INFOMEDIA ® FY2003 ANNUAL REPORT CONTENTS 1 2 3 4 6 CHAIRMAN’S LETTER RESULTS AT A GLANCE SUMMARY INTRODUCTION ACHIEVEMENTS 14 ACQUISITIONS 18 VIEWS FROM OUR CUSTOMERS 25 APPOINTMENTS AND AWARDS 26 OUTLOOK 27 AUDITED ACCOUNTS 28 DIRECTORS’ REPORT 34 STATEMENT OF FINANCIAL PERFORMANCE 35 STATEMENT OF FINANCIAL POSITION 36 STATEMENT OF CASH FLOWS 37 NOTES TO FINANCIAL STATEMENTS 62 DIRECTORS’ DECLARATION 63 AUDIT REPORT 64 CORPORATE GOVERNANCE STATEMENT 65 ADDITIONAL INFORMATION 66 PERSONAL NOTES PAGES 68 CORPORATE DIRECTORY © 2003 Infomedia Ltd. All Rights Reserved Worldwide. This document may not be reproduced in whole or in part without the express written permission of Infomedia Ltd. CHAIRMAN’S LETTER Dear Fellow Shareholders, It is with pride that I present to you the 2003 Annual Report for your Company, Infomedia Ltd. For the seventh consecutive year, Infomedia achieved admirable levels of growth and record levels of revenue and profit. Company revenue increased by eighteen million dollars to $62,652,000 and net profit after tax increased 36.7% to $18,325,000. The five-year Compound Annual Growth Rate (CAGR) for our revenues stands at a solid 54.7%. Our core business of electronic parts catalogues (EPC) increased by 19.9% from 38,830 paying subscriptions at the start of the year to 46,580 at its close. This growth was achieved through ‘organic’ market development and a strategic acquisition. The five-year CAGR for our product subscriptions now stands strongly at 39.2%. A fully franked final dividend of one and nine-tenths cents (1.9¢) was paid to shareholders of record at 8 September 2003. This combined with the interim dividend declared in February 2003 of one and one-half cents (1.5¢) brings the total franked dividend for the year to three and four-tenths cents (3.4¢) per share, a growth of 23.6% over FY2002. The audited accounts section of this report will allow you to review the full financial performance of your Company. Your support of management's continuous product improvement policy and research and development expenditure has contributed to Infomedia being a well-respected leader in its field and its products being likely valued. The coming year holds in store exciting prospects for the Company. I believe it will be a seminal period for our future expansion, as the results of some of these creative initiatives take root in our domestic and international markets. These works include ECD's high-performance next generation Microcat electronic parts selling system, DMD's essential Superservice Menus data application and BSD's fertile Wintel-based AutoLedgers convergent desktop applications. I further believe that Infomedia's reputation and patronage in the Americas and Europe will continue to grow. Our advanced readiness for Internet EPC delivery, through Microcat FRESH and Microcat LIVE, will pay dividends beginning this year, as clients in both markets now appear ready to make parts e-commerce a serious part of their sales strategy. As this momentum progresses in coming years, I am confident it will carry us aloft. If you wish to find out more information on your Company's products, historical financial information or media releases, you may conveniently do so at the Internet website www.infomedia.com.au. On behalf of the Board of Directors, management and staff, I thank you for your confidence and participation in the Company and commend this Annual Report to you. Respectfully Yours, Richard David Graham Chairman and CEO www.infomedia.com.au 1 RESULTS AT A GLANCE 2 www.infomedia.com.au SUMMARY Seventh consecutive year of commendable financial growth Company revenue increased by 40.9% to $62.6 million. Net profit after tax increased 36.7% over the previous financial year to $18.3 million. Strengthened data licences Five new and renewed long-term data licences were signed for Microcat® and PartsImager® with Ford for Europe, North America, Australia-New Zealand and Asia Pacific and with General Motors for the Americas. Strong subscription growth Infomedia® EPC subscriptions grew by 19.9% from 38,830 at the beginning of the year to 46,580 at the close of the year. Superservice Menus™ launched The Data Management Division commenced the commercial roll out of their new automotive service quoting application. Starting in Australia with Toyota, the coverage of the menus will expand to cover the domestic and then international markets. Australian Exporter of the Year Infomedia was awarded the coveted Australian Export Award in the category of Information and Communications Technology, beating a record number of nominees. Internet products launched successfully Microcat FRESH® was released with a low key commercial launch in Ford’s European market, followed by piloting for Toyota dealers in the Swedish market. Infomedia grows with acquisitions Infomedia acquired the global PartsImager business from the USA based EDS Automotive Retail Group. The businesses of Dealer Management System (DMS) provider, VM Computer Services (VMCS), in Brisbane and e-commerce enabling software company, Australian Windows Publishing, were also acquired. Infomedia Future Motors™ Showcase underway The Company began development of Infomedia’s Future Motors Showcase (FMS) in Perth, Western Australia. The Showcase profiles all the Company’s products in an automotive dealership-like environment. FMS is intended to redefine the sales process for the Company’s DMS and associated products by increasing certainty and reducing acquisition decision time for prospective subscribers. Oil company subscribers grow Penzoil and Conoco join the other major oil companies in Australia and New Zealand as subscribers to Infomedia's Lubricant Recommendation Database. New Non-Executive Director appointed Geoff Henderson joins the Infomedia Board of Directors as a Non-Executive Director after a long and distinguished career with the Ford Motor Company. www.infomedia.com.au 3 INTRODUCTION “More pieces from the convergence puzzle were put in place in FY2003.” 4 www.infomedia.com.au W e welcome you to this FY2003 Annual Report. It achievements during the 2003 financial year. In stands as the official record of your Company's addition to providing you with the key financial information you require about your Company, this year’s report also focuses on the major milestones for the past year and provides you with views on your Company from our customers’ perspective. We have interviewed representative customers from each Division of the Company for their views on our products and services and what these mean to their business. We trust you find all this informative. It has been pleasing to see the continuing growth of the business in not only financial performance but in infrastructure, product and staff development as well. During the financial year our convergence vision continued to come into focus, on the back of the maturing development of the AutoLedgers® Dealer Management System (DMS), its AutoMotives™ and AutoOffice™ companion products and the full DMS integration of Infomedia’s EPC and Superservice Menus™ products . During the FY2003 year, your Company also continued to grow through acquisitions. In July 2002, the business of Australian Windows Publishing Pty Ltd (AWP) was acquired, followed in August 2002 with the acquisition of the PartsImager EPC business. Furthermore, in March 2003, the Business Systems Division was expanded with the acquisition of DMS supplier, VM Computer Services Pty Ltd (VMCS). This acquisition establishes Infomedia as one of the largest suppliers of DMS in the Asia-Pacific region. With an increasing number of customers to serve and products to supply, our personnel worked diligently in the business. We continued to supply our products in a competent and timely fashion whilst developing products to fulfil future market requirements. The Electronic Catalogues Division produced 308 editions of our EPC products and commercially released the first Microcat Internet product and commenced development of the next platform release of Microcat. Our Data Management Division produced and piloted the new Superservice Menus product and continued to service its automotive and lubricant clients via their data management and publication services. The Business Systems Division continued development of its new convergent DMS products, common e-commerce protocol and the prototype Future Motors Showcase. The Achievements section of this Annual Report provides more detail on these and other significant activities from FY2003. www.infomedia.com.au 5 ACHIEVEMENTS “Microcat® continues to set the technology pace for the global EPC market.” 6 www.infomedia.com.au ELECTRONIC CATALOGUES DIVISION (ECD) D uring FY2003, ECD secured a new data licence agreements. These data licence licence and renewed four existing data agreements are the 'raw materials' of the electronic Pacific, Middle East and dealers of North American vehicles internationally. Ford Europe/North America/Asia Pacific/ parts catalogue (EPC) business. The agreements Australia/New Zealand renewal – five years are significant to ECD, as well as the overall The renewal of the agreement between Ford Europe business, as they represent growth in potential and Infomedia continues the long business subscribers and continuity of revenue streams over relationship between the two companies. a long-term period. These agreements included: Infomedia began supplying Microcat to Ford Europe ● General Motors, North America - New in 1997. Since that time it has become an Agreement - three years invaluable business tool for thousands of users on Ford, Europe - Renewal - five years a daily basis. Ford, North America - Renewal - five years The commercial environment for the automotive Ford, Asia Pacific - Renewal - five years industry in Europe has changed significantly since Ford, Australia/New Zealand - Renewal - five the original agreements were struck in 1997. Three years major changes that have occurred are: Our focus during FY2003 was to grow the greater computer sophistication in the business in the North American and European dealerships markets and this has been achieved. In terms of pervasiveness of the Internet both subscription growth and access to new removal of Block Exemption by the European markets these data licence agreements are Commission for the automotive industry. supportive of this success. European Commission Block Exemption is a body of legislation that affects the organisation, General Motors, North America new representation and delivery of automotive products agreement – three years and services throughout the European Union. Concurrent with the acquisition of the PartsImager Removing Block Exemption is expected to business, General Motors granted Infomedia a non- materially change the consumer face of the exclusive 3-year agreement with General Motors in automotive industry in Europe. Amongst other North America. The agreement gives the Company things, automakers are required to provide non- the right to market its EPC to the General Motors dealers with the same vehicle documentation dealers that use the North American product line, previously reserved only for their dealership including access to dealers' trade customers for our franchisees. Internet-based products. During the discussions and analysis leading up The General Motors dealer network in North to the renewal of the data licence agreement, it America is one of the largest automotive dealer was not possible to predict or model with certainty bodies in the world. The subscribers acquired from how Block Exemption would reshape the role of EDS were significant, but still only represents about workshop documentation and automotive 21% of the total potential market. We anticipate productivity tools like Microcat. Even today with the further growth in market share during FY2004. advent of post-Block Exemption only weeks away, Infomedia's relationship with General Motors there is still uncertainty as to the outcomes. The Holden goes back through its Data Management Block Exemption changes could cause a growth in Division to 1991. At that stage the Company demand for tools such as Microcat; however there supplied the PartFinder EPC to the Holden dealer is currently no basis upon which to forecast the bodies in Australia and New Zealand. In 2003, demand. As such, both parties wanted to maintain Infomedia supplies EPCs to General Motors dealers flexibility in order to respond to the future needs as in Australia/New Zealand, North America, Asia they became clearer. www.infomedia.com.au 7 ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ACHIEVEMENTS CONTINUED Taking this into consideration, an arrangement was created to renew the agreement for the term of five years. The first phase of the agreement is exclusive, and the later phase of the agreement provides for the possibility of developing a competitive market to service a potentially larger and more diverse audience than exists today. In addition, Ford Europe added Infomedia's Internet product, Microcat FRESH, to the agreement. This technology is designed to provide the dealer with tools to further enhance their existing business relationship with their customers. Now Ford’s European dealers have an online parts cataloguing and ordering system to use with their independent motor trade customers. Concurrent with the European licencing renewal, Ford North America, Ford Asia Pacific and Ford Australia/New Zealand also renewed their individual data licence agreements with Infomedia for five- year terms. North American expansion In February 2003 ECD products were exhibited at the National Automobile Dealer Association (NADA) Convention and Exposition. The convention, a major North American dealership trade show on the automotive dealer calendar, ran for four days and was attended by thousands of automotive dealers looking to find out about the latest dealership products, business trends and technologies. Infomedia's distributor for the Americas, EDS, represented the Microcat and PartsImager EPC products. Staff working the exhibit were constantly in demand, not only by dealers but also by automaker representatives wanting to learn about the latest versions of these products. In addition to showcasing the full range of Infomedia EPC versions available today, they demonstrated some of the forthcoming technology to notable interest. With regards to new technology, Infomedia's EPC development team is working on the newest version of Microcat, which is due to be commercially released in FY2004. Management believes this latest version will again demonstrate that Infomedia is leading the automotive EPC field. 8 www.infomedia.com.au Examples of EDS Microcat advertisements Acquisition of EDS PartsImager business Infomedia announced in August 2002 that it acquired the PartsImager EPC business of American global services company Electronic Data Systems Inc. (EDS). EDS developed PartsImager, which services the needs of thousands of end-users at GM, Lexus and Toyota dealerships in North and South America The purchase has expanded the presence and scope of Infomedia’s EPC business globally, particularly in the Americas where EDS-Automotive Retail Group has taken on the role of Exclusive Distributor for an initial three year period. EDS-ARG is headquartered in Troy, Michigan. Under the new distribution arrangements, EDS is responsible for sales, marketing, delivery and installation, customer support, training and administration services for both Microcat and PartsImager EPCs. Concurrent with the acquisition, the Company entered into a data licence agreement with General Motors Corporation SPO (USA), whose vehicle brands include Buick, Cadillac, Chevrolet, GMC Trucks, Oldsmobile, Pontiac and Saturn. Infomedia and its European distributor will distribute to and support the GM-SPO PartsImager customers in all the regions outside of the Americas. The Infomedia and EDS transition teams achieved admirable results in maintaining high standards for customer service, training and product sales in the regions during the fast changeover period. Since then subscriptions in the American markets have grown steadily. Management anticipates that EDS’s larger dealer-facing infrastructure will expand Microcat and PartsImager’s positive market profile and subscription numbers. www.infomedia.com.au 9 ACHIEVEMENTS CONTINUED “Superservice Menus™ will be to the service department what Microcat® is to the parts department: an exciting new way of doing business.” 10 www.infomedia.com.au DATA MANAGEMENT DIVISION (DMD) T he Data Management Division (Datateck Publishing Pty Ltd) continues to be a leading source of automotive publishing and data research expertise in the Australian market. Its even from dealer to dealer. It has in the past been stored in hard copy, which is expensive to maintain and keep current, and much more cumbersome and time-consuming to use. services range from automotive cataloguing and Superservice Menus capture the vital information technical illustrating to the development of software- for these operations and combine this data with VIN based solutions. The Division offers a wide range of and vehicle registrations in a single application. This automotive analytical data services. DMD has added allows the service area of a dealership to access this new customers and new services for existing information for both quoting and invoicing purposes. customers to their portfolio in FY2003. The product is available in a stand-alone application Its well-respected industry publications such as (similar to Microcat) or via a data pack that is loaded the Lubrication and Tune-Up Guide™, the Lubricant into a dealer's Dealer Management System (DMS). Recommendation Database and the service The main benefits to dealers are that: the data is information and warranty packages used by local kept up to date on a monthly basis; easy to use; automotive suppliers such as Holden and Mitsubishi, accurate; vehicle specific; and allows for consistency form the backbone of DMD's business. in service quoting. Repairs and service intervals are Below are two new product initiatives undertaken generally specified according to the manufacturers by DMD in FY2003. instructions. The application allows dealership staff to quote repair and maintenance prices with Superservice Menus™ confidence. One of the challenges of ensuring a successful and Superservice Menus were first released in July profitable service department is to be able to quickly 2003 to Toyota dealers in Australia, with other brand generate an accurate and competitive quotation. For versions to be released soon. a full service dealership this is not as easy as it sounds because it involves the synchronisation of Pontiac GTO Data Conversion many information sources. When the average dealer During FY2003, DMD was chosen to carry out the does up to 30,000 different service operations, catalogue data preparation of the General Motors- producing a quotation quickly and accurately Holden Monaro for the North American Pontiac GTO becomes an enormous task. conversion. This is a very high profile vehicle release By working with ECD and BSD, it became clear in the USA, with the GTO having a 'cult status' that there was a void in the market for top quality amongst American car enthusiasts. Accordingly, the service repair quoting information (referred to as vehicle conversion was conducted with painstaking ‘service menus’) for automotive dealers. A service attention to detail. menu is an information packet that details how a Based on the bill of materials from the vehicle specific service interval or vehicle component factory, Infomedia's technicians turned the raw data replacement should be carried out and costed. It into interpretable information. Each part is treated also includes information such as appropriate separately and is catalogued taking into account its replacement part numbers, quantities and types of individual application characteristics and state of any fluids that may be required (e.g. engine oil or interchangeability. transmission fluid) and the manufacturer’s The resulting catalogue information is used by the recommended labour time for each operation. manufacturers, franchises and third party suppliers. The form in which this information is generally The DMD team was chosen for their track record of available varies from automaker to automaker and timely delivery of a quality result. www.infomedia.com.au 11 ACHIEVEMENTS CONTINUED BUSINESS SYSTEMS DIVISION (BSD) D uring FY2002 and 2003 the Division has interface enhancements to the underlying technical and user been developing code base that was acquired in FY2001. Toward the end of FY2003, focus widened from product development activity to a pre-marketing phase. Throughout the year there were positive milestones passed. Among those were: AutoLedgers customers successfully commence ASP operation from Infomedia's Eastern Application Hosting Centre Steady progress in converting from its private data network to secure Internet-based VPN network Completion of a major product upgrade for AutoLedgers that included integration with products from the Company's other divisions Acquisition of a complementary DMS for small to medium size enterprises The development phase of the Future Motors Showcase Several AutoLedgers dealers are now running the new ASP model and are reporting cost savings and improved operating speeds over their previous in- house IT operations. This choice is proving to be popular with existing customers as well as being the preferred choice of new customers. FY2003 has also seen the adoption of a new and transparent way of pricing the Company's DMS offerings that is reshaping the commercial playing field for such products. It saves subscribers from traditionally high start-up costs and allows them to sales process as being inefficient and lacking pay a simple monthly cost per user subscription fee transparency. In order to create a sales technology for a complete DMS utility delivered to their desktop. as efficient as its computing technology they Through its western and eastern Application Hosting developed a prototype venue called Infomedia's Centres, Infomedia manages the central processing Future Motors Showcase in Perth. The Showcase equipment, data security, maintenance, and system provides a simulation and orientation environment personnel matters required to reliably deliver that mimics the actual operational structures of a AutoLedgers online to dealerships around Australia. dealership. At the venue, customers and prospective During the year, the Division undertook a study to customers will be able to simulate the actual assess the overseas potential for Infomedia's DMS operation of their business before they expand or products. The information provided by the study has subscribe to our products, eliminating the guesswork been encouraging. The Division is progressing to the and uncertainty in the decision making process. The next stage of determining which region may be most venue will demonstrate the powerful benefits that receptive to Infomedia's offerings. the Company’s product convergence strategy has in BSD management views the traditional DMS store for dealers. 12 www.infomedia.com.au ● ● ● ● ● ● ● ● ● ● “AutoLedgers® has a set of features, functionality, speed and affordability that are changing what dealers expect from a DMS.” www.infomedia.com.au 13 ACQUISITIONS ACQUISITION OF AUSTRALIAN WINDOWS PUBLISHING (AWP) BUSINESS “ezimerchant™ and a personal vision, can turn a home office into a thriving business.” T he business of Australian Windows Publishing Pty Ltd, which was acquired in July 2002, has experienced a smooth Infomedia. The business is now called, Infomedia’s integration into Retail Products Group (RPG). Over the last 12 months, RPG has relocated its operations to Sydney while at the same time doubling transaction server revenues and increasing product sales by over 50% in FY2003. ezimerchant™professional continues to be recognised as a leading product in its market segment by the media. The most recent in a string of plaudits from IT and user based journalists includes 'Best Buy' in PC User magazine, July 2003. As an illustration of the e-commerce power ezimerchant has put in the hands of its Australian users, the statistical information derived from Infomedia's Global Transaction Server shows at least 25% of the transaction volume is export related. Server statistics also show that revenues for the same group of companies have grown four fold over the past twelve months. Both new users and current merchants are growing rapidly using Infomedia technology. Once the RPG team had been transitioned successfully to the Sydney office, they commenced a series of marketing activities to test the product’s appeal to a wider audience. The work started with a redesign of the product packaging and websites and continued with test marketing television commercials regionally. The commercials were run in regional NSW to determine what messages best communicate about the ezimerchant opportunity. The first set of testimonial commercials ran for a period of four weeks and featured successful ezimerchant business entrepreneurs. The result was a marked increase in traffic to the ezimerchant website. In addition to marketing ezimerchant professional and preparing for its new version 4.0 release, RPG developed a new shrinkwrap software application for release in FY2004 called ezimailer™. This new horizontal application caters for businesses of all sizes. It facilitates conducting professional email marketing campaigns with ease and allows email addressees to complete an 14 www.infomedia.com.au e-commerce transaction with the click of a button inserted into an email. This is a capability normally available in systems costing thousands of dollars. ezimailer gives normal text and email documents, which are frequently used in direct marketing campaigns, the power of online transaction processing. Sellers can add payment, buy and other transaction buttons directly into the email they are sending, which means their addressees can purchase or pay directly from the email through secure payment and checkout processes. ezimailer incorporates order management that can handle numerous transaction types and be exported to a business accounting system. Like ezimerchant professional, ezimailer attracts both a purchase fee and recurring revenue streams. www.infomedia.com.au 15 ACQUISITIONS CONTINUED “For agricultural, motorcycle, marine and smaller automotive dealers, NOVA™ is the ideal DMS solution.” 16 www.infomedia.com.au ACQUISITION OF VM COMPUTER SERVICES (VMCS) BUSINESS I n March 2003, Infomedia announced the acquisition of the business of automotive DMS provider VM Computer Services Pty Ltd (VMCS), a company based in Queensland. Infomedia's wholly establishing an elastic national network of professional representatives for NOVA. Infomedia anticipates that this acquisition will add critical mass to its Australian business systems owned subsidiary, AutoConsulting Pty Ltd was the offerings, making the Company the second largest acquiring entity and will continue to operate the DMS supplier in the country. It is also anticipated to business from its Queensland facilities. provide an outlet for a number of new integrated data VMCS was the maker of the popular MISS (Motor products such as its Superservice Menus and online Industry Software System) Dealer management parts location and ordering. System (DMS), which is used by hundreds of dealerships across Australia. Now re-branded as NOVA™, the DMS is a popular choice with small to medium sized automobile and agricultural equipment dealerships that seek good functionality and ease-of- use without the burden of expensive high-end servers. The system is well respected in the market and has attracted a very loyal group of customers. The NOVA DMS is targeted toward dealerships and vehicle outlets generally requiring between 3 to 50 terminals, which makes it complementary to the Infomedia's higher-end AutoLedgers DMS. Dealerships of this size are the norm in Europe and Asia too. In time, NOVA may be adapted to conform to overseas dealership and OEM requirements, thus extending its potential. NOVA has a full GUI (graphical user interface) and can be installed on a low-cost Windows/Intel platform. This new business has both initial and recurring revenue aspects, and is compatible with the Company's core financial model. The latest release of the software has been well received with the addition of a new vehicle sales module and service booking ability. The update also includes the full integration ability of Infomedia's Superservice Menus. Recently, a leading Australian hire car company selected the NOVA DMS system for some of its vehicle sales operations. The John Deere Company has accredited the DMS for use by its Australian agricultural equipment dealerships, extending Examples of NOVA Graphical User interface (GUI) Infomedia's scope into this new genre of vehicle supplier. The sales, installation and training for NOVA are handled by independent sales agents (ISAs). Since Infomedia's acquisition of the business, there have been additional ISAs appointed with the objective of www.infomedia.com.au 17 VIEWS FROM OUR CUSTOMERS Richard Barber, Director of Strategic Marketing and Business Development, Clifford Thames Ltd, Chelmsford, UK Infomedia's European distribution partner Clifford Thames provides a range of support and market development services for Infomedia products in Europe. We are a tier-one global service provider to automakers in the aftermarket, specialising in parts and service content management, publishing, training, market support and implementation, similar to Infomedia's Datateck Division in Australia. I first became aware of Microcat after it was demonstrated to Ford of Europe management in early 1996. We were managing Ford's cataloguing data and microfiche production at the time and involved with supporting a European EPC initiative as well. After seeing the capabilities of Microcat, a lot of people at Ford and CT were pretty enthusiastic about it but were uncertain if it could make the transition from a regional to international product. After Ford asked us to provide a sample of European data to Infomedia, we had an opportunity to get to know their developers and management pretty well. I was very impressed not only with the product and their development plans, but also with the people in the business. They had a clear vision for their product, were focused on the customer, had a different kind of business model and possessed a real drive to be successful. In those days, Infomedia was a much smaller organisation than it is now and, from a European perspective, far away. It was accepted by everyone involved at that stage, that in order to be a well-accepted product, customer support and services would need to be European based. Well, support and service are what Clifford Thames does, so we put up our hand for the job, and Infomedia thought that was a good idea too. I guess Ford of Europe did as well, as they granted the first Microcat data licence to Infomedia in 1997. We all worked together to launch Microcat in Europe during 1997 and 1998. We benefited from a having a group of people in the manufacturer who were determined to have a great product for their dealers. There was a great deal of work to be done in delivering a product that worked for the European dealers since we were not only introducing a new EPC but also transitioning them from microfiche. We worked closely as a team to finalise the data and Microcat, often for very long hours. We travelled together around Europe conducting roadshows, which brought Microcat to the dealers. Despite the hard work there was also a great sense of fun and adventure, which I believe, still shines through the Infomedia-Clifford Thames relationship today and in Microcat itself. When Infomedia launched Microcat it set a number of industry firsts and instantly became the global benchmark EPC. Nothing has changed in that respect since then. Continuous development of Microcat has kept the product out in front and the clear focus on being the best has never changed. Since 1997 many automakers have adopted Microcat and it has become the leading product in Europe. 18 www.infomedia.com.au Tracey Beckler, Director Digital Camera Warehouse, Canterbury, NSW ezimerchant professional customer I started my business selling digital cameras over the Internet after a 'New Year’s inspiration' and literally registered the business the first working day of 2001. As the name of the business suggests, we sell digital cameras and supplies via our website, www.digitalcamerawarehouse.com.au. Once I had registered the business, I set about sourcing suppliers and software. In March 2001, I found ezimerchant professional on the Internet and got really excited. I downloaded the trial version and just loved it; it was exactly what I was looking for. Firstly, I did not need to be a programmer to use it. I found it very intuitive to set up the site initially and subsequently to keep it up to date with the latest products and prices. Additionally, it allowed me to link up to the major credit card payment gateways in minutes. When I compared the feature set, ease of use, quality of service and value for money, it became the clear choice for the business. When I started the business, I was still working full time and operating from home but the business grew so rapidly I quickly needed to move into a shared office. I now employ two full time and five part time staff and we are about to move again into bigger premises. The great thing for our business is that with ezimerchant as our 'virtual shop front' it really helps to keep our overheads down; ezimerchant is excellent value for money. Thanks to my inspiration and ezimerchant professional, the dream of a digital camera warehouse is now a thriving business. ezimerchant helped me to create this business and has really helped us to get good search ratings on the Internet, which is vital for a successful online business. When we need any support from the Infomedia team they have been great. Our calls and emails are always answered promptly and any problems have been sorted out with no fuss. We are looking forward to seeing the next update of ezimerchant to see what extra things we can do with our business in the future. www.infomedia.com.au 19 VIEWS FROM OUR CUSTOMERS CONTINUED Gino Bieringer, General Manager Parts, Logistics and IT, DAIHATSU Deutschland GmbH, Toenisvorst, Germany Microcat OEM distributor DAIHATSU Deutschland GmbH is one of the largest DAIHATSU importers in the world. Whilst the business in based is Germany, we are also responsible for the Austrian, Belgium, Luxembourg and Hungarian markets. We first became aware of Infomedia when our Australian colleagues introduced us to Microcat. They had been using Microcat for about two years and recommended we look at the system for Europe. It was clear straight away that Microcat was designed with a large amount of input from parts professionals and that it was obvious it would provide major productivity gains to our dealers. Along with our DAIHATSU European import colleagues, we proposed to DAIHATSU management that they considered introducing an EPC for Europe, and that in our opinion Microcat would be a top candidate. Richard Graham was invited to demonstrate the system to us at a distributor conference in 1998. Everyone was very impressed with what they saw and this lead to DAIHATSU management in Japan taking the decision to adopt Microcat as our standard EPC internationally. Infomedia's response was great; within a couple of weeks of this meeting we had our first dealer version to trial. One of the things we really like about Microcat is that it suits users of all abilities. The feature set is made to support parts people who are novices right through to highly skilled parts professionals. It is amazing how Microcat adapts to suit the needs of the user and their skill level, rather than the user having to adapt to the way Microcat wants them to work. It is great to see dealer staff with little experience being able to confidently give advice to their customers based on Microcat providing them with information that is of the highest quality. Comparing this to the previous way of selecting parts, the advantage is enormous. Furthermore, when Infomedia added local accessories to Microcat, the product became even more valuable to our dealers. We previously supplied this information in paper form and it was usually out of date before it left the printers. Now Microcat provides up to date data every month. Having current data in the hands of dealers has always been a challenge in the parts and service business. A constant stream of new vehicles and the supersession of parts data means that since we introduced Microcat the time involved in managing this process and return of incorrectly ordered parts has reduced dramatically. With the resources we have freed up as a result of choosing Microcat, we are now able to spend more time actively selling parts. In our experience it has not been uncommon to have the close attention of suppliers in the start up of any project. The great thing in our relationship with Infomedia is that we still feel that special 'start up' level attention four years later. It does not matter what part of the business we deal with or their area of expertise; we always get the same special attention and professional manner. I think is it Infomedia's culture to ensure that their products and service are 'top class'. Being involved with Infomedia and Microcat has been a very positive experience for DAIHATSU. 20 www.infomedia.com.au Marc Collins, General Parts Manager Palm Beach Lincoln Mercury, Florida, USA Microcat customer I am the General Parts Manager of Palm Beach Lincoln Mercury in Florida and we have one of the largest automotive parts departments in the USA. We have a total of 88 people in our wholesale parts department and eleven staff working the counters using Microcat. The staff create an average of fifteen hundred invoices per day covering 2500 product lines. We first started using Microcat after a visit to Sunrise Ford who was the first local dealer in the area using the system. Always interested in seeing the latest thing to move our business forward, and having been intrigued by Microcat's advertising slogan “It's not too good to be true, it's the way it should be” prompted me to make the visit in December 1999. Within fifteen minutes of seeing Microcat, we knew it was for us. From a business perspective, it was the savings and low cost of Microcat, combined with no contract and no maintenance charges that were all factors in our decision to change. Coming from an environment where long-term fixed price contracts and expensive hardware bundling were all part of the EPC purchasing decision, this was a refreshing change. From a user’s perspective our top producer cannot say enough about Microcat. Having used other EPCs, he says that Microcat is by far the best of the bunch. Using all of Microcat's keyboard shortcuts for speed has allowed him to increase his sales with the time saved in each look-up. He loves Microcat and says it will run rings around the other catalogs. When other dealers ask about EPCs I tell them Microcat is the premier way to go - the world is going Microcat. It's a new way of doing business in the dealership. And combined with Microcat's ease-of-use and the flexibility of training choices from on-site to computer based training, the transition to Microcat is made easy. The best thing I can say in summary is that Microcat has helped me sell more parts faster, with greater flexibility, while saving a bunch of money on the subscription price and all with no contract! www.infomedia.com.au 21 VIEWS FROM OUR CUSTOMERS CONTINUED Brad Davis, Administration Manager John Page Motors, Caboolture, QLD NOVA DMS customer John Page Motors has been a user of NOVA™ since 1988 when a local IT supplier introduced us to the system. We had been using a pretty primitive accounting system and books to run the business at that stage. In fact I think the first part number we entered into the system was keyed straight from our Cardex. The benefit we saw straight away was the cost of the system and support versus what it offered our organisation. Overall, it was the best value for money system you could buy and is still giving us great value for money all these years later. We operate a dual franchise with John Deere (tractor and ground care) and are a leading Nissan dealership to the rural area. We employ 26 staff and offer full parts, sales and service to our customers and use the NOVA system in just about every aspect of our business. The things we really like about NOVA is that it is very intuitive and user friendly. It is also very easy to train new staff and this is a major benefit to us in a busy dealership environment. We have had very few occurrences of down time and the system is one that really allows us to maximise our productivity. Word of mouth was a powerful tool in this industry at the time we had the original recommendation and that is still true today. We have recommended the system heavily to other dealers over the years and have been responsible for a number of dealers taking the NOVA system - we think it is that good. We see our relationship with Infomedia as a partnership more than anything. Infomedia provide us with the tools to allow us to get the job done very efficiently and effectively. We really appreciate the continuous improvement that goes into NOVA and feel the transition to a Windows environment has been very positive. The improved level of integration has also been well received and we look forward to Infomedia's continued commitment to providing us a great system at a value for money price. 22 www.infomedia.com.au Peter Dunn, Managing Director The Kloster Group, Newcastle, NSW AutoLedgers customer I have been with The Kloster Group for 27 years. I started as a Salesman and eventually took over the dealership some 15 years ago. During this time, the business has grown from being a single franchise Ford dealership into a large multi franchise operation. The Kloster Group now represents BMW, Chrysler, Daihatsu, Ford, Honda, Hyundai, Jeep, Mini, Nissan and Renault. The Kloster Group has been a long time customer of Infomedia's technology. We have been using AutoLedgers in one form or another since I began working at Klosters and we were also one of the first Microcat customers back in the early 1990's. Our business has grown enormously since the early years and one of the big benefits of the AutoLedgers system has been its flexibility to suit each of the stages along the way. As a customer, we also feel as though we have been instrumental in the development of the system. Infomedia listened to what we were trying to achieve and implemented the technology to suit our requirements. That's why the implementation of these features is so powerful. Equally, Infomedia's productivity and customer-focused solutions have helped us to progress and become as good as we are at our business. It's not easy to integrate five, six or in our case ten different franchises into the one operation, but with the co- operation between The Kloster Group and Infomedia teams, and the AutoLedgers system, we have made this a success. It's a great relationship. The biggest benefit of the AutoLedgers system for us is that it has allowed us to integrate and centralise our business. Despite the fact that we are an operation that runs a multi-franchise dealership over a number of sites in the Hunter region of NSW, we still have a central control point. We have strong controls over the entire operation and powerful reporting tools to keep us constantly up to date on all areas of the business, whether it is at one of our main sites in Newcastle or at one of our regional locations. From the overall business perspective, it is easy to look at expanding our business with new sites. We simply set up AutoLedgers at a new site, and we are able to view the new component of the business from the central location straight away. As a successful operation we are often asked our opinion on different areas of our business. When other dealers ask about what Dealer Management System (DMS) they should use, I tell them simply this. My advice is if you want a system that is practical, easy to use, is written by dealer people - for dealer people and is good value for money, then it has to be AutoLedgers. www.infomedia.com.au 23 VIEWS FROM OUR CUSTOMERS CONTINUED Colin Johnson, General Service Manager Strathpine Toyota and Torque Toyota, Strathpine and Redcliffe, QLD Superservice Menus pilot dealer I have been with the Strathpine and Torque Toyota business for about six years. The dealerships are medium size, metropolitan Toyota dealerships in Brisbane. Between the two locations we run 36 service staff including myself and conduct about one and a half million dollars worth of retail labour sales, outside of warranty and internal labour sales. The dealerships have been long time users of Infomedia's technology in the form of AutoLedgers and Partfinder. Earlier this year I was offered the opportunity to become a pilot dealer for Superservice Menus and jumped at the chance. I saw this as a great opportunity to work with and help influence the development of a much-needed product in the motor industry. It was apparent from the very beginning of the process that the Infomedia team was devoted to listening to and working closely with people who are 'hands-on' in the industry. They then develop precise, user-friendly technology that encompasses their research and uses their tools to supplement and leverage the years of experience we have in the business, not to fight against it or render it redundant. Infomedia also have a track record of continuing to refine and improve their technology to suit our evolving business requirements. As has been the case with our other Infomedia products, their staff provides fast and efficient back-up and support. The benefits to our business are derived from working closely with the Infomedia team and them listening to our requirements. The technology and service Infomedia provides really help our staff do their job faster with a greater degree of accuracy, and this has resulted in us having a happy and productive workplace. I would like to personally thank Alan Flude, our Infomedia Superservice Menus representative, and all of the project team for their devotion and continued enthusiasm in developing Superservice Menus. I had no hesitation at all in deciding to subscribe to Superservice Menus upon its release. 24 www.infomedia.com.au APPOINTMENTS AND AWARDS Geoff Henderson joins Board of Directors During February 2003, the Company announced that Mr Geoff Henderson had accepted a position as a Non-Executive Director on the Infomedia Board of Directors. Mr Henderson had recently retired after 30 years service with Ford Motor Company, where he last held the position of Manager, Customer Service Division, Ford Asia Pacific. This position entailed controlling the parts and service operations of the Ford companies in 12 Asia Pacific countries with a combined revenue in excess of A$650 million. During his time with Ford, Mr. Henderson held a number of senior positions in Australia, New Zealand and North America. In addition to his roles in parts and service, logistics and finance, he headed up a number of special teams that were involved in, amongst other things, selling Ford Australia's plastics plant and conducting the global due diligence with respect to the parts and service operations for Ford's proposed acquisition of Daewoo. Mr Henderson brings with him a wealth of experience in the automotive industry which is valued by the other Board members and management. He worked with the original Microcat project team during the product’s inception and early development to ensure it met Ford's requirements and standards. Mr Henderson took up his position effective 25 February 2003 and is Chairman of the Corporate Governance Committee. Infomedia wins Australian Export Award In November 2002, Infomedia won the ABC Asia-Pacific sponsored ‘Information and Communications Technology Award' at the Australian Export Awards (AEA) presentation. These awards recognise Australian businesses for excellence and achievement and helps to recognise and profile the ‘best of the best’ export enterprises in Australia. The AEA presentation was held at the Crown Casino in Melbourne and the Prime Minister, the Hon John Howard MP, was among the list of notable guests. This year there were a record number of entries with 448 businesses from across Australia participating. It also included the highest number of National Finalists with 72 businesses being selected for the final round. The AEA has earned the reputation throughout the Australian business community as one of the most prestigious and significant industry awards on the business calendar during their 40-year history. The program is supported by many of Australia's leading corporations, industry groups and export facilitators. It also remains a top priority and has a leading focus with the Australian Government. Austrade's Regional Trade Commissioner, Chris Jones said, "Companies like Infomedia are role models for other Australian businesses thinking of exporting." www.infomedia.com.au 25 OUTLOOK T he anticipated outlook for the 2004 financial year is for further managed revenue and profit growth. The primary activities where continued growth is anticipated include: future. Furthermore, we will be looking to extend our subscription-based existing customer relationships with the introduction of Microcat FRESH, the EPC that allows our franchised dealer customers to increasing penetration of current products conduct e-commerce with their independent motor negotiating and completing more automaker trade (IMT) customers. data licence agreements We also expect Business Systems Division growing use of Microcat FRESH revenues to grow and provide a good platform for successfully introducing new and line-extension strong growth during this decade. products such as Superservice Menus, Infomedia may continue to make selective AutoMotives CRM, AutoOffice and others. acquisitions in order to build the Company's product, The Company expects that the continued intellectual property, market share and personnel revenue growth during the year will come from an asset base. The type of business targeted for increase in EPC subscriptions in Europe and North acquisition will generally have the following benefits: America. We expect positive growth in subscriptions access to additional data licence rights for Toyota, Hyundai and General Motors along with intellectual property to enhance or expand the contributions from the other existing customer existing product range bases. access to markets currently not available to As in previous years there will be a focus on Infomedia obtaining additional data licence agreements to additional EPC, DMS or service and vehicle data support further growth in the EPC products into the product subscription agreements. 26 www.infomedia.com.au ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● AUDITED ACCOUNTS www.infomedia.com.au 27 DIRECTORS’ REPORT Your Directors submit their report for the year ended 30 June 2003. The names and details of the Directors of the Company in office during the financial year and until the date of this report are: FRANCES MARY HERNON MYER HERSZBERG BARRY RAYMOND FORD ANDREW PATTINSON NON-EXECUTIVE DIRECTOR NON-EXECUTIVE DIRECTOR NON-EXECUTIVE DIRECTOR VICE-CEO (CHAIRMAN OF REMUNERATION Myer Herszberg has been a (CHAIRMAN OF AUDIT COMMITTEE) Director of Infomedia since 1992. COMMITTEE) Andrew Pattinson was appointed to the Board of Directors on 31 Fran Hernon was appointed to the Mr Herszberg has extensive Barry Ford was appointed to the October 2001. He has played a Infomedia Board of Directors on consumer electronics experience Infomedia Board of Directors on leading role in Infomedia for over 19 June 2000. Ms Hernon has and was active in bringing home 19 June 2000. Mr Ford was 15 years, with 6 of these as extensive experience in media, computers to Australia in the early Director of Finance and Chief Director of Production and publishing, marketing and 1980s. As founder and proprietor Financial Officer of Goodman Operations in Sydney and more technology. She has held senior of Melbourne's Denman Audio Fielder Ltd from 1997 to 1999 recently 2 years as General editorial positions at News Ltd and chain 25 years ago, he has also and has sat on a number of Manager of the Data Management Murdoch Magazines and was brought many leading edge boards, including the Island Food Division in Melbourne. He moved General Manager of Harrison electronic products to Australia. Company and Yallourn Energy back to Sydney in January 2002 Communications and Director of Mr Herszberg also serves on where he was Chairman of the to take on the role of Infomedia’s Publicity at Channel 10, Managing Infomedia's Audit and Corporate Audit Committee. Mr Ford held Vice-CEO. Editor of NRMA's member magazine The Open Road, Manager, Business Communications for NRMA and most recently, Senior Account Manager, Group IT&T for the Insurance Australia Group (IAG). Ms Hernon also serves on Infomedia's Audit and Corporate Governance Committees. 28 www.infomedia.com.au Governance Committees. various financial management positions at General Motors Corporation between 1964 and 1989 including Director, Overseas Financial Planning & Analysis at GM Corp USA from 1984 to 1986 and Director of Finance and Strategic Planning at General Motors-Holden from 1987 to 1989. RICHARD DAVID GRAHAM CHAIRMAN AND CEO Richard Graham has held senior management positions in the American and Australian computer industry since 1977. Mr Graham has been Managing Director of Infomedia since 1988. He commenced his technology career at ComputerLand Corp (USA) and ComputerLand Australia Pty Ltd, where he held the positions of Marketing Director and General Manager respectively. In 1982 he founded Wiser-Microsoft, Microsoft's first full service distributor in Australia. GEOFFREY THOMAS HENDERSON NON-EXECUTIVE DIRECTOR (CHAIRMAN OF CORPORATE GOVERNANCE COMMITTEE) Geoff Henderson was appointed to the Infomedia Board of Directors on 25 February 2003. At the end of 2002 Mr Henderson retired after 30 years service with Ford Motor Company where he held the position of Manager, Customer Service Division, Ford Asia Pacific. This position entailed controlling the parts and service operations of the Ford companies in 12 Asia Pacific countries with a combined revenue in excess of A$650 million. During his time with Ford, Mr Henderson held a number of senior positions in Australia, New Zealand and North America in numerous Ford divisions including Finance, Purchasing and Parts and Service. www.infomedia.com.au 29 DIRECTORS’ REPORT CONTINUED INTERESTS IN THE SHARES AND OPTIONS OF THE COMPANY AND RELATED BODIES CORPORATE As at the date of this report, the interests of the Directors in the shares and options of the Company were: Wiser Laboratory Pty Limited Yarragene Pty Limited Andrew Pattinson Wiser Centre Pty Limited Richard Graham Barry Ford Fran Hernon Geoff Henderson ORDINARY SHARES FULLY PAID 100,277,501 39,421,599 4,407,716 1,000,000 926,559 116,666 5,000 - INFOMEDIA LTD OPTIONS OVER ORDINARY SHARES - - 648,000 - - - - 100,000 Richard Graham is the sole Director and beneficial shareholder of Wiser Laboratory Pty Limited. Richard Graham is a Director of Wiser Centre Pty Limited, trustee for the Wiser Centre Pty Ltd Superannuation Fund. Myer Herszberg is a Director and major shareholder of Yarragene Pty Limited. PRINCIPAL ACTIVITIES Infomedia Ltd is a company limited by shares that is incorporated and domiciled in Australia. The principal activities during the year of entities within the consolidated entity were: developer and supplier of electronic parts catalogues for the automotive industry globally; information management, analysis and creation for the domestic automotive and oil industries; and developer and supplier of dealer management systems for the motor vehicle industry. There have been no significant changes in the nature of those activities during the year. EMPLOYEES The consolidated entity employed 171 (2002: 135) full time employees as at 30 June 2003. DIVIDENDS Dividends paid or declared during the year: Interim dividend – 1.5 cents per share – fully franked Final dividend – 1.9 cents per share – fully franked NET TANGIBLE ASSETS PER SHARE The consolidated entity’s net tangible assets per share are as follows: Net tangible assets per share at 30 June 2003 Net tangible assets per share at 30 June 2002 $’000 4,866 6,168 Cents 4.90 7.32 REVIEW AND RESULTS OF OPERATIONS Financial The consolidated entity experienced improvement in sales and profits over the prior year. Revenue from ordinary activities increased by 41% and profit from ordinary activities after income tax expense increased by 37%. SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS There has been no significant change in the state of affairs of the Company since the last Directors’ report. SIGNIFICANT EVENTS AFTER THE BALANCE DATE There has been no matter or circumstance that has arisen since the end of the financial year, that has significantly affected, the operations of the Company, the results of those operations, or the state of affairs of the Company. LIKELY DEVELOPMENTS AND EXPECTED RESULTS The Directors anticipate that the 2004 financial year to be a period of managed growth of its traditional business and maximising the integration success of its acquisitions made. The most significant area for change is anticipated to be in: continued expansion of subscription revenues for Infomedia’s products; continued development of Infomedia’s software including online delivery; and organisation of an enhanced product range arising from the integration of recently acquired businesses. It is anticipated that the 2004 financial year would show continued improvement in profits. 30 www.infomedia.com.au ● ● ● ● ● ● ● ● ● ● ● ● ENVIRONMENTAL REGULATION AND PERFORMANCE The consolidated entity is not subject to any particular or significant environmental regulation under a law of the Commonwealth of Australia or of a State or Territory. SHARE OPTIONS Andrew Pattinson received 582,000 options on 5 July 2002 pursuant to the Employee Option Plan. Geoff Henderson received 100,000 options on 25 February 2003 upon his commencement with the Company as Non-Executive Director. No other options were granted to Directors during the financial year ended 30 June 2003. At the date of this report, there were 8,875,583 unissued ordinary shares under options. Refer to notes 27 and 32 for further details. SELECTIVE SHARE PLAN At the date of this report, 8,400,805 shares have been offered to selected persons pursuant to the Selective Share Plan. There are no remaining shares to be offered under the plan. The consideration for each share offered was nil. Refer to note 27 for further details. All Selective Share Plan shares allotted during the financial year ended 30 June 2003 were made in accordance with the plan and pursuant to the Initial Public Offering (IPO) document dated 14 July 2000. INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS During the year the Company paid a premium in relation to insuring Directors and other officers against liability incurred in their capacity as a Director or officer of the Company. The insurance contract specifically prohibits the disclosure of the nature of the policy and amount of premium paid. www.infomedia.com.au 31 DIRECTORS’ REPORT CONTINUED DIRECTORS’ AND OTHER OFFICERS’ EMOLUMENTS The Remuneration Committee of the Board of Directors is responsible for determining and reviewing compensation arrangements for the Directors and the executive team. The Remuneration Committee assesses the appropriateness of the nature and amount of emoluments of such officers on a periodic basis by reference to relevant employment market conditions with the overall objective of ensuring maximum stakeholder benefit from the retention of a high quality board and executive team. Details of the nature and amount of each element of the emolument of each Director of the Company and the consolidated entity: EMOLUMENTS OF DIRECTORS OF INFOMEDIA LTD ANNUAL EMOLUMENTS LONG-TERM EMOLUMENTS Base Fees Other (a) Superannuation $ Richard Graham 203,977 Andrew Pattinson 172,567 40,000 Myer Herszberg 40,000 Barry Ford 40,000 Fran Hernon 13,538 Geoff Henderson $ 9,210 - - - - - $ 17,100 15,266 3,600 3,600 3,600 1,218 Selective Share Plan (pursuant to IPO) Cost to Company $ Market Value $ (b) 247,082 Options Granted (c) No. $ - - - - - - - - 49,416 582,000 101,280 - - - - - - - 100,000 17,960 - - - No. 308,853 61,770 - - - - EMOLUMENTS OF EXECUTIVES OF INFOMEDIA LTD ANNUAL EMOLUMENTS LONG-TERM EMOLUMENTS Base Fees Other (a) Super- annuation Redundancy Payments Employee Share Plan Options granted (c) Gary Martin Nick Georges Guy Bryant Peter Adams Michael Connor $ $ $ 134,269 4,065 11,666 - 11,682 132,693 131,237 - 11,657 124,181 7,603 11,670 - - - $ - - - - 120,000 No. 2,454 2,454 2,454 2,454 1,111 Cost to Company $ - - - - - Market Value $ (b) 2,000 2,000 2,000 2,000 1,000 No. $ 582,000 101,280 582,000 101,280 90,000 15,660 90,000 15,660 - - (a) The category ‘Other’ includes the value of any non-cash benefits provided (b) The value attributed to the Selective Share Plan and Employee Share Plan is calculated as the total number of shares allotted multiplied by the weighted average market price of the shares of the five trading days on the Australian Stock Exchange preceding first date of offer. (c) Options granted as part of remuneration have been valued using an option pricing model which takes into account factors such as the exercise price, the current level of volatility of the underlying share price and the time to maturity of the option. There was no cost to the Company in issuing the options. 32 www.infomedia.com.au DIRECTORS’ MEETINGS The number of meetings of Directors (including meetings of committees of Directors) held during the year and the number of meetings attended by each Director were as follows: Directors' Meetings 9 MEETINGS OF COMMITTEES Audit & Corporate Governance 4 Remuneration 1 Number of meetings held: Number of meetings attended: Richard Graham Geoff Henderson Andrew Pattinson Myer Herszberg Barry Ford Fran Hernon 9 2 8 7 9 9 - - - 4 4 4 - - - 1 - 1 ROUNDING The amounts contained in this report and in the financial report have been rounded to the nearest $1,000 (where rounding is applicable) under the option available to the Company under ASIC class Order 98/0100. The Company is an entity to which the Class Order applies. Signed in accordance with a resolution of the Directors. Richard David Graham Chairman Sydney, 27 August 2003 www.infomedia.com.au 33 STATEMENT OF FINANCIAL PERFORMANCE YEAR ENDED 30 JUNE 2003 NOTES CONSOLIDATED INFOMEDIA LTD 2(i) 2(ii) 2(iii) Revenue from ordinary activities Expenses from ordinary activities excluding Supreme Court Litigation and borrowing costs Borrowing costs expense Costs incurred in defending and disposing of Supreme Court Litigation Profit from ordinary activities before income tax expense Income tax expense relating to ordinary activities 3 Profit from ordinary activities after income tax expense Total revenues, expenses and valuation adjustments attributable to Infomedia Ltd and recognised directly in equity Total changes in equity other than those resulting from transactions with owners as owners 2(iv) 5 2003 $’000 2002 $’000 2003 $’000 2002 $’000 62,652 44,465 60,584 42,395 (36,067) (348) (23,859) (11) (33,730) (348) (22,206) (11) - (1,218) - (1,218) 26,237 (7,912) 19,377 (5,968) 26,506 (7,888) 18,960 (5,661) 18,325 13,409 18,618 13,299 - - - - 18,325 13,409 18,618 13,299 Basic earnings per share (cents per share) Diluted earnings per share (cents per share) Franked dividends per share (cents per share) 23 23 4 5.65 5.65 3.40 4.15 4.13 2.75 34 www.infomedia.com.au STATEMENT OF FINANCIAL POSITION AT 30 JUNE 2003 NOTES CONSOLIDATED INFOMEDIA LTD CURRENT ASSETS Cash Receivables Inventories Other TOTAL CURRENT ASSETS NON-CURRENT ASSETS Receivables – wholly owned group Investments Property, plant and equipment Intangible assets Deferred research & development costs Deferred tax assets TOTAL NON-CURRENT ASSETS TOTAL ASSETS CURRENT LIABILITIES Payables Interest-bearing liabilities Provisions excluding tax liabilities Provision for income tax Deferred revenue TOTAL CURRENT LIABILITIES NON-CURRENT LIABILITIES Interest-bearing liabilities Provisions excluding tax liabilities Deferred tax liabilities TOTAL NON-CURRENT LIABILITIES TOTAL LIABILITIES NET ASSETS EQUITY Contributed equity Retained profits TOTAL EQUITY 6 7 8 9 10 12 13 14 15 16 17 18 19 20 21 2003 $’000 2002 $’000 2003 $’000 2002 $’000 19,352 9,313 106 540 29,311 - - 7,082 27,265 2,748 1,206 38,301 18,785 5,481 61 228 24,555 - - 6,890 5,573 2,503 603 15,569 19,001 8,807 86 529 28,423 6,742 - 4,602 22,520 2,748 1,040 37,652 18,196 4,871 44 212 23,323 5,965 - 4,248 2,182 2,503 473 15,371 67,612 40,124 66,075 38,694 3,823 2,384 963 1,176 5,304 13,650 8,128 680 2,004 10,812 1,845 58 5,902 1,026 605 9,436 14 201 782 997 3,693 2,384 808 1,155 4,820 12,860 8,128 354 1,977 10,459 1,611 58 5,612 1,104 406 8,791 14 103 782 899 24,462 10,433 23,319 9,690 43,150 29,691 42,756 29,004 22 5 17,474 25,676 17,474 12,217 17,474 25,282 17,474 11,530 43,150 29,691 42,756 29,004 www.infomedia.com.au 35 STATEMENT OF CASH FLOWS YEAR ENDED 30 JUNE 2003 NOTES CONSOLIDATED INFOMEDIA LTD CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers Payments to suppliers and employees Interest received Borrowing costs paid Income tax paid NET CASH FLOWS FROM OPERATING ACTIVITIES 2003 $’000 2002 $’000 2003 $’000 2002 $’000 60,551 (30,463) 723 (348) (7,225) 46,823 (25,066) 575 (11) (6,737) 58,256 (29,692) 845 (348) (7,204) 44,232 (24,766) 689 (11) (6,016) 24 (a) 23,238 15,584 21,857 14,128 CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of property, plant and equipment Proceeds from sale of property, plant and equipment Purchase of EDS PartsImager catalogue business Purchase of Australian Windows Publishing business Purchase of VM Computer Services business Payment of option to acquire a business (1,332) - (22,076) (596) (1,583) - (4,617) 15 - - - (60) (1,296) - (22,076) (596) - - (2,849) 15 - - - (60) NET CASH FLOWS USED IN INVESTING ACTIVITIES (25,587) (4,662) (23,968) (2,894) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from borrowings Repayment of borrowings Dividends paid on ordinary shares Finance lease principal paid NET CASH FLOWS FROM/(USED IN) FINANCING ACTIVITIES 21,779 (9,074) (9,730) (59) - - (8,874) (115) 21,779 (9,074) (9,730) (59) - - (8,874) (115) 2,916 (8,989) 2,916 (8,989) NET INCREASE IN CASH HELD 567 1,933 805 2,245 Add opening cash brought forward CLOSING CASH CARRIED FORWARD 24 (b) 18,785 19,352 16,852 18,785 18,196 19,001 15,951 18,196 36 www.infomedia.com.au NOTES TO FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Basis of accounting The financial statements have been prepared in accordance with the historical cost convention. The financial report is a general purpose financial report which has been prepared in accordance with the requirements of the Corporations Act 2001 which includes applicable Accounting Standards. Other mandatory professional reporting requirements (Urgent Issues Group Consensus Views) have also been complied with. (b) Changes in accounting policies The accounting policies adopted are consistent with those of the previous year except for the accounting policies with respect to the provision for dividends and employee benefits. (i) Provision for dividends The consolidated entity has adopted the new Accounting Standard AASB 1044 “Provisions, Contingent Liabilities and Contingent Assets” which has resulted in a change in the accounting for the dividends provision. Previously, the consolidated entity recognised a provision for dividend based on the amount that was proposed or declared after the reporting date. In accordance with the requirements of the new Standard, a provision for dividends will only be recognised at the reporting date where the dividends have been declared, determined or publicly recommended prior to the reporting date. The effect of the revised policy has been to increase consolidated retained profits and decrease provisions at the beginning of the year by $4,864,000 (refer to note 5). In accordance with the new Standard, no provision for dividend has been recognised for the year ended 30 June 2003. (ii) Employee benefits The consolidated entity has adopted the revised Accounting Standard AASB 1028 “Employee Benefits”, which has resulted in a change in the accounting policy for the measurement of employee benefit liabilities. Previously, the consolidated entity measured the provision for employee benefits based on remuneration rates at the date of recognition of the liability. In accordance with the requirements of the revised Standard, the provision for employee benefits is now measured based on the remuneration rates expected to be paid when the liability is settled. The effect of the revised policy has been to decrease current year profits by $125,635 due to an increase in the employee benefits expense. Current provisions at 30 June 2003 have also increased by $125,635 as a result of the change in accounting policy. (c) Principles of consolidation The consolidated financial statements are those of the economic entity, comprising Infomedia Ltd (the parent entity) and all entities which Infomedia Ltd controlled from time to time during the year and at balance date. Information from the financial statements of subsidiaries is included from the date the parent company obtains control until such time as control ceases. Where there is loss of control of a subsidiary, the consolidated financial statements include the results for the part of the reporting period during which the parent company has control. Subsidiary acquisitions are accounted for using the purchase method of accounting. The financial statements of subsidiaries are prepared for the same reporting period as the parent entity, using consistent accounting policies. Adjustments are made to bring into line any dissimilar accounting policies which may exist. All intercompany balances and transactions, including recognised profits arising from intra-group transactions, have been eliminated in full. Unrealised losses are eliminated unless costs cannot be recovered. (d) Foreign currencies Translation of foreign currency transactions Transactions in foreign currencies of entities within the consolidated entity are converted to local currency at the rate of exchange ruling at the date of the transaction. Amounts payable to and by the entities within the consolidated entity that are outstanding at the balance date and are denominated in foreign currencies have been converted to local currency using rates of exchange ruling at the end of the financial year. Except for certain specific hedges and hedges of foreign currency operations, all resulting exchange differences arising on settlement or re-statement are brought to account in determining the profit or loss for the financial year, and transaction costs, premiums and discounts on forward currency contracts are deferred and amortised over the life of the contract. Forward exchange contracts The consolidated entity enters into forward exchange contracts where it agrees to sell specified amounts of foreign currencies in the future at a predetermined exchange rate. The objective is to match the contract with anticipated future cash flows from sales and purchases in foreign currencies, to protect the consolidated entity against the possibility of loss from future exchange rate fluctuations. The forward exchange contracts are usually for no longer than 12 to 24 months. Forward exchange contracts are recognised at the date the contract is entered. Exchange gains or losses on forward exchange contracts are charged to the profit and loss except those relating to hedges of specific commitments which are deferred and included in the measurement of the sale or purchase. www.infomedia.com.au 37 NOTES TO FINANCIAL STATEMENTS CONTINUED 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (e) Cash and cash equivalents Cash on hand and in banks and short-term deposits are stated at nominal values. For the purposes of the Statement of Cash Flows, cash includes cash on hand and in banks, and money market investments readily convertible to cash within 2 working days, net of outstanding bank overdrafts. (f) Trade and other receivables Trade receivables are recognised and carried at original invoice amount less a provision for any uncollectable debts. An estimate for doubtful debts is made when collection is no longer probable. Bad debts are written-off as incurred. Receivables from related parties are recognised and carried at the nominal amount due. Interest is taken up as income on an accrual basis. (g) Investments All non-current investments are carried at the lower of cost and recoverable amount. (h) Inventories Manufacturing Inventories are valued at the lower of cost and net realisable value. Costs incurred in bringing each product to its present location and condition are accounted for as follows: Raw materials – purchase cost on a first-in-first-out basis; and ● Work-in-progress – cost of direct labour and materials. (i) Recoverable amount Non-current assets are not carried at an amount above their recoverable amount, and where carrying values exceed this recoverable amount assets are written down. (j) Property, plant and equipment Cost and valuation Property, plant and equipment are carried at cost. Depreciation Depreciation is provided on a straight line basis on all property, plant and equipment, other than freehold land. Major depreciation periods are: Freehold buildings: Leasehold improvements: Plant and equipment: Plant and equipment under lease: 2003 40 years 5 to 20 years 3 to 15 years 3 years 2002 40 years 5 to 20 years 3 to 15 years 3 years (k) Leases Leases are classified at their inception as either operating or finance leases based on the economic substance of the agreement so as to reflect the risks and benefits incidental to ownership. Operating leases The minimum lease payments of operating leases, where the lessor effectively retains substantially all of the risks and benefits of ownership of the leased item, are recognised as an expense on a straight line basis. Contingent rentals are recognised as an expense in the financial year in which they are incurred. Finance leases Leases which effectively transfer substantially all of the risks and benefits incidental to ownership of the leased item to the consolidated entity are recognised at the present value of the minimum lease payments and disclosed as property, plant and equipment under lease. A lease liability of equal value is also recognised. Capitalised lease assets are depreciated over the estimated useful life of the assets. Minimum lease payments are allocated between interest expense and reduction of the lease liability with the interest expense calculated using the interest rate implicit in the lease and charged directly to profit and loss. The cost of improvements to or on leasehold property is recognised, disclosed as leasehold improvements, and amortised over the unexpired period of the lease or the estimated useful lives of the improvements, whichever is the shorter. 38 www.infomedia.com.au ● ● ● (l) Intangibles Goodwill Goodwill represents the excess of the purchase consideration over the fair value of identifiable net assets acquired at the time of acquisition of a business or shares in a controlled entity. Goodwill is amortised by the straight-line method over the period during which benefits are expected to be received. This is taken as being 10 years. Intellectual Property Intellectual property relates to copyright and software codes over key products. Intellectual property is amortised over its useful life, being 10 years. (m) Trade and other payables Liabilities for trade creditors and other amounts are carried at cost which is the fair value of the consideration to be paid in the future for goods and services received, whether or not billed to the consolidated entity. Payables to related parties are carried at the principal amount. Interest, when charged by the lender, is recognised as an expense on an accrual basis. (n) Provisions Provisions are recognised when the economic entity has a legal, equitable or constructive obligation to make a future sacrifice of economic benefits to other entities as a result of past transactions or other past events, it is probable that a future sacrifice of economic benefits will be required and a reliable estimate can be made of the amount of the obligation. A provision for dividends is not recognised as a liability unless the dividends are declared, determined or publicly recommended on or before the reporting date. (o) Revenue in advance Certain contracts allow annual subscriptions to be invoiced in advance. The components of revenue relating to the subscription period beyond balance date are recorded as a liability. (p) Loans and borrowings All loans are measured at the principal amount. Interest is charged as an expense as it accrues. Finance lease liability is determined in accordance with the requirements of AASB 1008: Leases. (q) Share capital Ordinary share capital is recognised at the fair value of the consideration received by the Company. Any transaction costs arising on the issue of ordinary shares are recognised directly in equity as a reduction of the share proceeds received. (r) Revenue recognition Revenue is recognised to the extent that it is probable that the economic benefits will flow to the entity and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised: Subscriptions Subscription revenue is recognised when the copyright article has passed to the buyer with related support revenue being recognised over the service period. Where the copyright article and related support revenue are inseparable then the revenue is recognised over the service period. Interest Control of a right to receive consideration for the provision of, or investment in, assets has been attained. (s) Cost of goods sold Cost of goods sold includes the direct cost of raw materials and agency costs associated with the manufacture and distribution of the product. (t) Taxes Income taxes Tax-effect accounting is applied using the liability method whereby income tax is regarded as an expense and is calculated on the accounting profit after allowing for permanent differences. To the extent timing differences occur between the time items are recognised in the financial statements and when items are taken into account in determining taxable income, the net related taxation benefit or liability, calculated at current rates, is disclosed as a future income tax benefit or a provision for deferred income tax. The net future income tax benefit relating to tax losses and timing differences is not carried forward as an asset unless the benefit is virtually certain of being realised. www.infomedia.com.au 39 NOTES TO FINANCIAL STATEMENTS CONTINUED 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Goods and services tax (GST) Revenues, expenses and assets are recognised net of the amount of GST except: where the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the acquisition of the asset or as part of the expense item as applicable; and receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the Statement of Financial Position. Cash flows are included in the Statement of Cash Flows on a gross basis and the GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority are classified as operating cash flows. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority. (u) Employee entitlements Provision is made for employee entitlement benefits accumulated as a result of employees rendering services up to the reporting date. These benefits include wages and salaries, annual leave and long service leave. Liabilities arising in respect of wages and salaries, annual leave and any other employee entitlements expected to be settled within twelve months of the reporting date are measured at their nominal amounts based on remuneration rates which are expected to be paid when the liability is settled. All other employee entitlement liabilities are measured at the present value of the estimated future cash outflow to be made in respect of services provided by employees up to the reporting date. In determining the present value of future cash outflows, the interest rates attaching to government guaranteed securities which have terms to maturity approximating the terms of the related liability are used. Employee entitlements expenses and revenues arising in respect of the following categories: wages and salaries, non-monetary benefits, annual leave, long service leave and other leave entitlements; and other types of employee entitlements. are charged against profits on a net basis in their respective categories. The value of shares issued under the employee share scheme described in note 27 is not being charged as an employee entitlement expense. In respect of the consolidated entity’s accumulated benefits superannuation plans, any contributions made to the superannuation funds by entities within the consolidated entity are charged against profits when due. (v) Research and development costs Research and development costs are expensed as incurred, except where the future benefits are recoverable beyond any reasonable doubt. When research and development costs are deferred such costs are amortised over future periods on a basis related to expected future benefits. Unamortised costs are reviewed at each balance date to determine the amount (if any) that is no longer recoverable and any amount identified is written off. (w) Earnings per share Basic earnings per share is determined by dividing the profit from ordinary activities after related income tax expense by the weighted average number of ordinary shares outstanding during the financial year. Diluted EPS is calculated as net profit attributable to members, adjusted for: cost of servicing equity (other than dividends); the after tax effect of dividends and interest associated with dilutive potential ordinary shares that have been recognised as expenses; and other non-discretionary changes in revenue or expenses during the period that would result from the dilution of potential ordinary shares; divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus element. 40 www.infomedia.com.au ● ● ● ● ● ● ● ● ● ● ● ● ● ● YEAR ENDED 30 JUNE 2003 NOTES CONSOLIDATED INFOMEDIA LTD 2003 $’000 2002 $’000 2003 $’000 2002 $’000 2. PROFIT FROM ORDINARY ACTIVITIES Profit from ordinary activities before income tax expense includes the following revenues and expenses whose disclosure is relevant in explaining the financial performance of the entity: (i) Revenues from ordinary activities Sales revenue Interest revenue - wholly owned group - other persons/corporations Total interest revenue Profit on sale of non current assets Other revenue Revenues from ordinary activities (ii) Expenses from ordinary activities excluding Supreme Court Litigation and borrowing costs Cost of goods sold Salaries & wages (including on-costs) Depreciation of non-current assets - Buildings - Plant & equipment - Plant & equipment under lease - Leasehold improvements Total depreciation of non-current assets Amortisation of non-current assets - Goodwill - Intellectual property - Deferred research and development costs Total amortisation of non-current assets Management fee paid to controlled entities Bad and doubtful debts Operating lease rental Foreign currency exchange loss Foreign currency contract costs amortised Industrial relations dispute resolution including legal costs Costs incurred for non-renewal of overseas distribution services Costs incurred for defending an international trademark Other expenses Expenses from ordinary activities excluding Supreme Court Litigation and borrowing costs (iii) Borrowing costs Interest expense - other corporations Finance charges – lease liability Borrowing costs 61,813 43,846 59,623 41,662 - 723 723 - 116 62,652 - 575 575 7 37 44,465 141 704 845 - 116 60,584 133 556 689 7 37 42,395 12,647 12,478 8,935 10,031 12,306 10,438 8,351 8,162 62 1,247 7 96 1,412 1,129 1,492 732 3,353 - 66 606 291 374 206 909 39 914 12 90 1,055 497 200 315 1,012 - 146 481 312 - - - 282 3,443 - 1,887 7 1,124 7 56 1,194 684 1,455 732 2,871 1,097 65 684 291 374 206 909 282 3,013 6 807 12 50 875 59 200 315 574 1,750 136 551 312 - - - - 1,495 36,067 23,859 33,730 22,206 346 2 348 - 11 11 346 2 348 - 11 11 www.infomedia.com.au 41 NOTES TO FINANCIAL STATEMENTS CONTINUED YEAR ENDED 30 JUNE 2003 NOTES CONSOLIDATED INFOMEDIA LTD 2003 $’000 2002 $’000 2003 $’000 2002 $’000 2. PROFIT FROM ORDINARY ACTIVITIES (CONTINUED) (iv) Significant items Costs incurred in defending and disposing of Supreme Court Litigation (v) Research & Development Costs (included within note 2(ii) above) Total research & development costs incurred during the year Less: research & development costs deferred Net research and development costs expensed - 1,218 - 1,218 2,091 1,975 2,091 1,975 14 (977) (1,040) (977) (1,040) 1,114 935 1,114 935 3. INCOME TAX The prima facie tax on operating profit differs from the income tax provided in the financial statements as follows: Prima facie tax on operating profit Tax effect of permanent differences - Legal expense - Entertainment - Depreciation of buildings - Amortisation of intangible assets - Additional research and development deduction - Intellectual property – copyright deduction (Over)/under provision of previous year Income tax expense attributable to operating profit 7,871 5,813 7,951 5,688 44 28 2 399 (159) (24) (249) 7,912 44 30 2 209 (148) (24) 42 5,968 44 25 2 267 (159) (24) (218) 7,888 44 25 2 78 (148) (24) (4) 5,661 42 www.infomedia.com.au YEAR ENDED 30 JUNE 2003 NOTES CONSOLIDATED INFOMEDIA LTD 4. DIVIDENDS PROPOSED OR PAID (a) Dividends proposed and recognised as a liability Franked - (2002: 1.50) per share (b) Dividends paid during the year: Franked interim - 1.50 cents (2002: 1.25) per share Final franked dividend - (2002: 1.50 cents) Total dividends paid during the year (c) Dividends proposed and not recognised as a liability: Final franked dividend - 2003: 1.90 cents per share The tax rate at which dividends were franked is 30%. The amount of franking credits available for the subsequent financial year are: – franking account balance as at the end of the financial year – franking credits that will arise from the payment of income tax payable as at the end of the financial year – franking debits that will arise from the payment of dividends as at the end of the financial year The tax rate at which paid dividends have been franked is 30% (2002: 30%). Dividends proposed will be franked at the rate of 30% (2002: 30%). As of 1 July 2002, the new imputation system requires a company’s franking credits to be expressed on a tax-paid basis. The franking account surplus existing at 30 June 2002 has been reinstated to a tax paid amount by multiplying the Class C franking surplus by 30/70. 5. RETAINED PROFITS Balance at the beginning of the year Profit from ordinary activities after income tax expense Adjustment arising from adoption of revised Accounting Standard: AASB1044 “Provisions, Contingent Liabilities and Contingent Assets” Total available for appropriation Dividends provided for or paid Balance at the end of the year 2003 $’000 2002 $’000 2003 $’000 2002 $’000 - 4,864 - 4,864 4,866 4,864 9,730 4,036 4,838 8,874 4,866 4,864 9,730 4,036 4,838 8,874 6,168 - 6,168 - 5,340 6,265 1,155 1,104 - 6,495 (2,085) 5,284 12,217 18,325 7,742 13,409 11,530 18,618 7,165 13,299 4,864 - 4,864 - 35,406 (9,730) 25,676 21,151 (8,934) 12,217 35,012 (9,730) 25,282 20,464 (8,934) 11,530 www.infomedia.com.au 43 NOTES TO FINANCIAL STATEMENTS CONTINUED YEAR ENDED 30 JUNE 2003 NOTES CONSOLIDATED INFOMEDIA LTD 6. RECEIVABLES (CURRENT) Trade debtors Provision for doubtful debts Other debtors Net foreign currency forward contracts receivable (a) Australian dollar equivalent of amounts receivable in foreign currencies not effectively hedged: New Zealand dollars (b) Terms and conditions relating to the above financial instruments are set out in Note 34. 7. INVENTORIES (CURRENT) Raw materials At cost Total inventories at the lower of cost and net realisable value 8. OTHER CURRENT ASSETS Prepayments 9. RECEIVABLES (NON-CURRENT) Wholly-owned group - subsidiary entities 10. INVESTMENTS (NON-CURRENT) Investments at cost comprise: Controlled entities – unlisted Total investments in balance sheet 11. INTERESTS IN SUBSIDIARIES 32 11 2003 $’000 6,240 (49) 6,191 127 2,995 9,313 2002 $’000 5,473 (45) 5,428 53 - 5,481 2003 $’000 5,736 (49) 5,687 125 2,995 8,807 2002 $’000 4,875 (45) 4,830 41 - 4,871 19 19 14 14 19 19 14 14 106 106 540 540 - - - 61 61 228 228 - - - 86 86 529 529 44 44 212 212 6,742 5,965 $7 only $7 only $7 only $7 only Name Infomedia Investments Pty Ltd – ordinary shares Country of incorporation % of equity interest held by the consolidated entity 2003 % 100 Australia 2002 % 100 100 100 $2 only $2 only $4 only $4only $1 only $7 only $1 only $7 only Datateck Publishing Pty Ltd – ordinary shares Australia 100 AutoConsulting Pty Ltd – ordinary shares Australia 100 44 www.infomedia.com.au YEAR ENDED 30 JUNE 2003 NOTES CONSOLIDATED INFOMEDIA LTD 2003 $’000 2,860 (119) 2,741 1,367 (301) 1,066 3,807 2002 $’000 2,860 (57) 2,803 1,224 (205) 1,019 3,822 2003 $’000 2002 $’000 647 (31) 616 1,115 (205) 910 1,526 647 (24) 623 972 (150) 822 1,445 4,291 (2,241) 2,050 3,514 (1,317) 2,197 3,817 (1,907) 1,910 3,088 (1,102) 1,986 592 (221) 371 1,899 (1,045) 854 165 (165) - 3,275 520 (152) 368 1,298 (802) 496 165 (158) 7 3,068 571 (213) 358 1,847 (1,039) 808 165 (165) - 3,076 505 (145) 360 1,247 (797) 450 165 (158) 7 2,803 11,174 (4,092) 7,082 9,581 (2,691) 6,890 8,162 (3,560) 4,602 6,624 (2,376) 4,248 12. PROPERTY, PLANT & EQUIPMENT Freehold land and buildings At cost Provision for depreciation Leasehold improvements At cost Provision for amortisation Total land and buildings Office equipment At cost Provision for depreciation Furniture & fittings At cost Provision for depreciation Plant and equipment At cost Provision for depreciation Plant and equipment under lease At cost Provision for amortisation Total plant and equipment Total property, plant and equipment At cost Provision for depreciation and amortisation Total written down amount (a) Assets pledged as security Lease liabilities are secured by a charge over the leased assets. (b) Fair Values The fair values of freehold land & buildings have been determined by reference to Directors’ valuations performed on an open market basis being the amounts for which the assets could be exchanged between a knowledgeable willing buyer and a knowledgeable willing seller in an arms length transaction. The carrying value of Freehold land and buildings is reflective of their fair value at 30 June 2003. www.infomedia.com.au 45 NOTES TO FINANCIAL STATEMENTS CONTINUED YEAR ENDED 30 JUNE 2003 NOTES CONSOLIDATED INFOMEDIA LTD 2003 $’000 2002 $’000 2003 $’000 2002 $’000 12. PROPERTY, PLANT & EQUIPMENT (CONTINUED) (c) Reconciliation of property, plant and equipment carrying values Freehold land and buildings Carrying amount – opening balance Additions Depreciation Carrying amount – closing balance Leasehold improvements Carrying amount – opening balance Additions Amortisation Carrying amount – closing balance Office equipment Carrying amount – opening balance Additions Additions through acquisition of business Transfers in from other categories Disposals Depreciation Carrying amount – closing balance Furniture & fittings Carrying amount – opening balance Additions Additions through acquisition of business Depreciation Carrying amount – closing balance Plant and equipment Carrying amount – opening balance Additions Additions through acquisition of business Depreciation Carrying amount – closing balance Plant and equipment under lease Carrying amount – opening balance Transfers out to other categories Depreciation Carrying amount – closing balance 2,803 - (62) 2,741 1,019 143 (96) 1,066 2,197 705 83 - - (935) 2,050 368 66 7 (70) 371 496 420 181 (243) 854 7 - (7) - 629 2,213 (39) 2,803 385 724 (90) 1,019 1,175 1,691 - 9 (7) (671) 2,197 117 309 - (58) 368 455 226 - (185) 496 28 (9) (12) 7 623 - (7) 616 822 143 (55) 910 1,986 671 68 - - (815) 1,910 360 63 2 (67) 358 450 420 181 (243) 808 7 - (7) - 629 - (6) 623 148 724 (50) 822 957 1,595 - 9 (7) (568) 1,986 110 306 - (56) 360 409 226 - (185) 450 28 (9) (12) 7 46 www.infomedia.com.au YEAR ENDED 30 JUNE 2003 NOTES CONSOLIDATED INFOMEDIA LTD 2003 $’000 12,812 (2,207) 10,605 18,469 (1,809) 16,660 27,265 2002 $’000 4,968 (1,078) 3,890 2,000 (317) 1,683 5,573 2003 $’000 8,101 (778) 7,323 16,969 (1,772) 15,197 22,520 2002 $’000 593 (94) 499 2,000 (317) 1,683 2,182 2,940 1,900 2,940 1,900 977 3,917 (1,169) 2,748 1,206 1,206 1,137 2,686 3,823 1,040 2,940 (437) 2,503 603 603 1,095 750 1,845 977 3,917 (1,169) 2,748 1,040 1,040 1,120 2,573 3,693 1,040 2,940 (437) 2,503 473 473 1,062 549 1,611 2,370 14 2,384 - 58 58 2,370 14 2,384 - 58 58 13. INTANGIBLE ASSETS Goodwill – at cost Accumulated amortisation Intellectual property – at cost Accumulated amortisation 14. DEFERRED RESEARCH AND DEVELOPMENT COSTS Balance at beginning of year Research & development costs incurred during the year and deferred Accumulated amortisation Balance at end of year 15. DEFERRED TAX ASSETS Future income tax benefit 16. PAYABLES (CURRENT) Trade creditors Other creditors (a) Terms and conditions relating to the above financial instruments are set out in note 34. 17. INTEREST-BEARING LIABILITIES (CURRENT) 17 (i) Bank loans 17 (ii) Lease liability Terms and conditions relating to the above financial instruments: (i) The bank loan drawings have been made pursuant to a multi-currency cash advance facility and are currently denominated in US dollars. The amortising facility terminates in August 2005 and is provided on the condition of interlocking guarantees between the Parent entity and its controlled entities (the guarantors). All outstanding US dollar denominated debt has been hedged at reporting date. (ii) Finance leases have an average lease term of 3 years with the option to purchase the asset at the completion of the lease term for the asset’s residual value. The average discount rate implicit in the leases is 8%, (2002: 8%). Lease liabilities are secured by a charge over the leased assets. www.infomedia.com.au 47 NOTES TO FINANCIAL STATEMENTS CONTINUED YEAR ENDED 30 JUNE 2003 NOTES CONSOLIDATED INFOMEDIA LTD 18. PROVISIONS EXCLUDING TAX LIABILITIES (CURRENT) Provision for dividends Employee entitlements 4 27 19. DEFERRED REVENUE (CURRENT) Revenue in advance Deferred gain on foreign currency forward contracts 20. INTEREST-BEARING LIABILITIES (NON-CURRENT) Bank loans Lease liability 17 (i) 17 (ii) 21. PROVISIONS EXCLUDING TAX LIABILITIES 2003 $’000 - 963 963 697 4,607 5,304 8,128 - 8,128 27 680 680 2002 $’000 4,864 1,038 5,902 605 - 605 - 14 14 201 201 2003 $’000 - 808 808 213 4,607 4,820 8,128 - 8,128 2002 $’000 4,864 748 5,612 406 - 406 - 14 14 354 354 103 103 17,474 17,474 17,474 17,474 17,474 17,474 17,474 17,474 2003 2002 Number of shares $’000 Number of shares $’000 323,734,073 17,474 320,289,707 17,474 27 27 432,393 256,266 324,422,732 - - 17,474 3,304,729 139,637 323,734,073 - - 17,474 (NON-CURRENT) Employee entitlements 22. CONTRIBUTED EQUITY Issued and paid up capital – 324,422,732 shares fully paid (2002: 323,734,073) Movement in shares on issue Beginning of the financial year Issued during the financial year: - Selective Share Plan - Employee Share Plan End of the financial year (a) Employee Option Plan A total of 6,619,000 options were issued to eligible employees during the year at an average exercise price of $0.87. Refer to Note 27 for further details. 48 www.infomedia.com.au YEAR ENDED 30 JUNE 2003 NOTES CONSOLIDATED INFOMEDIA LTD 23. EARNINGS PER SHARE The following reflects the earnings and share data used in the calculations of basic and diluted earnings per share: Earnings used in calculating basic and diluted earnings per share Weighted average number of ordinary shares used in calculating basic earnings per share Effect of dilutive securities Share options Employee Share Plan shares Selective Share Plan shares Adjusted weighted average number of ordinary shares used in calculating diluted earnings per share 2003 $’000 2002 $’000 18,325 13,409 2003 Number of shares 2002 Number of shares 324,335,454 322,780,335 49,875 83,725 3,554 255,791 56,963 1,329,168 324,472,608 324,422,257 www.infomedia.com.au 49 NOTES TO FINANCIAL STATEMENTS CONTINUED YEAR ENDED 30 JUNE 2003 NOTES CONSOLIDATED INFOMEDIA LTD 24. STATEMENT OF CASH FLOWS (a) Reconciliation of profit after tax to the net cash flows from operations Profit from ordinary activities after income tax expense Depreciation of non-current assets Amortisation of non-current assets Provision for doubtful debts Net (profit)/loss on sale of non current assets Changes in assets and liabilities: Trade receivables and other debtors Deferred research and development costs Trade and other creditors Provision for employee entitlements Tax provision Deferred income tax liability Future income tax benefit Prepayments Inventories Revenue in advance Net cash flow from operating activities (b) Reconciliation of cash Cash balance comprises: – cash on hand – cash on deposit (c) Financing facilities available At reporting date, the following financing facilities had been negotiated and were available: Total Facilities: USD13Million multi-currency cash advance facility Less: amortised portion Facility available before utilisation Facilities used at reporting date: Bank loans Facilities unused at reporting date: Bank loans 2003 $’000 2002 $’000 2003 $’000 2002 $’000 18,325 1,412 3,353 4 - (1,378) (977) 1,919 349 151 1,220 (585) (372) (36) (147) 23,238 13,409 1,055 1,012 (41) (7) 2,357 (1,040) (146) 164 (369) (143) (266) (18) 124 (507) 15,584 18,618 1,194 2,871 4 - (2,259) (977) 2,025 310 52 1,195 (567) (377) (39) (193) 21,857 13,299 875 574 9 (7) 732 (1,040) (47) 98 22 (153) (238) (27) (24) 55 14,128 2,292 17,060 19,352 3,896 14,889 18,785 1,941 17,060 19,001 3,307 14,889 18,196 19,496 4,872 14,624 10,498 4,126 - - - - - 19,496 4,872 14,624 10,498 4,126 - - - - - 50 www.infomedia.com.au YEAR ENDED 30 JUNE 2003 NOTES CONSOLIDATED INFOMEDIA LTD 2003 $’000 2002 $’000 2003 $’000 2002 $’000 25. BUSINESSES ACQUIRED (a) Australian Windows Publishing business On 1 July 2002, Infomedia acquired the business of Australian Windows Publishing Pty Limited. The components of the acquisition were: Consideration paid: Prepaid option fee Cash Net Assets Acquired: Inventory Plant and equipment Intellectual property including software code Goodwill arising from acquisition Total net assets acquired (b) EDS PartsImager catalogue business On 28 August 2002, Infomedia acquired the EDS PartsImager catalogue business. The components of the acquisition were: Consideration paid: Cash Net Assets Acquired: Intellectual property including software code Plant and equipment Goodwill arising from acquisition Total net assets acquired (c) VM Computer Services business On 31 March 2003, AutoConsulting Pty Ltd (a wholly owned controlled entity) acquired the VM Computer Services dealer management system business. The components of the acquisition were: Consideration paid: Cash Net Assets Acquired: Inventory Plant and equipment Intellectual property including software code Goodwill arising from acquisition Creditors Provisions Revenue in advance Total net assets acquired 60 596 656 4 70 450 132 656 22,076 14,519 181 7,376 22,076 1,583 5 20 1,500 336 (2) (38) (238) 1,583 - - - - - - - - - - - - - - - - - - - - - - 60 596 656 4 70 450 132 656 22,076 14,519 181 7,376 22,076 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - www.infomedia.com.au 51 NOTES TO FINANCIAL STATEMENTS CONTINUED YEAR ENDED 30 JUNE 2003 NOTES CONSOLIDATED INFOMEDIA LTD 2003 $’000 2002 $’000 2003 $’000 2002 $’000 476 987 434 1,156 355 839 364 1,150 1,463 1,590 1,194 1,514 15 - 15 (1) 14 14 - 14 60 15 75 (3) 72 58 14 72 15 - 15 (1) 14 14 - 14 60 15 75 (3) 72 58 14 72 26. EXPENDITURE COMMITMENTS (a) Lease expenditure commitments (i) Operating leases (non-cancellable): Minimum lease payments – not later than one year – later than one year and not later than five years – aggregate operating lease expenditure contracted for at balance date (ii) Finance leases: – not later than one year – later than one year and not later than five years – total minimum lease payments – future finance charges – lease liability – current liability – non-current liability – aggregate finance lease expenditure contracted for at balance date 17 20 (b) Assets which are the subject of finance leases include computer hardware and equipment. (c) Operating leases have an average lease term of two years (2002: two years). Assets which are the subject of operating leases include office space. 52 www.infomedia.com.au YEAR ENDED 30 JUNE 2003 NOTES CONSOLIDATED INFOMEDIA LTD 2003 $’000 2002 $’000 2003 $’000 2002 $’000 27. EMPLOYEE ENTITLEMENTS AND SUPERANNUATION COMMITMENTS Employee Entitlements The aggregate employee entitlement liability is comprised of: Provisions (current) Provisions (non-current) 18 21 Employee Option Plan The Employee Option Plan entitles the Company to offer ‘eligible employees’ options to subscribe for shares in the Company. Options will be granted at a nil issue price unless otherwise determined by the Directors of the Company and each Option enables the holder to subscribe for one Share. The exercise price for the Options granted will be as specified on the option certificate or, if not specified, the volume weighted average price for Shares of the Company for the five days trading immediately before the day on which the options were granted. The Options may be exercised in accordance with the date determined by the Board, which must be within four years of the option being granted. Information with respect to the number of options granted under the employee share incentive scheme is as follows: 963 680 1,643 1,038 201 1,239 808 354 1,162 748 103 851 2003 2002 Number of options Weighted average exercise price Number of options Weighted average exercise price Balance at beginning of year - granted - forfeited - exercised Balance at end of year 27(a) 27(b) 27(c) 27(d) 3,840,584 6,619,000 (1,568,001) - 8,891,583 1.47 0.87 1.18 - 1.07 2,504,084 1,336,500 - - 3,840,584 1.40 1.58 - - 1.47 (a) Options held at the beginning of the reporting period: The following table summarises information about options held by employees at 1 July 2002 Number of options 900,000 333,334 121,000 699,750 450,000 1,288,500 18,000 30,000 Grant date Earliest Vesting Date Expiry Date Weighted average exercise price 19/6/2000 19/6/2000 20/4/2001 20/4/2001 20/4/2001 23/4/2001 8/10/2001 12/11/2001 19/6/2001 19/6/2001 23/3/2002 18/12/2001 16/4/2002 26/3/2002 8/10/2002 12/11/2002 19/6/2003 28/6/2003 20/4/2004 20/4/2004 20/4/2004 20/4/2004 8/10/04 12/11/04 1.00 1.00 2.00 1.80 1.73 1.59 1.29 1.43 www.infomedia.com.au 53 NOTES TO FINANCIAL STATEMENTS CONTINUED YEAR ENDED 30 JUNE 2003 27. EMPLOYEE ENTITLEMENTS AND SUPERANNUATION COMMITMENTS (CONTINUED) (b) Options granted during the reporting period: The following table summarises information about options granted by Infomedia Ltd to employees during the year Number of options 5,949,000 570,000 100,000 Grant date Earliest Vesting Date Expiry Date Weighted average exercise price 5/7/2002 1/7/2002 25/2/2002 26/3/2003 1/7/2003 25/2/2004 20/5/2005 1/8/2005 25/4/2006 0.88 0.73 1.00 (c) Options exercised during the reporting period: There were no options exercised during the reporting period. (d) Options held at the end of the reporting period: The following table summarises information about options held by employees at 30 June 2003 Number of options 54,333 431,750 450,000 1,288,500 18,000 30,000 5,949,000 570,000 100,000 Grant date Earliest Vesting Date Expiry Date Weighted average exercise price 20/4/2001 20/4/2001 20/4/2001 23/4/2001 8/10/2001 12/11/2001 5/7/2002 1/7/2002 25/2/2002 23/3/2002 18/12/2001 16/4/2002 26/3/2002 8/10/2002 12/11/2002 26/3/2003 1/7/2003 25/2/2004 20/4/2004 20/4/2004 20/4/2004 20/4/2004 8/10/04 12/11/04 20/5/2005 1/8/2005 25/4/2006 2.00 1.80 1.73 1.59 1.29 1.43 0.88 0.73 1.00 Employee Share Plan The Company provides employees, not including Directors, the opportunity to acquire shares in the Company. The scheme applies to employees with at least 12 months service and provides that offers be made to at least 75% of the persons employed by the Company for at least twelve months and not more than twice in each financial year. Each offer to each employee cannot exceed a market value of $1,000. The consideration for each share offered will be nil unless otherwise determined by the Board. Shares may not be offered to employees who are ineligible, being employees with legal or beneficial interest in more than 5% of the Company or who control or may cast more than 5% of the maximum votes at a general meeting of the Company. The total number of shares issued pursuant to the Employee Share Plan at the date of this report is 625,715 (2002: 325,085). The following table lists the number of shares issued by tranche since the inception of the plan: Date of Issue 5/2/2001 5/10/2001 21/1/2002 19/7/2002 6/2/2003 21/7/2003 Total 54 www.infomedia.com.au Number of Shares Rounded Unit Price $ Value of Tranche $’000 60,168 64,872 74,765 125,280 130,986 169,644 625,715 1.81 1.57 1.27 0.77 0.87 0.79 109 102 95 96 114 134 650 YEAR ENDED 30 JUNE 2003 27. EMPLOYEE ENTITLEMENTS AND SUPERANNUATION COMMITMENTS (CONTINUED) Selective Share Plan Under the Selective Share Plan (SSP) and pursuant to the IPO, the Company has offered shares to selected persons on set offer dates. The participants are limited to 17 individuals named in the schedule to the SSP. As at the date of this report all shares under the plan have been issued. The consideration for each share offered was $nil. The set offer dates are provided below. Date 1 September 2000 30 March 2001 3 July 2001 30 March 2002 3 July 2002 Number of shares 3,675,352 988,331 2,316,398 988,331 432,393 Status Issued during the 2001 financial year Issued during the 2001 financial year Issued during the 2002 financial year Issued during the 2002 financial year Issued during the 2003 financial year Superannuation Commitments Contributions are made by the Company in accordance with the relevant statutory requirements. Contributions by the Company for the year ended 30 June 2003 were 9% (2002: 8%) of employee’s wages and salaries which are legally enforceable in Australia. The superannuation plans provide accumulation benefits. 28. CONTINGENT LIABILITIES (a) Interlocking Guarantees The bank loan drawings have been made pursuant to a multi-currency cash advance facility. The facility has been provided on the condition of interlocking guarantees between the Parent entity and its controlled entities (the guarantors). (b) Bank Guarantee A bank guarantee for $10,350 pertaining to leased premises from a non-related party remains on hand at 30 June 2003. YEAR ENDED 30 JUNE 2003 NOTES CONSOLIDATED INFOMEDIA LTD 2003 $ 2002 $ 2003 $ 2002 $ 29. REMUNERATION OF DIRECTORS Income paid or payable, or otherwise made available, in respect of the financial year, to all Directors of each entity in the consolidated entity, directly or indirectly, by the entities of which they are Directors or any related party: Income paid or payable, or otherwise made available, in respect of the financial year, to all Directors of Infomedia Ltd, directly or indirectly, from the entity or any related party: The number of Directors of Infomedia Ltd whose income (including superannuation contributions) fell within the following bands is: $10,000 – $19,999 $40,000 – $49,999 $140,000 – $149,999 $180,000 – $189,999 $210,000 – $219,999 $230,000 – $239,999 In the opinion of the Directors, remuneration paid to Directors is considered reasonable. Directors’ remuneration is determined on the basis of cost to the Company. It therefore excludes any offerings of equity instruments. 563,676 516,000 563,676 516,000 Number 1 3 - 1 - 1 Number 1 3 1 - 1 - www.infomedia.com.au 55 NOTES TO FINANCIAL STATEMENTS CONTINUED YEAR ENDED 30 JUNE 2003 NOTES CONSOLIDATED INFOMEDIA LTD 2003 $ 2002 $ 2003 $ 2002 $ 30. REMUNERATION OF EXECUTIVES Remuneration received or due and receivable by executive officers of the consolidated entity whose remuneration is $100,000 or more, from entities in the consolidated entity or a related party, in connection with the management of the affairs of the entities in the consolidated entity whether as an executive or otherwise: Remuneration received or due and receivable by executive officers of the company whose remuneration is $100,000 or more, from the company or any related party, in connection with the management of the affairs of the company whether as an executive or otherwise: Remuneration of executives includes shares allotted under the Employee Share Plan and Selective Share Plan (pursuant to the IPO). The number of executives of Infomedia Ltd whose income (including superannuation contributions) fell within the following bands is: $120,000 – $129,999 $160,000 – $169,999 $190,000 – $199,999 $240,000 – $249,999 $250,000 – $259,999 $270,000 – $279,999 $330,000 – $339,999 $470,000 – $479,999 $640,000 – $649,999 $780,000 – $789,999 $950,000 – $959,999 31. AUDITORS’ REMUNERATION Amounts received or due and receivable by the auditors of Infomedia Ltd for: – an audit or review of the financial report of the entity and any other entity in the consolidated entity – other services in relation to the entity and any other entity in the consolidated entity 1,759,501 3,340,088 1,759,501 3,340,088 Number 1 2 - 1 1 - 1 1 - - - Number 2 - 1 1 - 1 - - 1 1 1 Number 1 2 - 1 1 - 1 1 - - - Number 2 - 1 1 - 1 - - 1 1 1 130,000 112,500 110,500 95,500 145,645 275,645 118,994 231,494 123,322 233,822 118,994 214,494 56 www.infomedia.com.au YEAR ENDED 30 JUNE 2003 32. RELATED PARTY DISCLOSURES Directors The Directors of Infomedia Ltd during the financial year were: Richard Graham; Myer Herszberg; Andrew Pattinson; Barry Ford; Geoff Henderson (appointed 25 February 2003); Fran Hernon. Wholly-owned group transactions (a) An unsecured, interest bearing loan of $2,283,970 (2002: $2,283,970) remains owing from Infomedia Investments Pty Limited to Infomedia Ltd. Interest is charged at commercial rates. (b) An unsecured, interest free loan of $146,818 (2002: $88,933) remains owing to Infomedia Investments Pty Limited by Infomedia Ltd. The loan is repayable in seven days upon demand. (c) An unsecured, interest free loan of $2,840,933 (2002: $3,770,506) remains owing from Datateck Publishing Pty Limited to Infomedia Ltd. The loan is repayable in seven days upon demand. (d) An unsecured, interest free loan of $1,763,423 (2002: $Nil) remains owing from AutoConsulting Pty Limited to Infomedia Ltd. The loan is repayable in seven days upon demand. (e) During the year a management fee of $1,097,484 (2002: $1,750,000) was paid to Datateck Publishing Pty Limited by Infomedia Ltd. Director and Director-related entity transactions (a) Infomedia Ltd rents office space from Wiser Laboratory Pty Limited, a company in which Richard Graham is a Director. The total rent payments for the year ended 30 June 2003 of $277,999 (2002: $246,833) were on commercial terms. (b) Infomedia Ltd rents office space from Richard Graham. The total rent payments for the year ended 30 June 2003 of $171,713 (2002: $47,495) were on commercial terms. (c) Infomedia Ltd rents office space to Wiser Laboratory Pty Limited, a company in which Richard Graham is a Director. The total rent receipts for the year ended 30 June 2003 of $10,053 (2002: $5,971) were on commercial terms. Equity instruments of Directors and Director related entities (a) Interests in the equity instruments of entities in the consolidated entity held by Directors of the reporting entity and their Director-related entities at balance date, being the number of instruments held are: Wiser Laboratory Pty Limited Wiser Centre Pty Limited Rentamobile Pty Limited Yarragene Pty Limited Richard Graham Myer Herszberg Andrew Pattinson Fran Hernon Barry Ford Geoff Henderson Total Infomedia Ltd Ordinary Shares Fully Paid Options Over Ordinary Shares 2003 2002 100,277,501 100,277,501 1,000,000 28,577,154 45,844,445 617,706 - 4,345,946 5,000 116,666 - 146,155,041 180,784,418 1,000,000 - 39,421,599 926,559 - 4,407,716 5,000 116,666 - 2003 - - - - - - 648,000 - - 100,000 748,000 2002 - - - - 450,000 450,000 66,000 200,000 133,334 - 1,299,334 (b) Movements in Directors and Director related entity equity holdings: (i) Richard Graham acquired 308,853 shares on 3 July 2002 in accordance with the Selective Share Plan (SSP) for no consideration. (ii) Andrew Pattinson acquired 61,770 shares on 3 July 2002 in accordance with the Selective Share Plan (SSP) for no consideration. (iii) Andrew Pattinson was granted 582,000 options at an exercise price of $0.88 on 5 July 2002 pursuant to the employee option plan. (iv) Geoff Henderson was granted 100,000 options at an exercise price of $1.00 on 25 February 2003 pursuant to the employee option plan. www.infomedia.com.au 57 NOTES TO FINANCIAL STATEMENTS CONTINUED 32. RELATED PARTY DISCLOSURES (CONTINUED) (v) On 8 May 2003, Rentamobile Pty Limited sold 28,577,154 shares at a price of $0.76 (vi) On 8 May 2003, Yarragene Pty Limited sold 6,422,846 shares at a price of $0.76. (vii) On 30 June 2003 the following options expired for Directors: Richard Graham 450,000; Myer Herszberg 450,000, Fran Hernon 200,000 and Barry Ford 133,334. NOTES Electronic Catalogue Division $’000 Other Divisions Eliminations Total $’000 $’000 $’000 33. SEGMENT INFORMATION PRIMARY SEGMENT 30 JUNE 2003 Business Segments REVENUE Sales revenue Other revenue Intersegment revenue Total segment revenue Unallocated revenue: Interest revenue Total consolidated revenue RESULTS Segment result Unallocated items: Interest revenue Borrowing costs Consolidated entity profit from ordinary activities before income tax expense Income tax expense 3 Consolidated entity profit from ordinary activities after income tax expense ASSETS Segment assets Unallocated assets: Cash Total Assets LIABILITIES Segment liabilities Unallocated liabilities: Total Liabilities 58 www.infomedia.com.au 56,739 116 - 56,855 5,074 - 660 5,734 - - (660) (660) 61,813 116 - 61,929 723 62,652 2(i) 28,192 (2,330) - 25,862 723 (348) 26,237 (7,912) 18,325 41,376 6,884 - 48,260 23,105 1,357 - 19,352 67,612 24,462 - 24,462 PRIMARY SEGMENT 30 JUNE 2002 Business Segments REVENUE Sales revenue Other revenue Intersegment revenue Total segment revenue Unallocated revenue: Interest revenue Total consolidated revenue RESULTS Segment result NOTES Electronic Catalogue Division $’000 Other Divisions Eliminations Total $’000 $’000 $’000 38,495 37 184 38,716 5,351 7 1,750 7,108 - - (1,934) (1,934) 43,846 44 - 43,890 575 44,465 2(i) 21,138 (1,107) - 20,031 Unallocated items: Interest revenue Costs incurred in defending and disposing of Supreme Court Litigation Borrowing costs Consolidated entity profit from ordinary activities before income tax expense Income tax expense 3 Consolidated entity profit from ordinary activities after income tax expense ASSETS Segment assets Unallocated assets: Cash Total Assets LIABILITIES Segment liabilities Unallocated liabilities: Provision for dividend Total Liabilities SECONDARY SEGMENT While the products of the consolidated entity are used globally, the Company has only one distinguishable geographical segment, Australia. Segment products and locations The consolidated entity’s operating divisions are organised and managed separately according to the nature of the products and the services they provide, with each segment offering different products. Infomedia’s core business involves the production of the Microcat and Partfinder electronic parts catalogues. These systems are specialised business tools designed to make the selection and sale of replacement parts fast, easy and accurate. Included within “other divisions” are the Data Management and Business Systems divisions. Data Management provide 575 (1,218) (11) 19,377 (5,968) 13,409 15,646 5,693 - 21,339 18,785 40,124 3,926 1,643 - 5,569 4,864 10,433 a range of specialised data analysis and research services primarily to the automotive industry. Business Systems specialises in the development of business management and accounting systems, electronic automotive trading networks and system integration for retail automotive dealerships. All products are sourced from Australia. Segment accounting policies The group generally accounts for intersegment sales and transfers as if the sales or transfers were to third parties at current market prices. Segment accounting polices are the same as the consolidated entity’s accounting policies described in Note 1. During the financial year, there were no changes in segment accounting policies that had a material effect on the segment information. www.infomedia.com.au 59 NOTES TO FINANCIAL STATEMENTS CONTINUED 34. FINANCIAL INSTRUMENTS (a) Interest rate risk The consolidated entity’s exposure to interest rate risks and the effective interest rates of financial assets and financial liabilities, both recognised and unrecognised at the balance date, are as follows: Financial Instruments Floating interest rate 1 year or less Over 1 to 5 years More than 5 years Fixed interest rate maturing in: 2003 $'000 2002 $'000 2003 $'000 2002 $'000 2003 $'000 2002 $'000 2003 $'000 2002 $'000 (i) Financial Assets Cash Receivables - trade Net foreign currency forward contracts Total financial assets 19,352 - 18,785 - - 19,352 - 18,785 (ii) Financial Liabilities Trade and other creditors Bank Loans Finance lease liability Interest rate cap Total financial liabilities - 10,498 - (10,498) - - - - - - - - - - - - 14 2,370 2,384 - - - - - - 58 - 58 - - - - - - - 8,128 8,128 - - - - - - 14 - 14 - - - - - - - - - - - - - (ii) Financial liabilities - - - - - (b) Terms, conditions and accounting policies The consolidated entity’s policies, including the terms and conditions of each class of financial asset, financial liability and equity instrument, both recognised and unrecognised at balance date, are as follows: RECOGNISED FINANCIAL INSTRUMENTS BALANCE SHEET NOTES ACCOUNTING POLICIES (i) Financial Assets Receivables - trade Unlisted Shares (ii) Financial Liabilities 6 Trade receivables are carried at nominal amounts due less any provision for doubtful debts. A provision for doubtful debts is recognised when collection of the full nominal amount is no longer possible. 10,11 Unlisted shares are carried at the lower of cost or recoverable amount. Dividend income is recognised when dividends are declared by the investee. Trade and other creditors 16 Liabilities are recognised for amounts to be paid in the future for goods and services received, whether or not billed to the Company. Finance lease liability 17,20 The lease liability is accounted for in accordance with AASB 1008. (iii) Equity Ordinary Shares (iv) Derivatives 22 Ordinary share capital is recognised at the fair value of the consideration received by the Company. Forward Exchange Contracts 34(d) The consolidated entity enters into forward exchange contracts where it agrees to sell specified amounts of foreign currencies in the future at a predetermined rate. The objective is to protect the consolidated entity against the possibility of loss from future exchange rate fluctuations. The forward exchange contracts are charged to the profit and loss except those relating to hedges of specific commitments which are deferred and included in the measurement of specific commitments which are deferred and included in the measurement of the sale or purchase. 60 www.infomedia.com.au N/A - not applicable for non-interest bearing financial instruments. Financial Instruments Non-interest bearing Total carrying amount as per the balance sheet Weighted average effective interest rate 2003 $'000 2002 $'000 2003 $'000 2002 $'000 2003 % 2002 % (i) Financial Assets Cash - Receivables - trade Net foreign currency forward contracts Total financial assets (ii) Financial Liabilities Trade and other creditors Bank Loans Finance lease liability Interest rate cap Total financial liabilities - 6,191 2,995 9,186 3,823 - - - 3,823 - 5,428 19,352 6,191 18,785 5,428 - 5,428 2,995 28,538 - 24,213 1,845 - - - 1,845 3,823 10,498 14 - 14,335 1,845 - 72 - 1,917 4.30 N/A N/A - N/A 2.08 8.26 2.68 - 3.51 N/A N/A - N/A - 8.26 - - TERMS AND CONDITIONS Credit sales are on terms up to 30 days. The unlisted shares held at balance date are ordinary shares. Trade liabilities are normally settled in 30 day terms. As at balance date, the Company had an average finance lease term of three years. The average discount rate implicit in the lease is 8%. The security over finance leases is disclosed in notes 17 and 20. Details of shares issued at balance date are set out in note 22. N/A – not applicable for non-interest bearing financial instruments. (c) Net fair values The aggregate net fair value of financial assets and financial liabilities, both recognised and unrecognised, at balance date are not materially different from their carrying amount in the balance sheet. (d) Credit risk exposure The consolidated entity’s maximum exposures to credit risk at balance date in relation to each class of recognised financial assets, other than derivatives, is the carrying amount of those assets as indicated in the balance sheet. The maximum credit risk does not take into account the value of any collateral or other security held, in the event other entities/parties fail to perform their obligations under the financial instruments in question. In relation to derivative financial instruments, whether recognised or unrecognised, credit risk arises from the potential failure of counterparties to meet their obligations under the contract or arrangement. The consolidated entity’s maximum credit risk exposure in relation to these is as follows: Forward exchange contracts – the full amount of the currency it will be required to pay or purchase when settling the forward exchange contract, should the counterparty not pay the currency it is committed to deliver to the Company. At balance date the net amount was $2,995,000. Concentrations of credit risk A majority of the consolidated entity’s electronic cataloguing sales are invoiced directly to vehicle manufacturers or their national distributors. Consequently, rather than the consolidated entity collecting individual sales subscriptions from individual subscribers, it receives monthly payments from a small number of credible companies. Credit risk in trade receivables is managed in the following ways: - credit sales are on terms up to 30 days; - an agent acts on the Company’s behalf in foreign locations; - subscribers must sign a standard user agreement, accepting terms and conditions. www.infomedia.com.au 61 DIRECTORS’ DECLARATION In accordance with a resolution of the Directors of Infomedia Ltd, I state that: (1) In the opinion of the Directors: (a) the financial statements and notes of the Company and of the consolidated entity are in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the Company’s and consolidated entity’s financial position as at 30 June 2003 and of their performance for the year ended on that date; and (ii) complying with Accounting Standards and Corporations Regulations 2001; and (b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. On behalf of the Board Richard David Graham Chairman Sydney, 27 August 2003 62 www.infomedia.com.au Independent audit report to the members of Infomedia Ltd Matters relating to the Electronic Presentation of the Audited Financial Report This audit report relates to the financial report of Infomedia Ltd (the company) for the year ended 30 June 2003 included on the company’s web site. The company’s directors are responsible for the integrity of the company’s web site. We have not been engaged to report on the integrity of the company’s web site. The audit report refers only to the statements named below. It does not provide an opinion on any other information which may have been hyperlinked to/from these statements. If users of this report are concerned with the inherent risks arising from electronic data communications they are advised to refer to the hard copy of the audited financial report to confirm the information included in the audited financial report presented on this web site. Scope The financial report and directors’ responsibility The financial report comprises the statement of financial position, statement of financial performance, statement of cash flows, accompanying notes to the financial statements, and the directors’ declaration for Infomedia Ltd (the company) and the consolidated entity, for the year ended 30 June 2003. The consolidated entity comprises both the company and the entities it controlled during that year. The directors of the company are responsible for preparing a financial report that gives a true and fair view of the financial position and performance of the company and the consolidated entity, and that complies with Accounting Standards in Australia, in accordance with the Corporations Act 2001. This includes responsibility for the maintenance of adequate accounting records and internal controls that are designed to prevent and detect fraud and error, and for the accounting policies and accounting estimates inherent in the financial report. Audit approach We conducted an independent audit of the financial report in order to express an opinion on it to the members of the company. Our audit was conducted in accordance with Australian Auditing Standards in order to provide reasonable assurance as to whether the financial report is free of material misstatement. The nature of an audit is influenced by factors such as the use of professional judgement, selective testing, the inherent limitations of internal control, and the availability of persuasive rather than conclusive evidence. Therefore, an audit cannot guarantee that all material misstatements have been detected. We performed procedures to assess whether in all material respects the financial report presents fairly, in accordance with the Corporations Act 2001, including compliance with Accounting Standards in Australia, and other mandatory financial reporting requirements in Australia, a view which is consistent with our understanding of the company’s and the consolidated entity’s financial position, and of their performance as represented by the results of their operations and cash flows. We formed our audit opinion on the basis of these procedures, which included: • examining, on a test basis, information to provide evidence supporting the amounts and disclosures in the financial report, and assessing the appropriateness of the accounting policies and disclosures used and the reasonableness of significant accounting estimates made by the directors. • While we considered the effectiveness of management’s internal controls over financial reporting when determining the nature and extent of our procedures, our audit was not designed to provide assurance on internal controls. We performed procedures to assess whether the substance of business transactions was accurately reflected in the financial report. These and our other procedures did not include consideration or judgment of the appropriateness or reasonableness of the business plans or strategies adopted by the directors and management of the company. Independence We are independent of the company, and have met the independence requirements of Australian professional ethical pronouncements and the Corporations Act 2001. In addition to our audit of the financial report, we were engaged to undertake the services disclosed in the notes to the financial statements. The provision of these services has not impaired our independence. Audit opinion In our opinion, the financial report of Infomedia Ltd is in accordance with: (a) the Corporations Act 2001, including: (i) giving a true and fair view of the financial position of Infomedia Ltd and the consolidated entity at 30 June 2003 and of their performance for the year ended on that date; and complying with Accounting Standards in Australia and the Corporations Regulations 2001; and (ii) (b) other mandatory financial reporting requirements in Australia. Ernst & Young John Haydon Partner Sydney 27 August 2003 CORPORATE GOVERNANCE STATEMENT EXPLANATION OF CORPORATE GOVERNANCE PRACTICES Infomedia Ltd is committed to best practice governance and processes that will enhance effectiveness and ensure the appropriate degree of accountability and transparency to shareholders. The Board has reviewed the ASX Principles of Good Governance and Best Practice Recommendations that have been recommended for the 2004 reporting year. To ensure the Company keeps abreast of these recommendations and implements them in a manner and form appropriate to its business the Board has created a Corporate Governance Committee by splitting the former Audit and Corporate Governance Committee into two separate committees: The Audit Committee is chaired by Mr Ford and the Corporate Governance Committee is chaired by Mr Henderson. These changes have taken effect as of July 2003. ROLE OF THE BOARD The Board is responsible to shareholders for the corporate governance of the Company. Primarily, it establishes Company objectives, determines strategies for achieving those objectives and sets the overall policy framework within which the business of the Company is conducted. The Board focuses on building a profitable and sustainable enterprise that can yield growing shareholder value while at the same time ensuring that the Company operates in accordance with good management and governance practices. Board procedures and conduct are governed by the Company's constitution. COMPOSITION OF THE BOARD The Company's Constitution requires a minimum of three and a maximum of seven Directors, of whom at least two must ordinarily be resident in Australia. Following the appointment of Mr. Henderson on 25 February 2003 the Board currently comprises six Directors, being two Executive Directors and four Non-Executive Directors. The names and qualifications of each Director can be found on pages 28-29. Each have different and varied backgrounds and bring to the Board a wealth of experience and expertise. Where a vacancy on the Board arises during the year, the Board as a whole endeavours to select the most suitable candidate with the appropriate expertise and experience to ensure a balanced and effective Board. Where a Director is appointed during the year to fill a vacancy or as an addition to the current Board he or she receives a letter of appointment which sets out the terms of appointment and is introduced to the various business divisions of the Company. The Board met nine times during the 2003 financial year. These meetings were in addition to committee meetings. Under the Company's Constitution one third of the Directors, and any other Directors not in such one third who has held office for 3 years or more, other than the Chief Executive Officer, must retire by rotation each year. If eligible, the retiring Directors may offer themselves for re-election. COMMITTEES OF THE BOARD During the reporting year there were two formally constituted board committees: the Audit and Corporate Governance Committee (chaired by Mr Ford) and the Remuneration Committee (chaired by Ms Hernon). Each committee meets as required and has its own charter which defines its purpose and outlines its procedures and conduct. Each committee is empowered to seek any information that it requires from employees in pursuing its purpose and to obtain independent legal or other professional advice. SHARE TRADING The Company has adopted a formal policy governing the sale and purchase of the Company’s shares by Directors and employees. The policy expressly prohibits buying and selling Infomedia shares while in the possession of unpublished price sensitive information. In addition, Directors and management are only permitted to trade in Infomedia shares after the Company's half-year and annual results are announced, and thereafter only until 15 June (after the half-year) and 15 December (after the annual results). SHAREHOLDER RELATIONS AND REPORTING The Company has internal procedures in place which are designed to keep the market informed in accordance with all its periodic and continuous disclosure obligations as required by the Australian Stock Exchange and ASIC. CORPORATE VALUES All Directors and employees are expected to act with the highest level of integrity at all times in order to enhance the reputation and performance of the Company. The Company's values are articulated in various policy documents and via a comprehensive and regularly updated Intranet site. Traditionally, the Company has also held an annual event where all employees gather together in one location to align with the Company's objectives and values. 64 www.infomedia.com.au ADDITIONAL INFORMATION TOP TWENTY SHAREHOLDERS AS AT 1st SEPTEMBER 2003 NAME SHARES % OF ISSUED CAPITAL RANK Wiser Laboratory Pty Ltd Yarragene Pty Ltd J P Morgan Nominees Australia Ltd RBC Global Services Australia Nominees Pty Ltd Westpac Custodians Citicorp Nominees Pty Ltd ANZ Nominees Ltd National Nominees Ltd Government Superannuation Office Mr. Andrew Pattinson Queensland Investment Corporation Victorian Workcover Authority IOOF Investment Management Ltd Equity Trustees Ltd The University of Melbourne Commonwealth Custodial Services Ltd Mr. Gary Martin Cogent Nominees Pty Ltd Transport Accident Commission Citicorp Nominees Pty Ltd 100,277,501 39,421,599 38,093,466 24,968,513 23,418,637 23,070,739 7,040,056 6,764,382 5,023,529 4,407,716 2,204,581 2,195,960 2,165,490 2,107,349 1,743,424 1,714,007 1,598,142 1,431,382 1,398,577 1,280,902 30.89 12.14 11.73 7.69 7.21 7.11 2.17 2.08 1.55 1.36 0.68 0.68 0.67 0.65 0.54 0.53 0.49 0.44 0.43 0.39 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 INFOMEDIA LTD - RANGE OF SHARES AS AT 26th AUGUST 2003 RANGE SHAREHOLDERS SHARES HELD % OF TOTAL 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 - Over Escrowed Shares Total 300 1003 395 403 71 - 2,172 234,268 3,154,458 3,274,221 10,851,062 306,468,652 625,715 0.07 0.97 1.01 3.34 94.42 0.19 324,608,376 100.00 As at 26 of August 2003 there were 40 shareholders holding less than a marketable parcel of 500 ordinary shares. www.infomedia.com.au 65 PERSONAL NOTES PAGES 66 www.infomedia.com.au www.infomedia.com.au 67 CORPORATE DIRECTORY INFOMEDIA LTD Registered Office 1300 Pittwater Road Narrabeen NSW 2101 ABN 63 003 326 243 Telephone: (02) 9913 4500 Facsimile: (02) 9913 4799 Internet: www.infomedia.com.au DIRECTORS Richard David Graham - Chairman and CEO Andrew Pattinson - Executive Director and Vice-CEO Barry Raymond Ford - Non-Executive Director Frances Mary Hernon - Non-Executive Director Myer Herszberg - Non-Executive Director Geoffrey Thomas Henderson - Non-Executive Director COMPANY OFFICERS Mr Nick Georges, Company Secretary Mr Peter John Adams, Chief Financial Officer AUDITORS Ernst & Young The Ernst & Young Building 321 Kent Street Sydney NSW 2000 SHARE REGISTRY Computershare Registry Services Pty Limited GPO Box 7045 Sydney NSW 1115 LAWYERS Cowley Hearne Level 10 60 Miller Street North Sydney NSW 2060 68 www.infomedia.com.au PHOTOGRAPHIC INDEX page 4 page 6 Mun Ki Park, Infomedia Account Manager Tony Magnus, Infomedia Global Accounts Manager page 10 Service staff at Strathpine Toyota page 16 Brad Davis, Administration Manager, John Page Motors and Matthew Kroll, Infomedia Development Manager - Small Market DMS page 18 Richard Barber, Director of Strategic Marketing and Business Development, Clifford Thames Ltd page 19 Tracey Beckler, Director, Digital Camera Warehouse page 20 Gino Bieringer, General Manager, Parts, Logistics and IT, DAIHATSU Deutschland GmbH page 21 Marc Collins, General Parts Manager, Palm Beach Lincoln Mercury page 22 Brad Davis, Administration Manager, John Page Motors page 23 Peter Dunn, Managing Director, The Kloster Group page 24 Colin Johnson, General Service Manager, Strathpine Toyota page 25 Geoff Henderson, Non-Executive Director page 28-29 Infomedia Board of Directors FY2003 AutoLedgers, Infomedia, Microcat, Microcat FRESH, Microcat LIVE, Partfinder, PartsImager, SIP, and the ‘parts rainbow device’ are registered trademarks, and AutoOffice, AutoMotives, AutoShop, Datateck, ezimailer, ezimerchant, Future Motors, Lubrication & Tune-up Guide, NOVA and SuperService Menus are all trademarks of Infomedia Ltd for its business processes, software and documentation products. All other trademarks are the property of their respective owners.