2 0 2 0
A N N U A L R E P O R T
For the year ended 30 June 2020
IncentiaPay Ltd
ABN 43 167 603 992
ASX-listed IncentiaPay is the owner of The Entertainment Group – and the producer
of Australia and New Zealand’s Entertainment Membership App and corporate
Frequent Values product. Entertainment builds communities where everyone wins,
through experiences, savings, philanthropy and the building of businesses. Helping
others is at the heart of what we do.
Entertainment is an iconic brand with a
26-year history providing one of the largest
Merchant partners: Entertainment drives new
business and revenue growth through word of
portfolios of lifestyle offers and content in
mouth and exclusive marketing programs for
the market.
Members: A choice of memberships provide
access to thousands of 2-for-1 and up to 50%
off offers from almost 9,000 business partners
contemporary and casual dining merchants,
retail outlets, and travel and leisure partners.
Enterprise clients: Entertainment’s bespoke
dining and leisure benefits product provides
in dining, travel, activities, and retail across
organisations and major brands with trusted
almost 20,000 partner locations in Australia,
and well-known loyalty programs, featuring
New Zealand, and Bali. Our offers are available
always-on special offers across dining, take
across 21 major cities, regional areas, and
away, travel, and wellbeing to help retain
country towns. Entertainment is about
existing customers, reduce lapsed customers,
discovering new experiences and creating
and acquire new ones. Over 35 corporate
memories with family and friends all while
clients including household names such as
helping a good cause.
Zurich, Red Energy, HSBC and Budget Direct
Fundraiser groups: An Entertainment
Membership allows savvy consumers to
provide this offering to their clients.
There are over 100 Entertainment employees
do more of what they value and love every
working in 13 offices across Australia and New
day, while at the same time saving money
Zealand with headquarters in Sydney.
and helping a good cause. 20 per cent of
Membership sales go directly to fundraisers,
and since its establishment in 1994,
Entertainment has helped more than 15,000
charities large and small, local primary and high
schools, sports clubs and community groups
reach their fundraising community goals.
C O N T E N T S
Chairman’s Introduction ..................................................................1
CEO’s Operating Review ................................................................5
Financial Review ............................................................................... 13
Leadership Team .............................................................................. 17
Business Risks .................................................................................... 21
Directors’ Report ............................................................................. 25
Remuneration Report .................................................................... 31
Auditor’s Independence Declaration ..................................... 41
Financial Statements .....................................................................43
Directors’ Declaration ....................................................................111
Independent Auditor’s Report .................................................113
ASX Additional Information ..................................................... 120
Corporate Directory .....................................................................123
IncentiaPay Ltd ABN 43 167 603 992
Chairman’s
Introduction
1
Dear Shareholders,
On behalf of the Board of Directors of IncentiaPay, and
as your Chairman, I am pleased to present you with the
2020 Annual Report.
The past financial year has been one of significant
business change with the organisation evolving and
moving forward in many areas, while at the same time,
being forced to manage widespread and unexpected
macroeconomic and social disruption.
During FY2019, the Company announced a strategic
has seen the average revenue
per transaction in the 2020
sales season increase by
13 per cent. Thirdly, expansion
of distribution beyond the
‘not-for-profit’ channels. While
small merchant pilots did
commence, this pillar is being
deferred due to the onset of
Covid-19.
review of operations and organisational structure, and
In March 2020, the business experienced major and
effected a major Company turnaround strategy. Over
obviously unexpected disruption due to the Covid-19
the past year, we have made significant progress in
pandemic. While the Company’s pre-sales season was
our efforts to refocus the business; in our successful
successfully launched in February, this came to a halt with
search for a new Chief Executive Officer and the
substantially lower revenues in March, April, and most
subsequent development of our Executive Team; in our
of May than the organisation had become accustomed
implementation of a cost reduction program including
to. As the relaxing of restrictions took place across
a restructure; in our repair and rebuild of the business
Australia and New Zealand, the Company began to see
foundations; and, in managing the repercussions
some increase in its cash inflows from Entertainment
and impact on the business from Covid-19. All of this
Memberships in June, and the first half of July. However,
has been underpinned by support from our major
the second half of July and August saw a subsequent
shareholders, specifically, Suzerain Investments Holdings
down turn due to Covid-19 restrictions being reinforced.
Ltd (Suzerain).
People were key to the implementation and delivery
of the turnaround. In August 2019, Dean Palmer was
appointed to the Board of Directors, to join myself,
Jeremy Thorpe, and Charles Romito. In October 2019,
the Board’s search resulted in the appointment of
Henry Jones as CEO, replacing Interim CEO Darius
Coveney who departed at the end of August 2019, and
allowed me to step down as Executive Chairman. Henry
has subsequently formed an Executive Team whose
deep experience and background are outlined in the
Leadership Team section of this Annual Report.
At the end of 2019, IncentiaPay completed its restructure
as announced at the Annual General Meeting in
December, removing $14 million in annualised operating
expenditure and closing six regional offices.
The strategic focus for moving forward in 2020
continued to centre on three key pillars. Firstly, the
transition of the Entertainment Membership to a
100 per cent digital model. This was achieved as at
1 June 2020 with the iconic Entertainment book ceasing
to be sold after 26 years. Secondly, a focus on core
membership products. The Company enhanced its
core digital product to allow a 12-month membership
to commence any time - and introduced three different
product options including multi-city and multi-year, which
The ongoing results of the pandemic had widespread
impact on the organisation and its employees. While health,
wellbeing, and safety of the team were the first priority, with
work-from-home arrangements put in place, preserving
as many jobs as possible was key. In order to achieve this,
and in consultation with employees, the Company utilised
a combination of salary reductions for executives, senior
management, and the Board. A reduction in the number
of days worked for other team members, coupled with the
government’s JobKeeper payments were also utilised.
Strategic focus during this time was on supporting take-
away options from Entertainment Merchants, helping
Fundraiser groups to prepare for fundraising in a different
environment, and the significant technology transformation
that is being undertaken in the coming years. We have
remained vigilant in managing austerity measures
across the business.
The Company has now refocused its attention on
the delivery of its technology transformation, the
stengthening of consumer sentiment, and ensuring the
business is well placed in a post Covid-19 environment.
The Company will continue with its planned focus
to support Fundraiser groups and their fundraising
inititatives, as well as our Merchant partners.
CHAIRMAN’S INTRODUCTION
2
IncentiaPay would like to acknowledge the continued
We are most grateful for support from our largest
support of its largest shareholder and creditor,
shareholder, who has reinforced its ongoing
Suzerain, during this difficult time. In February
commitment and belief in the business, the value
2020, Suzerain converted $19,300,257 of its debt
of its underlying assets, the Company’s turnaround
into 410,643,766 ordinary shares (4.7c per share),
strategy and our technology transformation focus.
leaving approximately $500,000 of secured debt,
and between February and May provided a further
$9.825 million loan facility for the Company to
pursue additional growth over the medium to
long term.
The Board would also like to acknowledge and
thank its employees who have remained dedicated
and committed to the organisation throughout
a challenging period. In recognition, the Board
approved an Employee Gift Plan at the end of June,
In addition, a further $1.2 million facility has been
which will be finalised over the coming months,
approved, to be drawn down for transformational
following which shares will be issued.
On behalf of the Board, I would like to thank our
shareholders, our clients and our employees for their
support and contribution.
capital expenditure to be agreed between the
Company and the lender, Skybound Fidelis
Investment Limited as trustee for the Skybound
Fidelis Credit Fund (Skybound) - a related entity of
Suzerain. This funding is important for the business’
focus and its use of technology to transform and
advance the Company in the fintech industry.
The first application of this funding was announced
to the market on 3 August 2020 and is a multi-
year licensing agreement to partner with Paywith
Worldwide Inc. (Paywith) - to combine it’s Processing
STEPHEN HARRISON
Engine Offers Marketplace and Syndication Platform
CHAIRMAN
with our strong content and deep relationships -
to deliver new products and further enhance our
customer value proposition.
3
CHAIRMAN’S INTRODUCTION
4
CEO’s Operating
Review
55
CEO’S OPERATING
REVIEW
Looking back over the past
financial year, there is much for
the team at IncentiaPay to be
proud of. The transformation
that we commenced executing
on at the start of FY2020 is
clearly moving us in the right
LEVERAGING UNIQUE STAKEHOLDER
RELATIONSHIPS
We have a unique relationship between our Fundraiser
groups, Merchant partners and Member base. Coupled
with our Enterprise clients, it presents us with a
competitive advantage that is not easy to replicate. All
of our underlying strategic foundations are built with
these stakeholders in mind – they underpin the workings
of our core business.
direction, despite complexities and delays introduced by
MEMBER BASE
Covid-19.
• We have a premium and affluent member base
While there is certainly still a long road ahead of us, we
• We have a known renewal rate of 50.2 per cent with
also need to acknowledge the significant progress that
Members that redeem 12 or more offers a year
has been made in the turnaround of the organisation,
the building of our business foundations and the
alignment on our longer-term strategy. While our
restructure was significant, so was the unwavering
commitment of our team to our customers - Members,
Fundraiser groups, Merchant partners, and Enterprise
clients. I would like to acknowledge the hard work
and dedication of our employees whose parallel work
efforts on customer service and transformation were
simultaneously achieved amidst a pandemic that has
significantly impacted our team, sales revenue, and
entire network of stakeholders.
MERCHANT PARTNERS
• We have one of the largest databases of quality
Merchant partners in Australia and New Zealand
• Unique coverage across multiple category types
including dining, travel, activities, and retail
• Best in class savings that are valid year-round
without multiple restrictions, unlike other market
players
• Members have access to some of the most exclusive
restaurants, wine dinners, and experiences, all at
reduced prices
As I present my first formal letter as your CEO, there
FUNDRAISER GROUPS
is still much work to be done, but I am pleased with
the outcomes of our hard work, and confident that
IncentiaPay is far better positioned to capitalise on the
opportunities before us.
A SOLID FOUNDATION TO BUILD ON
We have the support and backing of our major
shareholders, cash funding and enviable assets. We
have a brand with more than 26 years of history, a
• We are strongly anchored in local communities with
deep connections across our Fundraiser groups
• We provide a unique yet simple fundraising
opportunity for our Fundraisers and their
supporters, who in turn, are our Members
• Fundraisers have always been and will continue to
be core to our value proposition
ENTERPRISE CLIENTS
channel of more than 15,000 Fundraiser groups across
• 35+ corporate clients
Australia and New Zealand selling Entertainment
Memberships, a Merchant partner base of almost
• Clients across multiple industries including banking,
insurance, superannuation, utilities, industry bodies
9,000 organisations offering goods and services across
and associations
20,000 merchant locations, and a Member base of
• Widespread geographic footprint with broad depth
more than 590,000 people (including Entertainment
and breadth of offers built up over many years, and
subscriptions, Frequent Values subscriptions and
applicability of interest to a wide end-user member
Enterprise clients).
base that is difficult and costly to replicate
CEO’S OPERATING REVIEW
66
FOUR-PHASED APPROACH FOR THE
ROAD AHEAD
In December last year at the Annual General Meeting,
I defined IncentiaPay’s four-phased approach for the
transformation. It consisted of the following:
1. TURNAROUND
• Cost reduction
• Book to digital
transition
• Focus on core business
• New channels
3. STRATEGY
• Medium to long-term
corporate strategy
• Organic growth
• Inorganic growth
2. FOUNDATIONS
• Platforms
• Product
• Team
• Operating model
4. BRAND
• Awareness & profile
• Media relations
• Investor relations
TURNAROUND
100 per cent digital
A key decision was also made over the past financial
year to transition the Company to a digital-only
world. The organisation, which has sold the iconic
Entertainment book to its Members for 26 years made
a strategic decision that from 1 June 2020, the book
would no longer be sold. In addition to cost savings from
a logistics and printing perspective, additional benefits
also included:
• App members redeeming at higher levels than book
members and gaining greater value;
• a full 12-months of validity from the date purchased;
• a more environmentally sustainable delivery
mechanism;
• a more user-friendly experience;
• the ability to add new offers at any time and allow
members to take advantage of them instantly;
• the ability to share a Membership across multiple devices;
• greater ability to increase member retention;
• better access and connection to our members via
IncentiaPay was a Company in need of significant
electronic communications; and,
restructure, as evidenced by our FY2019 financial results.
• an important step towards our fintech future.
Substantial progress has been made over the past eight
months with our turnaround on track, our commitment
to a digital future without the iconic Entertainment book
completed, and a 54 per cent reduction in our underlying
operating loss from $7.4 million in FY2019 to $3.4 million
in FY2020. Underlying operating loss in FY2020 was
impacted by the application of AASB 16, an accounting
standard that removes operating lease payments off the
Profit and Loss Statement and onto the Balance Sheet,
and is instead replaced by depreciation and interest which
appears outside of EBITDA reporting. The net effect is the
removal of $1.9 million to underlying operating loss.
Overall, the cost base going forward was reduced, in
particular:
• we reviewed and rationalised branch-based
expenditure including early termination of leases where
appropriate;
• baseline IT expenditure was reduced as part of an
IT infrastructure review;
A digital transition campaign was put in place at the
end of 2019 to manage the shift of book Members to
the App, including free trials to encourage take up. The
outcome has been in line with Company expectations,
based on general attrition rates, this being the first time
a book is not available, and the effects of Covid-19 on the
2020 sales season.
Paramount to the turnaround was returning our attention
to the core of the Entertainment business and a focus on
our Member base, Merchant partners, Fundraiser groups
and Enterprise clients. By better understanding the
needs of our audiences and building value propositions
to serve them, we will gain far more from these mutually
reinforcing relationships. Over the past financial year,
there have been a number of high-level initiatives
undertaken.
Member base
The Member joining process was revised, with an
improved look and feel and a refreshed interface to
• we consolidated our payroll systems and moved onto a
lessen barriers and move a buyer from consideration to
single payment cycle allowing better cash control; and,
purchase more quickly and easily.
• we implemented tighter controls over expenditure
processes including the implementation of a purchase
order system.
We also launched 12 and 24 month memberships with
three new product options and new standard pricing,
giving the opportunity to subscribe at any time for a full
year of membership from any start date. This change in
7
product pricing has increased the average sale by
Enterprise clients
13 per cent so far, over an eight-month period.
Focus over the past financial year has been on
Also new to the product mix was the opportunity to
servicing and protecting the existing Enterprise
gift an Entertainment Membership online and instantly
clients. The team have built up long-term relationships
deliver it. This was launched in 2019 for Christmas.
with Enterprise clients and work closely to implement
Merchant partners
As part of the organisational restructure in October,
the travel and leisure department were amalgamated
with the Merchant business development team to
create a reduced Partnerships team. The team took
responsibility for all acquisition, retention, and servicing
of content clients across Entertainment memberships,
Frequent Values and Enterprise clients, with accounts
reallocated due to the decrease in team members.
To facilitate better Merchant servicing with a smaller
team and support previous areas that were handled by
an in-house production team, the process to automate
Merchant onboarding, and manage content changes
and additions commenced. This has resulted in the
health checks and monitor results. Campaigns for
Enterprise clients focused on driving activations for
the Frequent Values loyalty membership among their
customer base, with redemption-based marketing that
showcased the value of offers through a scheduled
program of client communications and highlighted
available and new offers.
This was effective in assisting with activations and
renewals as evidenced by a large corporate client
reporting a reduction in its lapsed customer rate
of over 1.5 per cent, representing a seven-figure
cost saving.
While new sales were a secondary focus in FY2020,
we continued to field interest, signing a large corporate
in-house build of a product that can be integrated into
bank, as well as one of Australia’s largest insurance
other technology systems in the future as needed.
companies.
As at the end of June 2020, the seasonal recommit of
Website and App enhancements
merchants across Australia and New Zealand saw a
Several improvements have been made to the
81 per cent retention rate.
Entertainment website and App functionality. Among
Fundraiser groups
We have worked closely with our Fundraiser groups
over the past financial year to deliver more value. We
launched a new Fundraiser support program, to include
education and better training, as well as a digital asset
management solution to help store, organise, manage,
create, and distribute Fundraiser marketing assets.
The software solution allows the organisation to track
and analyse the use of digital assets by the Fundraiser
groups to better communicate and market to them.
The servicing of Fundraiser groups was also
restructured during the past financial year, with smaller
Fundraising groups moving to an internal inside sales
team, and an external call centre. In response to the
need to decrease expenditure due to Covid-19, all
accounts were temporarily brought back in-house and
reallocated to existing account managers. We continue
to use a flexible model that enables us to scale up and
down our need for external resourcing.
the most significant for Members included a new
website homepage and new online member journey
that changed the purchase, activation, and renewal
flow, enabled the bulk purchase of online subscriptions,
and introduced a membership gifting service. Tagging
for revenue source tracking and optimisation purposes
along with Google Ad-Words support was also
introduced, as was the enablement of promotional
codes and back-end redemption tracking for member
campaign execution, and a postcode search page to
find offers ‘near me’.
A number of administration improvements were
made to the Fundraiser and Merchant portals of
the Entertainment website, including improved
functionality to reset forgotten account keys, account
numbers and account passwords, and view Fundraiser
balances for commission raised.
From an internal perspective, improvements were made
to back-end administration portals to improve process
efficiency, and benefit from better reporting functionality.
CEO’S OPERATING REVIEW
8
FOUNDATIONS
We worked on defining and implementing the
foundations required for an efficient, long-term
business to maximise customer focus and take
advantage of market opportunities. This included
(CXO), Toby Ellis, our existing GM of Sales was
appointed as our Chief Revenue Officer (CRO), and
Stacey Hampton remained as our existing General
Manager of People (GM People).
Organisational restructure
reviewing and redefining our team, structure,
During the past financial year, IncentiaPay underwent
platforms, and culture.
Building a high performing team
During the past financial year, we have significantly
enhanced our Leadership Team with the following
appointments; Ben Newling, our existing GM of
Commercial was appointed to the position of Chief
Operating Officer (COO), Linda McDonald was
appointed as our Chief Customer Experience Officer
a significant organisational restructure, which saw
a decrease in employee numbers. The largest area
of restructure was in the Sales Team, as part of the
Company’s drive for better efficiency and effectiveness.
This resulted in the formation of an Inside Sales Team
focused on the acquisition and account management of
our smaller Fundraiser groups, and in-bound enquiries.
9
Building platform capability
Impact of Covid-19
The two areas in our business where platforms play a
At the timing of preparing this Annual Report, the
significant role in our future are Customer Experience
Covid-19 pandemic continues to evolve and change,
(including Marketing), and Technology. Historically, we
and the situation differs in Australia by state. As such,
have underinvested in building platform capability in
the Board and Management continue to monitor
both of these areas.
Over the past financial year, we have engaged with our
the situation and adapt. The virus has impacted
the business in its entirety, as well as all its key
existing and various external providers to implement
stakeholders.
a transformation plan that going forward, will
Merchant partners have been severely affected with
accelerate and better support the needs of our various
the shutdown of restaurant dine-in, travel restrictions
stakeholders and help us to access untapped market
in place and the temporary closure of many leisure
potential.
activities. As a direct response to the effect of Covid-19,
Transforming our core with culture
During the past financial year, we commenced the
transformation of our corporate culture, with a focus
on understanding the Company’s mission, and the
values and behaviours that we wish to uphold.
The Company cemented and socialised its mission to
create connection, a sense of belonging and a clear
purpose across all our stakeholders. As a loyalty
platform, our purpose is to create communities where
everyone benefits, through experiences, savings,
philanthropy, and the building of businesses.
We also committed to defining a Company direction
that gave purpose to the roles of our employees and
forming, “The Entertainment Way”, and in so doing,
we defined an agreed set of values to work to –
Community, Challenge, Courage, and Together. We
will come together, challenge ourselves and grow in
support of the Entertainment community. This new
“Way” is centred on a “One Team” approach in service
to our stakeholders.
We have successfully spent the past six months living
our new culture, improving communications and
information sharing, identifying the best platforms to
do so, and providing as much transparency as possible
with regards to the decisions that are made.
This has been particularly important from the onset
of Covid-19, where we were forced into a work
environment that saw us collaborating from afar
and unexpectedly changing our short-term strategic
focus. Despite challenging times, we have upheld the
corporate values and behaviours that were defined,
and I am immensely proud of the team.
the Company pivoted from a dine-in, to a takeaway
focus, launching the #EatAloneTogether campaign
in conjunction with the Restaurant & Catering
Association of Australia (R&CA) - its purpose to drive
immediate offer redemptions and support customer
traffic to Merchant partners. We will continue to work
with affiliated associations such as R&CA to evolve
how we assist our Merchant partners through these
challenging times, and evolve campaigns such as these
to maintain relevance like the shift from supporting
#EatAloneTogether to #TakeAwayTuesdays.
The virus is expected to impact Fundraisers for the
remainder of the year who are now unable to raise
money as they have traditionally done. With physical
events significantly impacted in the foreseeable future,
there is a need to find new approaches to engaging
with and gaining financial support. Entertainment’s
new 100 per cent digital platform is a simple, low cost
mechanism to aid our Fundraiser Groups in raising
those funds.
Commencement of the fundraising season which usually
starts in March was delayed by more than three months,
as were Entertainment’s Fundraiser group launches
which pivoted to focus on helping local communities.
With unemployment rates growing, Members are facing
economic hardship due to job losses or decreased
income. As at the date of this report, renewal rates are
lower than in previous years, with the possibility that
redemption of offers will also be lower in the coming
financial year than in previous periods.
The outcome of this has been financially detrimental
to the organisation, delaying the launch of sales
season and increasing the Company’s requirements for
liquidity, and funding. Due to far lower than expected
member sales, there was a material impact on revenue
between March and August 2020.
CEO’S OPERATING REVIEW
10
STRATEGY
At the end of 2019, IncentiaPay commenced a strategic
engagement to review and document the medium to long-
term corporate business strategy. As we move through
the current turnaround phase and focus on building the
business foundations, of equal importance is how we both
execute in the short term, and position ourselves well to
take advantage of the longer-term opportunities to 2023
We will partner with our Merchants to continue to
drive value and new customers to their businesses,
and enhanced insights to assist them in delivering a
stronger business outcome.
We will use our existing marketing and automation
platform more strategically to target current and
future Members with more relevant product offers,
communications, and campaigns that deliver even
and beyond. We have engaged a corporate consulting
greater performance.
agency to work with the business to define our approach,
We will utilise our relationships with Enterprise clients in
and we look forward to working through and sharing these
healthcare, telecommunications, and superannuation to
plans with the market in due course.
target their customer bases fuelling both our acquisition
Corporate governance and risk management
IncentiaPay’s Board remain strongly committed to sound
corporate governance practices and to managing risk to
protect 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.
For more information on our corporate governance,
please refer to the corporate governance statement on
the IncentiaPay website at www.incentiapay.com. For an
outline of business risks, please refer the Business Risks
section of this Annual Report.
Looking ahead
growth strategy and our Enterprise client engagement.
Technology and platforms are key to our current and
future success. On 3 August 2020, we announced
a strategic partnership with Paywith, an innovative
fintech company with a proven track record in building
game changing offer syndication, payments, and
rewards solutions. This is a key step forward in our
transformation strategy, with an impending product
suite that is going to transform the rewards and
payment industry, and positively impact thousands of
not-for-profits, schools and associations.
We look to our technology focused future in the fintech
industry. We will leverage data and insights, improve
participant experience, build member scale, focus on
the breadth and depth of Merchant partner content,
Our turnaround is on track. Despite Covid-19 delays, it
and better support Fundraiser groups.
is still expected to complete towards the end of next
financial year. We have made substantial progress on
business foundations and will continue to define and
refine our overall strategy for FY2023 and beyond.
We are sufficiently capitalised, with Suzerain, our largest
shareholder continuing to demonstrate its ongoing
confidence and commitment to the business so we can
address the significant and untapped market potential we
know exists.
We are working on enhanced value propositions for
Members, Fundraisers, and Merchants. We intend to
improve the current Fundraiser portal, as well as the
process by which Fundraiser groups join Entertainment.
We will create a more user friendly, automated, quicker,
and easier process, that is facilitated by software, and
allows these groups to access Fundraiser material
needed in a manner we can analyse.
A future that works for everyone
We have strong foundations, a significant opportunity
to deliver better value to customers and shareholders
and plans to execute. I would like to thank our
Members, Fundraisers, Merchant partners and
Enterprise clients for their loyalty, use of the platform
and for being our most vocal champions. I would like
to thank the team at IncentiaPay, including the Board,
for their hard work, dedication, sacrifice, and customer
focus, in a period that has been extremely challenging.
Finally, thank you to our shareholders for your faith in
the longer-term potential of this Company.
HENRY JONES
CHIEF EXECUTIVE OFFICER
11
CEO’S OPPERATING REVIEW
12
Financial
Review
131313
F I N A N C IA L R E V I EW
Gross revenue for FY2020 was $42.2 million, underlying
EBITDA for FY2020 was a loss of $3.4 million, and
negative operating cash flow was $13.8 million. Net
Membership revenue during FY2020 was lower than
expected due to a delay in the formal commencement
of the 2020 sales season, originally scheduled for
February. The launch was rescheduled to June 2020
as a series of virtual events, due to restrictions placed
loss after tax (NLAT) from ordinary activities was
on large gatherings. In prior years, the sales launch was
$24.7 million. Australian revenue accounted for
a series of face to face events that spearheaded the
$37.6 million, or 89.0 per cent (FY2019: $59.2 million,
seasons Fundraiser group activities.
91.8 per cent), while New Zealand revenue accounted
This disruption led to lower than anticipated activity
for $4.6 million, or 11.0 per cent (FY2019: $5.3 million,
from the fundraiser channel, and accordingly subdued
8.2 per cent).
G R O S S R E V E N U E
sales to members. In addition to launch disruption,
access to membership benefits has temporarily
reduced the appeal of an Entertainment subscription,
Overall gross revenue for FY2020 was $42.2 million
and uncertainty associated with job security has also
compared to $64.6 million in FY2019. This included
driven down demand.
$2.5 million, or 0.6 per cent from fee income and paid
Paid advertising revenue is down on the prior year due
advertising (2019: $5.4 million), $24.8 million, or
to the move away from printed books to digital-only
59 per cent from membership sales (2019: $28.6
memberships. This reduction was expected given the
million), $4.1 million, or 1.0 per cent from Enterprise
nature of the change and the popularity of the printed
client sales (2019: $3.3 million) and $10.7 million, or
25.4 per cent from gift card sales (2019: $27.3 million).
Government assistance provided during the calendar
year was $1.05 million (compared to no government
assistance in the previous corresponding period)
and consisted of a cash boost of $0.15 million and
JobKeeper payments of $0.9 million.
book with both Entertainment Members and Merchants.
The Company is repositioning the advertising product
offering to capitalise on the digital platform moving
forward.
N E T LOSS AF TE R TA X AN D I M PAI R M E NTS
Reported net loss after tax (NLAT) from ordinary
activities in FY2020 was $24.7 million compared to a net
The decrease in revenue was predominantly attributed
loss after tax from ordinary activities in FY2019 of
to a $16.6 million or a 61.0 per cent decline in gift card
$37.9 million. The net loss was predominantly attributed to:
sales from $27.3 million down to $10.7 million; a
• a 35.0 per cent or $22.4 million reduction in
$1.2 million or 36 per cent decline in paid advertising
underlying revenue;
and travel from $3.3 million down to $2.1 million; a
• transformation and restructure costs incurred to pivot
$3.8 million or 13.0 per cent decline in membership
the business from print to digital-only memberships;
sales from $28.6 million to $24.8 million; and, a
• impairment of the deferred consideration from the
$0.8 million increase in Enterprise client revenue from
Bartercard divestment;
$3.3 million to $4.0 million or a 24.0 per cent increase.
• impairment of leasehold improvement assets due to
A review of gift card offerings was undertaken midway
through FY2019, with a view to only offer gift cards that
provided a positive margin and contributed to overall
business objectives. The prior year’s gift card revenue
included those gift cards that were subsequently
removed from Entertainment’s offering. Furthermore,
gift card revenue was severely impacted towards the
second half of the year due to Covid-19.
branch closures;
• impairment of Entertainment Digital intangible assets
prior to disposal in early July 2020;
• impairment of goodwill given the assessment of the
net present value of discounted cash flows associated
with the Entertainment cash generating unit; and,
• acceleration of amortisation for technology
related intangible assets due to the technology
transformation initiative.
FINANCIAL REVIEW
1414
14
Despite a reduction in gross revenue and higher than
expected NLAT, the NLAT has reduced from the prior
year due to the transition from a printed book to a
digital-only Entertainment membership, resulting in
reduced production and logistics costs. Furthermore,
a restructure of operations and the reduction of
employee headcount has successfully removed fixed
employee related costs from the business, while
the closure of branches reduced property related
fixed costs. Additionally, the prior year’s NLAT
was impacted to a greater extent by impairment
adjustments to goodwill.
The Company has also taken active steps in the
management of costs due to challenging conditions
brought on by reduced revenue and the delayed
sales season launch. These included negotiating
with property managers for rent relief, employees’
salaries reduced by between 10 per cent and 40 per
cent, negotiating delayed payments to suppliers and
accessing all available support provided by both Federal
and State governments, including accessing cash grants
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 FY2020, 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 effects of
Covid-19, as well as the focus on rebuilding the core
business over the short to medium term.
As announced on 28 February 2020, the Company
obtained additional unsecured funding from its major
shareholder, Suzerain Investments Holdings Ltd
(Suzerain) of $5.8 million to support the business in
expediting revenue generating initiatives.
The Company also announced on 4 June 2020, that
Suzerain agreed to increase the facility by $4.0 million
for working capital and operational requirements.
Furthermore, an additional $1.2 million facility was
secured for transformational capital expenditure, from
Skybound Fidelis Investment Limited as trustee for
Skybound Fidelis Credit Fund.
and deferment of tax obligations. This will continue into
D I V I D E N D S
No dividend has been declared in relation to the
FY2020 results. The Board of Directors of IncentiaPay
do not expect to declare any dividends.
FY2021, thereby accessing all available cost reductions
and government support.
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
The Company continued with the restructure program
which commenced in the second half of FY2019,
with the focus to remove ongoing fixed costs from
the business. In line with that, the Company incurred
restructure costs associated with employee termination
and redundancies. Furthermore, the Company
continued to review leased office space and terminated
two leases early during FY2020.
D I S CO N TI N U E D O P E R ATI O N S
As part of the ongoing review of operations of the
Company, the Board commenced the disposal of the
assets associated with MobileDEN, which was then
finalised on 1 July 2020. This transaction did not result
in the divestment of any entities, as it was structured
around the disposal of associated assets of the
MobileDEN platform.
15
16
SECTION 0 | TITLE TO BE CONFIRMED Leadership
Team
1717
B OA R D O F D I R E C TO R S
Meet IncentiaPay’s Board of Directors – a group of knowledgeable business executives
with a track record of growing and building businesses.
STEPHEN HARRISON CHAIRMAN
Stephen has over 30 years of experience in the financial services, funds management, M&A,
private equity, and accounting fields - primarily focused on the energy, technology, IT services,
infrastructure, financial services, health, entertainment, and natural resource sectors.
He has held Director positions with international fund manager subsidiaries, 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 unlisted and listed companies
both in Australia and internationally.
He is currently the Chairman of two other public companies in Australia; NobleOak Life
Limited and Conscious Capital Limited.
JEREMY THORPE NON-EXECUTIVE DIRECTOR
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.
CHARLES ROMITO NON-EXECUTIVE DIRECTOR
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.
Charles hold an M.Sci (Physics) and a PhD (Innovation Management) from the University of
Cambridge.
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 an experienced business professional with more than 20 years of experience
across a variety of industries including finance, property, and funds management.
He is the founder and CEO of Skybound Fidelis Investment Limited - a specialist structured
finance, commercial credit, and property fund manager. He also serves on the boards
of all subsidiary and associate companies within Skybound Australia’s diverse range of
investments in Australia.
Dean holds a Bachelor of Commerce, Bachelor of Laws and is a member of Chartered
Accountants Australia and New Zealand.
LEADERSHIP TEAM
1818
E XC E CUTIV E TE A M
IncentiaPay has an outstanding leadership team with a deep history in business
management, technology, and marketing.
H E N RY J O N E S C H I E F E X E C U TI V E O F F I C E R
Henry Jones has more than 25 years of executive experience, predominantly in the
technology sector, having started, stabilised and grown businesses, both regionally
and globally. Prior to IncentiaPay, Henry was with IBM where he held senior positions
across Australia, New Zealand, and North America. Henry is also active with a number
of smaller entrepreneurial ventures, as a mentor and investor.
His role as CEO is key to leading and accelerating the Company’s turnaround and
building on its existing foundation to set the strategy for future growth.
Henry has an MBA from Harvard Business School, an LLB (Law) and a BA (Economics
and Politics) from the University of Melbourne.
B E N N E W L I N G C H I E F O P E R ATI N G O F F I C E R
Ben Newling has more than 15 years of experience across general management and
corporate advisory within investment banking, retail banking, and technology. His
executive experience covers equities, capital markets, M&A’s, and people management.
His role as COO spans commercial and legal compliance, finance, operations and
human resources.
Ben has a Master of Business Administration (MBA) focused in Finance and Financial
Management Services from the Macquarie Graduate School of Management.
L I N DA M C D O N A L D C H I E F C U S TO M E R E X P E R I E N C E O F F I C E R
Linda McDonald has more than 20 years of experience in delivering exceptional results
in the retail, FMCG and consumer healthcare industries, having held several senior
executive leadership roles in Marketing, Customer experience, eCommerce and Sales.
Her role as CXO is key to driving significant revenue, the creation of a transformation
digital program and a clear focus on customer acquisition, retention, and value growth.
Linda has a Bachelor of Commerce (Marketing) from the University of Wollongong and
is currently completing her MBA at the Macquarie Graduate School of Management.
1919
TO BY E L L I S C H I E F R E V E N U E O F F I C E R
Toby Ellis has more than 20 years of experience in sales and distribution, customer
experience, start-up commercialisation, emerging technologies, telecommunications
and enabling infrastructure, financial services, and transformation, across Australia
and Asia.
His role as CRO is key to driving revenue and growth across all the Company’s
channels. He is also responsible for Merchant and Partner engagement.
Toby has numerous finance and project management qualifications, including an
MBA from the Macquarie Graduate School of Management.
S TAC E Y H A M P TO N G M O F P E O P L E
Stacey Hampton has over 18 years of experience managing people and culture across
finance and technology companies, with previous roles focused on building a culture of
engagement, diversity, and inclusion.
Her role as GM of People is key to leading the Company through transformational
change, focusing on employee lifecycle and workforce planning, attraction, selection,
performance management, talent identification, leadership, learning and development,
and reward and recognition.
Stacey has a Bachelor of Business (Human Resources) and a Graduate Diploma Human
Resources and Industrial Relations.
LEADERSHIP TEAM
2020
Business
Risks
21
B U S I N E S S R I S K S
IncentiaPay faces a number of business risks that may impact the Company’s ability to
achieve its strategic objectives and create shareholder value. The Board considers the
following to be the key risks currently facing the business.
RISK
NATURE OF RISK
There is no certainty that IncentiaPay will remain sufficiently funded. IncentiaPay
recently secured additional funding from its largest shareholder Suzerain
Investments Holdings Ltd (Suzerain) to provide it with sufficient working capital
FUNDING
for the short term.
IncentiaPay continually manages its cash position and regularly monitors its
investments to balance the risk, outlay, and timings.
The Company has seen operating cash inflows decline due to the delay of the sales
season, and restrictions affecting dining out and general travel expenditure. This
has directly resulted in the Company making the difficult decision to stand down
employees and reduce hours, as well as reduce salaries for senior management,
executives and the Board. This has had a short-term impact on operational capacity. It
has further impacted our working environment, with work from home arrangements
MACRO-ECONOMIC
put in place to protect the health, safety, and well-being of our employees.
UNCERTAINTY
DUE TO COVID-19
As the Covid-19 pandemic continues to evolve, the Board and Management
continue to monitor the situation and adapt, and expenditure continues to be
closely monitored and managed based on revenue. The team remains vigilant
in managing austerity measures across the business whilst commencing the
implementation of transformational initiatives to ensure the business is well
placed in a post Covid environment.
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. 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 on the financial performance and/or
PERSONNEL
financial position of IncentiaPay.
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. 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.
BUSINESS RISKS
22
RISK
NATURE OF RISK
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
IncentiaPay.
TECHNOLOGY
IncentiaPay has signed a multi-year Master Services Agreement with Paywith
Worldwide to deliver core components of its future technology capability. The
Apps and websites will remain the intellectual property of IncentiaPay and
continuity of service to Paywith’s backend has been protected though a call
option, and market standard escrow provisions. In addition, IncentiaPay have a
technology team on staff, to ensure the ongoing performance of our systems.
REGULATORY
REPUTATION
IncentiaPay is subject to substantial regulatory and legal oversight. The
agencies with regulatory oversight of IncentiaPay and its subsidiaries include,
among others, the ASX and ASIC. Failure to comply with legal and regulatory
requirements may have a material adverse effect on IncentiaPay and its reputation
among 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.
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.
23
RISK
NATURE OF RISK
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
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 and customer experience platform 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.
COMPETITION
THIRD PARTY
FAILURE
INTELLECTUAL
PROPERTY RISK
BUSINESS RISKS
24
Directors’
Report
25
DIRECTORS’ REPORT
The Directors present their report on the consolidated
entity IncentiaPay Ltd and its controlled entities
(IncentiaPay) for the financial year ended 30 June
2020. The information in the CEO’s Operating Review
and Financial Review forms part of this Directors’
report and should be read in conjunction with this
PROCEEDINGS ON BEHALF OF COMPANY
No person has applied to the court under Section
237 of the Corporations Act 2001 for leave to bring
proceedings on behalf of the Company, or 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.
section of the Annual Report.
NON-AUDIT SERVICES
GENERAL INFORMATION
DIRECTORS
The Board of Directors, pursuant to advice from
the Audit and Risk Committee, is satisfied that the
provision of non-audit services during the year is
The following persons were Directors of IncentiaPay
compatible with the general standard of independence
Ltd during or since the end of the financial year up to
for auditors imposed by the Corporations Act 2001.
the date of this report:
The Directors are satisfied that the services disclosed
• Stephen Harrison (appointed 15 February 2019)
below did not compromise the external auditor’s
• Jeremy Thorpe (appointed 16 May 2019)
• Charles Romito (appointed 28 June 2019)
• Dean Palmer (appointed 15 August 2019)
Particulars of each Director’s experience and
independence for the following reasons:
• 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;
qualifications are set out on pages 28 to 29 of this
and,
report.
DIVIDENDS PAID OR DECLARED
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.
• the nature of the services provided does not
compromise the general principles relating to
auditor independence in accordance with APES 110:
Code 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
INDEMNIFYING DIRECTORS AND OFFICERS
30 June 2020:
The Company has entered into a deed of indemnity
in favour of each Director and Officer of the
Company. The indemnity operates so that officers are
indemnified on a full indemnity basis and to the full
extent permitted by law against liabilities and losses
incurred as an officer of the Company.
During or since the end of the financial year, the
Company has paid premiums to insure the Directors
$
Taxation services
79,874
Other services
725
Total
80,599
AUDITOR’S INDEPENDENCE DECLARATION
and Officers against liabilities for costs and expenses
The lead auditor’s independence declaration for the
incurred by them in defending legal proceedings
year ended 30 June 2020 has been received and can
arising from their conduct while acting in the capacity
be found on page 41 of the Annual Report.
of Directors or Officers of the Company, other than
conduct involving a wilful breach of duty in relation
to the Company. The insurance is in accordance with
section 199B of the Corporations Act 2001 (Cth). In
accordance with the terms of the policy, the policy
prohibits disclosure of its terms, including the amount
of the premium.
DIRECTORS’ REPORT
26
ASIC INSTRUMENT 2016/191 ROUNDING
IN FINANCIAL STATEMENTS / DIRECTORS’
REPORT
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, or in certain cases, to the
nearest dollar.
MATTERS ARISING AFTER THE END OF THE
FINANCIAL YEAR
The impact of the Covid-19 pandemic is ongoing and
it is not practicable to estimate the potential impact,
positive or negative, after the reporting date. The
situation is rapidly developing and is dependent on
measures imposed by the Australian Government and
other countries.
There were no other matters arising after the end of the
financial year which may significantly affect IncentiaPay’s
operations, their results in future financial years or the
state of affairs in future financial years.
ENVIRONMENTAL REGULATION
The Group is not subject to any significant environmental
regulation under a law of the Commonwealth or of a State
or Territory.
OPTIONS
There were no options over ordinary shares granted to or
vested by directors or other key management personnel
as part of compensation during the year ended 30 June
2020. There were no ordinary shares of the Group issued
on the exercise of options during the year ended 30 June
2020 and up to the date of this report.
27
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
C H A I R M A N
Board appointment
28 June 2019 as Chairman
15 February 2019 as Non-Executive Director
13 August to 14 October 2019 as Interim Executive Chairman
Interest in shares and options
Nil
Special responsibilities
Member of the Audit and Risk Committee
Member of the Nominations and Remuneration Committee
Directorships held in other listed entities
Sinetech Ltd
during the three years prior to the current year
MEC Resources Limited
Qualifications
Bachelor of Economics, CPA
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.
Experience
J E R E M Y TH O R P E
N O N - E X E C U TI V E D I R E C TO R
Board appointment
16 May 2019
Interest in shares and options
Jeremy Thorpe has an indirect interest in 422,386,092 shares.
Jeremy Thorpe’s family trust is a unit holder in Australia
Fintech Pty Ltd ACN 619 156 099 as trustee of the Australian
Fintech Trust, and Jeremy Thorpe is an employee of a related
entity of Suzerain.
Special responsibilities
Member of the Audit and Risk Committee
Member of the Nominations and Remuneration 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, and
consumer and business credit.
DIRECTORS’ REPORT
28
C H A R LE S R O M ITO
N O N - E X E C U TI V E D I R E C TO R
Board appointment
28 June 2019
Interest in shares and options
Nil
Special responsibilities
Member of the Audit and Risk Committee
Chairman of the Nominations and Remuneration 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
Experienced management consultant with an extensive
background in VC/PE and management academia. Expertise
lies in the intersection of innovation management, growth
strategy, and business transformation.
Passion for business model innovation, growth, transformation,
venturing and new businesses. Worked in VC/PE and been a
Lead Syndicate Investor for several private deals.
Published academic that has presented at world-leading
conferences on innovation management and designed,
developed, and delivered postgraduate and executive education
to several thousand high-performers from all five continents.
D E A N PA LM E R
N O N - E X E C U TI V E D I R E C TO R
Board appointment
15 August 2019
Interest in shares and options
Special responsibilities
Dean Palmer has an indirect interest in 422,386,092 shares. Dean
Palmer’s family trust is a unit holder in Australia Fintech Pty Ltd
ACN 619 156 099 as trustee of the Australian Fintech Trust, and
Dean Palmer is an employee of a related entity of Suzerain.
Chairman of the Audit and Risk Committee
Member of the Nominations and Remuneration Committee
Directorships held in other listed entities during
the three years prior to the current year
Nil
Qualifications
Experience
29
Bachelor of Laws (LLB), Bachelor of Commerce
Member of Chartered Accountants Australia & New Zealand
Chartered Accountant with more than 20 years of experience.
Founder and CEO of Skybound Fidelis Investment Limited - a
specialist structured finance, commercial credit, and property
fund manager. Has held numerous senior executive roles both
in Australia and the UK.
B E N N E W LI N G
CO M PA N Y S E C R E TA RY
Ben was appointed as the Company Secretary on 11 February 2019. Ben is employed at IncentiaPay as the Chief
Operating Officer. He holds an MBA.
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
Stephen Harrison
Jeremy Thorpe
Charles Romito
Dean Palmer
15
15
15
11
15
14
15
10
2
2
2
2
2
2
2
2
3
3
3
3
3
3
3
3
This Directors’ report, incorporating the CEO’s Operating Review, Financial Review and the Remuneration report
is signed in accordance with a resolution of the Board of Directors.
STEPHEN HARRISON
CHAIRMAN
18 September 2020
DIRECTORS’ REPORT
3030
Remuneration
Report
31
R E M U N E R ATI O N R E P O R T F R A M EWO 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.
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 02 0
NAME
POSITION
DATES
Stephen Harrison
Non-Executive Chairman
Full Financial Year
Jeremy Thorpe
Charles Romito
Dean Palmer
Non-Executive Director
Full Financial Year
Non-Executive Director
Full Financial Year
Non-Executive Director
Appointed 15 August 2019
E X E C U TI V E S A S AT 3 0 J U N E 2 02 0
NAME
Henry Jones
Ben Newling1
Darius Coveney
Heidi Halson
POSITION
CEO
COO
Acting CEO
EGM Retail
DATES
Appointed 14 October 2019
Full Financial Year
Until 30 August 2019
Until 20 August 2019
1. For the purposes of this report, Ben Newling is a KMP from 30 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.
During the period, the Company had a Performance Rights Equity Plan (PREP) in place. The terms and conditions
of the employee incentive plan were originally approved by shareholders on 5 April 2018. The PREP was wound up
on 22 July 2019 as most eligible employees had left the business and the Board’s intention was to provide a more
inclusive incentive plan for management and staff.
The Board has approved an Employee Gift Plan, which will see the Company issue $1,000 of shares to eligible staff
under section 83A-35 of the Income Tax Assessment Act 1997. The Board intends to issue theses shares from its
placement capacity.
Due to the impacts of Covid-19, the Board of Directors and KMPs temporarily reduced their remuneration by
between 30 per cent and 40 per cent.
Further, although not in the period, the Board approved a Loan Funded Share Scheme (LFS) for Henry Jones and
Ben Newling on 23 July 2020, and an Employee Share Scheme for other senior executives.
The Board approved Loan Funded Share Scheme is a three year long-term incentive plan for the CEO and
COO, which will vest over a three year period. Vesting conditions related to achieving FY2021 Board approved
budget, and for the FY2022 and FY2023 financial years, will vest where the share price is greater than
$0.10 and $0.15 respectively.
REMUNERATION REPORT
32
The Board approved Employee Share Scheme for senior management, will result in shares being issued into a trust
controlled by the Company. These shares will be subject to the same vesting hurdles as the LFS.
The Board’s policy is to review remuneration for KMP annually, based on market practice, duties and accountability.
All remuneration paid to Directors and Executives is valued at the cost to the Company and expensed in
accordance with Australian Accounting Standards. Independent advice is proactively sought when required,
particularly around the employment arrangements of new KMP including long-term incentive plans.
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.
The role, responsibility and charter of the Remuneration Committee was performed by the Board until 5 March
2020 when the Committee was re-constituted with Charles Romito appointed as Chairman of the Committee.
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).
E M P LOY E E G I F T P L A N
On 18 June 2020, the Board resolved to implement an Employee Gift Plan for all eligible employees under section
83A-35 of the Income Tax Assessment Act 1997. The Board accepts, since the onset of Covid-19, many staff have been
working reduced hours or are on reduced salaries. Commensurate with this, the Board approved the scheme and all
eligible employees will receive $1,000 of shares which will be issued from the Company’s placement capacity. Additional
information is included in note 31 to the Financial Statements.
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.
33
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 the achievement of agreed KPIs. The LTI is
provided predominantly as exposure to the price performance of ordinary shares of the consolidated entity, and
to align management incentives with long-term shareholder value.
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.
LONG-TERM INCENTIVES (LTI)
LTI’s are linked to share price performance and are provided to certain key management personnel as part of
their remuneration package, at the discretion of the Board. There were no LTI arrangements in place during the
period, however, LTI arrangements approved by the Board on 23 July 2020 include vesting arrangements on the
achievement of Board approved budget and share price hurdles. The exercise prices are 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 Company’s performance and its impact on shareholder
wealth for the five years to 30 June 2020:
FY2020
FY2019
FY2018
FY2017
FY2016
Revenue ($’000)
42,205
64,5721
75,8091
110,464
50,172
Profit/(loss) for the period
before tax ($’000)
(20,945)
(27,367)1
(23,197)1
11,349
8,134
Dividends paid ($’000)
-
-
2,666
3,877
3,071
Share price as at
30 June
$0.026
$0.045
$0.245
$0.740
$0.952
Change in share price
($0.019)
($0.200)
($0.495)
($0.212)
$0.145
1. Amounts exclude discontinued operations.
REMUNERATION REPORT
34
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
HELD AT
1 JULY 2019
RECEIVED AS PART
OF REMUNERATION
OTHER
CHANGES
HELD AT
30 JUNE 2020
DIRECTORS
Jeremy Thorpe1
Dean Palmer1
EXECUTIVES
Henry Jones
-
-
-
-
-
-
36,732,674
36,732,674
36,732,674
36,732,674
2,528,631
2,528,631
1. On 28 May 2020, Australia Fintech Pty Ltd as trustee for the Australia Fintech Trust, purchased 36,732,674 shares from Suzerain Investments
Holdings Ltd. Jeremy Thorpe and Dean Palmer are Directors of Australia Fintech Pty Ltd and beneficiaries of the Australia Fintech Trust.
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
HELD AT
1 JULY 2019
CHANGE IN
KMP STATUS
CLOSING
BALANCE
DIRECTORS
Iain Dunstan1
Darius Coveney1
3,035,714
2,678,571
(3,035,714)
(2,678,571)
-
-
1. Iain Dunstan left the Company during the year ended 30 June 2019 and Darius Coveney left the Company during the year ended 30 June
2020. The shares will be returned to the consolidated entity and will be held in an Employee Trust. As at 30 June 2020, the shares had not been
transferred to the employee trust, however, both individuals no longer qualify as KMP.
35
9 . 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
NON-
MONETARY
BENEFITS
BONUS
OTHER
SUPER-
ANNU-
ATION
OTHER
LONG
SERVICE
LEAVE
TERMINA-
TION
BENEFITS
LONG-TERM
INCENTIVE
PLAN
EQUITY
SETTLED
CASH
SETTLED
OTHER
(E.G.
HYBRIDS)
TOTAL
CASH
SALARY
AND
FEES
$
2020
DIRECTORS9
Stephen Harrison1 145,156
Jeremy Thorpe6
74,542
Charles Romito7
83,220
Dean Palmer2,6
65,270
EXECUTIVES
Henry Jones3
189,750
Ben Newling8
201,831
$
-
-
-
-
-
-
Darius Coveney4
94,717
3,590
Heidi Halson5
46,835
-
$
$
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
292
-
-
-
15,752
15,498
(68)
10,105
$
-
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
$
-
-
-
-
-
-
22,256
126,426 189,319
$
-
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
-
$
$
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
145,448
74,542
83,220
65,270
205,502
217,329
120,495
372,685
1. Stephen Harrison was appointed as Interim Executive Chairman from 30 August 2019 to 14 October 2019. This amount includes remuneration
related to that temporary appointment. Remuneration was paid partly in salary and partly to an associated entity.
2. Appointed as Director on 15/08/2019.
3. Appointed as CEO on 14/10/2019. Henry Jones is employed by IncentiaPay as a permanent full-time employee. For details relating to his
notice period required to terminate his contract, and termination payments provided for under the contract, refer to page 39.
4. Terminated on 30/08/2019. Termination benefits include unused annual leave paid on termination.
5. Terminated on 23/08/2019. Termination benefits include unused annual leave, redundancy, and notice period.
6. Directors fees were paid to an associated entity of Jeremy Thorpe and Dean Palmer and a related party of IncentiaPay Ltd.
7. Directors fees were paid to an associated entity of Charles Romito.
8. Remuneration disclosed is for period as KMP. Ben Newling is employed by IncentiaPay as a permanent full-time employee. For details relating
to his notice period required to terminate his contract, and termination payments provided for under the contract, refer to page 39.
9. All Directors are Non-Executive Directors other than where noted for an interim period. Directors do not receive performance related
compensation and are not provided with retirement benefits, apart from statutory superannuation where applicable.
REMUNERATION REPORT
36
SHORT-TERM
BENEFITS
POST
EMPLOYMENT
BENEFITS
LONG-TERM
BENEFITS
SHARE BASED
PAYMENTS
CASH
NON-
BONUS
OTHER
SUPER-
OTHER
LONG
TERMINA-
LONG-TERM
EQUITY
CASH
OTHER
TOTAL
SALARY
MONETARY
AND FEES
BENEFITS
ANNU-
ATION
SERVICE
TION
INCENTIVE
SETTLED
SETTLED
(E.G
LEAVE
BENEFITS
PLAN
HYBRIDS)
$
$
$
$
$
$
$
$
$
$
$
$
$
2019
DIRECTORS6
Stephen Harrison1,5
26,820
Jeremy Thorpe3
10,007
Charles Romito
-
PREVIOUS DIRECTORS
Murray d’Almeida1
42,975
Garth Barrett1
12,624
Chris Berkefeld1
138,186
Naseema Sparks1
128,073
EXECUTIVES
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Iain Dunstan2,5
245,343
375
70,832
Darius Coveney4
427,582
5,202
148,332
Heidi Halson
325,200
Toby Ellis
236,346
-
-
17,500
-
-
-
-
-
-
-
-
-
-
-
-
965
-
-
-
1,199
7,947
8,828
21,740
77,440
27,645
18,413
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
28,237
271,875
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(27,933)
(24,647)
72,706
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
27,785
10,007
-
42,975
13,823
146,133
136,901
338,594
905,784
443,051
254,759
1. Remuneration was paid partly in salary and partly to an associated entity.
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 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.
6. All Directors are Non-Executive Directors other than where noted. Directors do not receive performance related compensation and are not
provided with retirement benefits apart from statutory superannuation where applicable.
37
The proportion of remuneration linked to performance and the fixed proportion are as follows:
FIXED REMUNERATION
AT RISK - STI
AT RISK - LTI
FY2020
FY2019
FY2020
FY2019
FY2020
FY2019
DIRECTORS
Stephen Harrison
Jeremy Thorpe
Charles Romito
Dean Palmer
PREVIOUS DIRECTORS
Chris Berkefeld
Murray d’Almeida
Garth Barrett
Naseema Sparks
EXECUTIVES
Henry Jones
Iain Dunstan
Toby Ellis
Ben Newling
Darius Coveney
Heidi Halson
100%
100%
100%
100%
N/A
N/A
N/A
N/A
100%
N/A
N/A
100%
100%
100%
100%
100%
100%
N/A
100%
100%
100%
100%
N/A
87%
100%
N/A
86%
80%
-
-
-
-
-
-
-
-
-
N/A
-
-
-
-
-
-
-
-
-
-
-
-
N/A
21%
-
N/A
17%
4%
-
-
-
-
-
-
-
-
-
N/A
-
-
-
-
-
-
-
-
-
-
-
-
N/A
(8%)
-
N/A
(3%)
16%
The proportion of the cash bonus paid/payable or forfeited is as follows:
CASH BONUS PAID/PAYABLE
CASH BONUS FORFEITED
FY2020
FY2019
FY2020
FY2019
DIRECTORS
Stephen Harrison
Jeremy Thorpe
Charles Romito
Dean Palmer
PREVIOUS DIRECTORS
Chris Berkefeld
Murray d’Almeida
Garth Barrett
Naseema Sparks
EXECUTIVES
Iain Dunstan
Darius Coveney
Heidi Halson
Toby Ellis
Ben Newling
Henry Jones
-
-
-
-
-
-
-
-
N/A
-
-
N/A
-
-
-
-
-
-
-
-
-
-
50%
75%
100%
-
N/A
N/A
-
-
-
-
-
-
-
-
-
-
-
-
100%
100%
-
-
-
-
-
-
-
-
50%
25%
-
-
N/A
N/A
REMUNERATION REPORT
38
1 0 . 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
Title
Henry Jones
Chief Executive Officer
Agreement commenced
14 October 2019
Term of engagement
Ongoing
Details
Termination of employment:
• By either party on giving twenty-six (26) 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 and statutory entitlements to accrued leave, the
contract does not specify any termination payment.
Equity compensation
• Nil
NAME
Title
Ben Newling
Chief Operating Officer
Agreement commenced
30 August 2019
Term of engagement
Ongoing
Details
Termination of employment:
• By either party on giving thirteen (13) 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 and statutory entitlements to accrued leave, the
contract does not specify any termination payment.
Equity compensation
• Nil
39
1 1 . R E M U N E R ATI O N CO N S U LTA NT
IncentiaPay engaged a remuneration consultant in the financial year ended 30 June 2020.
Details of the recommendations made by the remuneration consultant are as follows:
• AON Rewards Solutions
• The consultant provided a benchmarking report in relation to the CEO’s remuneration on comparable
companies
• The total consideration for this engagement was $6,500 (excl. GST)
• The engagement was undertaken by the Chairman of the Nominations and Remuneration Committee in
consultation with the Chairman of the Board
• The Board is satisfied the recommendation was free from influence of KMP, given the selection of firm and
the engagement was managed directly through the Nominations and Remuneration Committee
REMUNERATION REPORT
40
Auditor’s
Independence
Declaration
41
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 2020 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
18 September 2020
PAR_SIG_01
PAR_NAM_01
PAR_POS_01
PAR_DAT_01
PAR_CIT_01
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.
AUDITOR’S INDEPENDENCE DECLARATION
42
Financial
Statements
43
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 02 0
CONSOLIDATED GROUP
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
NOTE
2
3
3
3
3
3
3
Bad debts
3
Other expenses
FY2020
$’000
42,205
(23,937)
(4,990)
(16,980)
(5,466)
(279)
(1,295)
(674)
(2,017)
(2,810)
(4,702)
FY2019
$’000
64,572
(41,919)
(14,553)
(19,141)
(2,015)
(2,943)
(346)
(2,622)
(2,419)
(447)
(6,134)
Operating loss before income tax
(20,945)
(27,967)
Gain on disposal of equity accounted investment
Loss before income tax
Tax benefit/(expense)
4(a)
Loss for the period
Loss for the period from discontinued operations
24
Net profit attributable to:
-
(20,945)
(3,717)
(24,662)
-
600
(27,367)
(786)
(28,153)
(9,751)
Members of the parent entity
(24,662)
(37,904)
Other comprehensive income
(Loss)/gain arising from translating foreign
controlled entities from continuing operations
Transfer of foreign currency translation
reserve to loss of discontinued operations
20
24
(29)
-
399
(208)
Total comprehensive loss for the period
(24,691)
(37,713)
Loss per share
Basic loss per share (cents)
5(a)
Loss from continuing operations
Loss from discontinued operations
Total
Diluted loss per share (cents)
5(a)
Loss from continuing operations
Loss from discontinued operations
Total
(8.2)
-
(8.2)
(8.2)
-
(8.2)
(12.1)
(4.2)
(16.3)
(12.1)
(4.2)
(16.3)
The accompanying notes form part of these financial statements.
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
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 02 0
CONSOLIDATED GROUP
NOTE
FY2020
$’000
FY2019
$’000
Current assets
Cash and cash equivalents
Deferred consideration
Trade and other receivables
Inventories
6
24
8
9
Other assets
10
Total current assets
Non-current assets
Deferred consideration
Right-of-use asset
Property, plant and equipment
24
11
12
Deferred tax assets
4(c)
Intangible assets
13
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Lease liabilities
Borrowings
14
15
16
Current tax liabilities 4(d)
Deferred revenue
Provisions
Total current liabilities
Non-current liabilities
Lease liabilities
Borrowings
Deferred revenue
Provisions
17
18
15
16
17
18
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
19
20
Accumulated losses
Total equity
5,307
-
992
134
2,351
8,784
-
2,781
1,327
-
14,387
18,495
27,279
6,235
1,731
517
186
6,219
764
15,652
2,158
2,691
350
182
5,381
21,033
6,246
116,026
377
(110,157)
6,246
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
The accompanying notes form part of these financial statements.
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
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 02 0
ORDINARY
SHARE
CAPITAL
ACCUMULATED
LOSSES
FOREIGN
CURRENCY
TRANSLATION
RESERVE
SHARE BASED
PAYMENTS
RESERVE
TOTAL
Balance at 1 July 2018
94,892
(47,591)
215
660
48,176
NOTE
$’000
$’000
$’000
$’000
$’000
Comprehensive income
Loss for the period
Other comprehensive income
Exchange differences on
translation of foreign operations
Transfer of foreign currency
translation reserve to loss of
discontinued operations
24
Total comprehensive loss for period
Transactions with owners,
in their capacity as owners
and other transfers
Shares issued during the period 19
Transaction costs
19
Movement during the period 20
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
FINANCIAL STATEMENTS
46
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 02 0
The accompanying notes form part of these financial statements.
ORDINARY
SHARE
CAPITAL
ACCUMULATED
LOSSES
NOTE
$’000
$’000
FOREIGN
CURRENCY
TRANSLATION
RESERVE
$’000
SHARE BASED
PAYMENTS
RESERVE
TOTAL
$’000
$’000
Balance at 1 July 2019
96,006
(85,495)
406
730
11,647
Comprehensive income
Loss for the period
Other comprehensive income
Exchange differences on
translation of foreign operations
Transfer of foreign currency
translation reserve to loss of
discontinued operations
24
Total comprehensive loss for period
Transactions with owners, in
their capacity as owners
and other transfers
-
-
-
-
(24,662)
-
-
-
(29)
-
(24,662)
(29)
Shares issued during the period 19
20,050
Transaction costs
19
Movement during the period 20
Total transactions with owners
and other transfers
(30)
-
20,020
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(730)
(24,662)
(29)
-
(24,691)
20,050
(30)
(730)
(730)
19,290
Balance at 30 June 2020
116,026
(110,157)
377
-
6,246
47
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 2020
The accompanying notes form part of these financial statements.
CONSOLIDATED GROUP
NOTE
FY2020
$’000
FY2019
$’000
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Government assistance received
Interest received
33,126
(47,616)
677
25
86,175
(99,591)
-
78
Net cash used in continuing operations
7
(13,788)
(13,338)
Cash flows from investing activities
Purchase of property, plant and equipment
Purchase of intangibles
Proceeds from sales of businesses
24
Proceeds from sale of unlisted equity investment
Net cash used in investing activities
Cash flows from financing activities
Net proceeds from issue of shares
19
Proceeds of loan repaid from external parties
Repayment of borrowings
Proceeds from borrowings
Payment of lease liabilities
Interest paid
Net cash from financing activities
Net increase/(decrease) in cash held
Cash and cash equivalents at beginning of financial period
Effects of movements in exchange
rates on cash and cash equivalents held
(40)
(169)
155
-
(54)
-
-
-
17,585
(1,610)
(249)
15,726
1,884
3,460
(37)
(1,597)
(1,878)
2,058
600
(817)
1,114
800
(4,000)
8,635
-
(221)
6,328
(7,827)
11,508
(221)
Cash and cash equivalents at the end
of the financial period in continuing operations
6
5,307
3,460
The accompanying notes form part of these financial statements.
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 02 0
Note 1
Summary of significant accounting policies ........................................................................................................................50
Note 2
Revenue .................................................................................................................................................................................................. 57
Note 3
Expenses ................................................................................................................................................................................................ 59
Note 4
Income tax .............................................................................................................................................................................................. 61
Note 5
Dividends, earnings per share and franking credit ..........................................................................................................64
Note 6
Cash and cash equivalents ........................................................................................................................................................... 65
Note 7
Cash flow information ..................................................................................................................................................................... 66
Note 8
Trade and other receivables ......................................................................................................................................................... 68
Note 9
Inventories .............................................................................................................................................................................................. 71
Note 10 Other assets ........................................................................................................................................................................................... 71
Note 11
Right-of-use assets ............................................................................................................................................................................72
Note 12
Property, plant and equipment ...................................................................................................................................................74
Note 13
Intangible assets ................................................................................................................................................................................. 76
Note 14
Trade and other payables .............................................................................................................................................................. 79
Note 15
Leases ......................................................................................................................................................................................................80
Note 16
Borrowings ............................................................................................................................................................................................ 82
Note 17
Deferred revenue ...............................................................................................................................................................................84
Note 18
Provisions ............................................................................................................................................................................................... 85
Note 19
Issued capital ....................................................................................................................................................................................... 88
Note 20 Reserves .................................................................................................................................................................................................90
Note 21
Key management personnel compensation ......................................................................................................................... 91
Note 22 Auditor’s remuneration .................................................................................................................................................................... 91
Note 23
Interests in subsidiaries and business combinations ....................................................................................................... 92
Note 24 Disposal groups classified as held for sale and discontinued operations ............................................................ 92
Note 25
Parent company information .......................................................................................................................................................99
Note 26
Segment information .......................................................................................................................................................................101
Note 27 Capital and leasing commitments........................................................................................................................................... 102
Note 28 Contingent liabilities and contingent assets ...................................................................................................................... 103
Note 29
Financial risk management ......................................................................................................................................................... 103
Note 30 Related party transactions ......................................................................................................................................................... 109
Note 31
Events after the reporting period ............................................................................................................................................ 110
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 02 0
N OTE 1 | S U M M A RY O F S I G N I F I C A NT
timing of expected revenue over the next 12 months by
ACCO U NTI N G P O LI C I E S
delaying renewals, which has been taken into account
in preparing the cash flow projections to assess the
B A S I S O F P R E PA R ATI O N
outcome of the going concern viability.
These general-purpose financial statements for
the year ended 30 June 2020 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
At 30 June 2020 the Group had cash on hand of
$5.3 million, net assets of $6.2 million and a net current
asset deficiency of $6.9 million. During the year ended
30 June 2020, the Group incurred a net loss before tax
from continuing operations of $20.9 million, including
impairment of $5.0 million, and incurred net cash
outflows from operating activities of $13.8 million.
(IFRS). Consequently, this financial report is compliant
The Directors have prepared cash flow projections
with IFRS. IncentiaPay Ltd is a listed public company
for the period from 1 July 2020 to 30 September 2021
incorporated and domiciled in Australia. The Company
that support the ability of the Group to continue as a
is a for-profit entity for financial reporting purposes
going concern. Most notable aspects of the cash flow
under Australian Accounting Standards. Material
projections include:
accounting policies adopted in the preparation of these
• Business transformation centred around technology,
financial statements are presented below and have
been consistently applied unless stated otherwise.
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 audited consolidated financial statements were
authorised for issue on 18 September 2020.
G O I N G CO N C E R N
The consolidated financial report has been prepared
on a going concern basis, which contemplates the
continuation of normal business operations and the
realisation of assets and settlement of liabilities in the
normal course of business.
During the year the Group focused its efforts on
transforming the business from a fixed membership
period to a 100 per cent rolling digital membership. The
digital membership was launched in November 2019 to
capitalise on the Christmas season. The formal launch
was scheduled for February 2020, however, due to
Covid-19 restrictions, was delayed as a virtual launch
to June 2020. Membership periods were extended
beyond 12 months to acknowledge the impact of limited
access to membership benefits and address concerns
raised by members. These changes have impacted the
to support revenue growth;
• Improved trading conditions on a progressive basis
to support merchant accessibility for members in the
short to medium term;
• Continued cost cutting through streamlining of
activities and processes;
• Continued receipt of government assistance; and,
• Continued support from the Group’s major
shareholder, Suzerain, through the availability of
financing facilities and accommodative repayment
terms. This includes an expectation that the Group
will defer the repayment of an amount of $500,000
in respect of the interest bearing loan, which is a
facility provided by Suzerain and its related entities
(all facilities in note 16 collectively referred to as the
Suzerain facilities) due to be settled on 30 September
2020, or to capitalise the repayment amount into
the existing facilities.
The funding of ongoing operations of the Group is
dependent upon the Group continuing to access
the Suzerain facilities and/or the Group reducing
expenditure in-line with current cash and financing
resources. As of 30 June 2020, the Group had undrawn
financing facilities from Suzerain totalling $8.3 million.
See note 16 for further information. This undrawn
amount has reduced to $7.6 million at the date of the
approval of this annual financial report.
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 02 0
The Directors have reasonable grounds to believe that
PROCESSES APPLIED
the ongoing financial support of Suzerain and its related
entities is likely to continue and therefore, the going
concern basis on which the financial report has been
As a consequence of Covid-19 and in preparing these
financial statements, management:
prepared is appropriate. However, should the Group
• Re-evaluated whether there were any additional areas
not meet its cash flow projections, the achievement
of judgement or estimation uncertainty beyond what
of which is inherently uncertain and highly sensitive to
has been disclosed above;
assumptions made in respect of revenue performance,
including not obtaining further financing from Suzerain
and its related entities as required, there is a material
uncertainty as to whether the Group will be able to
continue as a going concern.
• Updated its economic outlook – principally for the
purposes of inputs into its Expected Credit Losses
(”ECL”) through the application of forward-looking
information, but also for the input into the impairment
analysis of financial and non-financial asset classes
In the event the Group is unable to continue as a going
and disclosures such as fair values;
concern, the Group may be required to realise assets at
an amount different to that recorded in the Statement
of Financial Position, settle liabilities other than in the
ordinary course of business and make provision for other
costs which may arise.
A ) IMPACT KEY STATEMENTS OF FINANCIAL
POSITION ITEMS AND RELATED DISCLOSURES
THAT HAVE BEEN IMPACTED BY COVID-19 WERE
AS FOLLOWS:
Covid-19 was declared a world-wide pandemic by the
• Reviewed external market communications to identify
other Covid-19 related impacts;
• Reviewed public forecasts and experience from
previous downturns;
• Conducted several internal processes to ensure
consistency in the application of the expected impact
of Covid-19 across all asset classes; and,
• Considered the impact of Covid-19 on the Group’s
financial statement disclosures.
World Health Organisation in March 2020. Covid-19, as
Key Statements of Financial Position items and related
well as measures to slow the spread of the virus, have
disclosures that have been impacted by Covid-19 were as
since had a significant impact on global economies and
follows:
equity, debt, and commodity markets. The Group has
considered the impact of Covid-19 and other market
TRADE AND OTHER RECEIVABLES
volatility in preparing its financial statements.
The Group has reassessed expected credit losses in light
Given the dynamic and evolving nature of Covid-19,
of the current Covid-19 pandemic impacts on customers
limited recent experience of the economic and financial
as at 30 June 2020 and the adjusted loss rate was
impacts of such a pandemic, and the short duration
updated accordingly. See note 8.
between the declaration of the pandemic and the
preparation of these financial statements, changes
to estimates and outcomes that have been applied in
PROPERTY, PLANT AND EQUIPMENT AND
RIGHT-OF-USE ASSETS
the measurement of the Group’s assets and liabilities
Given the impact of Covid-19, the Property, plant and
may arise in the future. Other than adjusting events
equipment and Right-of-use assets were subject to
that provide evidence of conditions that existed at the
impairment testing which concluded that no material
end of the reporting period, the impact of events that
impairment was required.
arise after the reporting period will be accounted for in
future reporting periods.
INTANGIBLE ASSETS
Consistent with the Group’s accounting policies, the
Group has tested goodwill and indefinite life intangible
assets for impairment and has reviewed the carrying
value of its finite life intangible assets at the reporting
date for indicators of impairment and, where applicable,
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 02 0
reviewed the measurement of the carrying value of
monetary items are translated at the year-end exchange
such intangible assets. Such assessment incorporated a
rate. Non-monetary items measured at historical cost
consideration of Covid-19. See note 13.
continue to be carried at the exchange rate at the date
DEFERRED TAX ASSETS
of the transaction. Non-monetary items measured at fair
value are reported at the exchange rate at the date when
The Group has reassessed the recognition of deferred
fair values were determined.
tax assets based on a forecast taxable income in light of
the current Covid-19 pandemic impacts. See note 4.
Exchange differences arising on the translation of
monetary items are recognised in profit or loss, except
B ) PRINCIPLES OF CONSOLIDATION
where deferred in equity as a qualifying cash flow or net
The consolidated financial statements incorporate all of
investment hedge.
the assets, liabilities and results of the parent IncentiaPay
Exchange differences arising on the translation of
Ltd and all of its subsidiaries (also referred to as “the
non-monetary items are recognised directly in other
Group”). Subsidiaries are entities the parent controls. The
comprehensive income to the extent that the underlying
parent controls an entity when it is exposed to, or has
gain or loss is recognised in other comprehensive
rights to, variable returns from its involvement with the
income. Otherwise the exchange difference is
entity and has the ability to affect those returns through
recognised in profit or loss.
its power over the entity.
GROUP COMPANIES
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
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;
transactions between Group entities are fully eliminated
• Income and expenses are translated at average
on consolidation.
exchange rates for the period; and,
Accounting policies of subsidiaries have been adjusted
where necessary to ensure uniformity of the accounting
policies adopted by the Group.
• 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
C) FOREIGN CURRENCY TRANSACTIONS AND
dollars are recognised in other comprehensive income and
BALANCES
FUNCTIONAL AND PRESENTATION CURRENCY
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
The functional currency of each of the Group’s
period in which the Group disposes of the operation.
entities is measured using the currency of the primary
economic environment in which that entity operates.
D) GOODS AND SERVICES TAX (GST)
The consolidated financial statements are presented in
Revenues, expenses and assets are recognised net of the
Australian dollars, which is the parent entity’s functional
amount of GST, except where the amount of GST incurred
currency.
TRANSACTIONS AND BALANCES
is not recoverable from the relevant taxation authority.
Receivables and payables are stated exclusive of the
amount of GST receivable or payable. The net amount
Foreign currency transactions are translated into
of GST recoverable from, or payable to, the relevant
functional currency using the exchange rates prevailing
taxation authority is included with other receivables or
at the date of the transaction. Foreign currency
payables in the Statement of Financial Position.
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 02 0
Cash flows are presented on a gross basis. The GST
KEY JUDGEMENTS
components of cash flows arising from investing or
financing activities which are recoverable from, or
payable to, the relevant taxation authority are presented
as operating cash flows included in receipts from
customers or payments to suppliers.
E) COMPARATIVE FIGURES
Where the Group retrospectively applies an accounting
policy, makes a retrospective restatement or reclassifies
items in its financial statements, an additional (third)
Revenue recognition
The Group recognises revenue over time, using a
method that reflects the manner in which its obligations
are fulfilled. See note 2.
Lease term
The Group assesses whether it is reasonably certain
that an extension option will be exercised.
KEY ESTIMATES
Statement of Financial Position as at the beginning
Measurement of ECL allowance for trade receivables
of the preceding period in addition to the minimum
and contract assets
comparative financial statements is presented.
ECLs are measured at an unbiased, probability-
F) ROUNDING OF AMOUNTS
The parent entity has applied the relief available to it
under ASIC Instrument 2016 / 191. Accordingly, amounts
in the consolidated financial statements and Directors’
report have been rounded off to the nearest $1,000.
weighted amount, using reasonable and supportable
information that is available without undue cost or
effort at the reporting date. See note 8.
Deferred tax assets “DTA”
Availability of future taxable profit against which
deductible temporary differences and tax losses
G) NEW AUSTRALIAN ACCOUNTING STANDARDS
AND AMENDMENTS TO AUSTRALIAN ACCOUNTING
STANDARDS AND INTERPRETATIONS NOT YET
carried forward can be utilised.
Goodwill and other intangibles
ADOPTED
Certain new accounting standards and interpretations
have been published that are not mandatory for
the 30 June 2020 reporting period and have not been
adopted early by the Group. These amended standards
and interpretations are not expected to have a material
impact on the Group’s consolidated financial statements
in the current or future reporting periods:
• Amendments to references to conceptual framework
in AASB standards;
• Definition of a business (Amendments to AASB 3); and,
• Definition of material (Amendments to AASB 101 and
AASB 108).
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 2020 can be found in note 13.
The Group has re-assessed the useful life of the
software intangible asset, largely comprising costs
associated with capitalised web development. As a
H) CRITICAL ACCOUNTING ESTIMATES AND
result, amortisation has been accelerated to reflect this,
resulting in the asset being fully written down by
31 December 2020. See note 13.
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
expectation of future events and are based on current
trends and economic data, obtained both externally and
from within the Group.
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 02 0
I) CHANGES IN SIGNIFICANT ACCOUNTING
From 1 July 2019, leases are recognised as a right-
POLICIES
The Group applied AASB 16 using the modified
retrospective approach, under which the cumulative
effect of initial application is recognised in retained
earnings at 1 July 2019. Accordingly, the comparative
information presented for 2019 is not restated and it is
presented as previously reported, under AASB 117 and
related interpretations. The details of the changes in
accounting policies are disclosed below. Additionally,
the disclosure requirements in AASB 16 have not been
applied to comparative information.
DEFINITION OF A LEASE
Previously the Group determined at contract inception
whether an arrangement was or contained a lease
under AASB Interpretation 4, determining whether an
arrangement contains a lease.
The Group now assesses whether a contract is or
contains a lease, based on the criteria outlined in note
11. A contract is, or contains a lease if it conveys the
right to control the use of an identified asset for a
of-use asset and a corresponding liability at the date
at which the leased asset is available for use by the
Group. Each lease payment is allocated between the
liability and finance cost. The finance cost is charged
to profit or loss over the lease period to produce a
constant periodic rate of interest on the remaining
balance of the liability for each period. The right-of-use
asset is depreciated over the shorter of the asset’s life
and the lease term on a straight-line basis.
Assets and liabilities arising from a lease are initially
measured on a present value basis. Lease liabilities
include the net present value of the following lease
payments:
• Fixed payment, less any lease incentives receivable;
• Amounts expected to be payable by the lessee under
residual value guarantees;
• The exercise price of a purchase option if the lessee is
reasonably certain to exercise that option; and,
• Payments of penalties for terminating the lease, if the
lease term reflects the lessee exercising that option.
period of time in exchange for consideration. To assess
The lease payments are discounted using the lessee’s
whether a contract conveys the right to control the use
incremental borrowing rate, being the rate that lessee
of an identified asset, the Group uses the definition of a
would have to pay to borrow the funds necessary to
lease in AASB 16.
This policy is applied to contracts entered into on or
after 1 July 2019.
THE GROUP AS A LESSEE
As a lessee, the Group leases various properties
and equipment. Rental contracts are made for fixed
periods of 2 to 4 years. The Group’s leases may have
extension options as described below. Lease terms
obtain an asset of similar value in a similar economic
environment with similar terms and conditions.
Right-of-use assets are initially measured at cost
comprising the following:
• The amount of the initial measurement of lease liability;
• Lease payments made at or before the commencement
date less any lease incentive received;
• Initial costs; and,
are negotiated on an individual basis and contain a
• Restoration costs.
wide range of different terms and conditions. The
Right-of-use assets are subsequently measured at cost
lease agreements do not impose any covenants, but
less any accumulated depreciation and adjustments for
lease assets may not be used as security for borrowing
remeasurement of the lease liability.
purposes.
Until 30 June 2019, leases of properties and equipment
were classified as operating leases under AASB 117.
Payments made under operating leases (net of any
incentives received from the lessor) were charged to
profit or loss on a straight-line basis over the period of
the lease.
PRACTICAL EXPEDIENTS APPLIED
The Group used a number of practical expedients
when applying AASB 16 to leases previously classified
as operating leases under AASB 117.
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 02 0
In particular, the Group:
• Used a single discount rate to a portfolio of leases with
reasonably similar characteristics;
• Relied on previous assessments on whether leases are
onerous;
order to allocate resources to the segment and assess
its performance. Since the divestment of the Bartercard
business, IncentiaPay Ltd manages the Group as one
segment, being the Entertainment business. There is no
allocation impact to segment earnings.
• Adjusted the right-of-use asset by the amount of
any provision for onerous leases recognised in the
ADJUSTMENTS RECOGNISED ON ADOPTION OF
AASB 16
Statement of Financial Position immediately before the
On transition to AASB 16, the Group recognised lease
date of initial application;
liabilities in relation to leases which had previously
• Excluded initial direct costs from the measurement of
been classified as operating leases under the principles
the right-of-use assets at the date of initial application;
of AASB 117. These liabilities were measured at present
and,
• Used hindsight in determining the lease term where
the contract contains options to extend or terminate
the lease.
SHORT-TERM LEASES AND LEASES OF LOW-VALUE
ASSETS
The Group has elected not to recognise right-of-use
assets and lease liabilities for leases of low-value assets
and short-term leases. The Group recognises the lease
payments associated with these leases as an expense
on a straight-line basis over the lease term.
IMPACT ON TRANSITION
On transition to AASB 16, the Group recognised
right-of-use assets and lease liabilities. The change
in accounting policy impacted the following balance
sheet accounts on 1 July 2019:
• Right-of-use assets – increase by $4.3 million
• Lease liabilities – increase by $5.7 million
• Lease incentive loan – decrease by $0.6 million
• Onerous lease provision – decease by $0.6 million
The net impact on retained earnings on 1 July 2019
was nil as the Group applied the simplified transition
approach and has not restated comparative amounts.
IMPACT ON EARNINGS
operating lease payments were included in EBITDA, but
the amortisation of the right-of-use assets and interest
on the lease liability are excluded from this measure.
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
55
value of the remaining lease payments, discounted
using the lessee’s incremental borrowing rate as of
1 July 2019. The weighted average lessee’s incremental
borrowing rate applied to the lease liabilities on
1 July 2019 was 5.54 per cent.
Lease liabilities recognised in the Statement of
Financial Position at the date of initial application:
Operating lease commitments
disclosed as at 30 June 2019
Discounted using the lessee’s
incremental borrowing rate at
the date of initial application
Add/(less): recognition
exemption for leases with less
than 12 months of lease term at
transition
Add/(less): recognition
exemption for leases of
low-value assets
Add/(less): adjustments as a
result of a different treatment
of extension and termination
options1
Lease liabilities recognised as
at 1 July 2019
1 JULY 2019
$’000
6,352
5,711
-
-
-
5,711
1,723
3,988
Non-current liabilities
1. The Group has not included option extensions in the calculation as it
is considered probable that option extensions will not be exercised.
EBITDA increased by approximately $1.9 million, as the
Current lease liabilities
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 02 0
All right-of-use assets were measured at the amount
AMOUNTS RECOGNISED IN STATEMENT
equal to the lease liability, adjusted by the amount
OF CASH FLOWS
of any prepaid or accrual lease payments relating to
that lease recognised in that balance sheet as at 30
June 2019.
The Group has adjusted the right-of-use asset at the
date of initial application by $1.2 million, the amount
of provision for onerous lease and lease incentive
loan recognised in the Statement of Financial Position
immediately at the date of initial application.
EXTENSION OPTIONS
Interest on lease liabilities
Principal element of lease
payments
Total cash flow for leases
FY2020
$’000
249
1,610
1,859
In determining the lease term, management considers
all facts and circumstances that create an economic
RENT CONCESSION
incentive to exercise an extension option, or not
exercise a termination option. Extension options (or
periods after termination options) are only included
in the lease term if the lease is reasonably certain to
be extended (or not terminated). The Group is still
reviewing its options to renew, as such, extension
options are not included in the calculation.
This is reviewed if a significant event or a significant
change in circumstances occurs which affects this
assessment and that is within the control of the Group.
AMOUNTS RECOGNISED IN PROFIT AND LOSS
The Group has applied the practical expedient to all rent
concessions that meet the conditions.
Rent concession amounts recognised in profit and loss:
Rent concession as a negative
variable lease payment
FY2020
$’000
99
Rent concession amounts recognised in statement of
cash flows:
FY2020
$’000
FY2020
$’000
2020 leases under AASB 16
Reduced cash outflows
99
Interest on lease liabilities
249
Expenses relating to short-term
leases
Expenses relating to leases of
low-value assets, excluding
short-term leases of low-value
assets
2019 operating leases under
AASB 117
-
-
Lease expense
2,943
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 02 0
N OTE 2 | R E V E N U E
ACCO U N TI N G P O L I C Y
REVENUE FROM CONTRACTS WITH CUSTOMERS
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.
In November 2019, Entertainment launched a wholly digital version of the Entertainment membership that
incorporates a rolling 12-month subscription period. The subscription period commences when the membership
is activated and expires after a period of between 12 to 24 months, depending on the subscription purchased, or
longer if extensions have been applied under circumstances. The membership year for the 19/20 edition of the
Entertainment book ran from 1 June 2019 to 31 May 2020.
The Group 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. The Group has consistently applied this revenue recognition model to
both the 19/20 physical book, which expired on 31 May 2020 and the relaunched rolling digital memberships.
A summary of the revenue recognition by income stream of the Group is as follows:
• Fee income – Paid advertising: Revenue from Entertainment Publications marketing and merchant support fees
through the placement of advertisements and the distribution of offers and promotions on behalf of businesses
to members is recognised when the advertisement or offer is placed, distributed and invoiced. Revenue from
the successful promotion of merchant offers is recognised when the transaction occurs which evidences the
take up of the promotion.
• Fee income – Travel booking: Revenue from commission’s receivable for bookings are recognised when the
bookings are made, and it is paid for. Members have access to a range of discounts and deals from hotels,
airlines and car rental companies through the Group’s platform, from which the Group acts as an agent on
behalf of the hotels, airlines and car rental companies.
• Fee income - Consulting and media: Revenue relates to rendering of information technology consulting services
and it is recognised by reference to the stage of completion of the contract.
• Membership subscriptions: 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 contract 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. A gift with purchase promotion is treated as a reduction in
revenue over the life of the subscription.
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 02 0
• Corporate sales: 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.
• Gift card sales: 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.
REVENUE FROM GOVERNMENT GRANTS
Revenue from government grants are recognised when there is reasonable assurance that the Group will comply
with the conditions attaching to them and the grants will be received.
The Group has made an election to present JobKeeper on a net basis, being set off against the related salary
expense.
Cash flow boost assistance received during the period has been presented as revenue.
CONSOLIDATED GROUP
FY2020
$’000
FY20219
$’000
Fee income - Paid advertising and travel booking
Fee income - Consulting and media
2,108
347
Membership subscriptions
24,767
Corporate sales
4,121
3,274
2,097
28,611
3,283
Gift card sales
10,692
27,307
Government assistance
150
-
Revenue from ordinary activities
42,185
64,572
Interest received
20
-
Total
42,205
64,572
Contract receivables
(included in ‘Trade and other receivables’)
Contract liabilities
NOTE
8
17
FY2020
$’000
FY2019
$’000
870
6,569
2,495
21,394
The contract liabilities primarily relate to the advance consideration received from members for subscriptions, for
which revenue is recognised over time.
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 02 0
N OTE 3 | E X P E N S E S
Loss before income tax from continuing operations includes the following significant expenses:
CONSOLIDATED GROUP
FY2020
$’000
FY2019
$’000
Direct expenses of providing services
Variable expenses relating to book printing and production
Amortisation of printing and production
Corporate book printing
2,503
9,359
584
Gift cards
10,508
Other
Total
983
23,937
Bad debts written off
Deferred consideration
Other debtors
Movement in expected credit losses
Total
Employee expenses
Employee related expenses
JobKeeper payments earned
2,966
59
(215)
2,810
17,889
(909)
Total
16,980
Building occupancy expense
Rent
Variable lease expense
Total
Finance costs
Finance costs on borrowings
Interest expense on lease liabilities
Total
Depreciation and amortisation expense
Plant and equipment
Intangibles
Right-of-use assets
Total
Impairments
Goodwill
Intangible assets
Total
-
279
279
1,046
249
1,295
521
3,299
1,646
5,466
3,605
1,385
4,990
3,522
9,036
1,943
26,706
712
41,919
-
447
-
447
19,141
-
19,141
2,943
-
2,943
346
-
346
325
1,690
-
2,015
14,553
-
14,553
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 02 0
DIRECT EXPENSES OF PROVIDING SERVICES
Membership book printing and production expenses includes the amortisation of fundraiser sales commission
and prepaid production costs.
Sales commission paid to fundraiser partners for the sale of Entertainment memberships is an incremental cost
of obtaining contracts with customers, and is initially recognised as a prepayment on the balance sheet, and
subsequently amortised as an expense through the income statement in line with the recognition of revenue from
associated membership sales.
BAD DEBTS WRITTEN OFF
Bad debts written off relates to $2.9 million deferred consideration for the sale of a group of previous subsidiaries
known as the Bartercard business, (see ASX release 24 December 2019 Settlement of Claim with TCM), and
$0.06 million owing from Blackglass Pty Ltd also a previous subsidiary, for deferred consideration held for
working capital adjustments.
The Board has determined that these balances will not be recoverable.
EMPLOYEE EXPENSES
Employee related expenses include all costs associated with human resources and is offset by JobKeeper
payments earned as part of the Covid-19 government assistance package.
The Group has elected to present JobKeeper payments on a net basis, with the income being set off against the
related salary expense.
IMPAIRMENT OF INTANGIBLE ASSETS
See note 13.
DEPRECIATION AND AMORTISATION EXPENSE
The Group has re-assessed the useful life of the software intangible asset, largely comprising costs associated
with capitalised web development. As a result of the strategic transformation within the business during the
financial year, the Group has determined that the period over which the written down value will be consumed
will be shorter than previously estimated. Amortisation has been accelerated to reflect this, resulting in the asset
being fully written down by 31 December 2020.
The Group has adopted AASB 16, thereby recognising a right-of-use asset on the balance sheet using the
modified retrospective approach from 1 July 2019 and has not restated comparatives for the prior reporting
period. See note 1(i).
BUILDING OCCUPANCY EXPENSE
Due to the adoption of AASB 16, rent payments are included in the measurement of the lease liabilities and
variable lease payments not included in the measurement of the lease liabilities. See note 1(i).
FINANCE COSTS ON BORROWINGS
The increase in finance costs on borrowings is predominately due to the accrual of interest on the additional
borrowings from Suzerain. See note 16. The adoption of AASB 16 also resulted in the recognition of interest
expense on lease liabilities. See note 1(i).
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 02 0
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.
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.
In the current circumstances, the Group’s projections of future taxable profits may be affected by:
• Changes in forecasted cash flows – e.g. decrease in memberships, the costs of incentives to stimulate
membership sales and decreases in costs due to savings initiatives. Cash flows may also be negatively affected
by the dynamic and evolving nature of Covid-19 and the impact it has on the macro economic climate;
• Changes as a result of the Group’s operational strategies; and,
• Government support measures in response to Covid-19.
TAX CONSOLIDATION GROUP
IncentiaPay (the head entity) and its wholly owned Australian subsidiaries implemented the tax consolidation
legislation.
On adoption of the tax consolidation legislation, the entities in the tax consolidated Group entered into a tax
sharing and funding agreement which, in the opinion of the Directors, limits the joint and several liability of the
wholly-owned subsidiaries in the case of a default by the head entity.
This agreement provides that the wholly-owned subsidiaries will continue to fully compensate IncentiaPay for any
current tax payable assumed and be compensated by IncentiaPay for any current tax receivable and deferred
tax assets relating to unused tax losses or unused tax credits that are transferred to IncentiaPay under the tax
consolidation legislation.
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 02 0
CONSOLIDATED GROUP
FY2020
$’000
FY2019
$’000
a) The components of income tax expense comprise
Current tax
Deferred tax
Income tax expense
-
3,717
3,717
-
786
786
b) Numerical reconciliation of income tax
expense to prima facie tax payable
Loss from continuing operations before income tax expense
(20,945)
(27,367)
Loss from discontinuing operation before income tax expense
-
(9,881)
The prima facie tax payable on profit from ordinary activities before
income tax is reconciled to income tax as follows
Prima facie tax payable (benefit) on profit from ordinary activities before
income tax at domestic statutory rate of 30% (2019: 30%)
(6,284)
(11,174)
Add/(less) tax effect of
Permanent differences
Temporary differences
641
(410)
Unrecognised tax losses
6,053
Derecognised deferred tax assets
Income tax expense
3,717
3,717
9,288
-
2,672
-
786
No income tax benefit was recognised. This income tax benefit 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.
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 02 0
CONSOLIDATED GROUP
c) Deferred tax
OPENING
BALANCE
CHARGED TO
INCOME
DIVESTMENT
$’000
$’000
$’000
DERECOGNISED
DEFERRED TAX
ASSETS
$’000
TOTAL
$’000
Deferred tax assets
Provisions
6,164
(5,103)
(319)
Transaction costs on equity issues
888
(888)
-
Employee benefits
1,388
(174)
(548)
Property, plant and equipment
(18)
19
Intangibles
(1,708)
(388)
Other
(1,941)
5,748
(1)
250
348
Balance as at 30 June 2019
4,773
(786)
(270)
Provisions
Employee benefits
742
666
Intangibles
(1,846)
Other
4,155
Balance as at 30 June 2020
3,717
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(742)
(666)
1,846
(4,155)
(3,717)
742
-
666
-
(1,846)
4,155
3,717
-
-
-
-
-
The Group has estimated unutilised tax losses of $40.3 million. These losses, along with other deductible
temporary differences, have resulted in potential deferred tax assets for the Group of approximately $2.3 million,
calculated using the prevailing rate of Australian corporation tax of 30 per cent for the Group.
After considering the above, the Group has determined that these deferred tax assets will no longer be
recognised as it is uncertain whether future taxable profits in the short term will be sufficient to utilise the losses.
The Group is part way through its transformation plan which will provide a platform to deliver growth and
stability when restrictions are lifted post Covid-19. Current projections indicate a gradual return to profitability,
however, given the levels of uncertainty it may not be sufficient for the purposes of reporting.
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 02 0
CONSOLIDATED GROUP
FY2020
$’000
FY2019
$’000
d) Current tax
INCOME TAX PAYABLE
Income tax payable
186
186
The income tax payable relates to provisional income tax payable in New Zealand.
N OTE 5 | D I V I D E N D S , E A R N I N G S P E R S H A R E A N D F R A N K I N G C R E D IT
CONSOLIDATED GROUP
FY2020
$’000
FY2019
$’000
Franking account
Balance of franking account at year end
adjusted for franking credits arising from:
6,493
6,493
Payments of income tax
-
-
Franking credits available for subsequent financial year
6,493
6,493
The Directors have advised that they do not intend to declare dividends for the 2020 financial year. The ability
to utilise the franking credits is dependent upon the ability to declare dividends. In accordance with the tax
consolidation legislation, IncentiaPay Ltd as the head entity in the tax consolidated Group has also assumed the
benefit of $6.4 million (2019: $6.4 million) franking credits.
CONSOLIDATED GROUP
FY2020
$’000
FY2019
$’000
a) Reconciliation of earnings to profit or loss
Loss for the period from continuing operations
(24,662)
(28,153)
Loss for the period from discontinued operations
-
(9,751)
Earnings used to calculate basic EPS
(24,662)
(37,904)
Weighted average number of ordinary shares
outstanding during the year used in calculating basic EPS
302,134,914
233,011,438
Weighted average of dilutive convertible
notes and equity instruments outstanding
-
-
Weighted average number of ordinary shares
outstanding during the year used in calculating diluted EPS
302,134,914
233,011,438
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 02 0
N OTE 6 | C A S H A N D C A S H E Q U I VA L E 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
FY2020
$’000
FY2019
$’000
Cash at bank and on hand
5,304
3,457
Short-term bank deposits
3
3
Total cash and cash equivalents
5,307
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
5,307
Total cash and cash equivalents
5,307
3,460
3,460
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 02 0
N OTE 7 | C A S H F LOW I N FO R M ATI O N
CONSOLIDATED GROUP
FY2020
$’000
FY2019
$’000
Reconciliation of loss after income
tax to net cash flow from operations
Loss after income tax
(24,662)
(37,904)
Non-cash flows in loss
Amortisation
3,299
Loss on disposal of discontinued operations
Loss on disposal of leasehold improvements
Depreciation - property, plant and equipment
-
690
521
Depreciation - right-of-use
1,646
Impairment of intangibles in continuing operations
4,990
Sale of unlisted equity investment
-
Share based payment unwound
(730)
1,690
7,326
-
325
-
14,553
(600)
(70)
Net interest paid including investing
1,295
(346)
Changes in assets and liabilities, net of
effects of purchase and disposal of subsidiaries
Decrease in trade receivables
Decrease in prepayments
(Increase)/decrease in inventories
Decrease in deferred taxes receivable
4,867
5,502
(38)
3,717
8,081
4,329
254
1,059
Increase/(decrease) in trade payables and accruals
1,044
(6,860)
Decrease in deferred income
(14,825)
Increase in income taxes payable
-
(606)
18
Decrease in provisions
(1,104)
(4,725)
Cash flow used in operating activities
(13,788)
(13,338)
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 02 0
RECONCILIATION OF LIABILITIES ARISING FROM CASH FLOWS FROM FINANCING ACTIVITIES
INTEREST
BEARING
LOAN
ADDITIONAL GROWTH
OPERATIONAL
FACILITY
LEASE
LIABILITIES
LEASE
INCENTIVE
LOAN
$’000
$’000
$’000
$’000
Balance as at 1 July 2019
4,029
Initial recognition of lease liabilities1
-
-
-
Drawn down
15,000
2,585
Rent concessions or deferred rents
Repayment or amortised
Interest paid
Interest expenses
Line fees
-
-
-
788
-
Loan converted to equity
(19,300)
AASB 16 adjustment2
Balance as at 30 June 2020
-
517
-
5,711
-
(212)
(1,610)
(249)
249
-
-
-
-
-
-
71
35
-
-
2,691
3,889
606
-
-
-
-
-
-
-
-
(606)
-
1. The draw down of lease liabilities relate to the initial application of AASB 16, it is a non-cash entry and there is no cash flow impact.
See note 1(i).
2. As part of the initial application of AASB 16, the lease incentive loan was offset against the right-of-use assets at the date of initial application.
These transactions are non-cash. See note 1(i).
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 02 0
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.
Current
Trade receivables
Provision for loss allowance
Net trade receivables
Other receivables
Total current trade and other receivables
CONSOLIDATED GROUP
FY2020
$’000
FY2019
$’000
870
(241)
629
363
992
2,495
(580)
1,915
813
2,728
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 02 0
Movement in the provision for loss allowance of receivables is as follows:
OPENING
BALANCE
1 JULY 19
RECLASSIFIED
AS HELD FOR
SALE FOR YEAR
$’000
$’000
LOSS
ALLOWANCE
ADJUSTMENT
FOR YEAR
$’000
Current trade receivables
(580)
Total
(580)
-
-
215
215
AMOUNTS
WRITTEN
OFF
CLOSING
BALANCE
30 JUNE 20
$’000
124
124
$’000
(241)
(241)
OPENING
BALANCE
1 JULY 18
RECLASSIFIED
AS HELD FOR
SALE FOR YEAR
$’000
Current trade receivables
(2,287)
Total
(2,287)
$’000
1,954
1,954
LOSS
ALLOWANCE
ADJUSTMENT
FOR YEAR
$’000
(522)
(522)
AMOUNTS
WRITTEN
OFF
CLOSING
BALANCE
30 JUNE 19
$’000
275
275
$’000
(580)
(580)
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 amounts that are recoverable, which are not written
off or provided against. The remainder of receivables, after credit losses, are 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 of 30 June. Due to
the severe economic impacts of the Covid-19 outbreak, the Group reviewed the expected credit loss allowance and
determined that the adjusted loss rate for trade debtors past due over 60 days should be 100 per cent.
On that basis, the expected credit loss allowance as at 30 June 2020 was determined as follows for trade
receivables:
REPORT CATEGORY
DAYS
ADJUSTED
LOSS RATE
Current
Past due 1-30
Past due 31-60
Past due 61-90
Past due over 90
Greater than over
90 days overdue
0-30
31-60
61-90
91-120
121-150
Greater than 150
%
16
31
14
100
100
100
Total
RECEIVABLES
BALANCE
AS AT
30 JUNE 2020
$’000
LOSS
ALLOWANCE
AS AT
30 JUNE 2020
$’000
641
101
22
9
7
90
870
101
31
3
9
7
90
241
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 02 0
The expected credit loss allowance as at 30 June 2019 was determined as follows for trade receivables:
REPORT CATEGORY
DAYS
ADJUSTED
LOSS RATE
Current
Past due 1-30
Past due 31-60
Past due 61-90
Past due over 90
Greater than over
90 days overdue
0-30
31-60
61-90
91-120
121-150
Greater than 150
%
8
24
16
12
49
53
RECEIVABLES
BALANCE
AS AT
30 JUNE 2019
$’000
LOSS
ALLOWANCE
AS AT
30 JUNE 2019
$’000
1,342
333
264
23
103
430
111
79
43
3
51
293
580
Total
2,495
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. The class of assets described as “trade and other
receivables” are 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. Securities in the form of personal
guarantees from Directors, or registered mortgages are regularly taken to support customer trading activities.
CONSOLIDATED GROUP
FY2020
$’000
FY2019
$’000
Gross amount
Impaired (past due)
Total
Within initial trade terms
Past due not impaired - 30 days
60 days
90 days
90 days +
870
(241)
629
540
70
19
-
-
2,495
(580)
1,915
1,231
254
221
20
189
Total
629
1,915
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 02 0
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 is as follows:
CONSOLIDATED GROUP
FY2020
$’000
FY2019
$’000
Australia
New Zealand
Total
565
64
629
1,856
59
1,915
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
FY2020
$’000
FY2019
$’000
Gift cards held for sale
Total inventories
134
134
96
96
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 fundraiser commission incurred as a result of 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
FY2020
$’000
FY2019
$’000
Current
Short-term investments
1,018
Prepayments
337
Production prepayments
996
Total other assets
2,351
391
198
7,264
7,853
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 02 0
Year ended 30 June 2019
Balance as at 1 July 2018
Prepayments
PRODUCTION
PREPAYMENT
$’000
8,558
7,742
Amortisation
(9,036)
Balance as at 30 June 2019
7,264
Year ended 30 June 2020
Balance as at 1 July 2019
Prepayments
7,264
3,091
Amortisation
(9,359)
Balance as at 30 June 2020
996
N OTE 1 1 | R I G HT- O F - U S E A S S E T S
ACCO U N TI N G P O L I C Y
Right-of-use assets relate to leased property that do not meet the definition of investment property and are
presented as property, plant and equipment.
Right-of-use assets are initially measured at cost comprising the following:
• The amount of the initial measurement of lease liability (see note 1(i) and note 15);
• Any lease payments made at or before the commencement date less any lease incentive received;
• Any initial costs; and,
• Restoration costs.
Right-of-use assets are subsequently measured at cost less any accumulated depreciation and adjustments for
remeasurement of the lease liability.
In determining the lease term, management considers all facts and circumstances that create an economic incentive
to exercise an extension option, or not exercise a termination option. Extension options (or periods after termination
options) are only included in the lease term if the lease is reasonably certain to be extended (or not terminated). The
Group has determined that it will not be exercising the options to renew, as such, extension options are not included in
the calculation.
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 02 0
D E P R E C I ATI O N O F R I G H T- O F - U S E A S S E T S
The right-of-use asset is depreciated over the shorter of the asset’s life and the lease term on a straight-line basis.
CONSOLIDATED GROUP
FY2020
$’000
FY2019
$’000
Land and buildings
At cost
4,068
Accumulated depreciation
(1,510)
Total
2,558
Equipment
At cost
Accumulated depreciation
Total
Total right-of-use assets
359
(136)
223
2,781
-
-
-
-
-
-
-
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 right-of-use assets between the beginning and the end of
the current financial year are set out below.
CONSOLIDATED GROUP
LAND AND
BUILDINGS
$’000
EQUIPMENT
TOTAL
$’000
$’000
Balance as at 1 July 2019
Initial recognition of right-of-use assets
Additions to right-of-use assets
Depreciation charge for the year
Balance as at 30 June 2020
-
4,068
-
(1,510)
2,558
-
259
100
(136)
223
-
4,327
100
(1,646)
2,781
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 02 0
N OTE 1 2 | P R O P E R T Y, P L A N T A N D E Q U I P M E N T
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.
PLANT AND EQUIPMENT
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 the 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 more than 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.
DEPRECIATION OF PLANT AND EQUIPMENT
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.
Estimated useful life for each class of depreciable assets are:
CLASS OF FIXED ASSET
ESTIMATED USEFUL LIFE
Leasehold improvements
2-4 years
Plant and equipment
Leased plant and equipment
3-5 years
3-5 years
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.
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 02 0
CONSOLIDATED GROUP
FY2020
$’000
FY2019
$’000
Plant and equipment
At cost
Accumulated depreciation
Total
Leasehold improvements
At cost
Accumulated depreciation
Total
Total property, plant and equipment
821
(579)
242
2,090
(1,005)
1,085
1,327
806
(490)
316
2,970
(903)
2,067
2,383
MOVEMENTS IN CARRYING AMOUNTS
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 2018
Additions
Disposals
Transfers
Reclassified as held for sale
Depreciation expense
Balance as at 30 June 2019
Balance as at 1 July 2019
Additions
Disposals
Depreciation expense
Balance as at 30 June 2020
1,133
23
(125)
-
(592)
(123)
316
316
16
-
(90)
242
1,065
1,050
(25)
584
(405)
(202)
2,067
2,067
135
(686)
(431)
1,085
168
-
(40)
-
(128)
-
-
-
-
-
-
-
2,366
1,073
(190)
584
(1,125)
(325)
2,383
2,383
151
(686)
(521)
1,327
CONTRACTUAL COMMITMENTS
The parent entity did not enter into any contractual commitments for the acquisition of property, plant or
equipment during FY2020 or FY2019.
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 02 0
N OTE 1 3 | 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.
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 cash-generating
units or groups of cash-generating units, (“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 2 to 3 years (FY2019: 4-5 years).
During the period, the Group re-assessed the expected economic useful life of its software intangible assets and
revised their expected useful lives to between 2-3 years (previously between 4-5 years). The reassessment was
a result of the strategic transformation within the business, detailed further in notation 3 in the table on page 78.
These changes have been applied with effect from 1 July 2019 and have resulted in an increase in amortisation
expense for the year ended 30 June 2020 of $1.4 million.
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
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 02 0
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 cash-generating unit.
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
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 cash-generating unit 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
FY2020
$’000
FY2019
$’000
Goodwill
Cost
31,199
Accumulated impairment losses
(21,108)
Total
10,091
Technology and software
31,199
(17,503)
13,696
Accumulated amortisation and impairment losses (8,000)
(4,068)
Cost
9,296
9,127
Total
1,296
5,059
Purchased brand names and international rights
Accumulated impairment losses
-
Cost
3,000
Total
3,000
Other intangibles
Cost
Accumulated amortisation
Total
752
(752)
-
3,000
-
3,000
752
-
752
Total intangibles
14,387
22,507
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 02 0
CONSOLIDATED GROUP
GOODWILL
RESTATED
TECHNOLOGY
& SOFTWARE
RESTATED
BRAND NAME &
INTERNATIONAL
RIGHTS
OTHER
INTANGIBLES
RESTATED
TOTAL
$’000
$’000
$’000
$’000
$’000
Balance as at 1 July 2018
Measurement period adjustment1
Balance as at 1 July 2018
29,341
1,858
31,199
Additions
-
Disposals2
(2,950)
Amortisation charge
-
Impairment
(14,553)
Balance as at 30 June 2019
Balance as at 1 July 2019
13,696
13,696
Additions
Disposals
Amortisation charge3
-
-
-
Impairment4,5
(3,605)
Balance as at 30 June 2020
10,091
14,588
(2,317)
12,271
1,877
(7,399)
(1,690)
-
5,059
5,059
169
-
(3,299)
(633)
1,296
3,659
-
3,659
-
1,692
459
2,151
49,280
-
49,280
-
1,877
(659)
(1,399)
(12,407)
-
-
3,000
3,000
-
-
-
-
-
-
752
752
-
-
-
(1,690)
(14,553)
22,507
22,507
169
-
(3,299)
(752)
(4,990)
3,000
-
14,387
1. Adjustments to purchase price allocation in FY2019. Refer to Annual Report 2019 note 22(c) for details.
2. See note 24.
3. The Group have re-assessed the useful life of the software intangible asset, largely comprising costs associated with capitalised web
development. As a result of the strategic transformation within the business, the Group has entered into an agreement to move to a new
platform that will result in new products and higher value propositions for customers. The Group has determined that the period over which
the written down value of the existing platform will be shorter than previously estimated. Amortisation has been accelerated to reflect this,
resulting in the asset being fully written down by 31 December 2020.
4. As a result of the Group’s decision to seek expressions of interest with respect to Entertainment Digital business assets, it has been assessed
that the assets will not produce any future economic benefits to the Group, as such, the assets have been impaired to reflect an estimate of
their fair value less costs of disposal. This has resulted in impairment of $633,000 during the financial year.
5. As at 30 June 2020 the estimated recoverable amounts determined using the method outlined below were found to be less than the carrying
value of the net assets of the cash-generating unit and accordingly, an impairment adjustment on goodwill was required.
Current market conditions brought on by Covid-19, in addition to uncertainty associated with the change in the
Group’s business model, has triggered an assessment whether the carrying value of the Groups’ goodwill and
other non-current assets may be impaired.
The recoverable amount of the cash-generating unit is 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 cash-generating
units has been considered and the model includes a sensitivity analysis allowing for a range of growth rates.
The following assumptions were used in the value-in-use calculations:
Year ended 30 June 2020
2021 - 2025
Entertainment
Publications
GROWTH RATES
2021 - 2025
GROWTH RATES
2025 ONWARD
DISCOUNT RATE/WEIGHTED
AVERAGE COST OF CAPITAL
2.5% - 5%
2%
11%
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 02 0
Year ended 30 June 2019
2020- 2024
Entertainment
Publications
GROWTH RATES
2020-2024
GROWTH RATES
2024 ONWARD
DISCOUNT RATE/WEIGHTED
AVERAGE COST OF CAPITAL
2%
2%
11%
Cash flows used in the value-in-use calculations are based on forecasts produced by management. The growth
rates are based on a proposed strategic repositioning of the core operations of the business focusing on long-
term sustainability. Forecasts for 2021 consider the increased level of market volatility and uncertainty caused by
Covid-19 and the business transformation currently in progress. The Directors consider these forecasts to reflect
the best estimates of revenue based on facts and circumstances available as at 30 June 2020. Given the nature of
the uncertainty associated with the underlying assumptions, any changes over the coming months not factored in
the cash flow forecasts may result in material changes to the assumptions.
The key assumptions to which the model is most sensitive include:
• Forecast revenue and expenditure taking into account the impacts of Covid-19 for the first half of the forecast
year, and based on the continued progress of the technology transformation which is anticipated to be
completed in the first half of the financial year; and,
• The discount rate of 11 per cent (post tax).
As at 30 June 2020 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 cash-generating unit and accordingly, an impairment
adjustment was required.
Following the impairment loss recognised in the Group’s cash-generating unit, the recoverable amount was equal
to the carrying amount. Therefore, any adverse movement in a key assumption would lead to further impairment.
N OTE 1 4 | TR A D E A N D OTH E R PAYA B LE 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 payables are amounts not expected
to be settled within the next 12 months.
CONSOLIDATED GROUP
FY2020
$’000
FY2019
$’000
Current
Unsecured liabilities
Trade payables
Other payables and accruals
Litigation claim payables1
2,359
3,553
323
Total current unsecured liabilities
6,235
2,172
3,769
-
5,941
1. Litigation claim payables relate to various settlement fees incurred during the business restructure process.
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 02 0
N OTE 1 5 | LE A S E S
ACCO U N TI N G P O L I C Y
Lease liabilities are measured on a present value basis. Lease liabilities include the net present value of the
following lease payments:
• Fixed payment, less any lease incentives receivable;
• Amounts expected to be payable by the lessee under residual value guarantees;
• The exercise price of a purchase option if the lessee is reasonably certain to exercise that option; and,
• Payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option.
The lease payments are discounted using the lessee’s incremental borrowing rate of 5.54 per cent, being the rate
that the lessee would have to pay to borrow the funds necessary to obtain an asset of similar value in a similar
economic environment with similar terms and conditions.
Right-of-use assets are initially measured at cost comprising the following:
• The amount of the initial measurement of lease liability;
• Any lease payments made at or before the commencement date less any lease incentive received;
• Any initial costs; and,
• Restoration costs.
The Group has elected not to recognise right-of-use assets and lease liabilities for leases of low-value assets and
short-term leases. The Group recognises the lease payments associated with these leases as an expense on a
straight-line basis over the lease term.
CONSOLIDATED GROUP
FY2020
$’000
FY2019
$’000
Current
Lease liabilities
Total current lease liabilities
Non-current
Lease liabilities
Total non-current lease liabilities
1,731
1,731
2,158
2,158
Total lease liabilities
3,889
-
-
-
-
-
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 02 0
The Group has adopted AASB 16 using the modified retrospective approach from 1 July 2019 and has not
restated comparatives for the prior reporting period. See note 1(i).
Balance as at 1 July 2019
Initial recognition of lease liabilities
Interest charges
Repayments (including interest)
Rent concessions or deferred rents
Balance as at 30 June 2020
CONSOLIDATED GROUP
LEASE LIABILITIES
$’000
-
5,711
249
(1,859)
(212)
3,889
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 02 0
N OTE 1 6 | 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.
CONSOLIDATED GROUP
FY2020
$’000
FY2019
$’000
Current
Lease incentive loan
Interest bearing loan
Total current borrowings
Non-current
Lease incentive loan
Additional growth capital facility
Total non-current borrowings
-
517
517
-
2,691
2,691
140
4,029
4,169
466
-
466
Total borrowings
3,208
4,635
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 02 0
Facility limit
Unused facility
INTEREST BEARING
LOAN
ADDITIONAL GROWTH
OPERATIONAL FACILITY
TRANSFORMATIONAL
CAPITAL FACILITY
$’000
500
-
$’000
9,825
7,134
$’000
1,200
1,200
Interest rate (fixed)
10% per annum
10% per annum
12.5% per annum
Line fees
N/A
$9,708 per month
$2,000 per month
Maturity date
30/09/2020
31/12/2021
18 months from the date
of the first draw down
Security over all the
Group’s present and
future property
Subject to
shareholders’
approval
Subject to
shareholders’
approval
Security
Drawn down as at 1 July 2019
Drawn down
Interest expenses
Line fees
4,029
15,000
788
-
Loan converted to equity
(19,300)
Drawn down as at 30 June 2020
517
2,691
-
2,585
71
35
-
-
-
-
-
-
-
INTEREST BEARING LOAN
On 9 August 2019 the Group entered into a loan deed with Suzerain for total funding of $19.0 million to support
working capital requirements and to restructure the business.
The loan was to be repaid on 30 September 2020 with interest capitalised at 10 per cent per annum. During the
AGM, resolutions were passed to enter into a General Security Deed over the assets of the Group in the form
attached to the Convertible Loan Deed and 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.
Accordingly, $19.3 million including accrued interest of the convertible loan was converted to equity with the
issuance of 410,643,766 ordinary shares (4.7 cents per share) in the Company. This will leave $500,000 of the
convertible loan in which Suzerain had the option to convert up until 30 June 2020. The option lapsed as the
loan was not converted at 30 June 2020 and will remain as a secured interest-bearing loan repayable by
30 September 2020.
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 02 0
ADDITIONAL GROWTH OPERATIONAL FACILITY
The Group entered into a new Loan Deed with Suzerain on 27 February 2020 for the provision of a $5.83 million
facility (including associated borrowing costs). Subsequently, Suzerain has agreed to increase the facility limit of
the original loan by $4.0 million to $9.825 million. This facility is unsecured with the view to obtaining shareholder
approval for security over the assets of the Group at the Company’s next Annual General Meeting, anticipated to
be held in November 2020.
TRANSFORMATIONAL CAPITAL FACILITY
Skybound Fidelis Investment Limited as trustee for the Skybound Fidelis Credit Fund (Skybound) (a related entity
of Suzerain) agreed to provide the Group with a $1.2 million facility for the transformational capital expenditures
to be agreed between the Group and Skybound. As at 30 June 2020 this loan facility had not been drawn down.
LEASE INCENTIVE LOAN
As part of the initial application of AASB 16, the lease incentive loan was offset against the right-of-use assets at
the date of initial application. See note 1(i).
N OTE 1 7 | 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
FY2020
$’000
FY2019
$’000
Deferred revenue
Total current deferred revenue
Deferred revenue
Total non-current deferred revenue
6,219
6,219
350
350
21,394
21,394
-
-
Total deferred revenue
6,569
21,394
FINANCIAL STATEMENTS
84
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 02 0
Year ended 30 June 2019
Balance as at 1 July 2018
Revenue deferred
Revenue recognised
Balance as at 30 June 2019
Year ended 30 June 2020
Balance as at 1 July 2019
Revenue deferred
DEFERRED REVENUE
$’000
22,001
36,758
(37,365)
21,394
21,394
14,768
Revenue recognised
(29,593)
Balance as at 30 June 2020
6,569
The contract liabilities primarily relate to cash receipts from membership sales, for which revenue is recognised
over time. The reduction in contract liabilities is predominantly due to the impact of the Covid-19 pandemic,
which resulted in the planned launch events for the new digital product to be postponed from numerous physical
events in February 2020 to virtual events in June 2020. The launch events were earmarked as a key strategic tool
to engage fundraisers and use as a launchpad for the new digital membership. The change in membership also
changed the timing of when cash was collected as books could be sold ahead of when the membership period
commenced, whereas rolling digital memberships were only purchased when books expired, being 31 May 2020.
N OTE 1 8 | 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.
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.
85
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 02 0
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 government 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 benefits
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 decisions made by the Board to streamline the operations of the business in 2019, certain leases
became surplus to requirements. For those locations, the Group vacated the premises and attempted to sublease
the space. Those leases were determined to be onerous at the time the Group vacated the premises, and the
provision was calculated based on the present value of contracted obligations net of expected rental income.
As part of the initial application of AASB 16, the onerous lease provision was offset against the right-of-use assets
at the date of initial application. See note 1(i).
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 2017, a provision was raised for $4.5 million, being for employee entitlements
and occupancy costs. The Company spent $1.9 million of this provision during the six-month period ended 30 June
2018 and the remaining balance of $2.6 million was spent during the second half of financial year 2019.
MAKE GOOD PROVISION
The Group is required to restore the leased premises of its offices to their satisfactory condition at the end of
the respective lease terms. A provision has been recognised for the present value of the estimated expenditure
required for the restoration. These costs have been capitalised as part of the cost of leasehold improvements and
are amortised over the shorter of the term of the lease and the useful life of the assets.
FINANCIAL STATEMENTS
86
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 02 0
CONSOLIDATED GROUP
EMPLOYEE
BENEFITS
RESTRUCTUR-
ING PROVISION
ONEROUS
LEASES
PROVISION
MAKE GOOD
PROVISION
TOTAL
$’000
$’000
$’000
$’000
$’000
Year ended 30 June 2019
Balance as at 1 July 2018
4,174
2,600
Released
-
(2,600)
(Released)/additional provisions
Reclassified as held for sale
Balance as at 30 June 2019
Year ended 30 June 2020
Balance as at 1 July 2019
(Utilised)1/(transferred)2/
additional provisions3
Balance as at 30 June 2020
(1,506)
(1,253)
1,415
1,415
(597)
818
-
-
-
-
-
-
-
-
635
-
635
635
(635)
-
-
-
-
-
-
-
128
128
6,774
(2,600)
(871)
(1,253)
2,050
2,050
(1,104)
946
1. The release of employee benefits on departure of employees leaving the Group and the net movement of accruing and utilising employee
benefits.
2. The Group has applied the AASB 16 transition exemption to adjust the right-of-use asset by the amount previously recognised as an onerous
lease provision. See note 1(i).
3. Make good provision for occupied premises was raised in the current period. The amount includes interest of $18,000.
ANALYSIS OF TOTAL PROVISIONS
CONSOLIDATED GROUP
FY2020
$’000
FY2019
$’000
Current
Employee benefits
Onerous leases provision
Total current provisions
Non-current
Make good provision
Employee benefits
Total non-current provisions
Total provisions
764
-
764
128
54
182
946
1,198
635
1,833
-
217
217
2,050
87
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 02 0
N OTE 1 9 | I S S U E D C A P ITA L
CONSOLIDATED GROUP
FY2020
SHARES
FY2019
SHARES
FY2020
$’000
FY2019
$’000
655,940,612
242,618,274
116,026
96,006
DATE
NUMBER
OF SHARES
ISSUE PRICE
$
$’000
Ordinary shares -
fully paid on issue
INP has no limit to its
authorised share capital
Movements in ordinary
share capital
Ordinary shares at
beginning of the year
228,193,274
Issues during the year 28 February 2019
14,425,000
Less, costs of issues
-
Balance as at 30 June 2019
Ordinary shares at
beginning of the year
242,618,274
242,618,274
Issues during the year
1 November 20191
2,678,572
28 February 20202
410,643,766
Less, costs of issues
-
Balance as at 30 June 2020
655,940,612
0.08
-
0.28
0.05
-
94,892
1,155
(41)
96,006
96,006
750
19,300
(30)
116,026
1. Issued as final consideration for the acquisition of businesses of the Gruden group.
2. See note 16.
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.
FINANCIAL STATEMENTS
88
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 02 0
PERFORMANCE RIGHTS
NUMBER OF
PERFORMANCE
RIGHTS
ISSUED PRICE
$
$’000
Performance rights at beginning of the year
2,072,000
0.875
1,813,000
Balance as at 30 June 2019
2,072,000
Performance rights at beginning of the year
2,072,000
1,813,000
1,813,000
EP PREP wind up
(2,072,000)
0.875
(1,813,000)
Balance as at 30 June 2020
-
-
Performance rights were issued to management and employees of Entertainment Publications entities in May 2017.
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’s roll out commenced in August 2020.
89
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 02 0
N OTE 2 0 | 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 rights are 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 2019
Balance as at 1 July 2018
Amortised during the period
660
452
Unvested during the period1
(382)
Movement during the period
Balance as at 30 June 2019
Year ended 30 June 2020
Balance as at 1 July 2019
Unvested during the period2
Movement during the period
Balance as at 30 June 2020
-
730
730
(730)
-
-
215
-
-
191
406
406
-
(29)
377
875
452
(382)
191
1,136
1,136
(730)
(29)
377
1. 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.
2. Performance rights were issued to management and employees of Entertainment Publications entities in May 2017. The Board, on 22 July
2019, 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’s roll out commenced in August 2020. The share based payment reserve relating to these Performance rights has been reversed to
reflect this.
FINANCIAL STATEMENTS
90
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 02 0
N OTE 2 1 | 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 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 2020.
The total remuneration paid to KMP of the Group during the year was as follows:
CONSOLIDATED GROUP
FY2020
$’000
FY2019
$’000
Short-term employee benefits
Post-employment benefits
Long-term benefits
Share based payments
904
42
338
-
Total KMP compensation
1,284
1,835
164
300
20
2,319
N OTE 2 2 | AU D ITO R ’ S R E M U N E R ATI O N
CONSOLIDATED GROUP
FY2020
$’000
FY2019
$’000
Auditing or reviewing the financial statements
294
Taxation services - compliance
Other services
81
1
Total
376
306
57
17
380
91
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 02 0
N OTE 2 3 | I NT E 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
FY2020
%
FY2019
%
OWNERSHIP INTEREST
HELD BY THE GROUP
a) Information about principal subsidiaries
Entertainment Publications of Australia Pty Ltd
Australia
Entertainment Publications Ltd
New Zealand
Entertainment Digital Pty Ltd
(previously MobileDEN Pty Ltd)
Australia
Entertainment Trus Co Pty Ltd1
Australia
100
100
100
100
100
100
100
-
1. The Employee Share Plan trust (“ESP”) was established on 24 April 2020 to provide benefits to current employees, Directors and contractors
(“the Beneficiaries”). No shares are currently held by the ESP.
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.
N OTE 2 4 | 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 L E A N D
D I S CO NTI N U E D O P E R ATI O N S
2 02 0 F I N A N C I A L Y E A R
There were no discontinued operations during the 2020 financial year. During the financial year, the Group received
$0.15 million from the sale of the performance marketing business still owing at 30 June 2019 and presented in de-
ferred consideration.
2 01 9 F I N A N C I A L Y E A R
BARTERCARD BUSINESS
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 previous period as a discontinued operation. Financial
information relating to the discontinued operation for the period to the date of disposal is set out overleaf.
The financial performance and cash flow information presented are for the period 1 July 2018 to 19 November 2018.
FINANCIAL STATEMENTS
92
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 02 0
FINANCIAL PERFORMANCE AND CASH FLOW INFORMATION
FY2020
$’000
FY2019
$’000
Revenue
Expenses
Profit before income tax
Income tax
Profit after income tax of discontinued operation
Loss on sale of the subsidiary after income tax
Loss from discontinued operation
Exchange differences on translation of discontinued operations
Other comprehensive income from discontinued operations
Net cash inflow from operating activities
Net cash outflow from investing activities
Net cash inflow from financing activities
Net increase in cash generated by the division
DETAILS OF THE SALE OF THE SUBSIDIARY
FY2020
$’000
Cash
Deferred consideration
Total disposal consideration
Carrying amount of net assets sold
Loss on sale before income tax and reclassification
of foreign currency translation reserve
Reclassification of foreign currency translation reserve
Income tax expense on loss
Loss on sale after income tax
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
8,887
(8,271)
616
-
616
(6,196)
(5,580)
(208)
(208)
953
(1,100)
273
126
FY2019
$’000
2,000
2,878
4,878
(11,282)
(6,404)
208
-
(6,196)
93
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 02 0
There is no ’earn out’ clause in the sale agreement, additional cash consideration of $3.0 million was 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
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
Trade and other receivables
Inventories
Other assets
Property, plant and equipment
Intangible assets
Total assets
Trade and other payables
Vendor loans
Deferred revenue
Provisions
Total liabilities
Net assets
1,413
6,294
32
313
1,124
7,031
16,207
3,437
107
335
1,046
4,925
11,282
FINANCIAL STATEMENTS
94
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 02 0
G OV E R N M E N T D I V I S I O N (G R U D E N P T Y LT D)
On 19 November 2018, the Group announced its intention to exit the Government division. The business was sold on
13 December 2018 and is reported in the previous 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.
FINANCIAL PERFORMANCE AND CASH FLOW INFORMATION
FY2020
$’000
FY2019
$’000
Revenue
Expenses
Loss before income tax
Income tax
Loss after income tax of discontinued operation
Loss on sale of the subsidiary after income tax
Loss from discontinued operation
Net cash outflow from operating activities
Net cash outflow from investing activities
Net decrease in cash generated by the division
DETAILS OF THE SALE OF THE SUBSIDIARY
FY2020
$’000
Cash
Deferred consideration
Total disposal consideration
Carrying amount of net assets sold
Loss on sale before income tax
Income tax expense on gain
Loss on sale after income tax
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,773
(3,550)
(777)
-
(777)
(1,270)
(2,047)
(489)
(5)
(494)
FY2019
$’000
1,238
411
1,649
(2,919)
(1,270)
-
(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.
95
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 02 0
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
Trade and other receivables
Other assets
Intangible assets
Total assets
Trade and other payables
Deferred revenue
Provisions
Total liabilities
Net assets
132
3,366
9
2,058
5,565
2,321
148
177
2,646
2,919
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 previous 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.
Revenue
Expenses
Loss before income tax
Income tax
Loss after income tax of discontinued operation
Loss on sale of the subsidiary after income tax
Loss from discontinued operation
Net cash outflow from operating activities
Net cash inflow from investing activities
Net increase in cash generated by the division
FY2020
$’000
FY2019
$’000
-
-
-
-
-
-
-
-
-
-
2,732
(3,942)
(1,210)
130
(1,080)
(1,044)
(2,124)
(336)
371
35
FINANCIAL STATEMENTS
96
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 02 0
YEAR ENDED 30 JUNE 2018
Cash
Deferred consideration
Total disposal consideration
22 APR 2019
$’000
100
200
300
Carrying amount of net liabilities sold
(1,344)
Loss on sale before income tax
(1,044)
Income tax expense on gain
-
Loss 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.
The carrying amounts of assets and liabilities as at the date of sale (22 April 2019) were:
YEAR ENDED 30 JUNE 2018
22 APR 2019
$’000
Cash and cash equivalents
Trade and other receivables
Other assets
Intangible assets
Total assets
Trade and other payables
Provisions
Total liabilities
Net assets
60
1,556
1
2,235
3,852
2,479
29
2,508
1,344
97
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 02 0
CO N S O LI DATE D D I S CO NTI N U E D O P E R ATI O N I N FO R M ATI O N
The total presented for the tables above reconcile to the key financial figures as presented in its financial statements
as follows:
FY2020
$’000
FY2019
$’000
Deferred consideration
Current
Interest unlocked
Paid during the year
Total current deferred consideration
Non-current
Interest unlocked
Total non-current deferred consideration
Total deferred consideration
Loss for the period from discontinued operations
Bartercard business
Government business
Performance marketing business
Total loss for the period from discontinued operations
Year to date cash receipts from the sales of business
Bartercard business
Government business
-
-
-
-
-
-
-
-
-
-
-
-
-
-
FY2020
$’000
FY2020
$’000
Performance marketing business
Total cash receipts from the sales of business
155
155
19 NOV 2018
BARTERCARD
BUSINESS
13 DEC 2018
GOVERNMENT
BUSINESS
22 APR 2019
PERFORMANCE
MARKETING
$’000
$’000
$’000
Cash held in
discontinued operations
1,413
132
60
1,101
5
(411)
695
2,388
26
2,414
3,109
FY2019
$’000
(5,580)
(2,047)
(2,124)
(9,751)
FY2019
$’000
2,000
1,563
100
3,663
TOTAL
$’000
1,605
FINANCIAL STATEMENTS
98
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 02 0
N OT E 2 5 | 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
FY2020
$’000
FY2019
$’000
Total loss
(15,508)
(39,638)
Total comprehensive income
(15,508)
(39,638)
Statement of financial position
Assets
Current assets
1,724
Non-current assets
23,253
1,029
28,824
Total assets
24,977
29,853
Liabilities
Current liabilities
2,648
Non-current liabilities
9,341
7,970
12,069
Total liabilities
11,989
20,039
Equity
Issued capital
116,026
96,006
Reserves
-
1,339
Accumulated losses
(103,038)
(87,531)
Total equity
12,988
9,814
Details of the contingent assets and liabilities of the Group are contained in note 28. Details of the contractual
commitments are contained in note 27.
IncentiaPay Ltd, Entertainment Publications of Australia Pty Ltd and Entertainment Digital 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.
99
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 02 0
Set out below is a consolidated balance sheet as of 30 June 2020 of the parties to the Deed of Cross Guarantee.
FY2020
$’000
FY2019
$’000
Assets
Current assets
Cash and cash equivalents
4,394
Deferred consideration
Trade and other receivables
Inventories
Other assets
Total current assets
Non-current assets
-
924
100
1,961
7,379
Deferred consideration
-
Property, plant and equipment
Right-of-use asset
Deferred tax assets
Intangible assets
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Lease liabilities
Borrowings
Deferred revenue
Provisions
1,252
2,564
-
14,387
18,203
25,582
5,727
1,542
517
5,174
728
Total current liabilities
13,688
Non-current liabilities
Trade and other payables
Lease liabilities
Borrowings
Deferred revenue
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
1,725
2,124
2,691
350
52
6,942
20,630
4,952
Issued capital
116,026
Reserves
322
Retained earnings
(111,396)
Total equity
4,952
2,532
695
2,549
23
6,605
12,404
2,414
2,261
-
2,790
22,505
29,970
42,374
5,521
-
4,635
18,189
1,779
30,124
1,863
-
-
-
216
2,079
32,203
10,171
96,006
1,051
(86,886)
10,171
FINANCIAL STATEMENTS
100
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 02 0
See note 26 for the Consolidated Statement of Profit or Loss for the year ended 30 June 2020 of the parties to
the Deed of Cross Guarantee. All entities incorporated in Australia are the parties of Deed of Cross Guarantee.
N OT E 2 6 | 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. This decision
was based on the fact that the Group did not separately review the results of this division since the decision to
dispose of it.
The results of the discontinued operations are disclosed in note 24. There were no discontinued operations during
the 2020 financial year.
REVENUE BY GEOGRAPHICAL LOCATION
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 2020
AUSTRALIA
$’000
NEW ZEALAND
$’000
TOTAL
$’000
Revenue
Revenue from contracts with customers
37,464
Government assistance
150
4,591
-
42,055
150
Total revenue
37,614
4,591
42,205
Expenses
Direct expenses of providing services
(21,765)
Employee expenses
(16,020)
Depreciation and amortisation
(5,155)
Impairments
(4,990)
Interest
(1,277)
(2,172)
(960)
(311)
-
(18)
(23,937)
(16,980)
(5,466)
(4,990)
(1,295)
Other expenses
(10,276)
(206)
(10,482)
Total expenses
(59,483)
(3,667)
(63,150)
Segment loss before tax
(21,869)
924
(20,945)
Total assets
Segment total assets
25,583
1,696
27,279
Total liabilities
Segment total liabilities
19,037
1,996
21,033
101
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 02 0
Year ended 30 June 2019
AUSTRALIA
$’000
NEW ZEALAND
$’000
TOTAL
$’000
Revenue from contracts with 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 loss before tax
(27,737)
(230)
(27,967)
Total assets
Segment total assets
42,374
3,479
45,853
Total liabilities
Segment total liabilities
32,203
2,003
34,206
MAJOR CUSTOMERS
The Group has no major customers with all customers contributing small balances to revenues.
N OT E 27 | C A P ITA L A N D L E A S I N G CO M M ITM E NT S
CONSOLIDATED GROUP
FY2020
$’000
FY2019
$’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
Total
-
-
-
-
2,080
3,961
311
6,352
From 1 July 2019, the Group has recognised lease liabilities for these leases. See note 1(i).
FINANCIAL STATEMENTS
102
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 02 0
CAPITAL COMMITMENTS
On 31 July 2020, the Group entered into a master services agreement (MSA) with Paywith Australia Pty Ltd to
develop the IncentiaPay products.
This MSA follows on from a term sheet which was entered into in May 2020 which established the key commercial
terms of the agreement. An amount of $615,000 was committed under the provisions of the term sheet for the
development of the IncentiaPay products of which $50,000 was paid in June and a further $50,000 was accrued for
under trade payables. The remaining $515,000 is anticipated to be paid in the first of half of the 2021 financial year.
N OT E 2 8 | 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
S E C U R IT Y D E P O S IT
The parent entity had given the following guarantees as at 30 June 2020:
• Lease of the Sydney office space, $0.7 million.
• Guarantee for credit cards facility, $0.1 million.
• Lease of the Auckland office space, $0.082 million.
• Letter of credit for payroll payment facility, $0.1 million.
N OT E 2 9 | 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 139: Financial
Instruments: Recognition and Measurement as detailed in the accounting policies to these financial statements,
are as follows:
CONSOLIDATED GROUP
FY2020
$’000
FY2019
$’000
Financial assets
Cash and cash equivalents
5,307
Deferred consideration
Trade and other receivables
-
992
Total financial assets
6,299
Financial liabilities
Trade and other payables
Lease liabilities
Borrowings
6,235
3,889
3,208
Total financial liabilities
13,332
3,460
3,109
2,728
9,297
5,941
-
4,635
10,576
103
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 02 0
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.
The following are the remaining contractual maturities of financial liabilities at the reporting date. The amounts are
gross and undiscounted, and include contractual liabilities interest payments and exclude the impact of netting
agreements.
CONTRACTUAL CASH FLOWS
FY2020
CARRYING
VALUE
$’000
FY2019
CARRYING
VALUE
$’000
Maturity analysis
Financial assets
WITHIN 1 YEAR
1 - 5 YEARS
> 5 YEARS
TOTAL
FY2020
FY2019
FY2020
FY2019
FY2020
FY2019
FY2020
FY2019
$’000
$’000
$’000
$’000
$’000
$’000
$’000
$’000
Cash
5,307
3,460 5,307 3,460
Deferred consideration
-
3,109
-
695
Trade debtors
992
1,915
992
1,915
Other receivables
-
813
-
813
-
-
-
-
Financial liabilities
Trade and other
payables
6,235
5,940 6,235 5,940
-
Lease liabilities
3,889
-
1,888
-
2,317
-
2,414
-
-
-
-
Borrowings
3,208
4,635
517
4,169
2,691
466
-
-
-
-
-
-
-
-
5,307 3,460
-
-
-
-
3,109
992
1,915
-
813
- 6,235 5,940
- 4,205
-
- 3,208 4,635
FINANCIAL STATEMENTS
104
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 02 0
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.
CARRYING
VALUE
RECEIVABLES
$’000
CARRYING
VALUE
OTHER
FINANCIAL
LIABILITIES
$’000
FAIR VALUE
LEVEL 1
LEVEL 2
LEVEL 3
TOTAL
$’000
$’000
$’000
$’000
Year ended 30 June 2020
Financial assets not measured
at fair value
Cash
5,307
Deferred consideration
Trade debtors
Other receivables
Financial liabilities
not measured at fair value
Trade and other payables
Lease liabilities
Borrowings
-
629
363
-
-
-
-
-
-
-
6,235
3,889
3,208
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
5,307
-
629
363
6,235
3,889
3,208
CARRYING
VALUE
RECEIVABLES
-
$’000
CARRYING
VALUE
OTHER
FINANCIAL
LIABILITIES
$’000
FAIR VALUE
LEVEL 1
LEVEL 2
LEVEL 3
TOTAL
$’000
$’000
$’000
$’000
Year ended 30 June 2019
Financial assets not measured
at fair value
Cash
3,460
Deferred consideration
3,109
Trade debtors
Other receivables
1,915
813
-
-
-
-
Financial assets 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
105
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 02 0
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
Specific valuation techniques used to value financial instruments include:
• Deferred consideration - based on the present value of the future cash flows, discounted using a 3-year
government bond rate.
• Lease liabilities - based on the present value of the future cash flows, discounted using an incremental
borrowing 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 of our interest
exposure and the low number of cross border transactions. Refer to the Market risk section 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.
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.
FINANCIAL STATEMENTS
106
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 02 0
The Group has no significant concentrations of credit risk with any single customer or group of customers.
$35 million of the revenue in note 2 are memberships and gift cards sales, they are cash on delivery, therefore, the
Group has no significant credit risk.
Covid-19 impacts have increased the possibility of non-performance by customers, in particular, customers
operating within the travel and leisure sector. The Group started engaging with its customers since the start
of the pandemic, providing discounts to the existing debts or assisting customers with new sales proportions.
As the revenue from travel and leisure was $1.7 million which was only 4.0 per cent of the total revenue for the
financial year, there is 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.
The major customers of trade and other receivables were not affected by Covid-19, as this group of customers
are mainly in the energy, banking and insurance industry.
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.
B. LIQUIDITY RISK
Included in the $3.2 million disclosed in the 2020 borrowings time band is $0.5 million which is ‘within 1 year’, and
the loan is required to be repaid by 30 September 2020. See note 16. 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
The Group entered into a new Loan Deed with Suzerain on 27 February 2020 for the provision of a $5.83 million
facility (including associated borrowing costs). Subsequently, Suzerain has agreed to increase the facility limit of
the original loan by $4.0 million to $9.825 million. This facility will initially be unsecured with the view to obtaining
shareholder approval for security at the Company’s next Annual General Meeting, anticipated to be held in
November 2020. See note 16.
107
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 02 0
II. MATURITIES OF FINANCIAL LIABILITIES
Interest bearing loan
As at 30 June 2020, the interest bearing loan with Suzerain will mature on 30 September 2020. See note 16.
Additional growth operational facility
As at 30 June 2020, the additional growth operational facility with Suzerain will mature on 31 December 2021.
See note 16.
Transformational capital facility
As at 30 June 2020, the transformational capital facility with Suzerain will mature 18 months from the date of the
first draw down. There was no draw down as at 30 June 2020. See note 16.
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 has not hedged foreign currency
transactions as at 30 June 2020 as $4.6 million of total revenue is in NZD and the foreign currency fluctuation
between AUD and NZD is historically insignificant at 0.5 per cent during the year. Foreign exchange risk was
therefore, considered insignificant. Senior management continue to evaluate this risk on an ongoing basis.
The exposure to foreign currency risk at the end of the reporting period, expressed in Australian dollars, was as
follows:
FY2020
NZD
$’000
73
(91)
FY2019
NZD
$’000
218
(69)
Trade debtors
Trade payables
At the end of the financial year, the effect on profit and equity as a result of changes in the foreign exchange rate
with all other variables remaining constant would be as follows:
Year ended 30 June 2020
+/- 0.5% in foreign exchange rates
Year ended 30 June 2019
+/- 0.5% in foreign exchange rates
PROFIT
$’000
EQUITY
$’000
46
7
117
74
D. INTEREST RATE RISK
See note 16 for details related to interest rates and repayment terms for borrowings.
FINANCIAL STATEMENTS
108
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 02 0
N OTE 3 0 | R E L ATE 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.
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 21 for the value of the related party transactions above.
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 21 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.
The following transactions occurred with related parties controlled by key management personnel:
CONSOLIDATED GROUP
FY2020
$’000
FY2019
$’000
Purchases of services from entities controlled
by key management personnel
339
-
Transactions between the Company and controlled entities include loans, management fees and interest. These
are eliminated on consolidation.
Suzerain and Skybound, related parties to Jeremy Thorpe (Non-Executive Director) and Dean Palmer
(Non-Executive Director), have provided a total of $11.5 million loan facilities to the Group. During the period,
the Group drew down $3.2 million of the line of credit facility. See note 16 for additional detail.
109
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 02 0
N OTE 3 1 | E V E NT S A F T E R T H E R E P O R TI N G P E R I O D
EMPLOYEE GIFT PLAN
The Directors approved the establishment of an Employee Gift Plan effective on 28 July 2020, through an
employee trust, being Entertainment Trus Co Pty Ltd, whereby each employee will be gifted $1,000 of shares for
no payment. The number of shares will be determined based on the share price at the date they are issued and
will be subject to the terms of the plan rules which include:
• A recipient must be an employee of the Group on 28 August 2020.
• The shares cannot be sold, assigned, transferred, or used as security before the earlier of:
• The end of three years after the acquisition of the shares;
• The employee is no longer employed by the Group; or,
• There is a change of control event that occurs after the shares are issued to employees.
SALE OF MOBILEDEN
The Group entered into an agreement to dispose of the MobileDEN platform and associated assets on 1 July 2020
to Mobecom Limited. Consideration for the sale transaction will be determined using revenue over the period of
12 months after settlement. Settlement is dependent on Suzerain releasing its security interest over the assets,
which occurred on 1 July 2020. Assets and liabilities associated with this sale have not been reclassified as
available for sale in the financial report as they have either been fully recovered, or impaired, or have been fully
settled as at 30 June 2020.
COVID-19
Conditions affecting the macro economic environment and the uncertainty brought on by the Covid-19 pandemic
continues after 30 June 2020, and given the nature of the pandemic, the term of this impact is unknown. The
Group will continue to monitor the impacts associated with the pandemic, with a view to take appropriate and
timely action.
FINANCIAL STATEMENTS
110
Directors’
Declaration
111111
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 43 to 110, 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 2020 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 Chief Executive Officer and Chief Operating Officer.
S T E P H E N H A R R I S O N
C H A I R M A N
18 September 2020
IncentiaPay Limited ABN 43 167 603 992
Level 5, 68 Harrington Street, The Rocks 2000 NSW
p | +61 2 8256 5300 | e | info@incentiapay.com
www.incentiapay.com
DIRECTORS’ DECLARATION
112
Independent
Auditor’s
Report
113
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 2020 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 2020;
• 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; and
• 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 (including Independence Standards) (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.
1
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.
INDEPENDENT AUDITOR’S REPORT
114
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 with consideration to Covid-19;
•
•
•
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 judgment, 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.
115
Valuation of Goodwill and other intangible assets ($14.387m)
Refer to Note 13 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 53% 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 costs associated with the
business transformation program 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 transformation program, including
the strategic reposition of the core
operations of the business focussing on
long-term sustainability, as well as
anticipated impacts from Covid-19 on the
volatility of cash flows over the forecast
period. This 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 downturn in membership
subscriptions in the short-term and as a result
of Covid-19, as well as the change in
anticipated cash flow cycles following
completion of the Group’s 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 performance, business and
customers, and 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
INDEPENDENT AUDITOR’S REPORT
116
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.
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 Group recorded an impairment charge of
$3.6m against goodwill, resulting from the
reduction in business due to Covid-19 along
with changing cash flow cycles under the
business transformation, 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.
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.
117
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.
INDEPENDENT AUDITOR’S REPORT
118
Report on the Remuneration Report
Opinion
Directors’ responsibilities
In our opinion, the Remuneration Report
of IncentiaPay Limited for the year ended
30 June 2020, 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 31 to 40 of the Directors’ report for the year
ended 30 June 2020.
Our responsibility is to express an opinion on the
Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards.
KPMG
John Wigglesworth
Partner
Sydney
18 September 2020
119
ASX
Additional
Information
ASX ADDITIONAL INFORMATION
120
A SX A D D ITI O N A L I N FO R M ATI O N
As at 21 August 2020
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 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 50,000
50,001 to 100,000
100,001 and over
TOTAL
130
228
121
448
150
209
1,286
26,210
689,780
978,593
11,732,126
11,623,245
630,890,658
655,940,612
0.00
0.11
0.15
1.79
1.77
96.18
100.00
UNMARKETABLE PARCELS
The number of security investors holding less than a marketable parcel of 15,152 securities
($0.033 on 21/08/2020) is 578 and they hold 2,981,788 securities.
SUBSTANTIAL HOLDERS
RANK
NAME
CURRENT BALANCE
% ISSUED CAPITAL
1
2
Suzerain Investments Holdings Ltd
393,524,705
59.99%
Australia Fintech Pty Ltd
36,732,674
5.60%
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
393,524,705
59.99%
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
38,855,503
3
Australia Fintech Pty Ltd
4
Muirstone Capital Ltd
5
Sinetech Limited
6
HSBC Custody Nominees
121
36,732,674
28,861,387
16,178,574
12,693,730
5.92%
5.60%
4.40%
2.47%
1.94%
7
Everest MB Pty Ltd
7,518,000
8
Kootenay Investments Pty Ltd
6,500,000
9
BNP Paribas Nominees Pty Ltd
4,995,492
10
J.P. Morgan Nominees Australia Pty Limited
4,441,327
11
PC & Wendo Nominees Pty Ltd
3,496,008
12
Iain Dunstan
13
Mr Henry Michael Hoy Jones
14
Yarran Park Pty Ltd
15
Ben Johnson
3,035,714
2,528,631
2,170,034
2,139,574
16
Mr Lucas Rudolph and Jansen Van Vuuren
2,131,667
17
HSBC Custody Nominees (Australia) Limited
2,006,408
18
Virpaysol Pty Ltd
19
Darius Coveney
20 Ms Li Zhao
1,723,685
1,718,571
1,572,818
1.15%
0.99%
0.76%
0.68%
0.53%
0.46%
0.39%
0.33%
0.33%
0.32%
0.31%
0.26%
0.26%
0.24%
TOTAL
572,824,502
87.33%
VOTING RIGHTS
The Company has 655,940,612 fully paid ordinary shares on issue. Each ordinary share is entitled to one vote
when a poll is called, otherwise each member present at a meeting, or by proxy, has one vote by a show of hands.
There are no other classes of equity securities.
VOLUNTARY ESCROW
No shares are under voluntary escrow. No fully paid ordinary shares are subject to voluntary escrow.
ON-MARKET BUY-BACK
There is no current on-market share buy-back.
ASX ADDITIONAL INFORMATION
122
IncentiaPay
Corporate Directory
Directors
Mr Stephen Harrison - Chairman
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
Sundaraj & Ker
Level 36, Australia Square
264 George Street
Sydney 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
123
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