with lender consent, IncentiaPay made
its first repayment under the revised schedule on
29 March 2019 with an agreement to repay all
outstanding amounts by 30 June 2019.
IncentiaPay entered into a binding agreement with
New Gold Coast Holdings Pty Ltd on 28 February
2019, to issue 14,425,000 fully paid ordinary shares at
8 cents per share and, in doing so, raised $1.154 million.
The placement completed 1 March 2019. This holding
was subsequently transferred to Suzerain Investments
D I V I D E N D S
No dividend has been declared in relation to the
FY2019 results. The Board of Directors of IncentiaPay
do not expect to declare any dividends.
CO R P O R ATE G OV E R N A N C E A N D R I S K
M A N AG E M E NT
IncentiaPay’s Board remains strongly committed
to sound corporate governance practices and to
managing risk to protect its shareholders, employees,
partners, customers, the environment, Company assets
and its reputation.
The Board sets the risk appetite of the business to
ensure that operational direction is consistent with the
goals of the Company.
The Company intends to make incremental and ongoing
corporate governance improvements. In February last
year, the Board appointed KPMG to assist in a review
of the Company’s governance and controls, and in
December announced the appointment of PwC to assist
in the second phase of the strategic review. For more
information on corporate governance, please refer to
the corporate governance statement on the IncentiaPay
website. For an outline of business risks, please refer to
the Business Risks section of this Annual Report.
P E O P LE A N D C U LT U R E
IncentiaPay currently employs more than 195 staff
(2018:284 including staff from discontinued operations)
across 20 offices in Australia and New Zealand who have
spent the past year striving to reach Company goals.
Holdings Limited (Suzerain).
This decrease in staffing is the result of the divestment
7
activities previously outlined, as well as the ongoing
of valuable data and insights to assist with our data
automation and operational efficiency initiatives
driven strategy and decision making, and provide a more
progressed by the management team. We continue
flexible merchant offering.
to maintain a focus on, and recruit for the values that
underpin a sustainable and positive culture, supporting
our employees with an external Employee Assistance
Program (EAP). We value open communication and an
inclusive and collaborative working environment.
O U TLO O K
IncentiaPay has undergone significant business change
over the past financial year, from a structural, an
Executive and a Board perspective. We believe that all of
this has been necessary in order to achieve cost savings
and business rationalisation, drive productivity gains
and implement business improvement initiatives that
will increase our investment in technology to innovate.
We must continue to move forward and accelerate our
digital mindset to return to profitability, and for our
planned growth within the Entertainment business and
corporate channel to succeed.
The Company is now able to focus on three key areas.
Firstly, to grow our digital memberships and products.
Entertainment has traditionally been a highly successful
publishing business. Digitalisation commenced in 2015
with the launch of the Entertainment Digital App -
approximately 57 per cent of our current end users
consume the membership in a digital format. The push
to digitalisation will eliminate book production and
associated distribution costs, allow the Company to
create a better user experience, gain increased levels
Secondly, to leverage and monetise our database.
IncentiaPay has an extensive database of 33,000
merchant locations, 370,000 current members, a large
lapsed member database and 15,400 fundraiser groups
(as at 16/08/2019). The business has been predominantly
focused on the distribution of dining and entertainment
offers, such as travel, leisure and theme parks through
its fundraising channel. There is now an opportunity
to expand on distribution through other channels,
including corporates or affiliates, whilst still protecting
and supporting our existing fundraiser channel. We will
also be investing in our capability to better leverage data
analytics and automation.
Thirdly, to improve operational efficiency. The Company
currently operates with 195 staff across 20 offices
in Australia and New Zealand. Business initiatives
underway include the expansion of the phone based
inside sales team to manage lower value and regional
fundraisers, centralisation of regional offices and
resourcing as lease arrangements permit, an increased
focus on centralised product and marketing functions
to drive revenue, and improved prospect targeting, with
investment in IT systems, user interfaces, reporting and
data insights.
We will continue to support and develop our employees
as we transition and guide the Company through the
next phase of change and growth.
“ W E M U S T
C O N T I N U E T O
M O V E F O R WA R D
A N D A C C E L E R AT E
O U R D I G I TA L
M I N D S E T. ”
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The Board of
Directors
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M E E T I N C E N TI A PAY ’ S B OA R D O F D I R E C TO R S – A G R O U P O F
K N OW LE D G E A B LE B U S I N E S S E X E C U TI V E S W ITH A TR AC K R E CO R D O F
G R OW I N G A N D B U I LD I N G B U S I N E S S E S .
S T E P H E N H A R R I S O N I N T E R I M E X E C U TI V E C H A I R
Stephen Harrison has over 30 years of experience in the financial services, funds
management, private equity and accounting fields. He has held director positions with
Investec Funds Management and the Australian subsidiary of US based fund manager
Sanford C. Bernstein.
He has been a founder and held Directorships in a number of listed companies both
in Australia and overseas. He is currently Chairman of NobleOak Life Limited and
Sinetech Limited.
J E R E M Y T H O R P E N O N - E X E C U TI V E D I R E C TO R
Jeremy Thorpe holds BA and LLB degrees, is a qualified attorney in South Africa, and
the Managing Director and Chief Executive Officer of Skybound Capital Australia.
He serves on the boards of all subsidiary and associate companies within Skybound
Australia’s diverse range of investments and is directly responsible for their performance
and investment returns.
He has over 30 years of experience in corporate finance, private equity, consumer and
business credit, and structured finance. In the recent past he has served on the Board of
the National Credit Providers Association in Australia.
C H A R L E S R O M ITO N O N - E X E C U TI V E D I R E C TO R
Charles Romito is an experienced management consultant with an extensive
background across Venture Capital/Private Equity, Lead Syndicate Investing
and Management Academia. His expertise lies at the intersection of innovation
management, growth strategy and business transformation; and he has applied this to
the benefit of blue-chips, family offices and start-ups alike.
He was previously in the London office of the global strategy consultancy McKinsey &
Company and built on this with an Operating Partner/COO role in a VC fund. He has
since spent most of this decade as a sought-after advisor to both private investors and
corporates. As an academic he has both published and presented at world-leading
conferences on Innovation Management; as well as designed, developed and delivered
Postgraduate and Executive Education to several thousand high-performers across the
world.
D E A N PA L M E R N O N - E X E C U TI V E D I R E C TO R
Dean Palmer is a chartered accountant with more than 20 years of experience. He is
the founder and CEO of Skybound Fidelis Investment Limited - a specialist structured
finance, commercial credit and property fund manager.
He has held numerous senior executive roles both in Australia and the UK.
He has a Bachelor of Commerce, Bachelor of Laws and is a member of Chartered
Accountants Australia.
SECTION 2 | THE BOARD OF DIRECTORS
1010
Business
Risks
SECTION
3
11
I N C E NTI A PAY FAC E S A N U M B E R O F B U S I N E S S R I S K S TH AT M AY I M PAC T
TH E CO M PA N Y ’ S A B I LIT Y TO AC H I E V E IT S S TR ATE G I C O B J E C TI V E S A N D
C R E ATE S H A R E H O L D E R VA LU E . TH E B OA R D CO N S I D E R S TH E FO LLOW I N G
TO B E TH E K E Y R I S K S C U R R E NTLY FAC I N G TH E B U S I N E S S .
RISK
NATURE OF RISK
There is no certainty that IncentiaPay will remain sufficiently funded. IncentiaPay
is currently conducting a strategic review / recapitalisation process to determine
the long-term capital requirements of the business. The outcome of this review is
FUNDING
uncertain as is the appetite of its financiers.
IncentiaPay continually manages its cash position and regularly monitors its
investments to balance the risk, outlay and timings.
IncentiaPay’s success depends, in part, upon the continued performance,
efforts, abilities and expertise of its key management personnel, as well as
other management and technical personnel, including those employed on a
contractual basis.
The loss of the services of these personnel without replacement could have an
adverse impact on the successful operation, management and marketing of
IncentiaPay’s product/service offerings and platforms. Further, a substantial
increase in labour costs for employees or contractors may have an adverse impact
PEOPLE
on the financial performance and/or financial position of IncentiaPay.
The Company has commenced the search for a Chief Executive Officer.
The Board reviews the incentive structures of key personnel and senior
management to ensure their remuneration is in line with the market, with
a proportion deferred as a long-term/retention incentive. In addition,
management regularly undertakes succession planning analysis of key lead
roles with the view to understand suitable internal talent and their readiness to
assume these roles.
IncentiaPay is increasingly reliant on its technology to deliver services to its
customers. In the event of a technology outage or planned upgrade not fit
for purpose, this could create an adverse reputational or financial impact to
TECHNOLOGY
IncentiaPay.
To minimise this risk, IncentiaPay has insourced its technology team to actively
manage the product delivery process.
IncentiaPay is subject to substantial regulatory and legal oversight. The agencies
with regulatory oversight of IncentiaPay and its subsidiaries include, among
others, ASX and ASIC. Failure to comply with legal and regulatory requirements
may have a material adverse effect on IncentiaPay and its reputation among
REGULATORY
customers and regulators, and in the market.
IncentiaPay has compliance frameworks, policies and procedures in place to
manage the risk of non-compliance and is prepared to play an active role in
consulting with regulators on changes that could impact the business.
SECTION 3 | BUSINESS RISKS
12
RISK
NATURE OF RISK
REPUTATION
Reputation risk may arise through the actions of IncentiaPay or its employees
and adversely affect perceptions of IncentiaPay held by the public, customers,
shareholders or regulators. These issues include appropriately dealing with
product outages or issues, potential conflicts of interests, legal and regulatory
requirements, ethical issues, privacy laws, information security policies and sales
and trading practices. Damage to IncentiaPay’s reputation may have an adverse
impact on IncentiaPay’s financial performance, capacity to source funding, cost of
sourcing funding and liquidity.
IncentiaPay actively manages the above risks by regularly monitoring its market
reputation amongst customers and shareholders, as well as keeping an open
dialogue with regulators and financiers.
New competitors are emerging in the loyalty and incentives markets, within which
IncentiaPay operates. The loyalty space is particularly competitive, with many
well-funded international competitors. An inability to adapt to technological
advancement, including further digitisation and flexibility of products, could
negatively impact the ability to attract customers and have a material adverse
COMPETITION
effect on the business of IncentiaPay.
To mitigate this, IncentiaPay continues to invest in its merchant content, including
the signing of exclusive content where applicable. The Company’s ongoing
investment in its digital technology assets will also assist to lessen this risk.
IncentiaPay is reliant on several third party contractors. These third parties
provide essential services, on an outsourced basis, including software and/or
product development activities. Accordingly, IncentiaPay is reliant on contractors
properly performing their contractual obligations and performance failures
may have an adverse effect on IncentiaPay. IncentiaPay is also an extensive
user of third party provided IT hardware and software platforms, systems and
infrastructure. IncentiaPay is reliant on these suppliers properly performing their
contractual obligations, and performance failures or unreasonable price increases
may have a material adverse impact on the Company. A failure by any of these
suppliers to provide those services or a failure of their systems may adversely
affect IncentiaPay’s ability to provide services to its customers.
To minimise these risks, IncentiaPay actively engages with its key third party
providers on a regular basis and remains abreast of potential risks within these
providers through regular interaction at the senior management level.
Whilst every effort has been made to secure the technology supporting
IncentiaPay’s various platforms, IncentiaPay does not intend to apply to register
patents for all the intellectual property associated with the Entertainment and
Frequent Values platforms. Other parties may claim infringement of patents or
alternatively other parties may develop and patent other very similar, potentially
substitutable products, processes or technologies.
IncentiaPay see the unique value of its intellectual property, in the content of its
Entertainment and Frequent Values platforms, as a mitigant to this risk.
THIRD PARTY
FAILURE
INTELLECTUAL
PROPERTY RISK
13
SECTION 3 | BUSINESS RISKS
14
Directors’
Report
SECTION
4
15
Report
D I R E C TO R S ’ R E P O R T
The Directors present their report on the consolidated
entity IncentiaPay Ltd and its controlled entities
(IncentiaPay) for the financial year ended 30 June 2019.
The information in the Operating and Financial Review
of the Corporations Act 2001 for leave to bring
proceedings on behalf of the Company, or intervene in
any proceedings to which the Company is a party for
the purpose of taking responsibility on behalf of the
Company for all or any part of those proceedings.
forms part of this Directors’ report and should be read
N O N - AU D IT S E RV I C E S
in conjunction with this section of the Annual Report.
The Board of Directors, pursuant to advice from the
G E N E R A L I N FO R M ATI O N
D I R E C TO R S
Audit and Risk Committee, is satisfied that the provision
of non-audit services during the year is compatible
with the general standard of independence for auditors
The following persons were Directors of IncentiaPay Ltd
imposed by the Corporations Act 2001. The Directors
during or since the end of the financial year up to the
are satisfied that the services disclosed below did not
date of this report:
compromise the external auditor’s independence for the
• Stephen Harrison (appointed 15 February 2019)
following reasons:
• Dean Palmer (appointed 15 August 2019)
• Charles Romito (appointed 28 June 2018)
• Jeremy Thorpe (appointed 16 May 2019)
• all non-audit services are reviewed and approved
by the Audit and Risk Committee prior to
commencement to ensure they do not adversely
affect the integrity and objectivity of the auditor; and
• Darius Coveney (appointed 6 December 2018
• the nature of the services provided does not
and resigned 16 May 2019)
compromise the general principles relating to auditor
• Naseema Sparks (appointed 27 September 2018
independence in accordance with APES 110: Code
and resigned 28 June 2019)
• Chris Berkefeld (resigned 28 June 2019)
• Iain Dunstan (resigned 6 December 2018)
• Murray d’Almeida (resigned 27 September 2018)
• Garth Barrett (resigned 17 July 2018)
Particulars of each Director’s experience and
qualifications are set out later in this report.
D I V I D E N D S PA I D O R D E C L A R E D
No dividends were paid or declared for payment during
the financial year. Investors should note that the Board
of Directors of IncentiaPay Ltd do not expect to declare
dividends from the Company during the next financial
year.
I N D E M N I F Y I N G D I R E C TO R S A N D
O F F I C E R S
During or since the end of the financial year, the Company
has paid premiums to insure the Directors and officers
against liabilities for costs and expenses incurred by them
in defending legal proceedings arising from their conduct
while acting in the capacity of Directors or officers of the
Company, other than conduct involving a willful breach of
duty in relation to the Company.
PROCE E DINGS ON B E HALF OF COMPANY
No person has applied to the court under Section 237
of Ethics for Professional Accountants set by the
Accounting Professional and Ethical Standards Board.
The following fees were paid or payable to KPMG for
non-audit services provided during the year ended
30 June 2019:
$
Taxation services
56,620
Other services
16,595
Total
73,215
AU D ITO R ’ S I N D E P E N D E N C E
D E C L A R ATI O N
The lead auditor’s independence declaration for the
year ended 30 June 2019 has been received and can be
found on page 34 of the Annual Report.
O P TI O N S
Refer to the Remuneration report for details of
performance and other equity instruments on issue.
A S I C I N S T R U M E N T 2 01 6/ 1 9 1 R O U N D I N G
I N F I N A N C I A L S TAT E M E N T S /
D I R E C TO R S ’ R E P O R T
The Company is an entity to which ASIC Instrument
2016/191 applies. Accordingly, amounts in the financial
statements and Directors’ report have been rounded to
the nearest thousand dollars.
SECTION 4 | DIRECTORS’ REPORT
16
I N FO R M ATI O N R E L ATI N G TO D I R E C TO R S A N D CO M PA N Y S E C R E TA RY
S TE P H E N H A R R I S O N (appointed to the Board 15 February 2019)
I N T E R I M E X E C U TI V E C H A I R (appointed Chair 28 June 2019)
Interest in shares and options
Nil
Special responsibilities
Chairman of the Audit and Risk
Committee, from 15 February 2019
until 28 June 2019
Directorships held in other listed entities
during the three years prior to the current year
Sinetech Ltd
Qualifications
Bachelor of Economics
Experience
Experienced Chairman and Director with a demonstrated
history of working in the investment management industry.
Skilled in negotiation, asset management, management,
mergers & acquisitions and start-ups.
J E R E M Y TH O R P E (appointed to the Board 16 May 2019)
N O N - E X E C U TI V E D I R E C TO R
Interest in shares and options
Nil
Special responsibilities
Member of the Audit and
Risk Committee
Directorships held in other listed entities
during the three years prior to the current year
Nil
Qualifications
Experience
Bachelor of Laws (LLB)
Bachelor of Arts
Experienced in private equity, corporate finance, private
equity as well as consumer and business credit.
17
C H A R LE S R O M ITO (appointed to the Board 28 June 2019)
N O N - E X E C U TI V E D I R E C TO R
Interest in shares and options
Nil
Special responsibilities
Chairman of the Audit
and Risk Committee
Directorships held in other listed entities
during the three years prior to the current year
Nil
Qualifications
Doctor of Philosophy (Ph.D)
MSci, Physics
Experience
Charles is an experienced management consultant with an
extensive background in VC/PE and management academia.
His expertise lies at the intersection of innovation
management, growth strategy and business transformation.
He has a passion for business model innovation, growth
transformation, venturing & new businesses. He has worked in
VC/PE and been a Lead Syndicate Investor for several private
deals.
As an academic he has published and presented at world-
leading conferences on innovation management and
designed, developed and delivered postgraduate and
executive education to several thousand high-performers
from all 5 continents.
D E A N PA LM E R (appointed to the Board 15 August 2019)
N O N - E X E C U TI V E D I R E C TO R
Interest in shares and options
Special responsibilities
Directorships held in other listed entities during
the three years prior to the current year
Nil
Nil
Nil
Qualifications
Experience
Bachelor of Laws (LLB)
Bachelor of Commerce
Member of Chartered Accountants Australia & New Zealand
Dean is a chartered accountant with more than 20 years
of experience. He is the founder and CEO of Skybound
Fidelis Investment Limited - a specialist structured finance,
commercial credit and property fund manager.
He has held numerous senior executive roles both in Australia
and the UK.
SECTION 4 | DIRECTORS’ REPORT
18
18
DA R I U S COV E N E Y (appointed to the Board 6 December 2019)
E X E C U TI V E D I R E C TO R (resigned 16 May 2019)
Interest in shares and options
2,678,571 Loan Funded Shares held in escrow (as at resignation date)
Special responsibilities
COO/CFO/Acting CEO
Directorships held in other listed
entities during the three years prior
Nil
to the current year
Qualifications
Experience
Graduate Member of Australian Institute of Company Directors (GAICD)
Member of Chartered Accountants Australia & New Zealand
Bachelor of Commerce
Masters of Applied Finance
More than 20 years operational experience across financial services and
technology companies.
N A S E E M A S PA R K S AM (resigned 28 June 2019)
I N D E P E N D E N T C H A I R
Interest in shares and options
Nil
Special responsibilities
Chair of the Remuneration and Nominations Committee
Member of the Audit and Risk Committee
Directorships held in other listed
entities during the three years prior
to the current year
Australian Vintage Ltd
PMP Ltd
Melbourne IT Ltd
Grays e-Commerce Group Ltd
Qualifications
MBA
Dip. Marketing
FAICD
Naseema is an experienced ‘top-line growth’ Director with expertise in
business strategy, marketing, branding, consumer segmentation, digital
marketing and data. She has current experience in transformational
and disruptor businesses, especially those operating in the rapid
growth, customer acquisition and brand awareness stage. She also has
experience with businesses facing market and competitive pressures
where significant operational transformation is required to restore
profitability and growth.
She has been a professional non-executive director since 2005, serving
on boards of a diverse range of companies including ASX listed and
private companies, Government statutory authorities, not-for-profit arts,
health and education boards.
Experience
19
C H R I S B E R K E F E L D (resigned 28 June 2019)
N O N - E X E C U TI V E D I R E C TO R
Interest in shares and options
Nil
Special responsibilities
Chair of the Audit and Risk Committee
Member of the Remuneration and Nominations Committee
Directorships held in other listed entities
during the three years prior to the current year
Triple Energy Limited
Qualifications
Experience
Management Diploma
AICD
Chris has over 20 years of experience on public and private
company boards in New Zealand and Australia.
He has a background in industrial, waste and mining services
in Australia along with engineering and heavy transportation
services in Europe and Asia, and has extensive experience
as managing director, executive director and chief executive
officer in the waste industry spanning almost two decades.
I A I N D U N S TA N (resigned 6 December 2018)
M A N AG I N G D I R E C TO R A N D C H I E F E X E C U TI V E O F F I C E R
Interest in shares and options
3,035,714 Loan Funded Shares held in escrow (as at
3,135,714 fully paid ordinary shares (as at resignation date)
resignation date)
Special responsibilities
Chief Executive Officer
Directorships held in other listed entities
during the three years prior to the current year
Nil
Qualifications
Experience
Master of Commercial Law
MBA
GAICD
Iain has over 35 years of experience in the global fintech
industry, including an extensive listed company and M&A
background.
SECTION 4 | DIRECTORS’ REPORT
20
M U R R AY D ’A LM E I DA (resigned 27 September 2018)
C H A I R O F T H E B OA R D
Interest in shares and options
178,571 fully paid ordinary shares (as at resignation date)
Directorships held in other listed entities
Pacific Environment Ltd
during the three years prior to the current year
Management Resource Solutions Plc (UK)
Qualifications
Experience
Accountant
FAICD
Murray has over 35 years of diverse national and international
business experience, having begun his career as an
accountant in Perth. He founded Retail Food Group Limited
(ASX: RFG) and led its global expansion.
GA R TH BA R R E T T (resigned 17 July 2018)
N O N - E X E C U TI V E D I R E C TO R
Interest in shares and options
150,000 fully paid ordinary shares (as at resignation date)
Directorships held in other listed entities
during the three years prior to the current year
Nil
Qualifications
Experience
B.Com, F.C.A.
Chartered Accountant
Garth has more than 40 years of experience in strategic
planning, mergers and acquisitions, financial systems, risk
analysis and operations management.
B E N N E W LI N G (appointed 11 February 2019)
CO M PA N Y S E C R E TA RY
Ben was appointed as the Company Secretary on 11 February 2019, replacing Ms Laura Newell. Ben is employed
at IncentiaPay as the Executive General Manager - Commercial. He holds an MBA.
21
M E E TI N G S O F D I R E C TO R S
During the financial year, the following meetings of Directors (including committees of Directors) were held.
Attendances by each Director during the year was as follows:
DIRECTORS’
MEETINGS
AUDIT AND
RISK COMMITTEE
REMUNERATION AND
NOMINATIONS COMMITTEE
NUMBER
ELIGIBLE TO
ATTEND
NUMBER
ATTENDED
NUMBER
ELIGIBLE TO
ATTEND
NUMBER
ATTENDED
NUMBER
ELIGIBLE TO
ATTEND
NUMBER
ATTENDED
Murray d’Almeida
Garth Barrett
Charles Romito
Stephen Harrison
Jeremy Thorpe
Darius Coveney
Iain Dunstan
Chris Berkefeld
Naseema Sparks
4
1
-
10
4
8
9
21
21
4
-
-
10
4
8
9
20
21
-
-
-
2
-
-
-
4
4
-
-
-
2
-
-
-
4
3
-
-
-
-
-
-
-
1
1
-
-
-
-
-
-
-
1
1
This Directors’ report, incorporating the Operating and Financial Review and the Remuneration report is signed in
accordance with a resolution of the Board of Directors.
S TE P H E N H A R R I S O N
I N T E R I M E X E C U TI V E C H A I R
11 September 2019
SECTION 4 | DIRECTORS’ REPORT
22
Remuneration
Report
SECTION
5
23
R E M U N E R ATI O N R E P O R T F R A M E WO R K
1 . K E Y M A N AG E M E NT P E R S O N N E L
KMP are those people who have authority and responsibility for planning, directing and controlling the strategic
activities of the Group, directly or indirectly, including any Group (the Board) or any individual acting under
delegated authority (in the case of the Acting CEO and his direct reports).
K E Y M A N AG E M E N T P E R S O N N E L FO R T H E Y E A R CO M P R I S E D :
N O N - E X E C U TI V E D I R E C TO R S A S AT 3 0 J U N E 2 01 9
NAME
POSITION
DATES
Stephen Harrison4
Interim Executive Chair
Appointed 15 February 2019
Jeremy Thorpe
Charles Romito
Non-Executive Director
Appointed 16 May 2019
Non-Executive Director
Appointed 28 June 2019
P R E V I O U S D I R E C TO R S
NAME
POSITION
DATES
Murray d’Almeida1
Non-Executive Chair
Until 27 September 2018
Chris Berkefeld
Non-Executive Director
Until 28 June 2019
Naseema Sparks 1,4
Non-Executive Chair
Until 28 June 2019
Garth Barrett
Non-Executive Director
Until 17 July 2018
E X E C U TI V E S
NAME
POSITION
DATES
Iain Dunstan2
Darius Coveney2,3
Heidi Halson5
Toby Ellis
Managing Director and CEO
Until 6 December 2018
COO/CFO/Acting CEO
Full financial year
EGM – Retail
Full financial year
EGM – Corporate Sales
Appointed 13 August 2018
1. Murray d’Almeida resigned from the Board on 27 September 2018, with Naseema Sparks taking over as Chair of the Board.
2. Iain Dunstan fulfilled the role of CEO and Managing Director until 6 December 2019, at which time Darius Coveney was appointed Acting CEO.
3. Darius Coveney departed his role as Acting CEO on 30 August 2019. He was a member of the Board from 6 December 2018 until 16 May 2019.
4. Stephen Harrison was appointed Chair of the Board on 28 June 2019, when Naseema Sparks resigned.
5. Heidi Halson departed from her role as Executive General Manager - Retail on 22 August 2019.
2 . R E M U N E R ATI O N P O LI CY
The remuneration policy of IncentiaPay has been designed to attract the most qualified and experienced KMP
and align objectives with those of the business and shareholders. All executives receive a base salary which is
based upon factors such as the length of service, experience and skills, as well as superannuation as required by
law. Executives may sacrifice part of their salary to increase payments towards superannuation.
The Company has an Employee Share Ownership Plan. The terms and conditions of the employee incentive
plan were approved by shareholders on 5 April 2018. At a meeting of the Board on 22 July 2019, the share
plan was wound up, with the winding up share allocation agreed by the Board on that date. The Board will
reconsider the employee incentive plan as part of the current executive team refresh.
SECTION 5 | REMUNERATION REPORT
24
The Board’s policy is to review remuneration for KMP annually, based on market practice, duties and
accountability. Independent advice can be sought when required. All remuneration paid to directors and
executives is valued at the cost to the Company and expensed in accordance with Australian Accounting
Standards.
The maximum aggregate amount of fees that can be paid to Non-Executive Directors is subject to approval at
the AGM. The maximum amount currently approved by shareholders is $500,000 per annum.
3 . R E M U N E R ATI O N CO M M IT TE E A N D E X E C U TI V E CO M P E N SATI O N
The Remuneration Committee has the responsibility for providing advice in relation to the remuneration packages
of senior executives, non-executive and executive directors. The Committee is also responsible for the design
and oversight of any share option schemes, performance incentive packages, superannuation entitlements and
retirement and termination entitlements.
The Remuneration Committee reviews the compensation package for senior executives on an annual basis and
makes recommendations to the Board for approval. Compensation packages are reviewed and determined based
on current market rates and benchmarked against comparable roles and companies of a similar size.
Ms Sparks chaired the Committee until her resignation on 28 June 2019, at which point the Committee was
dissolved and its responsibilities and charter were assumed by the Board.
4 . R E M U N E R ATI O N O B J E C TI V E S A N D P R I N C I P L E S
Remuneration packages are set at levels that are intended to attract and retain executives capable of managing
the Company’s operations.
The Company’s remuneration strategy is structured to:
• ensure employee remuneration is fair and reasonable;
• attract and retain high calibre executives;
• align performance with shareholder value; and
• be easily understood by all stakeholders.
5 . R E M U N E R ATI O N F R A M E WO R K
The Executive Remuneration Framework is characterised by Fixed Remuneration (base salary, superannuation
plus other fixed benefits) and Variable/Performance Related Remuneration (including short-term incentive (STI)
and long-term incentive (LTI) linked to performance).
F IX E D CO M P E N SATI O N
This component is not performance linked and generally consists of salary, superannuation entitlements and a
motor vehicle allowance. The base amount is reviewed annually by the Remuneration Committee for the Chief
Executive Officer and other senior executives. Any adjustments made during the year will either be as a result
of market rate changes in order for the Company to remain competitive or to reflect any changes in the level of
responsibility in the event the role has expanded.
P E R FO R M A N C E R E L AT E D CO M P E N SATI O N
Performance related compensation includes both short-term and long-term incentives and is designed to reward
key management personnel for meeting or exceeding their financial and personal objectives. The STI is an ‘At
Risk’ bonus provided in the form of cash and its calculation is based on Underlying EBITDA and the achievement
of agreed KPIs, while the LTI is provided predominantly as exposure to the price performance of ordinary shares
of the consolidated entity.
25
SHORT-TERM INCENTIVES (STI)
The STI performance target is a Board approved scheme in which executives are incentivised to increase revenue
and decrease cost to maximise IncentiaPay earnings. Hurdles are set in order to incentivise improved business
performance. Individuals have STI targets, as set out in their contracts, with final payment amounts subject
to individual, divisional and group KPIs as well as Board review and approval. In some cases, guaranteed STI
amounts are approved on the initial hiring of key executives.
LONG-TERM INCENTIVES (LTI)
LTI’s are linked to share price performance and provided to certain key management personnel as part of their
remuneration package, at the discretion of the Board. During the year these LTI arrangements included time-
based vesting arrangements, the achievement of annual EBITDA hurdles and exercise prices set at or above the
share price on the date of issuance and thereby assist in the alignment of management and shareholders.
6 . G R O U P P E R FO R M A N C E A N D C H A N G E S I N S H A R E H O LD E R W E A LTH
The table below sets out summary information about the Group’s performance and its impact on shareholder
wealth for the five years to 30 June 2019:
2019
2018
2017
2016
2015
Revenue ($’000)
64,5722
75,8092
110,464
50,172
48,157
Profit/(loss) for the period before tax
($’000)
(27,367)2
(23,197)2
11,349
Dividends paid ($’000)
-
2,666
3,877
8,134
3,071
9,356
1,316
Share price as at 30 June
$0.045
$0.245
$0.740
$0.952
$0.807
Change in share price
($0.200)
($0.495)
($0.212)
$0.145
($0.145)1
1. Movement is for the period from 9 September 2014 to 30 June 2015 as the Group listed on the stock exchange from 9 September 2014.
2. Amounts exclude discontinued operations.
7. F U LLY PA I D O R D I N A RY S H A R E S H E LD BY K E Y M A N AG E M E NT P E R S O N N E L
2019
DIRECTORS
OPENING
BALANCE
RECEIVED AS PART OF
REMUNERATION
OTHER
CHANGES
CLOSING1
BALANCE
Murray d'Almeida2
178,571
Garth Barrett3
150,000
EXECUTIVES
Iain Dunstan4
2,192,569
-
-
-
-
-
178,571
150,000
943,145
3,135,714
SECTION 5 | REMUNERATION REPORT
26
2018
DIRECTORS
OPENING
BALANCE
RECEIVED AS PART OF
REMUNERATION
OTHER
CHANGES
CLOSING1
BALANCE
Murray d'Almeida
5,000
Garth Barrett
-
Brian Hall5
9,504,000
Antonie Wiese5
8,174,663
Trevor Dietz6
10,514,000
EXECUTIVES
Iain Dunstan
-
-
-
-
-
-
-
173,571
150,000
10,423
6,423
11,923
178,571
150,000
9,514,423
8,181,086
10,525,923
2,192,569
2,192,569
1. Represents the balance as at 30 June, unless KMP member resigned, then this represents the balance as at date of resignation.
2. Resigned 27 September 2018.
3. Resigned 17 July 2018.
4. Resigned 6 December 2018.
5. Resigned 2 February 2018.
6. Resigned 25 January 2018.
8 . LOA N F U N D E D S H A R E S H E L D BY K E Y M A N AG E M E NT P E R S O N N E L
2019
EXECUTIVES
OPENING
BALANCE
RECEIVED AS PART OF
REMUNERATION
CLOSING
BALANCE
NUMBER OF
SHARES VESTED
Iain Dunstan1
3,035,714
Darius Coveney1
2,678,571
-
-
3,035,714
2,678,571
-
-
2018
OPENING
BALANCE
RECEIVED AS PART OF
REMUNERATION
CLOSING
BALANCE
NUMBER OF
SHARES VESTED
EXECUTIVES
Iain Dunstan1
Darius Coveney1
-
-
3,035,714
2,678,571
3,035,714
2,678,571
-
-
1. Both Iain Dunstan and Darius Coveney left the Company during the year ended 30 June 2019. The shares are in the process of being returned
to the consolidated entity and will be held in an Employee Trust.
27
9 . P E R FO R M A N C E R I G HT S H E L D BY K E Y M A N AG E M E NT P E R S O N N E L
2019
EXECUTIVES
OPENING
BALANCE
RECEIVED AS PART OF
REMUNERATION
CLOSING
BALANCE
VESTED AND
EXERCISABLE
Heidi Halson
80,000
-
80,000
80,000
2018
EXECUTIVES
OPENING
BALANCE
RECEIVED AS PART OF
REMUNERATION
CLOSING
BALANCE
VESTED AND
EXERCISABLE
Heidi Halson
80,000
80,000
80,000
1 0 . D E TA I L S O F R E M U N E R ATI O N (K M P)
Details of the remuneration of KMP of the consolidated entity are set out in the following tables.
SHORT-TERM
BENEFITS
POST
EMPLOYMENT
BENEFITS
LONG-TERM
BENEFITS
SHARE-
BASED
PAYMENTS
SALARY
AND FEES
BONUS
SUPER-
ANNUATION
2019
$
DIRECTORS
Stephen Harrison1,5
26,820
Jeremy Thorpe3,5
10,007
Charles Romito5
-
PREVIOUS
DIRECTORS
Murray d’Almeida1,5
42,975
Garth Barrett1,5
12,624
Chris Berkefeld1,5
138,186
Naseema Sparks1,5
128,073
EXECUTIVES
$
-
-
-
-
-
-
-
$
965
-
-
-
1,199
7,947
8,828
Iain Dunstan2,5
245,718
70,832
21,740
Darius Coveney4
432,784
148,332
77,440
Heidi Halson
325,200
17,500
27,645
Toby Ellis5
236,346
-
18,413
1. Remuneration was paid partly in salary and partly to an associated entity.
LONG
SERVICE
LEAVE
$
-
-
-
-
-
-
-
-
-
-
-
TERMINATION
BENEFITS
EQUITY
SETTLED
TOTAL
$
-
-
-
-
-
-
-
$
$
-
-
-
-
-
-
-
27,785
10,007
-
42,975
13,823
146,133
136,901
28,237
(27,933)
338,594
271,875
(24,647)
905,784
-
-
72,706
445,051
-
254,759
2. Termination benefits include unused annual leave paid on termination. Negative share-based payment is due to a reversal of share-based
payment previously recognised.
3. Directors fees were paid to an associated entity of Jeremy Thorpe and a related party of IncentiaPay Ltd.
4. Termination benefits include unused annual leave paid on termination, and contract termination costs agreed on 28 July 2019 but not paid
SECTION 5 | REMUNERATION REPORT
28
until FY2020. Negative share-based payment is due to a reversal of share-based payment previously recognised.
5. Remuneration disclosed is for period as KMP.
SHORT-TERM
BENEFITS
POST
EMPLOYMENT
BENEFITS
LONG-TERM
BENEFITS
SHARE-
BASED
PAYMENTS
SALARY
AND FEES
BONUS
SUPER-
ANNUATION
TERMINATION
BENEFITS
EQUITY
SETTLED
TOTAL
LONG
SERVICE
LEAVE
$
-
-
-
-
$
-
-
-
-
38,068
184,471
45,287
252,900
252,900
2018
$
DIRECTORS
Murray d’Almeida1
108,546
Chris Berkefeld2
25,000
Naseema Sparks2
7,083
Garth Barrett3
75,000
PREVIOUS
DIRECTORS
Trevor Dietz4
433,222
Brian Hall4
302,269
Antonie Wiese4
306,444
EXECUTIVES
$
-
-
-
-
-
-
-
$
-
2,375
672
7,125
11,038
11,038
Iain Dunstan2
261,155
106,250
23,293
Darius Coveney2
151,809
72,500
14,172
Heidi Halson
225,307
95,500
20,048
1. Directors fees were paid to an associated entity of Murray d’Almeida.
2. Remuneration disclosed is from the date of appointment as a KMP.
3. Remuneration was paid partly in salary and partly to an associated entity.
-
-
-
-
-
$
-
-
-
-
-
-
-
$
108,546
27,375
7,755
82,125
701,048
566,207
570,382
-
-
-
27,933
418,631
24,647
263,128
97,113
437,968
4. Remuneration disclosed is up to date of resignation as KMP and includes payments as an employee as well as payments to an associated
entity and all deferred settlement arrangements.
29
The proportion of remuneration linked to performance and the fixed proportion are as follows:
FIXED REMUNERATION
AT RISK - STI
AT RISK - LTI
FY2019
FY2018
FY2019
FY2018
FY2019
FY2018
DIRECTORS
Stephen Harrison
Jeremy Thorpe
Charles Romito
PREVIOUS DIRECTORS
Murray d’Almeida
Garth Barrett
Chris Berkefeld
Naseema Sparks
EXECUTIVES
Iain Dunstan
Darius Coveney
Heidi Halson
Toby Ellis
100%
100%
100%
100%
100%
100%
100%
87%
86%
80%
100%
N/A
N/A
N/A
100%
100%
100%
100%
68%
63%
56%
N/A
-
-
-
-
-
-
-
21%
17%
4%
-
N/A
N/A
N/A
-
-
-
-
25%
28%
22%
N/A
-
-
-
-
-
-
-
(8%)
(3%)
16%
-
N/A
N/A
N/A
-
-
-
-
7%
9%
22%
N/A
The proportion of the cash bonus paid/payable or forfeited is as follows:
CASH BONUS PAID/PAYABLE
CASH BONUS FORFEITED
FY2019
FY2018
FY2019
FY2018
DIRECTORS
Stephen Harrison
Jeremy Thorpe
Charles Romito
PREVIOUS DIRECTORS
Murray d’Almeida
Chris Berkefeld
Naseema Sparks
EXECUTIVES
Iain Dunstan
Darius Coveney
Heidi Halson
Toby Ellis
-
-
-
-
-
-
50%
75%
100%
-
-
-
-
-
-
-
50%
50%
-
-
-
-
-
-
-
-
50%
25%
-
-
-
-
-
-
-
-
50%
50%
-
-
SECTION 5 | REMUNERATION REPORT
30
1 1 . S E RV I C E AG R E E M E NT S
Remuneration and other terms of employment for key management personnel are formalised in service
agreements. Details of these agreements are as follows:
NAME
Darius Coveney
Title
Acting CEO (previously CFO/COO)
Agreement commenced
1 February 2018
Term of engagement
3 years
Details
Termination of employment:
The Company agreed to terminate Mr Coveney’s contract on and from 30 August
2019. On termination Mr Coveney was paid a termination payment equal to nine
(9) months salary (excluding higher duties arrangements as Acting CEO).
Equity compensation: 2,678,571 Loan Funded Shares, which were returned to the
Company on exit.
NAME
Heidi Halson
Title
Executive General Manager – Retail
Agreement commenced
New agreement signed 7 January 2019 (service commenced 1 June 1994)
Term of engagement
Ongoing
Details
Termination of employment:
The Company agreed to terminate Ms Halson’s contract on and from 22 August
2019. On termination Ms Halson was paid a termination payment equal to 13 weeks
salary plus statutory entitlements.
Equity compensation: Up to 200,000 Performance Rights per annum.
NAME
Toby Ellis
Title
Executive General Manager – Corporate Sales
Agreement commenced
13 August 2018
Term of engagement
Ongoing
Details
Termination of employment:
By either party on giving four (4) weeks notice; or immediately on payment in lieu
of notice or if any of the conditions for summary terminations are met including
serious misconduct, gross negligence, breach of contract, bankruptcy, crime or
repeated absence without explanation.
Excluding payment in lieu of notice, the contract does not specify any termination
payment.
Equity compensation: Nil
31
1 2 . S H A R E - BA S E D CO M P E N SATI O N
LOA N F U N D E D S H A R E S
As at 30 June 2018, there were 5,714,285 shares issued to key management personnel as part of Loan Funded
Share (LFS) arrangements approved by shareholders on 5 April 2018.
Given both Mr Coveney and Mr Dunstan have left IncentiaPay, the shares are in the process of being returned
to the consolidated entity. These shares will be held in an Employee Trust and be available to the Board to meet
future share-based compensation requirements.
P E R FO R M A N C E R I G H T S E Q U IT Y P L A N
As at 30 June 2018, there were 80,000 Performance Rights issued to key management personnel, following
shareholder approval on 5 April 2018.
The Performance Rights were issued under the ‘Performance Rights Equity Plan’ (PREP) which was
communicated to shareholders on 24 May 2017 and approved at the Company’s EGM held on 5 April 2018.
The key terms of the PREP can be summarised as follows:
• Annual grant of Performance Rights for four years.
• Number of Performance Rights granted is calculated based on:
– Annual maximum grant amount;
– Annual (calendar year) revenue hurdles;
– Annual (calendar year) EBITDA hurdles; and
– Continuing employment.
• Performance Rights issued then vest annually in July at 25 per cent per annum for four years.
• Vested Performance Rights convert to ordinary shares 1:1.
SECTION 5 | REMUNERATION REPORT
32
Auditor’s
Independence
Declaration
SECTION
6
33
Lead Auditor’s Independence Declaration under
Section 307C of the Corporations Act 2001
To the Directors of IncentiaPay Limited
I declare that, to the best of my knowledge and belief, in relation to the audit of IncentiaPay Limited for
the year ended 30 June 2019 there have been:
i.
ii.
no contraventions of the auditor independence requirements as set out in the
Corporations Act 2001 in relation to the audit; and
no contraventions of any applicable code of professional conduct in relation to the audit.
KPMG
John Wigglesworth
Partner
Sydney
11 September 2019
KPMG, an Australian partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity.
Liability limited by a scheme approved under
Professional Standards Legislation.
SECTION 6 | AUDITOR’S INDEPENDENCE DECLARATION
34
Financial
Statements
SECTION
7
35
Financial
I N C E NTI A PAY LTD A N D CO N TR O L LE D E NTITI E S
CO N S O LI DATE D S TATE M E NT O F P R O F IT O R LO S S A N D OTH E R
CO M P R E H E N S I V E I N CO M E FO R TH E Y E A R E N D E D 3 0 J U N E 2 01 9
CONSOLIDATED GROUP
FY2019
NOTE
$’000
FY2018
RESTATED*
$’000
Direct expenses of providing services
Revenue
Impairments
Employee expenses
Depreciation and amortisation expense
Building occupancy expense
Finance costs
Legal and professional costs
Website and communication
Other expenses
2
3
3
3
3
3
Operating loss before income tax
Gain on disposal of equity accounted investment
Loss before income tax
Tax (expenses)/benefit
4(a)
Loss for the period
Loss for the period from discontinued operations
23
Net profit attributable to
64,572
(41,919)
(14,553)
(19,141)
(2,015)
(2,943)
(346)
(2,622)
(2,419)
(6,581)
(27,967)
600
(27,367)
(786)
(28,153)
(9,751)
75,809
(44,972)
(11,929)
(23,910)
(3,981)
(1,995)
(1,101)
(1,320)
(1,763)
(8,035)
(23,197)
-
(23,197)
2,000
(21,197)
(40,986)
Members of the parent entity
(37,904)
(62,183)
Other comprehensive income
Gain arising from translating foreign controlled entities from
continuing operations
Transfer of foreign currency translation reserve to loss from
discontinued operations
399
23
(208)
883
-
Total comprehensive income/(loss) for the period
(37,713)
(61,300)
Earnings/(loss) per share
5
Basic earnings/(loss) per share (cents)
Loss from continuing operations
Loss from discontinued operations
Total
Diluted earnings/(loss) per share (cents)
5
Loss from continuing operations
Loss from discontinued operations
Total
(12.1)
(4.2)
(16.3)
(12.1)
(4.2)
(16.3)
(18.2)
(35.3)
(53.5)
(18.2)
(35.3)
(53.5)
*See note 23 for details about restatements as a result of the divestments.
The accompanying notes form part of these financial statements.
SECTION 7 | FINANCIAL STATEMENTS
36
I N C E NTI A PAY LT D A N D CO N TR O L L E D E NTITI E S
CO N S O LI DATE D S TATE M E N T O F F I N A N C I A L P O S ITI O N A S AT 3 0 J U N E 2 01 9
Current assets NOTE
Cash and cash equivalents
Deferred consideration
Trade and other receivables
Inventories
6
23
8
9
Other assets
10
Assets disposal group classified as held for sale
Total current assets
Non-current assets
Deferred consideration
23
Trade and other receivables
Property, plant and equipment
8
11
Deferred tax assets
4(c)
Intangible assets
12
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Borrowings
Vendor loans
13
14
15
Current tax liabilities 4(d)
Liabilities included in disposal group held for sale
Deferred revenue
Provisions
Total current liabilities
Non-current liabilities
Trade and other payables
Borrowings
Provisions
Total non-current liabilities
Total liabilities
Net assets
16
17
13
14
17
Issued capital
Reserves
18
19
Accumulated losses
Total equity
CONSOLIDATED GROUP
FY2019
$’000
FY2018
$’000
3,460
695
2,728
96
7,853
-
14,832
2,414
-
2,383
3,717
22,507
31,021
45,853
5,941
4,169
-
186
21,394
1,833
-
33,523
-
466
217
683
34,206
11,647
96,006
1,136
(85,495)
11,647
11,130
-
9,675
350
12,186
1,596
34,937
-
141
2,366
4,773
49,280
56,560
91,497
11,949
-
800
169
22,001
5,643
777
41,339
851
-
1,131
1,982
43,321
48,176
94,892
875
(47,591)
48,176
The accompanying notes form part of these financial statements.
37
I N C E NTI A PAY LT D A N D CO N TR O L L E D E NTITI E S
CO N S O LI DATE D S TATE M E N T O F C H A N G E S I N E Q U IT Y FO R TH E Y E A R E N D E D
3 0 J U N E 2 01 9
ORDINARY
SHARE
CAPITAL
ACCUMULATED
LOSSES
FOREIGN
CURRENCY
TRANSLATION
RESERVE
SHARE-BASED
PAYMENTS
RESERVE
TOTAL
$’000
$’000
$’000
$’000
$’000
Balance at 1 July 2017
54,554
17,258
(668)
Comprehensive income
Loss for the period
Other comprehensive income
Exchange differences on
translation of foreign operations
Total comprehensive
loss for the period
Transactions with owners,
in their capacity as owners
and other transfers
Shares issued during the period
Transaction costs
Other equity movement
Dividends for the period
Movement during the period
Total transactions with owners
and other transfers
-
-
-
(62,183)
--
-
(62,183)
883
883
41,689
(2,041)
690
-
-
-
-
-
(2,666)
-
40,338
(2,666)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
71,144
(62,183)
883
(61,300)
41,689
(2,041)
690
(2,666)
660
660
660
38,332
Balance at 30 June 2018
94,892
(47,591)
215
660
48,176
The accompanying notes form part of these financial statements.
SECTION 7 | FINANCIAL STATEMENTS
38
INCE NTIAPAY LTD AN D CONTROLLE D E NTITIE S
CO N S O LI DATE D S TATE M E N T O F C H A N G E S I N E Q U IT Y FO R TH E Y E A R E N D E D
3 0 J U N E 2 01 9
ORDINARY
SHARE
CAPITAL
ACCUMULATED
LOSSES
FOREIGN
CURRENCY
TRANSLATION
RESERVE
SHARE-BASED
PAYMENTS
RESERVE
TOTAL
NOTE
$’000
$’000
$’000
$’000
$’000
Balance at 1 July 2018
94,892
(47,591)
215
660
48,176
Comprehensive income
Loss for the period
Other comprehensive income
Exchange differences on
translation of foreign operations
Transfer of foreign currency
translation reserve to loss from
discontinued operations
23
Total comprehensive loss
for the period
Transactions with owners, in their
capacity as owners and other
transfers
Shares issued during the period 18
Transaction costs 18
Movement during the period 19
Total transactions with owners
and other transfers
-
-
-
-
1,155
(41)
-
1,114
(37,904)
-
-
-
399
(208)
-
-
(37,904)
399
(208)
(37,904)
191
-
(37,713)
-
-
-
-
-
-
-
-
-
-
70
70
1,155
(41)
70
1,184
Balance at 30 June 2019
96,006
(85,495)
406
730
11,647
The accompanying notes form part of these financial statements.
39
I N C E NTI A PAY LT D A N D CO N TR O L L E D E NTITI E S
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2019
CONSOLIDATED GROUP
FY2019
NOTE
$’000
FY2018
$’000
Cash flows from operating activities
Receipts from customers
86,175
120,003
Payments to suppliers and employees
(99,591)
(123,020)
Interest received
Tax paid
78
-
Net cash from/(used in) continuing operations
7
(13,338)
Cash flows from investing activities
Purchase of property, plant and equipment
Purchase of intangibles
Proceeds from sales of businesses (net of cash disposed)
12
23
Acquisition of subsidiaries net of cash acquired 22(c)
Proceeds from sale of equity investment 22(b)
Net cash from/(used in) investing activities
Cash flows from financing activities
Net proceeds from issue of shares
18
Proceeds of loan repaid from external parties
15
(1,597)
(1,878)
2,058
-
600
(817)
1,114
800
Repayment of borrowings
(4,000)
Repayment of convertible note
Proceeds from borrowings
Interest paid
Loan to external parties
Dividends paid
Net cash from financing activities
Net increase/(decrease) in cash held
Cash and cash equivalents at beginning of financial period
Cash and cash equivalents at the end of the
financial period in continuing operations
Cash held in discontinued operations
Effects of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at the end of the financial period in
continuing operations
6
The accompanying notes form part of these financial statements.
-
8,635
(221)
-
-
6,328
(7,827)
11,508
3,681
-
(221)
3,460
-
(580)
(3,597)
(339)
(6,103)
-
297
-
(6,145)
30,241
-
(14,439)
(5,000)
-
(1,216)
(1,000)
(2,666)
5,920
(3,822)
15,330
11,508
(378)
-
11,130
SECTION 7 | FINANCIAL STATEMENTS
40
I N C E NTI A PAY LT D A N D CO N TR O L L E D E NTITI E S
NOTE S TO TH E FINANCIAL STATE M E NTS FOR TH E YEAR E N DE D 30 J U N E 2 01 9
N OTE S TO TH E F I N A N C I A L S TATE M E NT S
Note 1
Summary of significant accounting policies ........................................................................................................................42
Note 2
Revenue ..................................................................................................................................................................................................45
Note 3
Expenses ................................................................................................................................................................................................46
Note 4
Income tax .............................................................................................................................................................................................48
Note 5
Dividends and earnings per share.............................................................................................................................................. 51
Note 6
Cash and cash equivalents ........................................................................................................................................................... 52
Note 7
Cash flow information ..................................................................................................................................................................... 53
Note 8
Trade and other receivables .........................................................................................................................................................54
Note 9
Inventories ............................................................................................................................................................................................. 57
Note 10 Other assets .......................................................................................................................................................................................... 57
Note 11
Property, plant and equipment .................................................................................................................................................. 58
Note 12
Intangible assets .................................................................................................................................................................................60
Note 13
Trade and other payables .............................................................................................................................................................. 65
Note 14
Borrowings ............................................................................................................................................................................................ 65
Note 15
Vendor loan........................................................................................................................................................................................... 67
Note 16 Deferred revenue ............................................................................................................................................................................... 67
Note 17
Provisions ...............................................................................................................................................................................................68
Note 18
Issued capital ........................................................................................................................................................................................ 71
Note 19
Reserves ................................................................................................................................................................................................. 73
Note 20 Key management personnel compensation ........................................................................................................................ 74
Note 21
Auditor’s remuneration ................................................................................................................................................................... 74
Note 22
Interests in subsidiaries and business combinations ....................................................................................................... 75
Note 23 Disposal groups classified as held for sale and discontinued operations ............................................................ 79
Note 24
Parent company information ....................................................................................................................................................... 87
Note 25
Segment information .......................................................................................................................................................................89
Note 26 Capital and leasing commitments.............................................................................................................................................90
Note 27 Contingent liabilities and contingent assets .........................................................................................................................91
Note 28
Financial risk management ............................................................................................................................................................91
Note 29 Related party transactions ........................................................................................................................................................... 95
Note 30 Events after the reporting period .............................................................................................................................................96
41
I N C E NTI A PAY LT D A N D CO N TR O L L E D E NTITI E S
NOTE S TO TH E FINANCIAL STATE M E NTS FOR TH E YEAR E N DE D 30 J U N E 2 01 9
N OTE 1 | S U M M A RY O F S I G N I F I C A NT
ACCO U NTI N G P O LI C I E S
per annum and was originally repayable on
30 September 2019 however the maturity date of the
loan was amended subsequent to year-end and has now
B A S I S O F P R E PA R ATI O N
been extended to 30 September 2020.
These general-purpose financial statements for
the year ended 30 June 2019 have been prepared
in accordance with the Corporations Act 2001,
Australian Accounting Standards and Interpretations
of the Australian Accounting Standards Board and
International Financial Reporting Standards as issued
by the International Accounting Standards Board.
IncentiaPay Ltd is a listed public company incorporated
and domiciled in Australia. The Company is a for-
profit entity for financial reporting purposes under
At 30 June 2019 the Group had cash on hand of
$3.5 million, net assets of $11.6 million and a net current
asset deficiency of $18.7 million ($13.5 million of which
will not crystallise as a cash outflow in the next
12 months as it relates to revenue received in advance
(liability) and prepaid production and commission
expenses (asset)). During the year ended 30 June 2019,
the Group incurred a net loss before tax from continuing
operations of $27.4 million, including impairment of
$14.6 million, and incurred net cash outflows from
Australian Accounting Standards. Material accounting
operating activities of $13.3 million.
policies adopted in the preparation of these financial
Subsequent to year end, on 9 August 2019 the Group
statements are presented below and have been
entered into a Loan Deed with Suzerain Investments
consistently applied unless stated otherwise.
Holdings Limited, a major shareholder of the Company,
Except for cash flow information, the financial
statements have been prepared on an accruals basis and
are based on historical costs, modified where applicable
by the measurement at fair value of selected non-
current assets, financial assets and financial liabilities.
These financial statements were authorised for issue on
11 September 2019.
G O I N G CO N C E R N
for $19.0 million. This includes the $4.0 million already
provided to the Group in May 2019. The additional
$15.0 million is to be provided to support the working
capital requirements of the Group and to restructure the
business. The receipt of funds will occur in four separate
tranches which are dependent upon certain conditions
being met, see note 30.
The Directors have prepared cash flow projections that
support the ability of the Group to continue as a going
The consolidated financial report has been prepared
concern. These cash flow projections assume the Group
on a going concern basis, which contemplates the
will satisfy all conditions to enable the drawdown of all
continuation of normal business operations and the
four tranches under the Loan Deed.
realisation of assets and settlement of liabilities in the
The ongoing operation of the Group is dependent upon
normal course of business.
During the year the Group divested its Bartercard
business, government business and performance
marketing business and received $3.6 million in
the Group satisfying the conditions required to enable
the funding under the Loan Deed to be granted and/
or the Group reducing expenditure in-line with available
funding and/or the Group raising additional debt or
cash consideration (with deferred consideration of
equity funding, the achievement of which are inherently
$3.1 million yet to be collected).
uncertain until realised.
On 28 February 2019, the Group successfully completed
These conditions give rise to material uncertainties that
a placement of 14,425,000 ordinary shares to its largest
may cast significant doubt upon the Group’s ability to
shareholder group, raising approximately $1.15 million.
continue as a going concern.
On 16 May 2019, the Group entered into a short-term
In the event the Group does not continue as a going
loan agreement with Suzerain Investments Holdings
concern it may not be able to realise its assets and
Limited, a major shareholder of the Company,
extinguish its liabilities in the ordinary course of
for $4.0 million. The loan attracts interest at 10 per cent
operations.
SECTION 7 | FINANCIAL STATEMENTS
42
I N C E NTI A PAY LT D A N D CO N TR O L L E D E NTITI E S
NOTE S TO TH E FINANCIAL STATE M E NTS FOR TH E YEAR E N DE D 30 J U N E 2 01 9
A ) PRINCIPLES OF CONSOLIDATION
net investment hedge.
The consolidated financial statements incorporate
all of the assets, liabilities and results of the parent
IncentiaPay Ltd and all of its subsidiaries (also referred
to as “the Group”). Subsidiaries are entities the parent
controls. The parent controls an entity when it is
exposed to, or has rights to, variable returns from its
Exchange differences arising on the translation
of non-monetary items are recognised directly in
other comprehensive income to the extent that
the underlying gain or loss is recognised in other
comprehensive income. Otherwise the exchange
difference is recognised in profit or loss.
involvement with the entity and has the ability to affect
GROUP COMPANIES
those returns through its power over the entity.
The assets, liabilities and results of all subsidiaries are
fully consolidated into the financial statements of the
Group from the date on which control is obtained
by the Group. The consolidation of a subsidiary is
discontinued from the date that control ceases. Inter-
company transactions, balances and unrealised gains or
losses on transactions between group entities are fully
eliminated on consolidation.
Accounting policies of subsidiaries have been adjusted
where necessary to ensure uniformity of the accounting
policies adopted by the Group.
B ) FOREIGN CURRENCY TRANSACTIONS AND
BALANCES
FUNCTIONAL AND PRESENTATION CURRENCY
The financial results and position of foreign operations,
whose functional currency is different from the Group’s
presentation currency, are translated as follows:
• Assets and liabilities are translated at exchange rates
prevailing at the end of the reporting period;
• Income and expenses are translated at average
exchange rates for the period; and
• Retained earnings are translated at the exchange rates
prevailing at the date of the transaction.
Exchange differences arising on translation of foreign
operations with functional currencies other than
Australian dollars are recognised in other comprehensive
income and included in the foreign currency translation
reserve in the Statement of Financial Position. The
cumulative amount of these differences is reclassified
into profit or loss in the period in which the Group
The functional currency of each of the Group’s
disposes of the operation.
entities is measured using the currency of the primary
economic environment in which that entity operates.
C ) GOODS AND SERVICES TAX (GST)
The consolidated financial statements are presented in
Australian dollars, which is the parent entity’s functional
currency.
Revenues, expenses and assets are recognised net of
the amount of GST, except where the amount of GST
incurred is not recoverable from the relevant taxation
TRANSACTIONS AND BALANCES
authority.
Foreign currency transactions are translated into
functional currency using the exchange rates
prevailing at the date of the transaction. Foreign
currency monetary items are translated at the year-
end exchange rate. Non-monetary items measured at
Receivables and payables are stated exclusive of the
amount of GST receivable or payable. The net amount
of GST recoverable from, or payable to, the relevant
taxation authority is included with other receivables or
payables in the Statement of Financial Position.
historical cost continue to be carried at the exchange
Cash flows are presented on a gross basis. The GST
rate at the date of the transaction. Non-monetary items
components of cash flows arising from investing
measured at fair value are reported at the exchange
or financing activities which are recoverable from,
rate at the date when fair values were determined.
or payable to, the relevant taxation authority are
Exchange differences arising on the translation of
monetary items are recognised in profit or loss, except
where deferred in equity as a qualifying cash flow or
presented as operating cash flows included in receipts
from customers or payments to suppliers.
43
I N C E NTI A PAY LT D A N D CO N TR O L L E D E NTITI E S
NOTE S TO TH E FINANCIAL STATE M E NTS FOR TH E YEAR E N DE D 30 J U N E 2 01 9
D ) COMPARATIVE FIGURES
• additional disclosure requirements.
Where the Group retrospectively applies an accounting
policy, makes a retrospective restatement or reclassifies
items in its financial statements. See note 22(c) and 23.
The transitional provisions of AASB 16 allow a lessee to
either retrospectively apply the Standard to comparatives
in line with AASB 108 or recognise the cumulative effect
of retrospective application as an adjustment to opening
E ) ROUNDING OF AMOUNTS
equity on the date of initial application.
The parent entity has applied the relief available to
The Group has reviewed all the Group’s leasing
it under ASIC Instrument 2016 / 191. Accordingly,
arrangements over the last year in light of the new lease
amounts in the financial statements and Directors’
accounting rules in AASB 16. The Standard will affect
report have been rounded off to the nearest $1,000.
primarily the accounting for the Group’s operating leases.
F ) NEW AND AMENDED ACCOUNTING POLICIES
ADOPTED BY THE GROUP
Accounting Standards and Interpretations issued by
the AASB that are not yet mandatorily applicable to
the Group, together with an assessment of the potential
impact of such pronouncements on the Group when
adopted in future periods, are discussed below:
AASB 16: Leases (applicable to annual reporting
periods beginning on or after 1 January 2019).
When effective, this Standard will replace the current
accounting requirements applicable to leases in
AASB 117: Leases and Related Interpretations. AASB
16 introduces a single lessee accounting model that
eliminates the requirement for leases to be classified as
operating or finance leases.
The main changes introduced by the new Standard
include:
As at the reporting date, the Group has non-cancellable
operating lease commitments of $6.0 million.
Right-of-use assets for property leases will be measured
at the amount of the lease liability on adoption (adjusted
for any prepaid or accrued lease expenses). All other
leases are identified as short-term leases or low value
leases which will be recognised on a straight-line basis as
expense in profit or loss.
The Group expects to recognise right-of-use assets
of approximately $4.4 million on 1 July 2019 and lease
liabilities of $4.4 million. There is no expected impact
to the overall net assets, however net current assets
will be $1.6 million lower due to the presentation of a
portion of the liability as a current liability.
The Group expects that net profit after tax will increase
by approximately $0.054 million for 2020 as a result of
adopting AASB 16. EBITDA is expected to increase
by approximately $1.6 million, as operating lease
• recognition of a right-to-use asset and liability for
payments were previously accounted for as part of
all leases (excluding short-term leases with less than
EBITDA, however, the amortisation of the right-of-use
12 months of tenure and leases relating to low-value
assets and interest on the lease liability are excluded
assets);
from this measure.
• depreciation of right-to-use assets in line with AASB
Operating cash flows will increase, and financing
16: Property, Plant and Equipment in profit or loss
cash flows decrease by approximately $1.6 million as
and unwinding of the liability in principal and interest
repayment of the principal portion of the lease liabilities
components;
will be classified as cash flows from financing activities.
• variable lease payments that depend on an index
The Group will apply the Standard from its mandatory
or a rate are included in the initial measurement
of the lease liability using the index or rate at the
commencement date;
adoption date of 1 July 2019. The Group intends to
apply the simplified transition approach and will not
restate comparative amounts for the year prior to first
• by applying a practical expedient, a lessee is
adoption. Right-of-use assets for property leases will
permitted to elect not to separate non-lease
be measured at the amount of the lease liability on
components and instead account for all components
adoption (adjusted for any prepaid or accrued lease
as a lease; and
expenses).
SECTION 7 | FINANCIAL STATEMENTS
44
I N C E NTI A PAY LT D A N D CO N TR O L L E D E NTITI E S
NOTE S TO TH E FINANCIAL STATE M E NTS FOR TH E YEAR E N DE D 30 J U N E 2 01 9
G ) CRITICAL ACCOUNTING ESTIMATES AND
The Group initially adopted AASB 9 Financial
JUDGEMENTS
The Directors’ estimates and judgments are
incorporated into the financial statements and are
based on historical knowledge and the best available
current information. Estimates assume a reasonable
Instruments from 1 July 2018. The adoption of this
Standard did not have a material effect on the Group’s
opening retained earnings, see note 8.
N OTE 2 | R E V E N U E
expectation of future events and are based on current
ACCO U N TI N G P O L I C Y
trends and economic data, obtained both externally
and from within the Group.
KEY ESTIMATES AND JUDGEMENTS
Impairment – goodwill and other intangibles
The Group assesses impairment at the end of each
reporting period by evaluating conditions and events
specific to the Group that may be indicative of
impairment triggers. Recoverable amounts of relevant
assets are reassessed using the higher of fair value less
costs of disposal or value-in-use calculations which
incorporate various key assumptions.
Further details on the key estimates used in the
impairment evaluation and the impairment recognised
in respect of goodwill or other intangibles for the year
ended 30 June 2019 can be found in note 12.
Impairment – cash debtor receivables
The Group assesses impairment of cash debtor
receivables at the end of each reporting period by
reference to the history of cash debtor collections.
H ) CHANGES IN SIGNIFICANT ACCOUNTING
POLICIES
AASB 9 Financial Instruments, addresses the
classification, measurement and derecognition of
financial assets and financial liabilities, introduces new
rules for hedge accounting and a new impairment
model for financial assets.
Other than for a limited number of exceptions, including
leases, the revenue model in AASB 15 applies to all
contracts with customers as well as non-monetary
exchanges between entities in the same line of business
to facilitate sales to customers and potential customers.
The core principle of the Standard is that an entity
recognises revenue to depict the transfer of promised
goods or services to customers at an amount that
reflects the consideration to which the entity expects
to be entitled in exchange for the goods or services. To
achieve this objective AASB 15 provides the following
five-step process:
• Identify the contract(s) with a customer;
• Identify the performance obligations in the
contract(s);
• Determine the transaction price;
• Allocate the transaction price to the performance
obligations in the contract(s); and
• Recognise revenue when (or as) the performance
obligations are satisfied.
The membership year runs from 1 June to the following
31 May.
Entertainment Publications satisfies its obligations as
services are rendered to members during the period
of membership. Benefits must be provided constantly
throughout the period and Entertainment Publications
has concluded that a straight-line basis is the most
appropriate method.
• Revenue from Entertainment Publications marketing
The only financial assets expected to be impacted
and merchant support fees through the placement
are trade receivables. The new impairment model
of advertisements and the distribution of offers and
requires the recognition of impairment provisions
promotions on behalf of businesses to members
based on expected credit losses (ECL) rather than
is recognised when the advertisement or offer is
only incurred credit losses as is the case under AASB
placed, distributed and invoiced. Revenue from
139. The application of this new approach has not
the successful promotion of merchant offers is
had a significant impact on the classification and
recognised when the transaction occurs which
measurement of this provision, although it will result in
evidences the take up of the promotion.
an earlier recognition of credit losses.
• Revenue from commission’s receivable for bookings are
45
I N C E NTI A PAY LT D A N D CO N TR O L L E D E NTITI E S
NOTE S TO TH E FINANCIAL STATE M E NTS FOR TH E YEAR E N DE D 30 J U N E 2 01 9
recognised when the bookings are made, and it is paid for.
• On commencement of memberships, Entertainment Publications enters into a performance obligation to
deliver benefits in the form of special offers, discounts, promotions and booking facilities to members during
the period of membership. A liability is recognised for unearned revenue for performance obligations to
members that have not yet been satisfied. Payment for membership is made prior to the commencement of
membership.
• Entertainment Publications enters into contracts with corporate customers to develop a program of special
offers, discounts, promotions and booking facilities for their customers or employees during the period
applicable in the contract. Entertainment Publications has taken the view that the performance obligations
defined in the contract should be bundled into one performance obligation centred around access to the
program of benefits. Revenue is therefore recognised evenly over the period of the agreement.
• Revenue from the sale of gift cards on behalf of businesses to members is recognised when the gift card is
provided to the customer and it is paid for.
Payment terms are highly varied for the different sources of revenue, different customers and contract terms are
individually negotiated.
All revenue is stated net of the amount of goods and services tax (GST).
CONSOLIDATED GROUP
FY2019
$’000
FY2018
RESTATED*
$’000
Sales revenue
Fee income - Paid advertising and travel booking
Fee income - Consulting and media
Membership subscriptions
Corporate sales
3,274
2,097
28,611
3,283
Gift card sales
27,307
Total
64,572
2,963
764
32,751
4,724
34,607
75,809
*Amounts have been restated due to discontinued operations.
N OTE 3 | E X P E N S E S
ACCO U N TI N G P O L I C Y
DIRECT EXPENSES OF PROVIDING SERVICES
Sales commissions paid for the sale of memberships, being an incremental cost of obtaining contracts with
customers, are recognised initially as prepayments, see note 10. Subsequently, they are amortised as expenses
through the income statement in line with the recognition of revenue from membership sales. These relate
predominantly to commission paid to not for profit partners.
Costs incurred for the development of the following year’s membership package are capitalised as costs incurred
to fulfil a contract with a customer. They are recognised initially as an asset and subsequently amortised over the
period of membership during which those benefits are delivered to members, see note 10.
SECTION 7 | FINANCIAL STATEMENTS
46
I N C E NTI A PAY LT D A N D CO N TR O L L E D E NTITI E S
NOTE S TO TH E FINANCIAL STATE M E NTS FOR TH E YEAR E N DE D 30 J U N E 2 01 9
Loss before income tax from continuing operations includes the following significant expenses:
CONSOLIDATED GROUP
FY2019
$’000
FY2018
RESTATED*
$’000
Direct expenses of providing services
Membership book printing and production
Corporate book printing
12,558
1,943
Gift cards
26,706
Other
Total
712
41,919
9,174
1,243
34,406
149
44,972
Bad and doubtful debts
Trade receivables
447
275
Rental expense on operating leases
Minimum lease payments
2,943
1,995
Finance cost
Finance cost paid or payable
346
1,101
Depreciation and amortisation expense
Plant and equipment
Amortisation of intangibles
Total
Impairments
325
1,690
2,015
Goodwill
14,553
Development costs
Investment in unlisted entity
Other balance sheet items
-
-
-
Total
14,553
1,282
2,699
3,981
-
6,519
1,500
3,910
11,929
See note 12 for the impairment of goodwill related to the Entertainment business.
*Amounts have been restated due to discontinued operations.
47
I N C E NTI A PAY LTD A N D CO N TR O L LE D E NTITI E S
NOTE S TO TH E FINANCIAL STATE M E NTS FOR TH E YEAR E N DE D 30 J U N E 2 01 9
N OTE 4 | I N CO M E TA X
ACCO U N TI N G P O L I C Y
The income tax expense for the year comprises current income tax expense and deferred tax expense. Current
income tax expense charged to profit or loss is the tax payable on taxable income. Current tax liabilities are
measured at the amounts expected to be paid to the relevant taxation authority. Deferred income tax expense reflects
movements in deferred tax asset and deferred tax liability balances during the year as well as unused tax losses.
Current and deferred income tax expense is charged outside profit or loss when the tax relates to items that are
recognised outside profit or loss. Except for business combinations, no deferred income tax is recognised from
the initial recognition of an asset or liability, where there is no effect on accounting or taxable profit or loss.
Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the period when the
asset is realised or the liability is settled and their measurement also reflects the manner in which management
expects to recover or settle the carrying amount of the related asset or liability. With respect to non-depreciable
items of property, plant and equipment measured at fair value and items of investment property measured at fair
value, the related deferred tax liability or deferred tax asset is measured on the basis that the carrying amount of
the asset will be recovered entirely through sale.
Deferred tax assets relating to temporary differences and unused tax losses are recognised only to the extent
that it is probable that future taxable profit will be available against which the benefits of the deferred tax asset
can be utilised.
Current tax assets and liabilities are offset where a legally enforceable right of set-off exists and it is intended that
net settlement or simultaneous realisation and settlement of the respective asset and liability will occur. Deferred
tax assets and liabilities are offset where:
• a legally enforceable right of set-off exists; and
• the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either
the same taxable entity or different taxable entities where it is intended that net settlement or simultaneous
realisation and settlement of the respective asset and liability will occur in future periods in which significant
amounts of deferred tax assets or liabilities are expected to be recovered or settled.
SECTION 7 | FINANCIAL STATEMENTS
48
I N C E NTI A PAY LT D A N D CO N TR O L L E D E NTITI E S
NOTE S TO TH E FINANCIAL STATE M E NTS FOR TH E YEAR E N DE D 30 J U N E 2 01 9
a) The components of income tax expense/(benefit) comprise
Current tax
Deferred tax
Income tax expense/(benefit)
b) Numerical reconciliation of income tax
expense to prima facie tax payable
CONSOLIDATED GROUP
FY2019
$’000
FY2018
$’000
-
786
786
(700)
(1,300)
(2,000)
Loss from continuing operations before income tax expense
(27,367)
(22,723)
Loss from discontinuing operation before income tax expense
(9,881)
(41,461)
The prima facie tax payable on profit from ordinary activities before
income tax is reconciled to income tax as follows
Prima facie tax benefit on profit from ordinary activities before income tax
at domestic statutory rate of 30% (2018: 30%)
(11,174)
(19,255)
Add /(less) tax effect of
Permanent differences
9,288
Recoupment of prior year tax (profits)/losses not previously brought to
account
Unrecognised tax losses
Income tax expense/(benefit)
-
2,672
786
17,925
(1,143)
473
(2,000)
No income tax benefit was recognised from permanent differences associated with tax losses. Income tax
benefits arising from tax losses will only be realised if:
• the Group derives future assessable income of a nature and of an amount sufficient to enable the Group to
benefit from the deductions for the losses to be realised;
• the Group continues to comply with the conditions for deductibility imposed by tax legislation; and
• no changes in tax legislation adversely affect the Group in realising the benefit from the deductions for the losses.
49
I N C E NTI A PAY LT D A N D CO N TR O L L E D E NTITI E S
NOTE S TO TH E FINANCIAL STATE M E NTS FOR TH E YEAR E N DE D 30 J U N E 2 01 9
CONSOLIDATED GROUP
c) Deferred tax
OPENING
BALANCE
CHARGED TO
INCOME
CHARGED
DIRECTLY
TO EQUITY
DIVESTMENT
TOTAL
Deferred tax assets
Provisions
5,585
579
Transaction costs on equity issues
659
(462)
Employee benefits
Property, plant and equipment
937
(30)
451
12
Intangibles
(1,892)
184
Other
(2,198)
Balance as at 30 June 2018
3,061
257
1,021
Provisions
6,164
(5,103)
Transaction costs on equity issues
888
(888)
Employee benefits
1,388
(174)
Property, plant and equipment
(18)
19
Intangibles
(1,708)
(388)
Other
(1,941)
5,748
Balance as at 30 June 2019
4,773
(786)
d) Current tax
-
691
-
-
-
-
691
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(319)
-
(548)
(1)
6,164
888
1,388
(18)
(1,708)
(1,941)
4,773
742
-
666
-
250
(1,846)
348
(270)
4,155
3,717
CONSOLIDATED GROUP
FY2019
$’000
FY2018
$’000
INCOME TAX PAYABLE
Income tax payable
186
169
The income tax payable relates to provisional income tax payable in New Zealand.
SECTION 7 | FINANCIAL STATEMENTS
50
I N C E NTI A PAY LT D A N D CO N TR O L L E D E NTITI E S
NOTE S TO TH E FINANCIAL STATE M E NTS FOR TH E YEAR E N DE D 30 J U N E 2 01 9
N OTE 5 | D I V I D E N D S A N D E A R N I N G S P E R S H A R E
DISTRIBUTIONS PAID
2018 interim fully franked ordinary dividend of 2.25 cents (2017: 2.25 cents)
per share paid 9 January 2018
Dividends paid during the year
Distributions paid
Total dividends for the period
Franking account
CONSOLIDATED GROUP
FY2019
$’000
FY2018
$’000
-
-
-
2,666
2,666
2.25 cents
Balance of franking account at year end
adjusted for franking credits arising from
6,493
6,506
Payments of income tax
-
(13)
Franking credits available for subsequent financial year
6,493
6,493
The Directors have advised that they do not intend to declare dividends for FY2019.
CONSOLIDATED GROUP
FY2019
$’000
FY2018
RESTATED*
$’000
a) Reconciliation of earnings to profit or loss
Loss from continuing operations
(28,153)
(21,197)
Loss from discontinued operations
(9,751)
(40,986)
Loss used to calculate basic EPS
(37,904)
(62,183)
Weighted average number of ordinary shares outstanding during the year
used in calculating basic EPS
233,011,438
116,182,656
Weighted average of dilutive convertible notes and equity instruments
outstanding
-
5,520,548
Weighted average number of ordinary shares outstanding during the year
used in calculating diluted EPS
233,011,438
121,703,204
*Amounts have been restated due to discontinued operations. See note 23.
51
I N C E NTI A PAY LT D A N D CO N TR O L L E D E NTITI E S
NOTE S TO TH E FINANCIAL STATE M E NTS FOR TH E YEAR E N DE D 30 J U N E 2 01 9
N OTE 6 | C A S H A N D C A S H E Q U I VA LE NT S
ACCO U N TI N G P O L I C Y
Cash and cash equivalents include cash on hand, deposits available on demand with banks, other short-term
highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts, if
any, are reported within short-term borrowings in current liabilities in the Statement of Financial Position.
CONSOLIDATED GROUP
FY2019
$’000
FY2018
$’000
Cash at bank and on hand
3,457
10,120
Short-term bank deposits
3
Total cash and cash equivalents
3,460
Reconciliation of cash
Cash at the end of the financial year as shown in the Statement of Cash
Flows is reconciled to items in the Statement of Financial Position as
follows
Cash and cash equivalents
3,460
Total cash and cash equivalents
3,460
1,010
11,130
11,130
11,130
SECTION 7 | FINANCIAL STATEMENTS
52
I N C E NTI A PAY LT D A N D CO N TR O L L E D E NTITI E S
NOTE S TO TH E FINANCIAL STATE M E NTS FOR TH E YEAR E N DE D 30 J U N E 2 01 9
N OTE 7 | C A S H F LOW I N FO R M ATI O N
CONSOLIDATED GROUP
FY2019
$’000
FY2018
$’000
Reconciliation of loss after income tax to net cash flow from operations
Cash flows excluded from profit attributable to operating activities
-
-
Loss after income tax
(37,904)
(62,183)
Non-cash flows in profit
Amortisation
Loss/(gain) on disposal of discontinued operations
Write down of inventory to fair value
Depreciation
1,690
7,326
-
325
Impairment of intangibles in continuing operations
14,553
Impairment of intangibles in discontinued operations
Sale of unlisted equity investment
Share-based payment
-
(600)
(70)
4,774
(1,770)
3,432
1,281
11,929
33,693
-
-
Net interest paid including investing (346)
(1,216)
Changes in assets and liabilities, net of effects
of purchase and disposal of subsidiaries
(Increase)/decrease in trade receivables
(Increase)/decrease in prepayments
(Increase)/decrease in inventories
8,081
4,329
254
(Increase)/decrease in deferred taxes receivable
1,059
Increase/(decrease) in trade payables and accruals
(6,860)
2,564
(2,386)
4,919
(1,712)
969
Increase/(decrease) in deferred income
(606)
(915)
Increase/(decrease) in income taxes payable
18
(868)
Increase/(decrease) in deferred taxes payable
-
-
Increase/(decrease) in provisions
(4,725)
3,892
Cash flow from operating activities
(13,338)
(3,597)
53
I N C E NTI A PAY LT D A N D CO N TR O L L E D E NTITI E S
NOTE S TO TH E FINANCIAL STATE M E NTS FOR TH E YEAR E N DE D 30 J U N E 2 01 9
RECONCILIATION OF LIABILITIES ARISING FROM CASH FLOWS FROM FINANCING ACTIVITIES
FY2018
BORROW
REPAYMENT
$’000
$’000
$’000
INTEREST
PAID
$’000
INTEREST
EXPENSES
$’000
FY2019
$’000
Credit line facility
Lease incentive loan*
Bank term loan
Total
-
-
-
-
4,029
606
-
-
4,000
(4,000)
8,635
(4,000)
-
-
(46)
(46)
-
-
46
46
4,029
606
-
4,635
* The lease incentive loan carries no interest component. If there is no default, the loan reduces by 20 per cent
each year until the balance is zero at the end of the lease.
N OTE 8 | TR A D E A N D OT H E R R E C E I VA B L E S
ACCO U N TI N G P O L I C Y
Trade and other receivables include amounts due from customers for goods sold and services performed in the
ordinary course of business. Receivables expected to be collected within 12 months of the end of the reporting
period are classified as current assets. All other receivables are classified as non-current assets.
Trade and other receivables are initially recognised at fair value, less any provision for loss allowance.
CONSOLIDATED GROUP
FY2019
$’000
FY2018
$’000
Current
Trade receivables
Provision for loss allowance
Net trade receivables
Other receivables
2,495
(580)
1,915
813
Total current trade and other receivables
2,728
Non-current
Other receivables
Total non-current trade and other receivables
-
-
9,150
(2,287)
6,863
2,812
9,675
141
141
SECTION 7 | FINANCIAL STATEMENTS
54
I N C E NTI A PAY LT D A N D CO N TR O L L E D E NTITI E S
NOTE S TO TH E FINANCIAL STATE M E NTS FOR TH E YEAR E N DE D 30 J U N E 2 01 9
Movement in the provision for loss allowance of receivables is as follows:
OPENING
BALANCE
1 JULY 18
$’000
RECLASSIFIED
AS HELD FOR
SALE FOR YEAR
$’000
CHARGE
FOR THE
YEAR
$’000
AMOUNTS
WRITTEN
OFF
$’000
CLOSING
BALANCE
30 JUNE 19
$’000
Current trade receivables
(2,287)
Total
(2,287)
1,954
1,954
(522)
(522)
275
275
(580)
(580)
OPENING
BALANCE
1 JULY 17
$’000
RECLASSIFIED
AS HELD FOR
SALE FOR YEAR
$’000
CHARGE
FOR THE
YEAR
$’000
AMOUNTS
WRITTEN
OFF
$’000
CLOSING
BALANCE
30 JUNE 18
$’000
Current trade receivables
(4,285)
Total
(4,285)
-
-
(301)
(301)
2,299
(2,287)
2,299
(2,287)
The Group impairs the value of individual trade debtors based on an assessment of the credit quality of the
customer, the previous trading pattern of the customer and management’s assessment of the likely recovery.
All trade debtors which are not likely to be recovered are either written off or an impairment for expected credit
losses is recognised. No credit risk is expected in respect of recoverables which are not written off or provided
against. The remainder of receivables, after credit losses, are considered to be of high credit quality.
The Group uses a “roll rate” method to calculate expected credit losses for trade receivables from individual
customers that is made up of a variable mix of number and size of balances. Loss rates are calculated based
on the probability of receivables progressing through successive stages of delinquency to write off. Roll rates
are calculated using an analysis of how balances change from one month to next until they reach 90 days. Data
over the last 12 months was reviewed to determine the level of recovery of those receivables older than 90 days.
Combining these two measurements provided the Group with the ability to determine the loss allowance as at
30 June.
REPORT CATEGORY
DAYS
ADJUSTED
LOSS RATE
Current
Past due 1-30
Past due 31-60
Past due 61-90
Past due 90-120
0-30
31-60
61-90
91-120
121-150
Greater than 120 days overdue
Greater than 150
%
8
24
16
12
49
53
RECEIVABLES
BALANCE
AS AT
30 JUNE 2019
$’000
LOSS
ALLOWANCE
AT
30 JUNE 2019
$’000
1,342
333
264
23
103
430
111
79
43
3
51
293
580
Total
2,495
55
I N C E NTI A PAY LT D A N D CO N TR O L L E D E NTITI E S
NOTE S TO TH E FINANCIAL STATE M E NTS FOR TH E YEAR E N DE D 30 J U N E 2 01 9
C R E D IT R I S K
The Group has no significant concentration of credit risk with respect to any single counterparty or group of
counterparties other than those receivables specifically impaired and mentioned within note 8. The class of assets
described as “trade and other receivables” is considered to be the main source of credit risk related to the Group.
No collateral is held in respect of these exposures and there are no other credit enhancement arrangements. All trade
receivables have been investigated and, other than those which have been written off or for which credit losses have
been recognised, there are no indicators of poor credit quality for trade receivables.
CONSOLIDATED GROUP
FY2019
$’000
FY2018
$’000
Gross amount
Impaired (past due)
Net trade receivables
Within initial trade terms
Past due not impaired - 30 days
60 days
90 days
90 days +
2,495
(580)
1,915
1,231
254
221
20
189
Total
1,915
9,150
(2,287)
6,863
2,653
396
555
63
3,196
6,863
G E O G R A P H I C A L C R E D IT R I S K
The Group has significant operations in Australia and New Zealand. The Group’s exposure to credit risk for trade
and other receivables at the end of the reporting period in these regions was as follows:
CONSOLIDATED GROUP
FY2019
$’000
FY2018
$’000
Australia
1,856
New Zealand
59
Total
1,915
6,645
218
6,863
SECTION 7 | FINANCIAL STATEMENTS
56
I N C E NTI A PAY LT D A N D CO N TR O L L E D E NTITI E S
NOTE S TO TH E FINANCIAL STATE M E NTS FOR TH E YEAR E N DE D 30 J U N E 2 01 9
N OTE 9 | I N V E NTO R I E S
ACCO U N TI N G P O L I C Y
Inventories represent gift cards. These assets are valued at the lower of cost and net realisable value.
CONSOLIDATED GROUP
FY2019
$’000
FY2018
$’000
Gift cards held for sale
Total inventories
96
96
350
350
N OTE 1 0 | OT H E R A S S E T S
ACCO U N TI N G P O L I C Y
Other assets relate to prepaid sales commissions paid for the sale of memberships and costs incurred for the
development of the following year’s membership package, see note 3, and short-term investments that relate to
security deposits for leased premises.
CONSOLIDATED GROUP
FY2019
$’000
FY2018
$’000
Current
Short-term investments
Current loans receivable
Prepayments
391
-
198
Production prepayments
7,264
Total other assets
7,853
1,267
1,598
763
8,558
12,186
PRODUCTION
PREPAYMENT
$’000
Year ended 30 June 2018
Balance as at 1 July 2017
8,520
Prepayments
9,371
Amortisation
(9,333)
Balance as at 30 June 2018
8,558
57
I N C E NTI A PAY LT D A N D CO N TR O L L E D E NTITI E S
NOTE S TO TH E FINANCIAL STATE M E NTS FOR TH E YEAR E N DE D 30 J U N E 2 01 9
Year ended 30 June 2019
Balance as at 1 July 2018
Prepayments
8,558
7,742
Amortisation
(9,036)
Balance as at 30 June 2019
7,264
Production prepayments relate to contract assets under AASB 15, being incremental cost of obtaining contracts
with customers.
N OTE 1 1 | P R O P E R T Y, P L A NT A N D E Q U I P M E NT
ACCO U N TI N G P O L I C Y
Each class of property, plant and equipment is carried at cost or fair value (as indicated) less, where applicable, any
accumulated depreciation and impairment losses.
P L A N T A N D E Q U I P M E N T
Plant and equipment are measured on the cost basis and therefore carried at cost less accumulated depreciation and
any accumulated impairment. In the event the carrying amount of plant and equipment is greater than the estimated
recoverable amount, the carrying amount is written down immediately to the estimated recoverable amount and
impairment losses are recognised either in profit or loss or as a revaluation decrease if the impairment losses relate to
a revalued asset. A formal assessment of recoverable amount is made when impairment indicators are present.
The carrying amount of plant and equipment is reviewed annually by Directors to ensure it is not in excess of the
recoverable amount from these assets. The recoverable amount is assessed on the basis of the expected net cash
flows that will be received from the asset’s employment and subsequent disposal. Where material, the expected net
cash flows are discounted to their present values in determining recoverable amounts.
The cost of fixed assets constructed within the consolidated Group includes the cost of materials, direct labour,
borrowing costs and an appropriate proportion of fixed and variable overheads.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only
when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the
item can be measured reliably. All other repairs and maintenance are recognised as expenses in profit or loss during
the financial period in which they are incurred.
D E P R E C I ATI O N
The depreciable amount of all fixed assets including buildings and capitalised lease assets, but excluding freehold
land, is depreciated on a straight-line basis over the asset’s useful life to the consolidated Group. Useful life is
taken to commence from the time the asset is held ready for use. Leasehold improvements are depreciated over
the shorter of either the unexpired period of the lease or the estimated useful lives of the improvements.
CLASS OF FIXED ASSET
ESTIMATED USEFUL LIFE
Leasehold improvements
10 - 40 years
Plant and equipment
Leased plant and equipment
3 - 5 years
3 - 5 years
SECTION 7 | FINANCIAL STATEMENTS
58
I N C E NTI A PAY LT D A N D CO N TR O L L E D E NTITI E S
NOTE S TO TH E FINANCIAL STATE M E NTS FOR TH E YEAR E N DE D 30 J U N E 2 01 9
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting
period.
An asset’s carrying amount is written down immediately to its recoverable amount if its carrying amount is
greater than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains and
losses are recognised in profit or loss in the period in which they arise. When revalued assets are sold, amounts
included in the revaluation surplus relating to that asset are transferred to retained earnings.
L E A S E S
Leases of fixed assets, where substantially all the risks and benefits incidental to the ownership of the asset – but
not the legal ownership are transferred to entities in the consolidated Group, are classified as finance leases.
Finance leases are capitalised by recognising an asset and a liability at the lower of the fair value of the leased
property or the present value of the minimum lease payments, including any guaranteed residual values. Lease
payments are allocated between the reduction of the lease liability and the lease interest expense for the period.
Leased assets are depreciated on a straight-line basis over the shorter of their estimated useful lives or the lease term.
Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are
recognised as expenses in the periods in which they are incurred.
Lease incentives under operating leases are recognised as a liability and amortised on a straight-line basis over
the lease term.
CONSOLIDATED GROUP
FY2019
$’000
FY2018
$’000
Plant and equipment
At cost
Accumulated depreciation
Net book value
Leasehold improvements
At cost
Accumulated depreciation
Net book value
Leased plant and equipment
At cost
Accumulated depreciation
Net book value
806
(490)
316
2,970
(903)
2,067
-
-
-
2,395
(1,262)
1,133
2,042
(977)
1,065
246
(78)
168
Total plant and equipment
2,383
2,366
59
I N C E NTI A PAY LT D A N D CO N TR O L L E D E NTITI E S
NOTE S TO TH E FINANCIAL STATE M E NTS FOR TH E YEAR E N DE D 30 J U N E 2 01 9
M OV E M E N T S I N C A R RY I N G A M O U N T S
Movements in the carrying amounts for each class of property, plant and equipment between the beginning and
the end of the current financial year are set out below.
CONSOLIDATED GROUP
PLANT
AND
EQUIPMENT
LEASEHOLD
IMPROVEMENTS
LEASED
PLANT AND
EQUIPMENT
TOTAL
$’000
$’000
$’000
$’000
Balance as at 1 July 2017
Additions
Disposals
Transfers
Addition through business combinations
1,676
197
(109)
-
67
Depreciation expense
(698)
Balance as at 30 June 2018
1,133
Balance as at 1 July 2018
Additions
Disposals
Transfers
1,133
23
(125)
-
Reclassified as held for sale
(592)
Addition through business combinations
Depreciation expense
Balance as at 30 June 2019
-
(123)
316
1,464
67
-
-
56
(522)
1,065
1,065
1,050
(25)
584
(405)
-
(202)
2,067
155
75
-
-
-
(62)
168
168
-
(40)
-
(128)
-
-
-
3,295
339
(109)
-
123
(1,282)
2,366
2,366
1,073
(190)
584
(1,125)
-
(325)
2,383
N OTE 1 2 | I NTA N G I B LE A S S E T S
ACCO U N TI N G P O L I C Y
GOODWILL
Goodwill is carried at cost less any accumulated impairment losses. Goodwill is calculated as the excess of the
sum of the following items, over the acquisition date fair value of net identifiable assets acquired:
• the consideration transferred;
• any non-controlling interest (determined under either the full goodwill or proportionate interest method); and
• the acquisition date fair value of any previously held equity interest.
The acquisition date fair value of the consideration transferred for a business combination plus the acquisition date
fair value of any previously held equity interest shall form the cost of the investment in the financial statements.
SECTION 7 | FINANCIAL STATEMENTS
60
I N C E NTI A PAY LT D A N D CO N TR O L L E D E NTITI E S
NOTE S TO TH E FINANCIAL STATE M E NTS FOR TH E YEAR E N DE D 30 J U N E 2 01 9
Fair value re-measurements in any pre-existing equity holdings are recognised in the profit or loss in the period
in which they arise. Where changes in the value of such equity holdings had previously been recognised in other
comprehensive income, such amounts are recycled to profit or loss.
Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill is tested for impairment at least
annually and/or when other indicators of impairment exist and is allocated to the Group’s CGUs or groups of
CGUs (“CGUs”). These CGUs represent the lowest level at which goodwill is monitored but are not larger than an
operating segment. Gains and losses on the disposal of an entity include the carrying amount of goodwill of the
entity that has been sold. Changes in the ownership interests in a subsidiary that do not result in a loss of control
are accounted for as equity transactions and do not affect the carrying amounts of goodwill.
TECHNOLOGY, SOFTWARE AND DATABASE ASSETS
Technology and software assets acquired separately are capitalised at cost. Where the technology and software
asset has been acquired as part of a business acquisition, these assets are recognised at fair value as at the date
of acquisition.
The useful lives of these assets are then assessed to be either finite or indefinite. Assets with a finite life are
amortised over that life with the expense being recognised in the profit and loss. Expenditure on the development
of technology and software assets are capitalised until the software is ready for use and then amortised over their
expected useful life of 4 - 5 years (FY2018: 4 - 5 years).
These assets are tested for impairment at least annually as part of the value in use analysis associated with the
cash generating unit.
BRAND NAMES AND INTERNATIONAL RIGHTS
The brand names and international rights were acquired in a separate transaction. These assets are recognised
using the cost model, which requires an intangible asset to be recorded at cost less any accumulated
amortisation and any accumulated impairment losses.
These intangible assets have been assessed as having an indefinite useful life as neither brand names nor
international rights are subject to contractual or statutory time limits. There is no foreseeable limit to the period
over which the asset is expected to generate net cash inflows. As a result, no amortisation will be charged.
These assets are tested for impairment at least annually, either individually or within a CGU.
DEVELOPMENT COSTS
Development costs consist of costs incurred in designing, developing and contracting new territories. Recognition
of the development costs only occurs when feasibility studies confirm that franchise proliferation is expected
to deliver future economic benefits, these benefits can be measured reliably and there are adequate resources
available to complete the development. The development costs are amortised over their useful life starting from
the time the development of a territory is complete. The franchise agreements are for a term of 10 years and this
will be used as the useful life for the purposes of amortisation.
IMPAIRMENT OF ASSETS
At the end of each reporting period, the Group assesses whether there is any indication that an asset may be
impaired. The assessment will include the consideration of external and internal sources of information including
dividends received from subsidiaries, associates or jointly controlled entities deemed to be out of pre-acquisition
profits. If such an indication exists, an impairment test is carried out on the asset by comparing the recoverable
amount of the asset, being the higher of the asset’s fair value less costs to sell and value in use, to the asset’s
carrying amount. Any excess of the asset’s carrying amount over its recoverable amount is recognised
immediately in profit or loss, unless the asset is carried at a revalued amount in accordance with another
61
I N C E NTI A PAY LT D A N D CO N TR O L L E D E NTITI E S
NOTE S TO TH E FINANCIAL STATE M E NTS FOR TH E YEAR E N DE D 30 J U N E 2 01 9
Standard (e.g. in accordance with the revaluation model in AASB 116: Property, Plant and Equipment). Any
impairment loss of a revalued asset is treated as a revaluation decrease in accordance with that other Standard.
Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the
recoverable amount of the CGU to which the asset belongs.
Impairment testing is performed at least annually for goodwill, intangible assets with indefinite lives and
intangible assets not yet available for use.
CONSOLIDATED GROUP
FY2019
$’000
FY2018
$’000
Goodwill
Cost
31,199
56,310
Accumulated impairment losses
(17,503)
(26,969)
Net book value
13,696
29,341
Technology and Software
Cost
9,127
Accumulated amortisation and impairment losses
(4,068)
Net book value
5,059
Purchased brand names and international rights
Cost
3,000
Accumulated impairment losses
-
Net book value
3,000
Development costs
Cost
Accumulated impairment losses
Net book value
Other intangibles
Cost
Accumulated amortisation
Net book value
-
-
-
752
-
752
22,625
(8,037)
14,588
6,610
(2,951)
3,659
6,792
(6,792)
-
1,729
(37)
1,692
Total intangibles
22,507
49,280
SECTION 7 | FINANCIAL STATEMENTS
62
I N C E NTI A PAY LT D A N D CO N TR O L L E D E NTITI E S
NOTE S TO TH E FINANCIAL STATE M E NTS FOR TH E YEAR E N DE D 30 J U N E 2 01 9
GOODWILL
$’000
TECHNOLOGY
AND
SOFTWARE
RESTATED^
$’000
BRAND NAME &
INTERNATIONAL
RIGHTS
DEVELOPMENT
COSTS
OTHER
INTANGIBLES
RESTATED^
TOTAL
$’000
$’000
$’000
$’000
Balance as at 1 July 2017
52,425
Additions
Acquisition of franchises
Disposals
-
93
-
Additions through
business combinations
3,792
13,585
4,809
-
(335)
2,971
Amortisation charge
-
(4,737)
6,610
-
-
-
-
-
5,355
1,164
-
-
-
-
-
77,975
37
6,010
-
-
93
(335)
1,692
8,455
(37)
(4,774)
Impairment
(26,969)
(1,705)
(2,951)
(6,519)
-
(38,144)
Balance
as at 30 June 2018
29,341
14,588
3,659
Balance as at 1 July 2018
29,341
14,588
3,659
Measurement period
adjustment^
1,858
(2,317)
Balance as at 1 July 2018
31,199
Additions
-
12,271
1,877
Disposals*
(2,950)
(7,399)
Amortisation charge
-
(1,690)
Impairment
(14,553)
-
-
3,659
-
(659)
-
-
Balance
as at 30 June 2019
13,696
5,059
3,000
^See note 22(c).
*See note 23.
-
-
-
-
-
-
-
-
-
1,692
49,280
1,692
49,280
459
-
2,151
49,280
-
1,877
(1,399)
(12,407)
-
(1,690)
-
(14,553)
752
22,507
At 30 June 2019, the market capitalisation of the Group was below the carrying value of the Group’s net assets.
Under the requirements of Australian Accounting Standards, this is a trigger event for assessing whether the
carrying value of the Group’s goodwill and other non-current assets may be impaired.
In line with this requirement, the recoverable amount of the CGU was determined based on a value-in-use
calculation, covering a detailed five-year forecast, followed by an expected cash flow for the unit’s remaining
useful life using the growth rates determined by management. Where appropriate the value of any proposed sale
of CGUs has been considered and the model includes a sensitivity analysis allowing for a range of growth rates.
63
I N C E NTI A PAY LT D A N D CO N TR O L L E D E NTITI E S
NOTE S TO TH E FINANCIAL STATE M E NTS FOR TH E YEAR E N DE D 30 J U N E 2 01 9
The following assumptions were used in the value-in-use calculations:
Year ended 30 June 2019
2020 - 2024
Entertainment
Publications
Year ended 30 June 2018
GROWTH RATES
2020 - 2024
GROWTH RATES
2024 ONWARD
DISCOUNT RATE/WEIGHTED
AVERAGE COST OF CAPITAL
2%
2%
11%
2019- 2021
GROWTH RATES
2019-2020
GROWTH RATES
2021 ONWARD
DISCOUNT RATE/WEIGHTED
AVERAGE COST OF CAPITAL
Bartercard
(7.0%) to (5.0%)
2.5%
Entertainment
Publications
5.0%
FY2021 at 5.0%
FY2022 onward at 2.5%
14.5%
12.0%
Cash flows used in the value-in-use calculations are based on forecasts produced by management. The Directors
consider these forecasts to be conservative, as the growth rates are based on a proposed strategic repositioning
of the core operations of the business, focusing on long-term sustainability. Forecasts for 2020 take into account
expected strategic structural changes, which form the basis for forecast profitability from 2021 onwards. Costs
have been adjusted to take into account growth assumptions and inflation expectations appropriate to the
locations in which the Group operates.
The key assumptions to which the model is most sensitive include:
• Forecast revenue and expenditure (based on the proposed transformation program); and
• The discount rate of 11 per cent (post tax).
As at 30 June 2019 the estimated recoverable amounts determined using the method outlined above were found
to be less than the carrying value of the net assets of the CGU and accordingly, an impairment adjustment was
required.
Following the impairment loss recognised in the Group’s CGU, the recoverable amount was equal to the carrying
amount, therefore, any adverse movement in a key assumption would lead to further impairment.
SECTION 7 | FINANCIAL STATEMENTS
64
I N C E NTI A PAY LT D A N D CO N TR O L L E D E NTITI E S
NOTE S TO TH E FINANCIAL STATE M E NTS FOR TH E YEAR E N DE D 30 J U N E 2 01 9
N OTE 1 3 | TR A D E A N D OTH E R PAYA B L E S
ACCO U N TI N G P O L I C Y
Trade and other payables represent the liabilities for goods and services received by the entity that remain
unpaid at the end of the reporting period. The balance is recognised as a current liability with the amounts
normally paid within 60 days of recognition of the liability. The non-current part of payables are amounts not
expected to be settled within the next 12 months.
Current
Unsecured liabilities
Trade payables
Sundry payables and accruals
Total current unsecured liabilities
Non-current
Unsecured liabilities
Sundry payables and accruals
Total non-current unsecured liabilities
CONSOLIDATED GROUP
FY2019
$’000
FY2018
$’000
2,172
3,769
5,941
-
-
6,169
5,780
11,949
851
851
N OTE 1 4 | B O R R OW I N G S
ACCO U N TI N G P O L I C Y
NON-DERIVATIVE
Non-derivative loans and borrowings are financial liabilities with fixed or determinable payments that are not
quoted in an active market and are subsequently measured at amortised cost using the effective interest rate
method. Gains or losses are recognised in profit or loss through the amortisation process and when the financial
liability is derecognised.
Amortised cost is calculated as the amount at which the financial liability is measured at initial recognition less
principal repayments, and adjusted for any cumulative amortisation of the difference between that initial amount
and the maturity amount calculated using the effective interest method.
The effective interest method is used to allocate interest income or interest expense over the relevant period
and is equivalent to the rate that exactly discounts estimated future cash payments or receipts (including fees,
transaction costs and other premiums or discounts) through the expected life (or when this cannot be reliably
predicted, the contractual term) of the financial instrument to the net carrying amount of the financial asset
or financial liability. Revisions to expected future net cash flows will necessitate an adjustment to the carrying
amount with a consequential recognition of an income or expense item in profit or loss.
65
I N C E NTI A PAY LT D A N D CO N TR O L L E D E NTITI E S
NOTE S TO TH E FINANCIAL STATE M E NTS FOR TH E YEAR E N DE D 30 J U N E 2 01 9
CONSOLIDATED GROUP
FY2019
$’000
FY2018
$’000
Current
Unsecured liabilities
Lease incentive loan
140
Line of credit facility
4,029
Total current borrowings
4,169
Non-current
Unsecured liabilities
Lease incentive loan
Total non-current borrowings
466
466
Total borrowings
4,635
-
-
-
-
-
-
During the first half of the year, the Group drew down $2.7 million of its $3.0 million overdraft facility and
borrowed an additional $4.0 million to facilitate existing operations from its bank. The two facilities were fully
repaid during the second half of the year from the share placement in February 2019 and supported by the new
line of credit facility extended by a major shareholder.
SECTION 7 | FINANCIAL STATEMENTS
66
I N C E NTI A PAY LT D A N D CO N TR O L L E D E NTITI E S
NOTE S TO TH E FINANCIAL STATE M E NTS FOR TH E YEAR E N DE D 30 J U N E 2 01 9
Line of credit facility
A major shareholder has provided a $4.0 million line of credit facility to the Group. During the period the Group
drew down $4.0 million of the line of credit facility on 9 August 2019. The term of this loan was extended to
30 September 2020. See note 30 for further details of the facility.
Lease incentive loan
As part of the new lease agreement for the new office in Sydney, the landlord has financed the new fitout with
a lease incentive loan. The loan carries no interest component. If there is no default, the loan reduces by 20 per
cent each year until the balance is zero at the end of the lease.
N OTE 1 5 | V E N D O R LOA N
CONSOLIDATED GROUP
FY2019
$’000
FY2018
$’000
Current
Vendor loan
Total vendor loan
-
-
800
800
N OTE 1 6 | D E F E R R E D R E V E N U E
ACCO U N TI N G P O L I C Y
Deferred revenue constitutes contract liabilities under AASB 15, as it relates to performance obligations to the
members of Entertainment Publications not yet satisfied, see note 2.
CONSOLIDATED GROUP
FY2019
$’000
FY2018
$’000
Current
Deferred revenue
21,394
Total deferred revenue
21,394
22,001
22,001
67
I N C E NTI A PAY LT D A N D CO N TR O L L E D E NTITI E S
NOTE S TO TH E FINANCIAL STATE M E NTS FOR TH E YEAR E N DE D 30 J U N E 2 01 9
DEFERRED
REVENUE
$’000
Year ended 30 June 2018
Balance as at 1 July 2017
21,671
Revenue deferred
31,776
Revenue recognised
(31,446)
Balance as at 30 June 2018
22,001
Year ended 30 June 2019
Balance as at 1 July 2018
22,001
Revenue deferred
36,758
Revenue recognised
(37,365)
Balance as at 30 June 2019
21,394
N OTE 1 7 | P R OV I S I O N S
ACCO U N TI N G P O L I C Y
Provisions are recognised when the Group has a legal or constructive obligation, as a result of past events, for
which it is probable that an outflow of economic benefits will result and that outflow can be reliably measured.
Provisions are measured using the best estimate of the amounts required to settle the obligation at the end of the
reporting period.
SECTION 7 | FINANCIAL STATEMENTS
68
I N C E NTI A PAY LT D A N D CO N TR O L L E D E NTITI E S
NOTE S TO TH E FINANCIAL STATE M E NTS FOR TH E YEAR E N DE D 30 J U N E 2 01 9
EMPLOYEE BENEFITS
Short-term employee benefits
Provision is made for the Group’s obligation for short-term employee benefits. Short-term employee benefits are
benefits (other than termination benefits) that are expected to be settled within 12 months after the end of the
annual reporting period in which the employees render the related service. These benefits include wages, salaries
and sick leave. Short-term employee benefits are measured at the (undiscounted) amounts expected to be paid
when the obligation is settled.
The Group’s obligations for short-term employee benefits are recognised as a part of current trade and other
payables in the Statement of Financial Position. The Group’s obligations for employees’ annual leave and long
service leave entitlements are recognised as provisions in the Statement of Financial Position.
Other long-term employee benefits
Provision is made for employees’ long service leave and annual leave entitlements not expected to be settled
within 12 months after the end of the annual reporting period in which the employees render the related service.
Other long-term employee benefits are measured at the present value of the expected future payments to be
made to employees. Expected future payments incorporate anticipated future wage and salary levels, durations
of service and employee departures and are discounted at rates determined by reference to market yields at
the end of the reporting period on corporate bonds that have maturity dates that approximate the terms of
the obligations. Any re-measurements for changes in assumptions of obligations for other long-term employee
benefits are recognised in profit or loss in the periods in which the changes occur.
The Group’s obligations for long-term employee benefits are presented as non-current provisions in its Statement
of Financial Position, except where the Group does not have an unconditional right to defer settlement for at least
12 months after the end of the reporting period. In this case the obligations are presented as current provisions.
Retirement benefit contributions
All employees of the Australian entities and the majority of employees of foreign subsidiaries in the Group receive
defined contribution superannuation entitlements, for which the Group pays a fixed superannuation contribution
based on a percentage of the employee’s ordinary salary. All contributions in respect of employees’ defined
contribution entitlements are recognised as an expense when they become payable. The Group’s obligation with
respect to employees’ defined contribution entitlements is limited to its obligation for any unpaid superannuation
contributions at the end of the reporting period. All obligations for unpaid superannuation contributions are
measured at the (undiscounted) amounts expected to be paid when the obligation is settled and are presented as
current liabilities in the Group’s Statement of Financial Position.
ONEROUS LEASE PROVISION
The Group currently has leases for office space in various towns and cities across Australia and New Zealand.
As a result of recent decisions made by the Board to streamline the operations of the business, certain leases
have become surplus to requirements. For those locations the Group will vacate the premises and attempt
to sublease the space. These leases have been determined to be onerous at the time the Group vacates the
premises, and the provision has been calculated based on the present value of contracted obligations net of
expected rental income.
RESTRUCTURING PROVISION
In December 2017 IncentiaPay Ltd announced a restructure program in respect of geographical presence and the
employee cost base. As at 31 December, a provision was raised for $4.5 million, being for employee entitlements
and occupancy costs. The Company spent $1.9 million of the provision during the six-month period ended
30 June 2018 and the remaining balance of $2.6 million was utilised during the year.
69
I N C E NTI A PAY LT D A N D CO N TR O L L E D E NTITI E S
NOTE S TO TH E FINANCIAL STATE M E NTS FOR TH E YEAR E N DE D 30 J U N E 2 01 9
CONSOLIDATED GROUP
EMPLOYEE
BENEFITS
RESTRUCTURING
PROVISION
$’000
$’000
ONEROUS
LEASE
PROVISION
$’000
TOTAL
$’000
Year ended 30 June 2018
Balance as at 1 July 2017
Additional provisions
2,882
1,292
Balance as at 30 June 2018
4,174
-
2,600
2,600
Year ended 30 June 2019
Balance as at 1 July 2018
4,174
2,600
Utilised
-
(2,600)
(Released)/additional provisions
(1,506)
Disposals
(1,253)
Balance as at 30 June 2019
1,415
-
-
-
-
-
-
-
-
635
-
635
2,882
3,892
6,774
6,774
( 2,600)
(871)
( 1,253)
2,050
CONSOLIDATED GROUP
FY2019
$’000
FY2018
$’000
Analysis of total provisions
Current
Employee benefits
Restructuring provision
Onerous lease provision
Total current provisions
Non-current
Employee benefits
Total non-current provisions
1,198
-
635
1,833
217
217
Total provisions
2,050
3,043
2,600
-
5,643
1,131
1,131
6,774
SECTION 7 | FINANCIAL STATEMENTS
70
I N C E NTI A PAY LT D A N D CO N TR O L L E D E NTITI E S
NOTE S TO TH E FINANCIAL STATE M E NTS FOR TH E YEAR E N DE D 30 J U N E 2 01 9
N OTE 1 8 | I S S U E D C A P ITA L
CONSOLIDATED GROUP
FY2019
SHARES
FY2018
SHARES
FY2019
$’000
FY2018
$’000
Ordinary shares
- fully paid on issue
242,608,274
228,193,274
96,006
94,892
IncentiaPay Ltd has no limit to its authorised share capital.
Movements in
ordinary share capital
DATE
NUMBER
OF SHARES
ISSUE PRICE
$
$’000
Ordinary shares
at beginning of the year
Issues during the year:
19 September 2017
19 September 2017
91,327,771
275,000
620,000
27 November 2017
21,818,000
15 December 2017
4,446,323
2 March 2018
78,991,895
5 April 2018
5,714,285
-
1.00
0.77
0.45
0.45
0.28
0.28
11 May 2018
25,000,000
0.28
Less, costs of issues
Tax related costs of issues
-
-
-
-
Balance as at 30 June 2018
228,193,274
54,554
275
477
9,818
2,001
22,118
-
7,000
(2,041)
690
94,892
Ordinary shares
at beginning of the year
228,193,274
-
94,892
Issues during the year:
28 February 2019
14,415,000
Less, costs of issues
-
Balance as at 30 June 2019
242,608,274
0.08
-
1,155
(41)
96,006
Ordinary shares participate in dividends and the proceeds on winding-up of the Parent Entity in proportion to the
number of shares held. Shares have no par value.
At shareholders’ meetings each ordinary share is entitled to one vote when a poll is called, otherwise each
shareholder has one vote on a show of hands.
The entity manages its capital to ensure that it maximises the returns to shareholders as dividends and in capital
value, whilst maintaining sufficient equity to ensure the Company can meet its business development objectives
and continue as a going concern. The Group only has ordinary shares on issue and is not subject to any externally
imposed capital requirements.
Capital is also managed having regard to the Group’s long-term growth requirements.
71
I N C E NTI A PAY LT D A N D CO N TR O L L E D E NTITI E S
NOTE S TO TH E FINANCIAL STATE M E NTS FOR TH E YEAR E N DE D 30 J U N E 2 01 9
PERFORMANCE RIGHTS
Movements
in performance rights
Performance rights at
beginning of the year
DATE
NUMBER OF
PERFORMANCE
RIGHTS
ISSUED PRICE
$
$’000
Issued to staff
23 May 2017
2,072,000
0.875
1,813,000
Balance
as at 30 June 2018
Performance rights at
beginning of the year
Balance
as at 30 June 2019
2,072,000
1,813,000
2,072,000
0.875
1,813,000
2,072,000
1,813,000
Performance rights were issued to management and employees of Entertainment Publications entities in May 2017.
SECTION 7 | FINANCIAL STATEMENTS
72
I N C E NTI A PAY LT D A N D CO N TR O L L E D E NTITI E S
NOTE S TO TH E FINANCIAL STATE M E NTS FOR TH E YEAR E N DE D 30 J U N E 2 01 9
N OTE 1 9 | R E S E RV E S
ACCO U N TI N G P O L I C Y
SHARE-BASED PAYMENTS
The fair value of unissued ordinary shares granted is recognised as a benefit expense with a corresponding
increase in equity. The fair value is measured at grant date and recognised over the period during which the
recipients become unconditionally entitled to the equity based incentive.
Upon the issue of shares, the balance of the share-based payments reserve relating to those right is transferred
to share capital.
FOREIGN CURRENCY TRANSLATION
Exchange differences arising on translation of the foreign controlled entity are recognised in other
comprehensive income as a foreign currency translation reserve. The cumulative amount is reclassified to profit
or loss when the net investment is disposed.
CONSOLIDATED GROUP
SHARE-BASED
PAYMENTS
RESERVE
$’000
FOREIGN
CURRENCY
TRANSLATION
RESERVE
$’000
TOTAL
$’000
Year ended 30 June 2018
Balance as at 1 July 2017
-
(668)
(668)
Amortised during the period
Movement during the period
Balance as at 30 June 2018
Year ended 30 June 2019
Balance as at 1 July 2018
Amortised during the period
660
-
660
660
452
Unvested during the period
(382)
Movement during the period
Balance as at 30 June 2019
-
730
-
883
215
215
-
-
191
406
660
883
875
875
452
(382)
191
1,136
The shares issued on 5 April 2018 related to Loan Funded Share arrangements with the CEO and COO/CFO. These
shares are subject to various restrictions, as set out further in the Company’s Remuneration report. The departure of
key personnel to which the Loan Funded Shares relate has and will result in these shares not vesting. The portion of the
share-based-payments reserve relating to these shares has been reversed to reflect this.
73
I N C E NTI A PAY LT D A N D CO N TR O L L E D E NTITI E S
NOTE S TO TH E FINANCIAL STATE M E NTS FOR TH E YEAR E N DE D 30 J U N E 2 01 9
N OTE 2 0 | K E Y M A N AG E M E NT P E R S O N N E L CO M P E N SATI O N
Refer to the Remuneration report in Section 5 of this Annual Report for details of the remuneration paid or
payable to each member of the Group’s Key Management Personnel (KMP) for the year ended 30 June 2019.
The total remuneration paid to KMP of the Group during the year was as follows:
CONSOLIDATED GROUP
FY2019
$’000
FY2018
$’000
Short-term employee benefits
1,835
2,170
Post-employment benefits
Long-term benefits
Share-based payments
164
300
20
128
735
150
Total KMP compensation
2,319
3,183
N OT E 2 1 | AU D ITO R ’ S R E M U N E R ATI O N
CONSOLIDATED GROUP
FY2019
$’000
FY2018
$’000
Auditing or reviewing the financial statements
306
Taxation services - compliance
Other services
57
17
Total
380
306
103
267
676
SECTION 7 | FINANCIAL STATEMENTS
74
I N C E NTI A PAY LT D A N D CO N TR O L L E D E NTITI E S
NOTE S TO TH E FINANCIAL STATE M E NTS FOR TH E YEAR E N DE D 30 J U N E 2 01 9
N OTE 2 2 | I NTE R E S T S I N S U B S I D I A R I E S A N D B U S I N E S S CO M B I N ATI O N S
The Subsidiaries listed below have share capital consisting solely of ordinary shares which are held directly by the
Group. The proportion of ownership interests held equals the voting rights held by the Group. Each Subsidiary’s
principal place of business also reflects its country of incorporation.
Name of Entity
Principal Place
of Business
FY2019
FY2018
%
%
OWNERSHIP INTEREST
a) Information about Principal Subsidiaries
Bucqi Australia Pty Ltd
Australia
Bartercard Group Pty Ltd
Australia
Bartercard Services Pty Ltd
Australia
Bartercard Operations UK Ltd
United Kingdom
Bartercard Operations NZ Ltd
New Zealand
Bartercard Operations AUS Pty Ltd
Australia
Bartercard New Zealand GP Ltd
New Zealand
Bartercard New Zealand LP
New Zealand
Trade Exchange Software Services Pty Ltd
Australia
BPS Financial Ltd
Australia
Tindalls Dream Ltd
New Zealand
Valeo Corporation Ltd
New Zealand
Entertainment Publications of Australia Pty Ltd
Australia
Entertainment Publications Ltd
New Zealand
Gruden Pty Ltd
Australia
MobileDEN Pty Ltd
Australia
Blackglass Pty Ltd
Australia
b) Information about associated entity
Now Book It Pty Ltd*
Australia
-
-
-
-
-
-
-
-
-
-
-
-
100
100
-
100
-
-
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
33
Subsidiary financial statements used in the preparation of these consolidated financial statements have also been
prepared as at the same reporting date as the Group’s financial statements, using the same accounting policies. There
are no significant restrictions over the Group’s ability to access or use the assets and settle liabilities of the Group.
*The Group divested 33 per cent interest in Now Book It Pty Ltd for a consideration of $0.6 million during the year,
this is part of the plan to move to a single operating division – Entertainment.
75
I N C E NTI A PAY LT D A N D CO N TR O L L E D E NTITI E S
NOTE S TO TH E FINANCIAL STATE M E NTS FOR TH E YEAR E N DE D 30 J U N E 2 01 9
C ) B U S I N E S S CO M B I N ATI O N S
ACCO U N TI N G P O L I C Y
BUSINESS COMBINATIONS
Business combinations occur where an acquirer obtains control over one or more businesses.
A business combination is accounted for by applying the acquisition method, unless it is a combination involving
entities or businesses under common control. The business combination will be accounted for from the date that
control is attained, the fair value of the identifiable assets acquired and liabilities (including contingent liabilities)
assumed is recognised.
When measuring the consideration transferred in the business combination, any asset or liability resulting
from a contingent consideration arrangement is also included. Subsequent to initial recognition, contingent
consideration classified as equity is not re-measured and its subsequent settlement is accounted for within
equity. Contingent consideration classified as an asset or liability is re-measured in each reporting period to
fair value, recognising any change to fair value in profit or loss, unless the change in value can be identified as
existing at acquisition date.
All transaction costs incurred in relation to business combinations, other than those associated with the issue of a
financial instrument, are recognised as expenses in profit or loss when incurred.
The acquisition of a business may result in the recognition of goodwill or a gain from a bargain purchase.
ACQUISITION OF GRUDEN
On 14 May 2018, the Group acquired 100 per cent of the equity instruments of three wholly owned subsidiaries of
Gruden Group Limited, the subsidiaries are Gruden Pty Ltd, MobileDEN Pty Ltd and Blackglass Pty Ltd, thereby
obtaining control.
The acquisition was made to enhance the Group’s commitment to becoming Asia Pacific’s leading integrated
loyalty and payment solutions provider, enabling merchants to attract and engage consumers across multiple
platforms.
The fair value of the acquired intangible assets (patented technology and customer relationships) were presented
as provisional in the 30 June 2018 financial statements.
During the year ended 30 June 2019, the Group engaged an independent valuer to complete an assessment
over the identifiable intangible assets acquired as part of these acquisitions, using industry adopted valuation
techniques. Determining the fair value of acquired intangible assets involved developing estimates and
assumptions consistent with how market participants would price the identified assets. Where possible,
assumptions were based on observable or benchmark data. The intangible assets are presented in note 12.
As a result of the above independent valuation, the fair value of the acquired intangible assets have been restated
and are presented in the tables following.
Included in these restated amounts is also an adjustment to remove inter-company loan balances that should
not have been disclosed in the original purchase price allocation. We note that these inter-company assets
and liabilities fully eliminated on consolidation and therefore were correctly excluded from the consolidated
Statement of Financial Position in the prior year.
See note 23 as Gruden Pty Ltd and Blackglass Pty Ltd were divested during the year.
The details of the business combinations were finalised and are presented in the following tables.
SECTION 7 | FINANCIAL STATEMENTS
76
I N C E NTI A PAY LT D A N D CO N TR O L L E D E NTITI E S
NOTE S TO TH E FINANCIAL STATE M E NTS FOR TH E YEAR E N DE D 30 J U N E 2 01 9
GRUDEN
PTY LTD
MOBILEDEN
PTY LTD
BLACKGLASS
PTY LTD
PROVISIONAL
FAIR VALUE
PROVISIONAL
FAIR VALUE
PROVISIONAL
FAIR VALUE
$’000
$’000
$’000
ADJUSTMENTS
TO PURCHASE
PRICE
ALLOCATION
$’000
RESTATED
FAIR VALUE
$’000
Recognised amounts of
identifiable net assets
Property, plant and
equipment
Intangible assets
Total non-current assets
Trade and other receivables
Cash and cash equivalents
Assets-intercompany loans
Total current assets
Provisions
Total non-current liabilities
Provisions
Trade and other payables
Liabilities-
intercompany loans
80
42
1,827
1,907
1,728
440
2,908
5,076
35
35
468
2,154
1,047
2,266
2,308
289
495
-
784
4
4
68
520
3,781
1
570
571
457
25
(1,859)
(1,859)
-
-
-
123
2,804
2,927
2,474
960
-
1,920
(4,828)
2,402
(4,828)
3,434
26
26
58
678
-
-
-
-
65
65
594
3,352
-
(4,828)
-
Total current liabilities
3,669
4,369
736
(4,828)
3,946
Identifiable net
assets/(liabilities)
3,279
(1,281)
2,211
(1,859)
2,350
PROVISIONAL
AMOUNT
ADJUSTMENTS
TO PROVISIONAL
AMOUNT
RESTATED*
AMOUNT
Purchase consideration
Amount settled in cash
250
-
250
77
I N C E NTI A PAY LT D A N D CO N TR O L L E D E NTITI E S
NOTE S TO TH E FINANCIAL STATE M E NTS FOR TH E YEAR E N DE D 30 J U N E 2 01 9
Amount settled in shares at fair value
7,750
-
7,750
Total consideration
8,000
8,000
Goodwill on acquisition
3,791
1,859
5,650
Consideration settled in cash
(250)
Cash and cash equivalents acquired
Net cash inflow on acquisition
Acquisition costs charged to expenses
Net cash received relating to the acquisition
960
710
(413)
297
-
-
-
-
(250)
960
710
(413)
297
GRUDEN
PTY LTD
$’000
MOBILEDEN
PTY LTD
$’000
BLACKGLASS
PTY LTD
$’000
Goodwill acquired
2,954
700
1,996
Written off in FY2018
(2,000)
Disposed as part of the divestments*
(954)
-
-
-
(1,996)
Total
-
700
-
*See note 23.
SECTION 7 | FINANCIAL STATEMENTS
78
I N C E NTI A PAY LT D A N D CO N TR O L L E D E NTITI E S
NOTE S TO TH E FINANCIAL STATE M E NTS FOR TH E YEAR E N DE D 30 J U N E 2 01 9
N OTE 2 3 | D I S P O SA L G R O U P S C L A S S I F I E D A S H E L D FO R SA LE A N D
D I S CO NTI N U E D O P E R ATI O N S
BA R TE R C A R D B U S I N E S S
On 14 September 2018 the Group announced its intention to exit the Bartercard business. A binding Share Sale
Agreement to divest the Bartercard business was signed on 14 September 2018 and the sale transaction closed
on 19 November 2018. As such, this business is reported in the current period as a discontinued operation.
Financial information relating to the discontinued operation for the period to the date of disposal is set out below.
The financial performance and cash flow information presented are for the period 1 July 2018 to 18 November 2018.
Statement of Profit or Loss and other Comprehensive Income
FY2019
$’000
FY2018
$’000
Revenue
8,887
32,719
Expenses
(8,271)
(71,275)
Profit before income tax
Income tax
Profit/(loss) after income tax of discontinued operation
616
-
616
(38,556)
75
(38,481)
Loss on sale of the subsidiary after income tax
(6,196)
-
Loss from discontinued operation
(5,580)
(38,481)
Exchange differences on translation of discontinued operations
Other comprehensive income from discontinued operations
Net cash inflow from operating activities
(208)
(208)
953
-
-
448
Net cash (outflow) from investing activities
(1,100)
(2,096)
Net cash inflow/(outflow) from financing activities
Net increase in cash generated by the division
273
126
(104)
(1,752)
79
I N C E NTI A PAY LT D A N D CO N TR O L L E D E NTITI E S
NOTE S TO TH E FINANCIAL STATE M E NTS FOR TH E YEAR E N DE D 30 J U N E 2 01 9
YEAR ENDED 30 JUNE 2018
FY2019
$’000
Cash
2,000
Deferred consideration
Total disposal consideration
2,878
4,878
Carrying amount of net assets sold
(11,282)
Loss on sale before income tax and reclassification of foreign currency
translation reserve
(6,404)
Reclassification of foreign currency translation reserve
Income tax expense on loss
208
-
Loss on sale after income tax
(6,196)
There is no ’earn out’ clause in the sale agreement. Additional cash consideration of $3.0 million is receivable
over three years to November 2021. At the time of the sale the present value of the consideration receivable was
determined to be $2.9 million, bringing total disposal consideration to $4.9 million in return for the sale of the
share capital of the following subsidiary entities:
• Bartercard Group Pty Ltd
• Trade Exchange Software Services Pty Ltd
• BPS Financial Ltd
• Bucqi Australia Pty Ltd
• Bartercard Operations AUS Pty Ltd
• Bartercard Operations NZ Ltd
• Bartercard Services Pty Ltd
• Bartercard Operations UK Ltd
• Bartercard New Zealand GP Ltd
• Bartercard New Zealand LP
• Tindalls Dream Ltd
• Valeo Corporation Ltd
SECTION 7 | FINANCIAL STATEMENTS
80
I N C E NTI A PAY LT D A N D CO N TR O L L E D E NTITI E S
NOTE S TO TH E FINANCIAL STATE M E NTS FOR TH E YEAR E N DE D 30 J U N E 2 01 9
The carrying amounts of assets and liabilities as at the date of sale (19 November 2018) were:
YEAR ENDED 30 JUNE 2018
19 NOV 2018
$’000
Cash and cash equivalents
1,413
Trade and other receivables
6,294
Inventories
Other assets
Property, plant and equipment
Intangible assets
32
313
1,124
7,031
Total assets
16,207
Trade and other payables
3,437
Vendor loans
Deferred revenue
107
335
Provisions
1,046
Total liabilities
4,925
Net assets
11,282
81
I N C E NTI A PAY LT D A N D CO N TR O L L E D E NTITI E S
NOTE S TO TH E FINANCIAL STATE M E NTS FOR TH E YEAR E N DE D 30 J U N E 2 01 9
G OV E R N M E NT B U S I N E S S (G R U D E N P T Y LTD)
On 19 November 2018 the Group announced its intention to exit the Government business. The business was sold
on 13 December 2018 and is reported in the current period as a discontinued operation. Financial information
relating to the discontinued operation for the period to the date of disposal is set out below.
The financial performance and cash flow information presented is for the period 1 July 2018 to 13 December 2018.
FY2019
$’000
Revenue
2,773
Expenses
(3,550)
Loss before income tax
(777)
Income tax
-
FY2018*
$’000
1,074
(3,566)
(2,492)
399
Loss after income tax of discontinued operation
(777)
(2,093)
Loss on sale of the subsidiary after income tax
(1,270)
-
Loss from discontinued operation
(2,047)
(2,093)
Net cash outflow from operating activities
(489)
Net cash outflow from investing activities
(5)
Net decrease in cash generated by the division
(494)
186
-
186
*As the business was purchased on 14 May 2018, the comparative financial performance and cash flow information
presented is for the period 14 May 2018 to 30 June 2018.
SECTION 7 | FINANCIAL STATEMENTS
82
I N C E NTI A PAY LT D A N D CO N TR O L L E D E NTITI E S
NOTE S TO TH E FINANCIAL STATE M E NTS FOR TH E YEAR E N DE D 30 J U N E 2 01 9
Details of the sale of the subsidiary
Cash
Deferred consideration
Total disposal consideration
FY2019
$’000
1,238
411
1,649
Carrying amount of net assets sold
(2,919)
Loss on sale before income tax
(1,270)
Income tax expense on gain
-
Loss on sale after income tax
(1,270)
There is no ’earn out’ clause in the sale agreement, additional cash consideration of $0.4 million will be receivable.
At the time of the sale the present value of the consideration receivable was determined to be $0.4 million.
The carrying amounts of assets and liabilities as at the date of sale (13 December 2018) were:
YEAR ENDED 30 JUNE 2018
13 DEC 2018
$’000
Cash and cash equivalents
132
Trade and other receivables
3,366
Other assets
Intangible assets
Total assets
9
2,058
5,565
Trade and other payables
2,321
Deferred revenue
Provisions
148
177
Total liabilities
2,646
Net assets
2,919
83
I N C E NTI A PAY LT D A N D CO N TR O L L E D E NTITI E S
NOTE S TO TH E FINANCIAL STATE M E NTS FOR TH E YEAR E N DE D 30 J U N E 2 01 9
P E R FO R M A N C E M A R K E TI N G B U S I N E S S (B L AC KG L A S S P T Y LTD)
On 12 April 2019, the Group announced it had entered into a binding agreement to divest the Performance
Marketing business. The business was sold on 22 April 2019 and is reported in the current period as a discontinued
operation. Financial information relating to the discontinued operation for the period to the date of disposal is set
out below.
The financial performance and cash flow information presented are for the period 1 July 2018 to 22 April 2019.
FY2019
$’000
Revenue
2,732
Expenses
(3,942)
FY2018*
$’000
522
(460)
Loss before income tax
(1,210)
Income tax
130
Loss after income tax of discontinued operation
(1,080)
Loss on sale of the subsidiary after income tax
(1,044)
Loss from discontinued operation
(2,124)
Net cash outflow from operating activities
(336)
Net cash inflow from investing activities
Net decrease in cash generated by the division
371
35
62
-
62
-
62
-
-
-
*As the business was purchased on 14 May 2018, the comparative financial performance and cash flow information
presented is for the period 14 May 2018 to 30 June 2018.
DETAILS OF THE SALE OF THE SUBSIDIARY
YEAR ENDED 30 JUNE 2018
22 APRIL 2019
$’000
Cash
Deferred consideration
Total disposal consideration
100
200
300
Carrying amount of net assets sold
(1,344)
Gain on sale before income tax
(1,044)
Income tax expense on gain
-
Gain on sale after income tax
(1,044)
There is no ’earn out’ clause in the sale agreement, additional cash consideration of $0.2 million will be receivable.
No net present value calculation is required as the deferred consideration is payable within a year.
SECTION 7 | FINANCIAL STATEMENTS
84
The carrying amounts of assets and liabilities as at the date of sale (22 April 2019) were:
YEAR ENDED 30 JUNE 2018
22 APRIL 2019
$’000
Cash and cash equivalents
60
Trade and other receivables
1,556
Other assets
Intangible assets
Total assets
1
2,235
3,852
Trade and other payables
2,479
Provisions
29
Total liabilities
2,508
Net assets
1,344
85
CONSOLIDATED DISCONTINUED OPERATION INFORMATION
The total presented for the tables above reconcile to the key financial figures as presented in these financial
statements as follows:
Deferred consideration receivable
Current
Interest unlocked
Received during the year
Total current deferred consideration receivable
Non-current
Interest unlocked
Total non-current deferred consideration receivable
Total deferred consideration receivable
FY2019
$’000
1,101
5
(411)
695
26
2,414
3,109
FY2019
$’000
FY2018
$’000
Loss for the period from discontinued operations
Bartercard business
(5,580)
(38,556)
Government business
(2,047)
(2,492)
Performance Marketing business
(2,124)
62
Total loss for the period from discontinued operations
(9,751)
(40,986)
FY2019
$’000
Year to date cash receipts from the sales of business
Bartercard business
2,000
Government business
Performance Marketing business
1,563
100
Total cash receipts from the sales of business
3,663
SECTION 7 | FINANCIAL STATEMENTS
86
19 NOV 2018
BARTERCARD
BUSINESS
13 DEC 2018
GOVERNMENT
BUSINESS
$’000
$’000
22 APR 2019
PERFORMANCE
MARKETING
BUSINESS
$’000
Cash held at date of sale
1,413
132
60
TOTAL
$’000
1,605
N OT E 2 4 | PA R E NT CO M PA N Y I N FO R M ATI O N
a) Information relating to IncentiaPay Ltd (the Parent Entity):
Statement of profit or loss and other comprehensive income
FY2019
$’000
FY2018
$’000
Total (loss)/profit
(39,638)
(36,262)
Total comprehensive income
(39,638)
(36,262)
Statement of financial position
Assets
Current assets
1,029
Non-current assets
28,824
Total assets
29,853
Liabilities
Current liabilities
7,970
Non-current liabilities
12,069
Total liabilities
20,039
Equity
305
56,711
57,016
5,712
3,902
9,614
Issued capital
96,006
94,892
Reserves
1,339
403
Retained earnings
(87,531)
(47,893)
Total equity
9,814
47,402
Details of the contingent assets and liabilities of the Group are contained in note 27. Details of the contractual
commitments are contained in note 26.
b) IncentiaPay Ltd, Entertainment Publications of Australia Pty Ltd and MobileDEN Pty Ltd are parties to a deed
of cross guarantee under which each company guarantees the debts of the others. By entering into the deed, the
wholly-owned entities have been relieved from the requirement to prepare a financial report and Directors’ report
under ASIC Corporations (Wholly-owned Companies) Instrument 2016/785.
87
Set out below is a consolidated balance sheet as at 30 June 2019 of the parties to the Deed of Cross Guarantee.
FY2019
Current assets
$’000
Cash and cash equivalents
Deferred consideration
Trade and other receivables
Inventories
2,532
695
2,549
23
Other assets
6,605
Total current assets
12,404
Non-current assets
Deferred consideration
Property, plant and equipment
Deferred tax assets
Intangible assets
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Borrowings
Deferred revenue
Provisions
2,414
2,261
2,790
22,505
29,970
42,374
5,521
4,635
18,189
1,779
Total current liabilities
30,124
Non-current liabilities
Trade and other payables
Provisions
Total non-current liabilities
1,863
216
2,079
Total liabilities
32,203
Net assets
10,171
Equity
Issued capital
96,006
Reserves
1,051
Retained Earnings
(86,886)
Total equity
10,171
See note 25 for the Consolidated Statement of Profit or Loss for the year ended 30 June 2019 of the parties to
the Deed of Cross Guarantee.
SECTION 7 | FINANCIAL STATEMENTS
88
N OT E 2 5 | S E G M E NT I N FO R M ATI O N
ACCO U N TI N G P O L I C Y
Reportable segments are identified on the basis of internal reports on the business units of the Group that are
regularly reviewed by the Board of Directors in order to allocate resources to the segment and assess its
performance. Since the divestment of the Bartercard entities, IncentiaPay Ltd manages the Group as one
segment, being the Entertainment Publications business.
The Group’s segment results include a corporate category reflecting head office operating costs. This does not
qualify as an operating segment in its own right.
The Group has not disclosed the results of the discontinued operation within the segment disclosures, because
the Group has not separately reviewed the results of this division since the decision to dispose of it. The results of
discontinued operations are disclosed in note 23.
REVENUE BY GEOGRAPHIC REGION
Revenue, excluding revenue from discontinued operations, attributable to external customers is disclosed below
based on the country in which the revenue is derived and billed.
Year ended 30 June 2019
$’000
$’000
$’000
AUSTRALIA
NEW ZEALAND
TOTAL
Revenue from external customers
59,247
Revenue
Total revenue
59,247
Expenses
Direct expenses of providing services
(39,023)
Employee expenses
(17,669)
Depreciation and amortisation
(1,989)
Impairments
(14,553)
Interest
(346)
5,325
5,325
(2,896)
(1,472)
(26)
-
-
64,572
64,572
(41,919)
(19,141)
(2,015)
(14,553)
(346)
Other expenses
(13,404)
(1,161)
(14,565)
Total expenses
(86,984)
(5,555)
(92,539)
Segment profit before tax
(27,737)
(230)
(27,967)
Non-current assets
Segment non-current assets
29,970
1,051
31,021
89
Year ended 30 June 2018
$’000
$’000
$’000
AUSTRALIA
NEW ZEALAND
TOTAL
Revenue
Revenue from external customers
Total revenue
Expenses
70,491
70,491
5,318
5,318
75,809
75,809
Direct expenses of providing services
(43,068)
(1,904)
(44,972)
Employee expenses
(21,507)
(2,403)
(23,910)
Depreciation and amortisation
(3,960)
(21)
Impairments
(11,929)
Interest
(1,101)
-
-
Other expenses
(12,089)
(1,024)
(3,981)
(11,929)
(1,101)
(13,113)
Total expenses
(93,654)
(5,352)
(99,006)
Segment profit before tax
(23,163)
(34)
(23,197)
Non-current assets
Segment non-current assets*
51,547
3,430
54,977
*This item only includes Australia and New Zealand non-current assets. United Kingdom and USA
non-current assets have been divested.
MAJOR CUSTOMERS
The Group has no major customers with all customers contributing small balances to revenues.
N OTE 2 6 | C A P ITA L A N D L E A S I N G CO M M ITM E NT S
CONSOLIDATED GROUP
FY2019
$’000
FY2018
$’000
Operating lease commitments
Non-cancellable operating leases contracted
for but not recognised in the financial statements
Not later than 1 year
Between 2 and 5 years
Later than 5 years
2,080
3,961
311
6,352
3,512
6,954
1,454
11,920
SECTION 7 | FINANCIAL STATEMENTS
90
N OT E 27 | CO N TI N G E NT LI A B I LITI E S A N D CO NTI N G E NT A S S E T S
B A N K G UA R A N T E E S
The Parent Entity has given bank guarantees as at 30 June 2019 of $1.2 million relating to the lease of the Sydney
office space.
N OT E 2 8 | F I N A N C I A L R I S K M A N AG E M E NT
ACCO U N TI N G P O L I C Y
The Group’s financial instruments consist mainly of deposits with banks, accounts receivable and payable, loans
to and from subsidiaries and leases.
The totals for each category of financial instruments, measured in accordance with AASB 9: Financial
Instruments: Recognition and Measurement as detailed in the accounting policies to these financial statements,
are as follows:
CONSOLIDATED GROUP
FY2019
$’000
FY2018
$’000
Financial assets
Cash and cash equivalents
3,460
Deferred consideration
Trade and other receivables
Total financial assets
Financial liabilities
Trade and other payables
Borrowings
3,109
2,728
9,297
5,941
4,635
11,130
-
9,816
20,946
12,800
-
Total financial liabilities
10,576
12,800
FINANCIAL RISK MANAGEMENT POLICIES
Senior management meet on a regular basis to review currency and interest rate exposure and to evaluate treasury
management strategies where relevant, in the context of the most recent economic conditions and forecasts.
The overall risk management strategy seeks to assist the consolidated Group in meeting its financial targets,
while minimising potential adverse effects on financial performance. Its functions include the review of the use
credit risk policies and future cash flow requirements.
91
WITHIN 1 YEAR
1 - 5 YEARS
> 5 YEARS
TOTAL
Maturity analysis
FY2019
$’000
FY2018
$’000
FY2019
$’000
FY2018
$’000
FY2019
$’000
FY2018
$’000
FY2019
$’000
FY2018
$’000
Financial assets
Cash
3,460
11,130
-
Deferred consideration
695
-
2,414
Trade debtors
1,915
6,863
Other receivables
813
2,812
-
-
-
-
-
141
Financial liabilities
Trade and other payables
5,940
11,949
-
851
Borrowings
4,169
-
466
Vendor loan
-
800
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3,460
11,130
3,109
-
1,915
6,863
813
2,953
5,940
12,800
4,635
-
-
800
ACCO U N TI N G C L A S S I F I C ATI O N S A N D FA I R VA LU E S
The following table shows the carrying amounts and fair values of financial assets and financial liabilities,
including their levels in the fair value hierarchy. It does not include fair value information for financial assets and
financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value.
30 June 2019
CARRYING
VALUE
RECEIVABLES
CARRYING
VALUE
OTHER
FINANCIAL
LIABILITIES
$’000
LEVEL 1
LEVEL 2
LEVEL 3
TOTAL
$’000
$’000
$’000
$’000
FAIR VALUE
Financial assets not
measured at fair value
Cash
3,460
Deferred consideration
3,109
Trade debtors
Other receivables
1,915
813
-
-
-
-
Financial liabilities not
measured at fair value
Trade and other payables
Borrowings
-
-
5,941
4,635
-
3,109
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3,460
3,109
1,915
813
5,941
4,635
SECTION 7 | FINANCIAL STATEMENTS
92
30 June 2018
CARRYING
VALUE
RECEIVABLES
CARRYING
VALUE
OTHER
FINANCIAL
LIABILITIES
$’000
LEVEL 1
LEVEL 2
LEVEL 3
TOTAL
$’000
$’000
$’000
$’000
FAIR VALUE
Financial assets not
measured at fair value
Cash
Trade debtors
Other receivables
Financial assets not
measured at fair value
Trade and other payables
Vendor loan
11,130
6,863
2,953
-
-
-
-
-
12,800
800
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
11,130
6,863
2,953
12,800
800
R E CO G N I S E D FA I R VA LU E M E A S U R E M E N T S
The fair value of financial instruments that are not traded in an active market is determined using valuation
techniques which maximise the use of observable market data and rely as little as possible on entity-specific
estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in
level 2.
VA LUATI O N T E C H N I Q U E S U S E D TO D E T E R M I N E FA I R VA LU E S
The fair value of the deferred consideration has been determined based on the present value of the future cash
flows, discounted using a 3 year government bond rate.
When measuring the fair value of an asset or a liability, the Group uses observable market data as far as possible.
Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation
techniques as follows.
• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
• Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either
directly (i.e. as prices) or indirectly (i.e. derived from prices).
• Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
S E N S ITI V IT Y A N A LYS I S
Directors believe that the fair value of financial assets and liabilities are not sensitive to movements in either
interest rates or exchange rates having taken into account the relatively stable interest rate market, our interest
exposure and the low number of cross border transactions. Refer to the Market Risk information below for further
information.
S P E C I F I C F I N A N C I A L R I S K E X P O S U R E S A N D M A N AG E M E N T
The main risks the Group is exposed to through its financial instruments are credit risk, liquidity risk and market
risk consisting of interest rate risk and foreign currency risk.
M A R K E T R I S K
A. CREDIT RISK
Exposure to credit risk relating to financial assets arises from the potential non-performance by customers of
contract obligations that could lead to a financial loss to the Group.
93
I. RISK MANAGEMENT
Credit risk is managed through the maintenance of systems for the approval, granting and renewal of credit
limits, regular monitoring of exposures against such limits and monitoring of the financial stability of significant
customers, ensuring to the extent possible that customers to transactions are of sound credit worthiness. Such
monitoring is used in assessing receivables for impairment. Depending on the division within the Group, credit
terms are generally 14 to 30 days from the invoice date.
The maximum exposure to credit risk by class of recognised financial assets at the end of the reporting period
excluding the value of any collateral or other security held, is equivalent to the carrying amount and classification
of those financial assets (net of any provisions) as presented in the statement of financial position.
The Group has no significant concentrations of credit risk with any single customer or group of customers.
$56.0 million of the revenue in note 2 relates to memberships and gift cards sales, which are cash on delivery,
therefore, the Group has no significant credit risk.
II. IMPAIRMENT OF FINANCIAL ASSETS
The Group has trade and other receivables that are subject to the expected credit loss model. Trade and other
receivables that are neither past due nor impaired are considered to be of high credit quality. Aggregates of such
amounts are detailed in note 8. While cash and cash equivalents are also subject to the impairment requirements
of AASB 9, the identified impairment loss was immaterial.
TRADE AND OTHER RECEIVABLES
The Group applies the AASB 9 simplified approach to measuring expected credit losses which uses a lifetime
expected loss allowance for all trade receivables. See note 8 for details.
B. LIQUIDITY RISK
Included in the $4.169 million disclosed in the 2019 borrowings time band ‘within 1 year’, is the line of credit facility
from Suzerain. Subsequent to year end, the terms of the borrowings were revised and this amount is now payable
on 30 September 2020. See note 30. Management monitors rolling forecasts of the Group’s liquidity reserve and
cash and cash equivalents on the basis of expected cash flows.
Liquidity risk arises from the possibility that the Group might encounter difficulty in settling its debts or otherwise
meeting its obligations related to financial liabilities. The Group manages this risk through the following mechanisms:
• preparing forward-looking cash flow analyses in relation to its operating, investing and financing activities;
• monitoring undrawn credit facilities;
• obtaining funding from major financial institutions;
• maintaining a reputable credit profile;
• managing credit risk related to financial assets;
• only investing surplus cash with major financial institutions; and
• comparing the maturity profile of financial liabilities with the realisation profile of financial assets.
I. FINANCING ARRANGEMENTS
On 9 August 2019 the Group entered into a Loan Deed with Suzerain Investments Holdings Limited (Suzerain) for
funding of an additional $15.0 million to support working capital requirements and to restructure the business.
The restructure is designed to remove an estimated $10.0 million in operational cost from the business. See note 30.
II. MATURITIES OF FINANCIAL LIABILITIES
Line of credit facility
As at 30 June 2019, the line of credit facility with Suzerain was due to mature on 30 September 2019, however,
subsequent to year end, the terms of the facility were adjusted. See note 30.
SECTION 7 | FINANCIAL STATEMENTS
94
Lease incentive loan
As part of the lease agreement for the new office in Sydney, the landlord has financed the fitout with a lease
incentive loan. The loan carries no interest component. If there is no default, the loan reduces by 20 per cent each
year until there is a zero balance owing at the end of the lease. The loan will be payable immediately if the Group
fails the contractual obligation.
C. FOREIGN EXCHANGE RISK
The Group is exposed to foreign currency risk on the sale of memberships and other fee income from foreign
entities and on the translation of its foreign subsidiaries. Senior management had not hedged foreign currency
transactions as at 30 June 2019 as $8.0 million of total revenue is in NZD and the foreign currency fluctuation
between AUD and NZD is historically insignificant at 5 per cent during the year. Therefore, foreign exchange risk
was considered insignificant. Senior management continue to evaluate this risk on an ongoing basis.
Trade debtors
Trade payables
Year ended 30 June 2019
+/- 0.5% in foreign exchange rates
Year ended 30 June 2018
+/- 0.5% in foreign exchange rates
FY2019
NZD
$’000
218
(69)
FY2018
NZD
$’000
6,954
1,454
PROFIT
$’000
EQUITY
$’000
7
17
74
64
D. INTEREST RATE RISK
The interest rate relating to the borrowing with Suzerain is capitalised with a fixed rate of 10 per cent and is now
repayable on 30 September 2020. See note 30.
N OT E 2 9 | R E L AT E D PA R T Y TR A N SAC TI O N S
KEY MANAGEMENT PERSONNEL
Any persons having authority and responsibility for planning, directing and controlling the activities of the entity,
directly or indirectly, including any Director (whether Executive or otherwise) of that entity, are considered key
management personnel.
Pursuant to its LFS Plan the Company loaned funds to Iain Dunstan and Darius Coveney with respect to the
shares issued to them during the prior year. These shares will no longer vest and the associated balance in the
share-based payment reserve has been removed during the current financial year ended 30 June 2019.
In addition to the above, as at 30 June 2018, there were 80,000 Performance Rights issued to Heidi Halson,
following shareholder approval on 5 April 2018.
During the year certain remuneration entitlements of executive and non-executive directors were paid, upon
request of the Directors, to related entities or associates of those Directors.
See note 20 for the value of remuneration related transactions to key management personnel.
95
OTHER RELATED PARTIES
Other related parties include entities controlled by the Company and entities over which key management
personnel have joint control. Amounts disclosed in note 20 includes transactions with associated entities of key
management personnel.
Transactions between related parties are on normal commercial terms and conditions that are no more
favourable than those available to other parties unless otherwise stated.
Transactions between the Company and controlled entities include loans, management fees and interest. These
are eliminated on consolidation.
Suzerain Investments Holdings Limited (Suzerain), a related party to Mr Thorpe has provided a $4.0 million line
of credit facility to the Group, during the period the Group drew down $4.0 million of the line of credit facility.
Subsequent to year end, the terms of the credit facility were amended. See note 30.
N OTE 3 0 | E V E N T S A F T E R T H E R E P O R TI N G P E R I O D
On 9 August 2019 the Group entered into a Loan Deed with Suzerain for funding of an additional $15.0 million to
support working capital requirements and to restructure the business.
The restructure is designed to remove an estimated $10.0 million in operational cost from the business.
The receipt of the funding will occur in four stages:
• $4.0 million immediately after signing of the deed;
• $5.0 million on agreement of restructure specifics and associated cost;
• $3.0 million subject to shareholder approval of convertible loan security and operational cash flow being within
10 per cent of planned operational cash flow as at 1 December 2019; and
• $3.0 million subject to shareholder approval of convertible loan security and operational cash flow being within
10 per cent of planned operational cash flow as at 1 January 2020.
The loan is to be repaid on 30 September 2020 with interest capitalised at 10 per cent per annum. The Board
will seek shareholder approval at the next AGM to enter into a general security deed over the assets of the
Group in the form attached to the Loan Deed. The Board will also seek shareholder approval for the loan to be
convertible to ordinary shares at the higher of $0.047 per share or 30 days volume weighted average price prior
to conversion.
On 22 July 2019, the Board voted to wind up the original Performance Rights Equity Plan and replace it with a
new broad-based employee share equity plan. The new plan is yet to be defined or implemented, however the
Board has approved the winding up of the program and the associated settlement on the assumption of 40 per
cent of all entitlements vesting, equating to 1,550,000 shares.
SECTION 7 | FINANCIAL STATEMENTS
96
Directors’
Declaration
SECTION
8
9797
In accordance with a resolution of the Directors of IncentiaPay Ltd, the Directors of the
Company declare that:
The financial statements and notes, as set out on pages 35 to 96, are in accordance with
the Corporations Act 2001 and:
a) Comply with Australian Accounting Standards, which, as stated in the notes to
the financial statements, constitutes compliance with International Financial
Reporting Standards (IFRS); and
b) Give a true and fair view of the financial position as at 30 June 2019 and of the
performance for the year ended on that date of the consolidated Group;
In the Directors’ opinion there are reasonable grounds to believe that the Company will
be able to pay its debts as and when they become due and payable; and the Directors
have been given the declarations required by s295A of the Corporations Act 2001 from
the Financial Controller.
S T E P H E N H A R R I S O N
I N T E R I M E X E C U T I V E CH A I R
IncentiaPay Limited ABN 43 167 603 992
Level 10, 220 George Street, Sydney 2000 NSW
p | +61 2 8256 5300 | e | info@incentiapay.com
www.incentiapay.com
SECTION 8 | DIRECTORS’ DECLARATION
98
Independent
Auditor’s
Report
SECTION
9
99
Independent Auditor’s Report
To the shareholders of IncentiaPay Limited
Report on the audit of the Financial Report
Opinion
We have audited the Financial Report of
IncentiaPay Limited (the Company).
In our opinion, the accompanying Financial
Report of the Company is in accordance
with the Corporations Act 2001, including:
•
•
giving a true and fair view of the
Group’s financial position as at 30
June 2019 and of its financial
performance for the year ended on
that date; and
complying with Australian Accounting
Standards and the Corporations
Regulations 2001.
The Financial Report comprises:
• Consolidated statement of financial position as at 30
June 2019
• Consolidated statement of profit or loss and other
comprehensive income, Consolidated statement of
changes in equity, and Consolidated statement of
cash flows for the year then ended
• Notes including a summary of significant accounting
policies
• Directors’ Declaration.
The Group consists of the Company and the entities it
controlled at the year end or from time to time during
the financial year.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Our responsibilities under those standards are further described in the Auditor’s responsibilities for
the audit of the Financial Report section of our report.
We are independent of the Group in accordance with the Corporations Act 2001 and the ethical
requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics
for Professional Accountants (the Code) that are relevant to our audit of the Financial Report in
Australia. We have fulfilled our other ethical responsibilities in accordance with the Code.
KPMG, an Australian partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity.
Liability limited by a scheme approved under
Professional Standards Legislation.
SECTION 9 | INDEPENDENT AUDITOR’S REPORT
100
Material uncertainty related to going concern
We draw attention to Note 1, “Going Concern” in the Financial Report. The conditions disclosed in
Note 1, indicate a material uncertainty exists that may cast significant doubt on the Group’s ability to
continue as a going concern and, therefore, whether it will realise its assets and discharge its
liabilities in the normal course of business, and at the amounts stated in the financial report. Our
opinion is not modified in respect of this matter.
In concluding there is a material uncertainty related to going concern we evaluated the extent of
uncertainty regarding events or conditions casting significant doubt in the Group’s assessment of
going concern. This included:
• Analysing the cash flow projections by:
•
•
Evaluating the underlying data used to generate the projections for consistency with
other information tested by us, and our understanding of the Group’s intentions, and
past results and practices;
Assessing the planned levels of operating and capital expenditures for consistency of
relationships and trends to the Group’s historical results, particularly in light of recent
loss making operations, results since year end, and our understanding of the business,
industry and economic conditions of the Group;
• Assessing significant non-routine forecast cash inflows and outflows for feasibility, quantum
and timing. We used our knowledge of the client, its industry and financial position to assess
the level of associated uncertainty;
• Reading correspondence with existing financiers to understand the financing options available to
the Group, and assess the level of associated uncertainty resulting from financial loan draw-down
conditions and negotiation of additional/revised funding arrangements;
•
Evaluating the Group’s going concern disclosures in the financial report by comparing them
to our understanding of the matter, the events or conditions incorporated into the cash flow
projection assessment, the Group’s plans to address those events or conditions, and
accounting standard requirements. We specifically focused on the principal matters giving
rise to the material uncertainty.
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 of the current period.
These matters were addressed in the context of our audit of the Financial Report as a whole, and in
forming our opinion thereon, and we do not provide a separate opinion on these matters.
In addition to the matter described in the Material uncertainty related to going concern section, we
have determined the matter described below to be the Key Audit Matter.
101
Valuation of Goodwill and other intangible assets ($22.51m)
Refer to Note 12 to the Financial Report
The key audit matter
How the matter was addressed in our audit
A key audit matter for us was the Group’s
annual testing of goodwill and other intangible
assets for impairment, given the size of the
balance (being 49% of total assets). We
focussed on the significant forward-looking
assumptions the Group applied in their value in
use model, including:
•
•
•
forecast operating cash flows – the Group
has incurred a loss during the year, as a
result of impacts of reductions in
membership subscriptions and gift card
sales, as well as integration costs
associated with acquired businesses and
restructuring costs incurred this financial
year. These conditions increase the
possibility of goodwill and other intangible
assets being impaired. Forecast operating
cash flows take into account the Groups
proposed transformation program, including
the strategic reposition of the core
operations of the business focussing on
long-term sustainability which increases the
risk of inaccurate forecasts or a wider range
of possible outcomes, for us to consider.
forecast growth rate and terminal growth
rate – In addition to the uncertainties
described above, the Group’s model is
highly sensitive to small changes in these
assumptions, indicating likely impairment.
This drives additional audit effort specific to
their feasibility and consistency of
application to the Group’s strategy.
discount rate – this is complicated in nature
and varies according to the conditions and
environment the specific Cash Generating
Unit (CGU) is subject to from time to time,
and the model’s approach to incorporating
risks into the cash flows or discount rate.
The Group’s modelling is highly sensitive to
small changes in the discount rate.
Working with our valuation specialists, our
procedures included:
• We considered the appropriateness of the
value in use method applied by the Group to
perform the annual test of goodwill for
impairment against the requirements of the
accounting standards.
• We, along with our valuation specialists,
assessed the integrity of the value in use
model used, including the accuracy of the
underlying calculation formulas.
• We considered the sensitivity of the model by
varying key assumptions, such as forecast
growth rate, terminal growth rate and discount
rate, within a reasonably possible range. We
did this to identify those assumptions at higher
risk of bias or inconsistency in application and
to focus our further procedures.
• We assessed the accuracy of previous Group
forecasts to inform our evaluation of forecasts
incorporated in the model.
• Working with our valuation specialists, we
challenged the Group’s significant forecast
cash flow and growth assumptions in light of
the expected continued downturn in
membership subscriptions in the short-term
and as a result of the Group’s proposed
transformation program. We compared key
events to the Board approved plan and
strategy. We applied increased scepticism to
forecasts in the areas where previous
forecasts were not achieved. We compared
forecast growth rate and terminal growth rate
to published studies of industry trends and
expectations, and considered differences for
the Group’s operations. We used our
knowledge of the Group, their past
SECTION 9 | INDEPENDENT AUDITOR’S REPORT
102
The Group’s model used to perform their
annual testing of goodwill and other intangible
assets for impairment is largely manually
developed, uses adjusted historical
performance, and a range of internal and
external sources as inputs to the assumptions.
The Group have not met prior forecasts, raising
our concern for reliability of current forecasts.
Complex modelling, using forward-looking
assumptions tend to be prone to greater risk for
potential bias, error and inconsistent
application. These conditions necessitate
additional scrutiny by us, in particular to address
the objectivity of sources used for assumptions,
and their consistent application.
The carrying amount of the net assets of the
Group exceeded the Group’s market
capitalisation at year end, increasing the
possibility of goodwill and other intangible
assets being impaired. This further increased
our audit effort in this key audit area.
In addition to the above, the Group recorded an
impairment charge of $14.55m against
goodwill, resulting from the reduction in
business, increasing the sensitivity of the
model to small changes. This further increased
our audit effort in this key audit area.
We involved valuation specialists to supplement
our senior audit team members in assessing
this key audit matter.
performance, business and customers, and
our industry experience.
• We checked the consistency of the growth
rate to the Group’s stated plan and strategy,
past performance of the Group, and our
experience regarding the feasibility of these in
the industry/economic environment in which
they operate.
• Working with our valuation specialists, we
analysed the Group’s discount rate against
publicly available data of a group of
comparable entities.
• We assessed the difference between the
Group’s year-end market capitalisation and the
carrying amount of the net assets, by
comparing the year-end market capitalisation
to the Group’s enterprise value.
• We recalculated the impairment charge
against the recorded amount disclosed.
• We assessed the disclosures in the financial
report using our understanding obtained from
our testing and against the requirements of
the accounting standards.
Other Information
Other Information is financial and non-financial information in IncentiaPay Limited’s annual reporting
which is provided in addition to the Financial Report and the Auditor's Report. The Directors are
responsible for the Other Information.
Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not
express an audit opinion or any form of assurance conclusion thereon, with the exception of the
Remuneration Report and our related assurance opinion.
In connection with our audit of the Financial Report, our responsibility is to read the Other
Information. In doing so, we 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.
We are required to report if we conclude that there is a material misstatement of this Other
Information, and based on the work we have performed on the Other Information that we obtained
prior to the date of this Auditor’s Report we have nothing to report.
103
Responsibilities of the Directors for the Financial Report
The Directors are responsible for:
• preparing the Financial Report that gives a true and fair view in accordance with Australian
Accounting Standards and the Corporations Act 2001
•
•
implementing necessary internal control to enable the preparation of a Financial Report that
gives a true and fair view and is free from material misstatement, whether due to fraud or
error
assessing the Group and Company’s ability to continue as a going concern and whether the
use of the going concern basis of accounting is appropriate. This includes disclosing, as
applicable, matters related to going concern and using the going concern basis of accounting
unless they either intend to liquidate the Group and Company or to cease operations, or have
no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the Financial Report
Our objective is:
•
•
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 Australian Auditing Standards will always detect a material misstatement when it
exists.
Misstatements can arise from fraud or error. They 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 the Financial Report.
A further description of our responsibilities for the audit of the Financial Report is located at the
Auditing and Assurance Standards Board website at:
http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf. This description forms part of our Auditor’s
Report.
Report on the Remuneration Report
Opinion
Directors’ responsibilities
In our opinion, the Remuneration Report
of IncentiaPay Limited for the year ended
30 June 2019, complies with Section
300A of the Corporations Act 2001.
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 responsibilities
We have audited the Remuneration Report included in
pages 24 to 32 of the Directors’ report for the year
ended 30 June 2019.
Our responsibility is to express an opinion on the
Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards.
SECTION 9 | INDEPENDENT AUDITOR’S REPORT
104
105
ASX
Additional
Information
SECTION
10
SECTION 10 | ASX ADDITIONAL INFORMATION
106
A SX A D D ITI O N A L I N FO R M ATI O N
As at 31 August 2019
D I S T R I B U TI O N O F E Q U ITA B L E S E C U R ITI E S
ANALYSIS OF THE NUMBER OF EQUITABLE SECURITY HOLDERS BY SIZE OF HOLDING
RANGE
TOTAL HOLDERS
SECURITIES
% ISSUED CAPITAL
1 to 1000
1001 to 5000
5001 to 10000
10001 to 50000
50001 to 100000
100001 and over
TOTAL
133
257
142
384
131
197
1,242
30,456
767,386
1,145,662
10,185,198
9,667,183
215,098,104
236,903,989*
0.01
0.32
0.48
4.30
4.09
90.80
100.00
*Excluding Loan Funded Shares in escrow.
UNMARKETABLE PARCELS
The number of security investors holding less than a marketable parcel of 17,858 securities ($0.28 on
30/08/2019) is 642 and they hold 3,477,900 securities.
SUBSTANTIAL HOLDERS
RANK
NAME
CURRENT BALANCE
% ISSUED CAPITAL
1
2
3
4
Suzerain Investments Holdings Ltd
48,475,000
Citicorp Nominees Pty Limited
39,885,242
Sinetech Limited
18,500,002
JP Morgan Nominees Australia Pty Limited
17,062,358
19.98%
16.44%
7.63%
7.03%
TOP 20 HOLDERS OF FULLY PAID ORDINARY SHARES
The names of the twenty largest security holders of quoted equity securities are listed below:
RANK
INVESTOR
CURRENT BALANCE
% ISSUED CAPITAL
1
Suzerain Investments Holdings Ltd
48,475,000
19.98%
O R D I N A RY/ F U L LY PA I D O R D I N A RY S H A R E S
2
Citicorp Nominees Pty Limited
39,885,242
16.44%
3
Sinetech Limited
18,500,002
4
JP Morgan Nominees Australia Pty Limited
17,062,358
7.63%
7.03%
107
5
Everest MB Pty Ltd
7,518,000
6
Kootenay Investments Pty Ltd
6,500,000
7
BNP Paribas Nominees Pty Ltd
3,387,013
8
Iain Dunstan
9
Darius Coveney
10
Future Land Limited
11
Quotidian No2 Pty Ltd
12
Yarran Park Pty Ltd
13
Ben Johnson
3,035,714
2,678,571
2,500,000
2,250,000
2,170,034
2,139,574
14
Mr Lucas Rudolph Jansen Van Vuuren
2,131,667
15
Virpaysol Pty Ltd
16
Ms Li Zhao
1,723,685
1,572,818
17
Sulamerica Investments Pty Ltd
1,465,000
18
Mr Jibanath Nepal
19
Mr Mark Andrew Wing Young +
Ms Noreen Hallion + Mr Paul Simon Hallion
20 Ms Meirong Wang
VOTING RIGHTS
1,440,000
1,297,878
1,285,599
3.10%
2.68%
1.40%
1.25%
1.10%
1.03%
0.93%
0.89%
0.88%
0.88%
0.71%
0.65%
0.60%
0.59%
0.53%
0.53%
The Company has 236,903,989 fully paid ordinary shares on issue and 5,714,285 in voluntary escrow. Each
ordinary share is entitled to 1 vote when a poll is called, otherwise each member present at a meeting, or by
proxy, has 1 vote by a show of hands. There are no other classes of equity securities.
SECTION 10 | ASX ADDITIONAL INFORMATION
108
IncentiaPay
Corporate Directory
Directors
Mr Stephen Harrison – Interim Executive Chair
Mr Jeremy Thorpe – Non-Executive Director
Dr Charles Romito – Non-Executive Director
Mr Dean Palmer – Non-Executive Director
Company Secretary
Mr Ben Newling
Registered office
Level 5, 68 Harrington Street
The Rocks NSW 2000
Principal place
of business
Level 5, 68 Harrington Street
The Rocks NSW 2000
Share registry
Link Market Services
ACN 083 214 537
Level 12, 680 George Street
Sydney NSW 2000
+61 2 8280 7100
Auditor
KPMG
Level 38, Tower Three, International Towers Sydney
300 Barangaroo Avenue, Sydney, NSW 2000
Legal advisers
Gilbert + Tobin
Level 35, Tower Two, International Towers Sydney
200 Barangaroo Avenue
Barangaroo NSW 2000
Bankers
Commonwealth Bank of Australia
Level 3, 240 Queen Street
Brisbane Qld 4000
Stock exchange
listing
IncentiaPay Ltd shares are listed on the Australian Securities
Exchange (ASX code: INP)
Website
www.incentiapay.com.au
109
LEVEL 5, 68 HARRINGTON STREET
THE ROCKS, NSW 2000 AUSTRALIA
E M A I L
I N F O @ I N C E N T I A P AY. C O M
P H O N E ( 0 2 ) 8 2 5 6 5 3 0 0
WWW.INCENTIAPAY.COM