Infomedia Annual Report 2011

Plain-text annual report

Ltd ABN 63 003 326 243 Annual Report 2011 Table of Contents Results at a Glance Chairman’s Letter CFO Report One World – One Infomedia From our Customers Microcat 21st Anniversary Company Results Directors Directors’ Report Auditor’s Independence Declaration Statement of Comprehensive Income Balance Sheet Cash Flow Statement Statement of Changes in Equity Notes to the Financial Statements Directors’ Declaration Independent Audit Report Corporate Governance Additional Information Corporate Directory 1 3 6 8 11 14 15 16 17 26 27 28 29 30 31 68 69 71 78 79 © 2011 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. Results at a Glance 1. Results at a Glance Year Revenue* ($m) NPAT ($m) EBITDA ($m) DPS (¢) 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 21.1 7.7 12.6 2.7 34.5 12.8 20.0 2.5 43.8 13.4 20.9 2.75 61.8 18.3 30.6 3.4 69.6 20.7 35.7 3.8 59.1 5.5 27.3 3.4 55.6 18.1 25.8 11.0 54.6 15.3 23.6 4.0 51.7 13.1 19.9 3.2 51.3 10.5 15.8 2.8 50.5 11.3 18.1 2.4 48.9 10.0 18.8 2.4 * Revenue includes currency hedging gains/losses 2 . “Automakers desire to have uniform information systems and customer experiences... ” Chairman’s Letter 3. “We said we would break through our new product release logjam and we have done that.” Welcome to the FY2011 Annual Report to Shareholders. We anticipate both product lines will become part of the ‘One I can report that the Company has undergone much progres- sive change in the past year. Management has changed, objec- World’ approach that we see many automakers gravitating their ﬁ xed operations management strategies to. tives were refocused, ﬁ nancial performance was put under the As you know, Infomedia is a company whose product sales are spotlight, and productivity inside and outside of the Company mostly denominated in US Dollars and Euros, and despite a has been nurtured. When I wrote to you last year, it was with currency hedging policy to help mitigate repatriation risk, the the promise of returning the company to the core values and Australian Dollar’s unprecedented appreciation against these objectives upon which it was built: 1)product innovation that increases our customers’ productivity, and 2)realising fair val- ue for the contribution that our products make to our custom- ers’ proﬁ tability. Thanks to a lot of hard work and commitment currencies has outpaced our reasonable expectations. From FY2010 to FY2011 alone, the AUD strengthened an average 13% against the USD and 14% against the EUR. For compa- nies like ours, such large and rapid currency appreciations from all our staff around the world, I am pleased to report that cloud the underlying commercial story. those objectives have positively moved forward this year. For FY2011 our Company achieved Sales Revenue of $44.1M, Net Proﬁ t After Tax of $10.0M, and Operating Cashﬂ ow of $11.3M. For the 12th consecutive year, the Directors issued dividends consistent with policy. The ﬁ nal fully franked dividend for FY2011 was 1.2¢ which brought the total for the year to 2.4¢ fully franked. The Company remained debt free with $8.8M cash on the Balance Sheet at year end. These compare respectively with FY2010 results of: Sales $45.3M, NPAT of $11.3M , Cashﬂ ow of $10.2M, and annual dividend of 2.4¢ unfranked. On page 6, CFO, Jonathan Pollard provides an interpretive narrative of our FY2011 ﬁ nancial results that conveys more insight into the Company’s wellbeing than just the headline numbers alone might suggest. I encourage you to read that. One World I said we would break through our development logjam and we have done that – releasing new products throughout the year. The transition from our traditional Microcat DVD product to our newest electronic parts selling systems, Microcat LIVE and Microcat V6, began last winter for Toyota and Ford in the USA, then continued into the start of FY2012 with Land Rover, Hyundai, KIA, and other Ford and Toyota regions around the world. These new systems are delivering leading edge, dependable and affordable sales tools to our dealership customers anywhere, anytime and in any language they choose to access them. Just as positive was the commencement of transitioning Superservice Menus from DVD to being fully online. This is bringing new convenience to our licensees and increased mar- ket development and logistical beneﬁ ts to the Company. This product line continues to show strong subscription growth around the world. Subscriptions for our Microcat Partsbridge and Microcat MARKET products continued to grow as we ‘One World’ is the way our major OE licensors are beginning to saw automakers began to comprehend their practical value in see their aftersales operations. One World is a mindset beyond expanding sales for genuine Original Equipment (OE) parts. ‘international’ or ‘global’; beyond a patchwork of regions. 4. Our goal is to markedly contribute to our customers’ success... Chairman’s Letter 5. “Our vision for the decade ahead is to see the depth of Infomedia’s product lines expand ubiquitously around the world.” Those older paradigms are point-of-origin centric. They said, Our vision for the decade ahead is to see the depth of Infomedia’s ‘we are here, and from here we will go out and sell our wares’. product lines expand ubiquitously around the world. As we One World is a shift in company identity and thinking. move into our third decade of innovative software development, It’s organic thinking. In a One World paradigm there is no our methods modernise to keep current with changing times, speciﬁ c ‘here’. It’s one company operating as a whole, in a but our goal remains steadfast. That goal is to markedly con- whole world. In our ﬁ eld of endeavour, One World exhibits itself in the auto- tribute to our customers’ success. In turn, the value received for that contribution rewards our personnel who achieve that outcome and our shareholders who risk their capital to make makers’ desire to have uniform information systems, uniform it all possible. customer experiences, and ubiquitous access to operational tools and metrics. One World vision doesn’t see local languages It is the simple honesty of this vision and goal that underpins or universal access to online applications as “nice-to-haves” or our strategies and our actions, and gives me conﬁ dence in the “ticks-in-a-box”, but rather as basic fundamentals for a supplier long-term outlook for our Company. to be a viable commercial participant in the world. Infomedia has long been on-board with such thinking at the product development level, but now is expressing the One World paradigm at the enterprise level too. In the future, Infomedia’s expertise and identity need not be headquarter centric. Resources can be placed wherever in the world they are best expressed to serve the Company, in order to support our One World licensors and their afﬁ liates. Having the foresight and ﬂ exibility to align our organisation’s world view with that of our partners, creates new bonds and ﬁ elds of engagement that can go beyond any previous model used in our 21 years of application solution development. These are exciting times. For these reasons and for the overall performance results that you will read about herein, I commend this Annual Report to you, and look forward to seeing you at the Annual General Meeting if you are able to attend in person. Sincerely Yours, Richard David Graham Executive Chairman 4 September 2011 Subscriptions 6. CFO Report – Interpretive Narrative “...operating cashflow increased $1.1m to $11.3m.” The Company’s headline achievements for the 2011 financial year (FY2011) were Sales Revenue of $44.1M and Net Profit After Tax of $10.0M. This compares to financial year 2010 (FY2010) where Sales Revenue was $45.3M and Net Profit After Tax was $11.3M. Despite the reductions in reported Sales and Profit numbers, Operating Cashflow increased by $1.1M to $11.3M. As the Executive Chairman reported, a ﬁ nal fully franked dividend of 1.2 cents was paid to shareholders of record at 6 September 2011, bringing the total franked dividends for the year to 2.4 cents. Together with the share buyback, this represents a payout ratio of 76% of net proﬁ t. At 30 June 2011, the Company remained debt free, with $8.8M in cash on the balance sheet. Looking Behind the Numbers Whilst looking at the headline Sales and Proﬁ t numbers, it’s important to try and understand what’s behind those results. In analysing the headline FY2011 Sales and Proﬁ t numbers compared with FY2010, we can focus on three key drivers: 1) Performance in the currency that the sale takes place in; 2) The impact of foreign exchange rates; and 3) Capitalisation and Amortisation of our Research & Development costs. 1) Operational Performance in Constant Currency were in FY2010. This reduction was achieved through a com- bination of lower HR costs and targeted operational savings. It means, in constant currency terms, that operational per- formance improved by $4.8M in FY2011 over FY2010, which indicates strong control of the underlying business. 2) The Impact of Foreign Exchange Rates As with many exporters, the Company has borne the impacts of the escalating Australian dollar. Although the foreign currency theme has been a constant in analysing our results in recent times, the impact on the results reported in Australian dollars has become increasingly pronounced. Comparing the average rates in FY2005 to those in FY2011, we see that the AUD has strengthened 31% against the USD and 22% against the EUR. From FY2010 to FY2011 alone, the AUD strengthened an average 13% against the USD and 14% against the EUR. The Company maintains a hedging program that has seen positive hedging gains in both FY2010 and FY2011. However, despite this, the foreign exchange impact of our overseas revenues consumed 93% ($2.7m) of the constant currency sales growth mentioned in point 1 above. 3) R&D Capitalised and Amortisation The Company capitalises qualifying costs while a product is being developed. In some cases a product could be in develop- ment for a number of years and these costs build up. Once a As primarily an exporter, the majority of the Company’s sales product is released to the market for sale, the Company then are made in US Dollars (USD) and Euros (EUR) with the brings those costs back into the P&L in the form of amortisa- remainder in Australian Dollars (AUD). Sales in the natural currencies of USD, EUR and AUD all increased in FY2011. The main driver of sales growth was Superservice Menus which continues to be well received around the globe. If we translated the sales into AUD at the same foreign currency rates as those that occurred in FY2010 (i.e. viewing the re- sults in constant currency terms year on year), it would show an increase of AUD$2.9M in FY2011 sales revenue. When we look at operational costs in the same way (constant currency terms), they are $1.9M lower in FY2011 than they tion over future periods. See note 2(k) to the accounts for further information on these accounting policies. With the release of the new online Microcat LIVE, we’ve com- menced the amortisation of several years of development, which explains the sharp increase in amortisation between FY2010 and FY2011. This charge is a non-cash accounting entry since it ﬂ ows from costs that have been previously paid for and capital- ised, but has the impact of lowering the reported proﬁ t. The net impact of lower capitalisation and higher amortisation in FY2011 compared to FY2010 was a $3.4m reduction to pre tax proﬁ t. CFO Report – Interpretive Narrative 7. “Comparing the average rates in FY05 to those in FY11, we see that the AUD has strengthened 31% against the USD and 22% against the EUR.” Putting the Pieces Together This ‘waterfall’ chart visually demonstrates how these factors have impacted the results. The chart starts on the left side with a bar representing the NPAT reported for FY2010. Then we see how sales growth and costs savings amount to $3.8M in their constant cur- rency state. These improvements were dampened by a $2.7M reduction due to the impact of foreign exchange rates on overseas revenues and an increase in cost of $3.4M due to the impact of capitalisation and amortisation as our new products were released to market. The combined effect of those factors was a net reduction in NPAT of AUD$1.3m year on year. The Year Ahead Looking forward, the same dynamics are expected for FY2012. The Company anticipates further sales and subscription sales revenue to be between $43M and $45M, and net proﬁ t after tax to be between $7.5 million and $8.5 million. growth in their local currencies, while at the same time expects a worsening impact of foreign exchange rates when translating the overseas revenue into AUD. Equally signiﬁ cant – despite the great news that the company is releasing more products for commercialisation– is the amortisation of those products charged to the P&L. Accordingly, the Company has provided guidance that it anticipates its 2012 ﬁ nancial year Jonathan Pollard Chief Financial Ofﬁ cer 8. One Infomedia serving One World Karen Blunden (KB) joined the Company in November 2010 as the CEO of Infomedia’s North American sub- sidiary and the Global Director of Business Development and Sales, bringing with her extensive experience in mental competitive differentiator for us for as long as I can remember. Twenty-one years ago when HP and Bell & Howell were selling computer ‘iron’ to parts departments, Microcat was selling software-assisted decision making, user ergonom- leading automotive information technology solutions. ics, and DMS connectivity. Putting ourselves in the users’ shoes has always been a core strength of our product design. Our online solutions have their roots as far back as 1998 when Richard demonstrated our ﬁ rst global prototype to Ford in Detroit. Andrew Pattinson (AP), Director of Operations and Development, joined the Company in 1988. Andrew has been at the forefront of leadership in the Company including being on the Board of Directors from 2001 to 2004, and serving as Managing Director of Infomedia’s European subsidiary from 2004 to 2009. Karen and Andrew are respected leaders within the company and within the industry. They are leading the modernisation of the company’s strategies, structures, and priorities. These will facilitate the economic and intellectual sustainability needed to continue our innovation lead and to achieve our goal of product ubiquity this decade. Here they share some perspec- tives and insights for our shareholders benefit. (KB) What a great time to join the company. It is truly an evolutionary time in our marketplace. Infomedia has long been known as a world leader for innovative productivity tools for dealership Fixed Operations activities. Now as the Internet becomes an essential ﬁ xture in dealerships around the world, Infomedia’s product line vision and development strengths stand out all the more. As we’ve commenced releasing our newest generation of fully online products this past year, that competency is being conﬁ rmed to a new generation of users. I believe vehicle dealerships are amongst the most com- petitive businesses there are. They have to uphold the high standards of their brand, while having to compete both with independent operators and the limitations of their custom- ers’ wallet. Our original DVD-based products did a lot to reduce their cost of sales through personnel productivity and increased job accuracy – what was called ‘ﬁ x it right the ﬁ rst time’. I ﬁ rmly believe that our new Internet products will go beyond just improving productivity to another level – they are now increasing the sales of parts and service directly. (AP) This objective of increasing dealership productivity has been at the core of our product design agenda and a funda- One Infomedia serving One World 9. “Sales had net organic growth of $2.9M or 5% in constant currency terms” It’s taken over a decade to get all the various interests to align, are more advanced in that direction than any other provider. but now the Internet is fully accepted for Fixed Operation tools The company provides its products and customer support in and we are leading that charge. In the past twelve months more languages and in more countries than any independent we’ve released modern online re-inventions of Microcat (Mi- competitor. Now we are pushing that service envelope even crocat LIVE, MARKET & Partsbridge) and Superservice Menus. further with the introduction this year of our See & Learn These new products are designed to go beyond user productiv- online local language training, which accompanies the release ity, to create greater business ﬂ exibility and software-assisted sales completion. Our products provide customers with the beneﬁ t of real time information where they need it, when they need it. We understand dealers and technology, and this clearly shows in our approach to this new generation of opportunities. (KB) This understanding showed itself this past year, as some licensors wondered how effective an online environment would be for all their dealers around the world. The concern was that metropolitan dealers might have a great user experience, but what about rural or developing world dealers? Out of that body of concern, our business and technology leaders met and resolved that we were capable of making a bold promise. That of LIVE and SSM. Here again, we are reafﬁ rming Infomedia’s proven track record of product innovation and value add. (AP) To get to that goal of ubiquity, we are advancing on a signiﬁ cant framework of applications and interoperability that we call Microcat.Network. Going forward, as we design, build and reﬁ ne our product lines, it’s this principle of interoper- ability that will unleash much productivity potential. We like to think of it as a set of gears – one gear by itself just spins, but engage two or more gears together and you create the power to lift a massive weight. This is the vision we’ll project onto our future product line developments. (KB) The global economic circumstances of recent years have commercial promise is that all clients, regardless of location, placed added focus on dealership Fixed Operations. This will have a common user experience. A user in Algiers, inland is the area that our products serve. Systems like ours that China or outback Australia will have a good user experience just as those in metropolitan hubs do. This undertaking lifts the competitive bar to a new level for all online service providers. (AP) That promise is also backed up by our infrastructure budget, our application architecture, and our redesigned internal processes. The OEs really do want a ‘one world’ experience for their dealers and vehicle owners. To powerfully achieve that, we are looking beyond to our organisational paradigm of being a ‘global exporter’, to a much richer one world paradigm. Analysis has begun to consider what organisational changes we can make that could result in the Company being better and stronger where it counts centrally, regionally and locally. We’re asking, would a different expres- sion of our resources and functions better serve the Company to support our partners’ goals for a uniform high quality customer experience everywhere. (KB) Getting that right is part of our goal to achieve global product ubiquity in this decade. Richard inferred in his open- help to sell parts and service productively and efﬁ ciently are needed. The work we achieved in FY2011 in strengthening our Internet suite of products, our backend processes, and our management teams, means we are conﬁ dent we have the strength to deliver business growth in the years ahead. The Microcat.Network framework demonstrates not only our competitive leadership but also our willingness to cooperate with others to facilitate bigger and more effective aftersales solutions. In constant currency terms, our CFO has reported that FY2011 sales had a net organic growth of $2.9M or 5%. We are project- ing that FY2012 will show constant currency sales growth too. It will also be an intense and focused year for our commercial and technical teams. FY2012 will see expansion within all of the regions we operate. However I expect our new online products, developed within the Microcat.Network framework, and our One World/One Infomedia paradigm will generate notable growth in percentage terms in China, Russia, Africa and the Middle East. ing letter that while we serve one world with common solu- How does that saying go: ‘May we live in interesting times.’ tions, to the users it should feel like we are local. I believe we I repeat, it is a great time to join the company. 10. No Discs. No Dongles. No Delays. It works for you. From our Customers 11. “I can honestly say we have enjoyed the transition to Microcat LIVE” Ross Zuerner – Westside Lexus Ross Zuerner, Parts Manager Nick Lee, Parts Manager Westside Lexus, Houston, United States Yeovil Land Rover, Somerset, United Kingdom Westside Lexus, in Houston Texas, takes pride in being progressive and staying ahead of the curve. This attitude has proven successful, since Westside Lexus is in the top 10 of Lexus dealers in the United States and has been awarded Elite of Lexus 18 years in a row. For the past twenty-two years we have maintained this outlook, and Infomedia, through their technology, has helped maintain our competitive edge. In 1999, Lexus was discontinuing the paper catalogues and were requiring one of two options for electronic parts cata- loguing. There was a lot to consider, but the choice was clear to see; Microcat focused on the future which offered more opportunity for us. The advanced features and continuous support from Dan Stedem and his team cemented that we were Microcat users, and never interested in looking at I’ve been working in the genuine parts business for over 25 years and have been at the Land Rover dealership these past eleven. At Yeovil Land Rover we have four staff currently using Microcat LIVE for parts interpreting and selling. Before that we were all using the Microcat disc. As a Microcat customer since 2001 we were asked earlier this year to participate in the Microcat LIVE for Land Rover ﬁ eld test, prior to its wider introduction to Land Rover dealers around the world. The EPC is a critical business system in a parts department. As such we were interested to see how this new online product would compare to the disc version. My ﬁ rst impression was that Microcat LIVE is an excellent EPC. It is very easy to learn to use and its information is up to date as you would expect another supplier. of an Internet EPC. When Dan offered the opportunity to be the ﬁ rst pilot dealer This new Microcat has some extra features we ﬁ nd useful. for Microcat LIVE, we jumped at the opportunity. It is continually updated without having to receive a monthly Again, Microcat was looking toward the future. Any chance disc, and features like registration and chassis search perform to be on the cutting edge of technology and inﬂ uence its even better than the disc version. The ‘Reduce Choices’ func- functionality is something we wanted an opportunity to be tion that uses smart ﬁ ltering to get down to the required Land a part of. Microcat LIVE’s slogan, “It Works For You” is truly Rover part is a godsend. accurate, because they asked for our input. Participating in the pilot gave my staff the chance to be the ﬁ rst to learn the Microcat LIVE is very well supported by its Customer Service new product. I can honestly say that we have enjoyed the transition to Microcat LIVE; with webinar training and See & Learn videos my staff were prepared. Knowing that support, from a familiar voice, is only a call away is comforting. As of today, our team. In particular the back-up from our local representative during the ﬁ eld trial, Simon Lacey, was just superb. We expected he’d be on hand during the test, but his dedication was really quite amazing and much appreciated by the team at Yeovil Land Rover. It was a job well done. department has completed our conversion of twelve licenses Microcat LIVE really is an excellent product and since the trial and is solely reliant on Microcat LIVE. The latest features, such as the most current data and mobility to sell from any- where, offer a clear competitive advantage for our dealership. Infomedia maintains Microcat’s core values of no contracts, no additional fees and superior customer service; while continuing to move forward offering the latest in technology. Here at Westside Lexus, we have used Microcat for twelve years and will continue looking to the future with Infomedia. period I have not been back to the disc. In my opinion it is a much better EPC and we are happy to continue with it, no regrets. 12. Accuracy. Certainty. Trust. It sells for you. From our Customers 13. 13. “From the second the disc was loaded i knew that i had something that could change the way we work in the service industry.” Murray Thomsen, Service Manager Kevin Schofield, Service Manager Sainsbury Automotive Group, Dubbo, Australia Sunshine Automotive, Gold Coast, Australia Sainsbury Automotive Group comprises Hyundai, KIA, Subaru, Honda, Chrysler-Dodge-Jeep, Isuzu Ute and Chery dealerships in the Central West of New South Wales. We currently have over thirty staff operating at two locations in Dubbo, NSW. More than six years ago I received a computer CD from my Dealer Principal labelled Superservice Menus, and was asked to trial it. From the second the disc was loaded I knew that I had something that could change the way we work in the ser- vice industry. I have been on the front line of a dealership for 22 years now and have been a Service Manager for 16 of them. Training a new Service Advisor has become less stressful to myself and my customers. Superservice Menus, from a VIN or licence number, provides us the correct information every time to allow even the most inexperienced advisor to schedule the correct time for the service or repair and quote the correct price to the customer with full conﬁ dence. I have watched Superservice Menus grow over the years to provide us with the ability to load vehicles into our own Dealer Management System. The time that this is saving us is huge. Remember, every 0.1 of an hour is so important to our service department. Pre loaded service stories, parts and materials in the DMS are real time savers. We load the quote at the time of booking and the repair order is loaded with the correct service story, the parts department have a picking slip (with no more confusion of what parts are required for what service) and all the oils and shop materials are already booked out. I know our Infomedia representative, Alan Hilder, has a service background himself. It’s good to know we are dealing with someone that we trust to know the challenges and how this product helps our business. I am sure that any brand or Service Department manager that wants to be at the top and have the best NPS, CSI, and QES scores they can achieve will jump on board with Infomedia and Superservice Menus. Top Job. Here at Sunshine Automotive on the Gold Coast we ﬁ nd Superservice Menus is an excellent tool for our Ford and KIA Service Departments. Maintaining the number one position in this competitive and growing marketplace means ensuring all our staff are using the right tools. In our workshops we use the latest diagnostic equipment. On our customer vehicles we use genuine parts and lubricants. And in our service reception we use Superser- vice Menus. We ﬁ nd it’s the right tool for providing reliable and accurate service information to our customers. When we started with Superservice Menus several years ago we used the CD application. It was a fast and accurate way to price service and repair work. Later we were introduced to the DMS Datapak version as well, and have since installed it in both our dealerships. The Datapak has provided us with a single use system and we no longer need to duplicate the quote from one system to another. We also have the advantage that there are no user licence restrictions. Today, the reception, workshop, and parts counter are beneﬁ ting from the Superservice Menus information. There’s a great beneﬁ t in the uniform delivery of service information within the dealership. It means customers will always be quoted a consistent price. Our customers know whenever they call our dealerships for a price, it doesn’t matter who they speak to, they will get the right price. And when they come back to collect their car after service work, the price is what they were quoted. Superservice Menus gives us that kind of accuracy upfront. When a technician steps up to work on a car, the parts required for the job are already on hand. They’re working productive labour hours and not waiting for parts to be delivered. It’s easy to see just how important having Superservice Menus in the dealership is. That’s why I’ve no hesitation in recommending it to others. 14. Microcat 21st Anniversary YY ar Celebrating 21 Years ngt br 21 Microcat® celebrates 21 years as the EPC created for parts people by parts people. user ergonomics; operate in multiple languages and multiple currencies; and use DVD-ROM for simpler distribution and In 1987, a revolution began down-under changing the way parts had been sold for a century. From an idea that a personal computer could be programmed to select the correct parts, while the dealership parts rep focused on selling more to the customer, the most innovative EPC in the world was conceived – Microcat. In the years that followed, Microcat continued to set the agenda for EPC features and functions. It introduced a string of ﬁ rsts, including being the ﬁ rst EPC to: integrate VIN data to uniquely identify a vehicle for interpretation; use a single user interface regardless of OE franchise; directly transfer installation; just to name a few. In the 21 years since Microcat was released to its ﬁ rst user in 1990, it has led the way in product innovation around the world. It is published monthly in 31 languages, shipped to over 180 countries and is used by more than 100,000 parts peo- ple every day. Throughout this time, while competitors have come and gone, Microcat has continued to be developed and manufactured by one company – Infomedia. Those 21 years of continuous technology know-how and customer service under the same roof and same leadership pays dividends for our customers and shareholders every day. parts into a DMS for order entry; include interpretation for Now its sibling Fixed Operations products carry on the same local and regional parts; use colour and sound to improve commitment to innovation, spearheaded way back then. 15. Company Results 16. Directors’ Overview Directors Myer Herszberg Non-Executive Director F Frances Hernon H Non-Executive Director Richard Graham d G h Executive Chairman “The role of corporate governance is “Shareholders are entitled to expect to protect all shareholders equally, regardless of the size of their shareholding. As directors, we have a responsibility to act on behalf of, and try to create wealth for, all our shareholders. At Infomedia we are fortunate to have a long-standing team who have delivered consistent returns whilst continually seeking out new products and ideas to grow the business. This team has all the shareholders’ interests at heart and, I would suggest, has the balance right.” that the companies in which they invest are managed effectively and honestly. Corporate governance provides the framework for ethical leadership, sustainable business strategies and reliable ﬁ nancial statements. It is about assessing and mitigating risks such that performance is optimised. It is not a tick the box approach but rather must strike the right balance between vigilance and cost efﬁ ciency. Simply put, good corporate governance equals good business.” Mr Herszberg has been a Director since 1992 and was last re-elected to the Board in 2010. His strengths are in the areas of business development, electronics and real-estate. Ms Hernon has been a Director since 2000 and was last re-elected to the Board in 2009. Her strengths are in the areas of publishing, marketing and technology. “Corporate governance is a solemn trust- eeship held on behalf of each and every stakeholder of the Company. It’s about ﬁ duciary trust and it’s about subject matter competence. It’s about the Now, and it’s about the Future. It’s about Balance, and it’s about Edgy. Sharehold- ers aren’t looking for seat-warmers or box tickers. They want real people like themselves looking after their interest as they would do themselves. They want Directors who know the difference between governance and management; because only by knowing the difference can they get the best from each.” Mr Graham has been a Director since 1988 and was last re-elected to the Board in October 2008. His strengths are in the areas of business development, technology, innovation and organisation. Directors’ Report 17. Company Results 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: Infomedia Ltd Ordinary Shares fully paid Options over Ordinary Shares Wiser Equity Pty Limited Yarragene Pty Limited Wiser Centre Pty Limited Richard Graham Frances Hernon 101,464,342 23,421,589 1,000,000 926,559 5,000 - - - - - Richard Graham is the sole Director and beneﬁ cial shareholder of Wiser Equity 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 group were: • developer and supplier of electronic parts catalogues and service quoting systems for the automotive industry globally; and • information management, analysis and creation for the domestic automotive and oil industries. There have been no signiﬁ cant changes in the nature of those activities during the year. EMPLOYEES The company employed 212 (2010: 225) full time employees as at 30 June 2011. DIVIDENDS Final dividends recommended: On ordinary shares – ﬁ nal – fully franked Dividends paid in the year: On ordinary shares – 2011 interim – fully franked Final for the 2010 year: On ordinary shares – as recommended in the 2010 report, unfranked NET TANGIBLE ASSETS PER SECURITY The Company’s net tangible assets per security are as follows: Net tangible assets per share at 30 June 2011 Net tangible assets per share at 30 June 2010 Cents $’000 1.2 1.2 1.2 3,639 3,641 3,641 Cents 2.2 1.7 18. Directors’ Report Company Results REVIEW AND RESULTS OF OPERATIONS The following table presents sales revenue and proﬁ t after tax. There were no non-recurring signiﬁ cant items during the 2010 or 2011 ﬁ nancial years: Sales revenue Foreign exchange movement on hedges closed out during the period Proﬁ t after tax CONSOLIDATED 2011 $’000 44,093 4,821 48,914 10,039 2010 $’000 45,339 5,181 50,520 11,336 The Company reports net proﬁ t after tax (NPAT) of $10,039,000 which is slightly above the upper range of $10,000,000 previously advised in its guidance. Sales revenue was $44,093,000, against $45,339,000 for the ﬁ nancial year 2010. The reduction was caused by the impact of the strong Australian dollar, which, despite underlying growth in sales, drove a net reduction in sales revenue of $1,246,000. In constant currency terms, sales revenue rose by $2.9m and operating costs decreased $1.9m. However, the impact of foreign currency translations and movements in some non-cash entries, namely lower research and development capitalisation and higher depreciation and amortisation, combined to reduce proﬁ t by $1,297,000. Revenue from Superservice Menus increased by $1.9m in constant currency and this product continues to drive growth for the Company. The Company’s electronic parts catalogue (EPC) solutions also found new customers with its sophisticated Auto Partsbridge operating in the United States. It also launched its new fully online EPC, Microcat LIVE, for Toyota and Ford dealers in the USA and importing distributors around the world. Despite the reduction in net proﬁ t, cash ﬂ ows from operations increased by $1,146,000 to $11,320,000. During the reporting period, the Company maintained its share buyback program and repurchased 1,298,221 shares for consideration totalling $332,810. The Company is pleased to announce a fully franked ﬁ nal dividend payment of 1.2 cents. This, together with the fully franked interim dividend of 1.2 cents and the share buyback, reﬂ ects a distribution of 76% of reported net proﬁ t for the full year. This is consistent with the Company’s Dividend Policy. The record date to determine entitlements to the dividend distribution is 6 September 2011 and the date on which the dividend is payable is 20 September 2011. With regards to FY2012, the Company advises that, while it anticipates sales revenue growth on a constant currency basis, it expects its results will continue to be affected by adverse foreign exchange rates and amortisation as its new products continue to be released to market. Accordingly, the Company provides guidance that it anticipates its 2012 ﬁ nancial year sales revenue to be between $43M and $45M, and net proﬁ t after tax to be between $7.5 million and $8.5 million. SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS There has been no signiﬁ cant 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 ﬁ nancial year that has signiﬁ cantly affected the operations of the Company, the results of those operations, or the state of affairs of the Company. Directors’ Report 19. Company Results LIKELY DEVELOPMENTS AND EXPECTED RESULTS In the year ahead the Company expects to continue to release its Internet-based products. The company expects to continue increasing Superservice Menus™ revenue. ENVIRONMENTAL REGULATION AND PERFORMANCE The Company is not subject to any particular or signiﬁ cant environmental regulation under a law of the Commonwealth of Australia or of a State or Territory. SHARE OPTIONS Unissued shares At the date of this report, there were 1,000,000 unissued ordinary shares under options. Refer to Note 19 of the ﬁ nancial statements for further details of the options outstanding. Shares issued as a result of the exercise of options There were no shares issued as a result of the exercise of options during the year. Since the end of the ﬁ nancial year there have been no options exercised. INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS During the year the Company paid a premium in relation to insuring Directors and other ofﬁ cers against liability incurred in their capacity as a Director or ofﬁ cer of the Company. The insurance contract speciﬁ cally prohibits the disclosure of the nature of the policy and amount of premium paid. REMUNERATION REPORT – AUDITED This remuneration report outlines the director and executive remuneration arrangements of the Company and the Group in accordance with the requirements of the Corporations Act 2001 and its regulations. For the purposes of this report, key management personnel (KMP) of the Group are deﬁ ned as those persons having authority and responsibility for planning, directing and controlling the major activities of the Company and the Group, directly or indirectly, including any director (whether executive or otherwise) of the parent company. Details of Key Management Personnel (i) Directors (ii) Executives Richard Graham Executive Chairman* Karen Blunden Director of Global Business Development and Sales**** Gary Martin Chief Executive Ofﬁ cer** Nick Georges Company Secretary and Legal Counsel Frances Hernon Non-executive Director Andrew Pattinson Director of Operations and Global Solutions Myer Herszberg Non-executive Director Jonathan Pollard Chief Financial Ofﬁ cer Andrew Moffat Non-executive Director*** Michael Roach General Manager Asia Paciﬁ c *Appointed Executive Chairman on 1 September 2010, prior to this Mr Graham was the Non-executive Chairman **Resigned 31 August 2010 ***Resigned 5 November 2010 ****Appointed 21 November 2010 20. Directors’ Report Company Results REMUNERATION REPORT (CONTINUED) – AUDITED Compensation Philosophy The performance of the Company depends upon the quality of its Directors and Executives. To prosper, the Company must attract, motivate and retain highly skilled Directors and Executives. To this end, the Company embodies the following principles in its compensation framework: • Provide competitive rewards to attract high calibre executives; • Link executive rewards to shareholder value; and • Establish appropriate performance hurdles in relation to variable executive compensation. Remuneration Decisions Ms. Hernon, in her capacity as lead director for all matters that formally fell within the former Remuneration & Nomination Committee of the Board of Directors, is responsible for recommending to the Board the Company’s remuneration and compensation policy arrangements for all Key Management Personnel. Ms. Hernon, together with the non-executive members of the Board assess the appropriateness of the nature and amount of these emoluments on a periodic basis by reference to relevant employment market conditions with the overall objective of ensuring maximum stakeholder beneﬁ t from the retention of a high quality board and executive team. Compensation Structure In accordance with best practice corporate governance recommendations, the structure of non-executive Director and senior executive compensation is separate and distinct. Non-executive Director Compensation Objective The Board seeks to set aggregate compensation at a level which provides the Company with the ability to attract and retain Directors of appropriate calibre, whilst incurring a cost which is acceptable to shareholders. Structure The Constitution and the ASX Listing Rules specify that the aggregate compensation of non-executive Directors shall be determined from time to time by a general meeting. An amount not exceeding the amount determined is then available between the Directors as appropriate (for the year ending 30 June 2011 non-executive Directors’ compensation totalled $309,341 (2010: $309,341). The latest determination was at the Annual General Meeting held on 30 October 2002 when shareholders approved a maximum aggregate compensation of $450,000 per year. The Board has historically considered the advice from external consultants as well as the fees paid to non-executive Directors of comparable companies when undertaking a review process. Senior Executive and Executive Director Compensation Objective The Company aims to reward executives with a level and mix of compensation commensurate with their position and responsibilities within the Company so as to: Directors’ Report 21. Company Results REMUNERATION REPORT (CONTINUED) – AUDITED • reward executives for Company and individual performance against targets set by reference to appropriate benchmarks; • align the interests of executives with those of shareholders; • link reward with the strategic goals and performance of the Company; and • ensure total compensation is competitive by market standards. Structure In determining the level and make-up of executive compensation, the Remuneration Committee engages an external consultant from time to time to provide independent advice in the form of a written report detailing market levels of compensation for comparable executive roles. Compensation consists of the following key elements: • Fixed Compensation; • Variable Compensation – Short Term Incentive (‘STI’); and • Variable Compensation – Long Term Incentive (‘LTI’). The actual proportion of ﬁ xed compensation and variable compensation (potential short term and long term incentives) is established for Key Management Personnel (excluding the CEO and non-executive Directors) by the CEO in conjunction with the lead director (Ms. Hernon) for all remuneration matters, and in the case of the CEO, by the Chairman of the Board in conjunction with Ms. Hernon. Other executive salaries are determined by the CEO with reference to market conditions. Fixed Compensation Objective The level of ﬁ xed compensation is set so as to provide a base level of compensation which is both appropriate to the position and is competitive in the market. Fixed compensation is reviewed periodically by the CEO or Executive Chairman in conjunction with Ms. Hernon for the Key Management Personnel (excluding the CEO and non-executive Directors), and in the case of the CEO, by the Chairman of the Board in conjunction with Ms. Hernon. All other executive positions are reviewed periodically by the CEO or Executive Chairman. As noted above, Ms. Hernon has access to external advice independent of management. Structure Executives are given the opportunity to receive their ﬁ xed (primary) compensation in a variety of forms including cash or other designated employee expenditure such as motor vehicles. It is intended that the manner of payment chosen will be optimal for the recipient without creating undue cost for the Company. Variable Compensation – Short Term Incentive (STI) Objective The objective of short term compensation is to link the achievement of both individual performance and Company performance with the compensation received by the executive. 22. Directors’ Report Company Results REMUNERATION REPORT (CONTINUED) – AUDITED Structure The structure of short term compensation is a cash bonus dependent upon a combination of individual performance objectives and Company objectives being met. This reﬂ ects the Company wide practice of ‘Performance Planning & Review’ (PPR) procedures. Individual performance objectives centre on key focus areas. Company objectives include achieving budgetary targets that are set at the commencement of the ﬁ nancial year (adjusted where necessary for currency ﬂ uctuations). These performance conditions were chosen, in the case of individual performance objectives, to promote and maintain the individual’s focus on their own contribution to the Company’s strategic objectives through individual achievement in key result areas (KRAs) which include, for example, ‘leadership’, ‘decision making’, ‘results’ and ‘risk management’. In the case of Company objectives, budgetary performance conditions were chosen to promote and maintain a collaborative, Company wide focus on the achievement of those targets. In assessing whether an individual performance condition has been satisﬁ ed, pre-agreed key performance indicators (KPIs) are used. In assessing whether Company objectives have been satisﬁ ed, Board level pre-determined budgetary targets are used. These methods have been chosen to create clear and measurable performance targets. Variable Compensation – Long Term Incentive (LTI) Objective The objective of the LTI plan is to reward executives in a manner which aligns this element of compensation with the creation of shareholder wealth. As such LTI grants are made to executives who are able to inﬂ uence the generation of shareholder wealth and thus have a direct impact on the Company’s performance against the relevant long term performance hurdle. Structure The structure of long term compensation is in the form of share options pursuant to the employee option and employee share plans. Performance hurdles have been introduced for all share options issued after 31 December 2004 and are determined upon grant of those share options. These hurdles typically relate to the Company’s share price reaching or exceeding a particular level. These methods were chosen to create clear and measurable performance expectations. Directors’ Report 23. Company Results REMUNERATION REPORT (CONTINUED) – AUDITED Key Management Personnel and the ﬁ ve highest remunerated speciﬁ ed executives for the year ended 30 June 2011 and 30 June 2010. Short term Post- employment Share based payments Long service leave Termination payments Total Percentage performance related 2011 Financial Year: Salary and Fees Bonus Non Monetary Beneﬁ ts Superannuation Options $ $ $ $ $ $ $ $ % Directors: Richard Graham Myer Herszberg Frances Hernon Gary Martin** Andrew Moffat*** Executives: 115,000 56,300 56,250 50,000 20,553 - - - - - - - - - - Karen Blunden**** 128,956 24,653 718 190,000 33,250 280,000 39,200 208,889 36,000 200,000 28,000 - - - - 10,350 5,067 5,062 4,500 1,947 - 17,126 25,200 18,800 18,000 - - - - - - - - - 125,350 61,367 61,312 4,230 833 101,538 161,102 - 5,175 1,056 1,589 1,644 1,512 - - 3,167 4,667 2,100 3,333 - - - - - - 22,500 159,501 244,599 350,656 267,433 250,845 - - - - - 15% 14% 11% 13% 11% Nick Georges Andrew Pattinson Jonathan Pollard Michael Roach 2010 Financial Year: Directors: Richard Graham Gary Martin Myer Herszberg Frances Hernon Andrew Moffat Executives: Andrew Pattinson Michael Bodner* Michael Roach Nick Georges Jonathan Pollard 1,305,947 161,103 718 106,052 15,206 14,100 101,538 1,704,665 115,000 - - 10,350 - - - 125,350 - 27,000 14,976 5,000 300,000 60,000 56,300 56,250 56,250 - - - 280,000 36,800 - - - - - 240,038 - 13,840 200,000 32,000 190,000 29,975 180,000 21,600 - - - 5,067 5,062 5,062 25,200 - 18,000 17,100 16,200 - - - 3,629 8,770 3,486 3,744 5,442 - - - 4,667 - - - - - 406,976 15% 61,367 61,312 61,312 - - - 350,296 10% - 130,930 393,578 3,333 3,167 1,800 - - - 256,819 243,986 225,042 - 12% 12% 10% 1,673,838 180,375 13,840 129,041 40,047 17,967 130,930 2,186,038 *Resigned 31 May 2010 **Resigned 31 August 2010 ***Resigned 05 November 2010 ****Appointed 21 November 2010 24. Directors’ Report Company Results REMUNERATION REPORT (CONTINUED) – AUDITED Contract for Services The table and notes below summarise current executive employment contracts with the Company as at the date of this report: Nick Georges Jonathan Pollard Michael Roach Commencement date per latest contract 1 January 2008 1 October 2008 1 January 2009 Andrew Pattinson 1 February 2009 Karen Blunden 21 November 2010 Duration Notice Period – Company Notice Period – Executive 3 years 3 years 3 years 3 years 3 years 1 month 3 months 3 months 3 months 3 months 1 month 3 months 3 months 3 months 3 months Shares issued on exercise of compensation options (Consolidated) No options were exercised during the year. Compensation options: Granted during the year 30 June 2011 Terms and Conditions for each Grant Executives Options Issued No. Grant date Fair value per option at grant date ($) Exercise price per option ($) Expiry date Karen Blunden 250,000 21/11/2010 0.058 0.245 20/12/2013 Compensation options: Vested during the year 30 June 2011 Terms and Conditions for each Grant Vested Executives Options Issued Number Jonathan Pollard Michael Roach Andrew Pattinson Karen Blunden Total 250,000 250,000 250,000 250,000 1,000,000 Grant date 1/10/2008 1/1/2009 1/2/2009 21/11/10 Fair value per option at grant date ($) Exercise price per option ($) 0.061 0.032 0.031 0.058 0.37 0.29 0.29 0.245 Expiry date No. % 31/10/2011 166,667 66.6% 5/1/2012 166,667 66.6% 5/2/2012 166,667 66.6% 20/12/13 0 0.0% 500,001 50.0% Directors’ Report 25. Company Results REMUNERATION REPORT (CONTINUED) – AUDITED Compensation options: Granted and vested during the year 30 June 2010 Terms and Conditions for each Grant Vested Options Issued Number Grant date Fair value per option at grant date ($) Exercise price per option ($) Expiry date No. % Directors Gary Martin Executives Nick Georges Jonathan Pollard Michael Roach Andrew Pattinson Total 1,000,000 1/1/2008 250,000 250,000 250,000 250,000 2,000,000 1/1/2008 1/10/2008 1/01/2009 1/02/2009 DIRECTORS’ MEETINGS 0.078 0.078 0.061 0.032 0.031 0.53 0.53 0.37 0.29 0.29 5/2/2011 666,666 66.6% 5/2/2011 166,666 66.6% 31/10/2011 5/01/2012 5/02/2012 83,333 83,333 83,333 33.3% 33.3% 33.3% 1,083,331 54.2% The number of meetings of Directors (including meetings of committees of Directors) held during the year and the numbers of meetings attended by each Director were as follows: Committee Meetings Directors’ Meetings 9 Audit, Risk & Governance 3 9 2 7 9 4 - - 3 3 1 *Resigned 31 August 2010 **Resigned 5 November 2010 Number of meetings held: Number of meetings attended: Richard Graham Gary Martin* Myer Herszberg Frances Hernon Andrew Moffat** ROUNDING The amounts contained in this report and in the ﬁ nancial 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. AUDITOR INDEPENDENCE The Directors received an auditor’s independence declaration from the auditor of the Company (refer page 26). Signed in accordance with a resolution of the Directors. Richard David Graham Chairman Sydney, 23 August 2011 Auditor’s Independence Declaration to the Directors of Infomedia Ltd In relation to our audit of the financial report of Infomedia Ltd for the financial year ended 30 June 2011, to the best of my knowledge and belief, there have been no contraventions of the auditor independence requirements of the Corporations Act 2001 or any applicable code of professional conduct. Ernst & Young J K Haydon Partner 23 August 2011 Liability limited by a scheme approved under Professional Standards Legislation Statement of Comprehensive Income 27. Company Results YEAR ENDED 30 June 2011 Notes CONSOLIDATED Sales revenue Foreign exchange movement on hedges closed out during the period Cost of sales Gross Proﬁ t Finance revenue Employee beneﬁ ts expense Depreciation and amortisation Finance costs Operating lease rental Other income/(expenses) Proﬁ t before income tax Income tax expense Proﬁ t after income tax Other comprehensive income Foreign currency translation differences for foreign operations Effective cashﬂ ow hedges movement recognised in equity Other comprehensive income/(expense) for the period, net of tax Total comprehensive income for the period Basic earnings per share (cents per share) Diluted earnings per share (cents per share) Dividends per share – ordinary (cents per share) 2011 $’000 44,093 4,821 48,914 (19,769) 29,145 184 (8,944) (5,616) - (1,246) (167) 13,356 (3,317) 10,039 141 (656) (515) 9,524 3.31 3.31 2.40 3(i) 3(ii) 3(iii) 4 5 5 6 2010 $’000 45,339 5,181 50,520 (21,904) 28,616 103 (10,705) (3,745) (36) (1,167) 1,431 14,497 (3,161) 11,336 (290) (857) (1,147) 10,189 3.66 3.66 2.40 28. Balance Sheet Company Results AT 30 June 2011 Notes CONSOLIDATED CURRENT ASSETS Cash and cash equivalents Trade and other receivables Inventories Prepayments Derivatives TOTAL CURRENT ASSETS NON-CURRENT ASSETS Property, plant and equipment Prepayments Intangible assets and goodwill TOTAL NON-CURRENT ASSETS TOTAL ASSETS CURRENT LIABILITIES Trade and other payables Provisions Income tax payable Deferred revenue TOTAL CURRENT LIABILITIES NON-CURRENT LIABILITIES Provisions Deferred tax liabilities TOTAL NON-CURRENT LIABILITIES TOTAL LIABILITIES NET ASSETS EQUITY Contributed equity Reserves Retained proﬁ ts TOTAL EQUITY 17(b) 7 8 26 9 10 12 13 14 15 4 16 16 2011 $’000 8,820 4,044 48 2,517 2,091 2010 $’000 5,789 4,160 56 2,507 3,028 17,520 15,540 1,408 - 28,875 30,283 47,803 2,667 1,770 1,525 356 6,318 395 5,425 5,820 12,138 35,665 10,798 2,661 22,206 35,665 1,305 751 28,696 30,752 46,292 3,738 2,000 626 481 6,845 306 5,400 5,706 12,551 33,741 11,131 3,161 19,449 33,741 Cash Flow Statement 29. Company Results YEAR ENDED 30 June 2011 Notes CONSOLIDATED CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers Payments to suppliers and employees Interest received Income tax paid NET CASH FLOWS FROM OPERATING ACTIVITIES 17 (a) CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of property, plant and equipment NET CASH FLOWS USED IN INVESTING ACTIVITIES CASH FLOWS FROM FINANCING ACTIVITIES Share buy back payment Dividends paid on ordinary shares NET CASH FLOWS USED IN FINANCING ACTIVITIES NET INCREASE/(DECREASE) IN CASH HELD Add opening cash brought forward CLOSING CASH CARRIED FORWARD 16 6 17 (b) 2011 $’000 49,459 (36,171) 184 (2,152) 11,320 (674) (674) (333) (7,282) (7,615) 3,031 5,789 8,820 2010 $’000 51,294 (40,348) 103 (875) 10,174 (395) (395) (1,732) (10,263) (11,995) (2,216) 8,005 5,789 30. Statement of Changes in Equity Company Results YEAR ENDED 30 June 2011 CONSOLIDATED Contributed equity Retained earnings Employee equity beneﬁ ts reserve Cashﬂ ow hedge reserve Foreign currency translation reserve $’000 11,131 - - - - (333) - 10,798 $’000 19,449 10,039 - 10,039 - - (7,282) 22,206 $’000 1,195 - - - 15 - - $’000 2,119 - (656) (656) - - - $’000 (153) - 141 141 - - - 1,210 1,463 (12) Total $’000 33,741 10,039 (515) 9,524 15 (333) (7,282) 35,665 Contributed equity Retained earnings CONSOLIDATED Employee equity beneﬁ ts reserve Cashﬂ ow hedge reserve $’000 12,863 - - - - (1,732) $’000 18,376 11,336 - 11,336 - - - (10,263) $’000 1,152 - - - 43 - - $’000 2,976 - (857) (857) - - - Foreign currency translation Total reserve $’000 137 - (290) (290) - - - $’000 35,504 11,336 (1,147) 10,189 43 (1,732) (10,263) 11,131 19,449 1,195 2,119 (153) 33,741 At 1 July 2010 Proﬁ t for the period Other comprehensive income Total comprehensive income for the year Share based payments Share buy back Equity dividends At 30 June 2011 YEAR ENDED 30 June 2010 At 1 July 2009 Proﬁ t for the period Other comprehensive income Total comprehensive income for the year Share based payments Share buy back Equity dividends At 30 June 2010 Notes to the Financial Statements 31. Company Results 30 June 2011 1. CORPORATE INFORMATION The ﬁ nancial report of Infomedia Ltd for the year ended 30 June 2011 was authorised for issue in accordance with a resolution of the Directors on 23 August 2011. Infomedia Ltd is a company limited by shares incorporated and domiciled in Australia whose shares are publicly traded on the Australian stock exchange. The nature of the operations and principal activities of the Company are described in the Directors’ Report. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Basis of preparation The ﬁ nancial report is a general-purpose ﬁ nancial report, which has been prepared in accordance with the requirements of the Corporations Act 2001 and Australian Accounting Standards. The ﬁ nancial report has also been prepared on a historical cost basis, except for derivative ﬁ nancial instruments that have been measured at fair value. (b) Statement of compliance This ﬁ nancial report complied with Australian Accounting Standards as issued by the Australian Accounting Standards Board. This ﬁ nancial report also complied with the International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board. New/revised standards and interpretations applicable for the year commencing 1 July 2010 have been reviewed and it has been determined that those new/revised standards and interpretations do not have a material effect on the measurement and recording of items in the balance sheet and statement of comprehensive income. Certain Australian Accounting Standards and interpretations have recently been issued or amended but are not yet effective and have not been adopted by Infomedia Ltd for the current reporting period. The Directors have not yet assessed the impact of these new or amended standards (to the extent relevant to Infomedia Ltd) and interpretations. (c) Basis of consolidation The consolidated ﬁ nancial statements comprise the ﬁ nancial statements of Infomedia Ltd and its subsidiaries (‘the Company’). The ﬁ nancial statements of subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. Adjustments are made to bring into line any dissimilar accounting policies that may exist. All intercompany balances and transactions, including unrealised proﬁ ts arising from intra-group transactions, have been eliminated in full. Unrealised losses are eliminated unless costs cannot be recovered. Subsidiaries are consolidated from the date on which control is transferred to the Company and cease to be consolidated from the date on which control is transferred out of the Company. Where there is loss of control of a subsidiary, the consolidated ﬁ nancial statements include the results for the part of the reporting period during which Infomedia Ltd has control. (d) Signiﬁ cant accounting judgments, estimates and assumptions Signiﬁ cant accounting estimates and assumptions The carrying amounts of certain assets and liabilities are often determined based on estimates and assumptions of future events. The key estimates and assumptions that have a signiﬁ cant risk of causing a material adjustment to the carrying amounts of certain assets and liabilities within the next annual reporting period are: 32. Notes to the Financial Statements Company Results 30 June 2011 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) • Impairment of goodwill The Company determines whether goodwill is impaired at least on an annual basis. This requires an estimation of the recoverable amount of the cash generating units to which the goodwill and intangibles with indeﬁ nite useful lives are allocated. The assumptions used in this estimation of recoverable amount and the carrying amount of goodwill and intangibles with indeﬁ nite useful lives are discussed in Note 11. • Share-based payment transactions The Company measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by an external valuer using a binomial model, using the assumptions detailed in Note 19. • Research & Development Development costs are only capitalised by the Group when it is assessed that the technical feasibility of completing the intangible asset is valid so that the asset will be available for use or sale. Refer to note 2(k) for further discussion. (e) Foreign currency translation Translation of foreign currency transactions Transactions in foreign currencies of the Company are converted to local currency at the rate of exchange ruling at the date of the transaction. Amounts payable to and by the Company 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 reporting period. All currency exchange differences in the consolidated ﬁ nancial report are taken to the income statement. Translation of ﬁ nancial reports of overseas operations Both the functional and presentation currency of Infomedia Ltd and its Australian subsidiaries is Australian dollars (A$). Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate as at the date of the initial transaction. The functional currency of the overseas subsidiaries is as follows: IFM Europe Ltd Euros IFM Germany GmbH Euros IFM North America Inc United States Dollars (USD) As at the reporting date the assets and liabilities of these overseas subsidiaries are translated into the presentation currency of Infomedia Ltd at the rate of exchange ruling at the balance sheet date and the income statements are translated at the weighted average exchange rates for the period. Notes to the Financial Statements 33. Company Results 30 June 2011 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) The exchange differences arising on the retranslation are taken directly to a separate component of equity. (f ) Cash and cash equivalents Cash on hand and in banks and short-term deposits are stated at nominal values. For the purposes of the Cash Flow Statement, cash includes cash on hand and in banks, and money market investments readily convertible to cash within three months, net of outstanding bank overdrafts. (g) Trade and other receivables Trade receivables, which generally have 30 – 60 day terms, are recognised and carried at original invoice amount less an allowance for any uncollectable amounts. An allowance for doubtful debts is made when there is objective evidence that the Company will not be able to collect the debts. Bad debts are written off when identiﬁ ed. (h) Investments and other ﬁ nancial assets Financial assets in the scope of AASB 139 Financial Instruments: Recognition and Measurement are classiﬁ ed as either ﬁ nancial assets at fair value through proﬁ t or loss, loans and receivables, held-to-maturity investments, or available-for-sale investments, as appropriate. For the Company the relevant categories are listed below: Loans and receivables Loans and receivables are non-derivative ﬁ nancial assets with ﬁ xed or determinable payments that are not quoted in an active market. Such assets are carried at amortised cost using the effective interest method. Gains and losses are recognised in proﬁ t or loss when the loans and receivables are derecognised or impaired, as well as through the amortisation process. Investments in Subsidiaries Investments in subsidiaries are recorded at cost. (i) Inventories 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 ﬁ rst-in-ﬁ rst-out basis (j) Goodwill Goodwill acquired in a business combination is initially measured at cost being the excess of the cost of the business combina- tion over the Company’s interest in the net fair value of the acquiree’s identiﬁ able assets, liabilities and contingent liabilities. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is reviewed for impairment annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. 34. Notes to the Financial Statements Company Results For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Company’s cash-generating units, or groups of cash generating units, that are expected to beneﬁ t from the synergies of the combination, irrespective of whether other assets or liabilities of the Company are assigned to those units or groups of units. Each unit or group of units to which the goodwill is so allocated: • represents the lowest level within the Company at which the goodwill is monitored for internal management purposes; and • is not larger than a segment based on either the Company’s primary or the Company’s secondary reporting format determined in accordance with AASB 114 Segment Reporting. Impairment is determined by assessing the recoverable amount of the cash-generating unit (group of cash-generating units), to which the goodwill relates. When the recoverable amount of the cash-generating unit (group of cash-generating units) is less than the carrying amount, an impairment loss is recognised. When goodwill forms part of a cash-generating unit (group of cash-generating units) and an operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this manner is measured based on the relative values of the operation disposed of and the portion of the cash generating unit retained. Impairment losses recognised for goodwill are not subsequently reversed. (k) Intangible assets Intangible assets acquired separately or in a business combination are initially measured at cost. The cost of an intangible asset acquired in a business combination is its fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. Internally generated intangible assets, excluding capitalised development costs, are not capitalised and expenditure is charged against proﬁ ts in the year in which the expenditure is incurred. Research costs are expensed as incurred. Development costs are capitalised and an intangible asset for development expenditure on an internal project is recognised only when the Company can demonstrate the technical feasibility of completing the intangible asset so that it will be available for use or sale, its intention to complete and its ability to use or sell the asset, how the asset will generate future economic beneﬁ ts, the availability of resources to complete the development and the ability to measure reliably the expenditure attributable to the intangible asset during its development. Following the initial recognition of the development expenditure, the cost model is applied requiring the asset to be carried at cost less any accumulated amortisation and accumulated impairment losses. Any expenditure so capitalised is amortised over the period of expected beneﬁ ts from the related project commencing from the commercial release of the project. The carrying value of an intangible asset arising from development expenditure is tested for impairment annually when the asset is not yet available for use or more frequently when an indication of impairment arises during the reporting period. Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in proﬁ t or loss when the asset is derecognised. The useful lives of intangible assets are assessed to be either ﬁ nite or indeﬁ nite. Intangible assets with ﬁ nite lives are amortised over the useful life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a ﬁ nite useful life is reviewed at least at each Notes to the Financial Statements 35. Company Results 30 June 2011 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (k) Intangible assets (continued) ﬁ nancial year-end. Changes in the expected useful life or the expected pattern of consumption of future economic beneﬁ ts embodied in the asset are accounted for by changing the amortisation period or method, as appropriate, which is a change in accounting estimate. The amortisation expense on intangible assets with ﬁ nite lives is recognised in proﬁ t or loss in the expense category consistent with the function of the intangible asset. Intangible assets with indeﬁ nite useful lives are tested for impairment annually either individually or at the cash-generating unit level. Such intangibles are not amortised. The useful life of an intangible asset with an indeﬁ nite life is reviewed each reporting period to determine whether indeﬁ nite life assessment continues to be supportable. If not, the change in the useful life assessment from indeﬁ nite to ﬁ nite is accounted for as a change in an accounting estimate and is thus accounted for on a prospective basis. (l) Impairment of assets The Company assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Company makes an estimate of the asset’s recoverable amount. An asset’s recoverable amount is the higher of its fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inﬂ ows that are largely independent of those from other assets or groups of assets and the asset’s value in use cannot be estimated to be close to its fair value. In such cases the asset is tested for impairment as part of the cash generating unit to which it belongs. When the carrying amount of an asset or cash-generating unit exceeds its recoverable amount, the asset or cash-generating unit is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash ﬂ ows are discounted to their present value using a pre-tax discount rate that reﬂ ects current market assessments of the time value of money and the risks speciﬁ c to the asset. Impairment losses relating to continuing operations are recognised in those expense categories consistent with the function of the impaired asset unless the asset is carried at revalued amount (in which case the impairment loss is treated as a revaluation decrease). An assessment is also made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognised impairment loss is reversed (with the exception of goodwill) only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. If that is the case the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in proﬁ t or loss unless the asset is carried at revalued amount, in which case the reversal is treated as a revaluation increase. After such a reversal the depreciation charge is adjusted in future periods to allocate the asset’s revised carrying amount, less any residual value, on a systematic basis over its remaining useful life. (m) Property, plant and equipment Property, plant and equipment is stated at cost less accumulated depreciation and any accumulated impairment losses. Land and buildings are measured at cost less accumulated depreciation on buildings and less any impairment losses recognised. Depreciation is calculated on a straight-line basis over the estimated useful life of the assets as follows: 36. Notes to the Financial Statements Company Results 30 June 2011 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Major depreciation periods are: Leasehold improvements: Other plant and equipment: 2011 5 to 20 years 3 to 15 years 2010 5 to 20 years 3 to 15 years The assets’ residual values, useful lives and amortisation methods are reviewed, and adjusted if appropriate, at each ﬁ nancial year end. (i) Derecognition and disposal An item of property, plant and equipment is derecognised upon disposal or when no further future economic beneﬁ ts are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in proﬁ t or loss in the year the asset is derecognised. (n) Leases Operating lease payments are recognised as an expense in the income statement on a straight-line basis over the lease term. Lease incentives are recognised in the income statement as an integral part of the total lease expense. (o) Trade and other payables Trade payables and other payables are carried at amortised costs and represent liabilities for goods and services provided to the Company prior to the end of the ﬁ nancial year that are unpaid and arise when the Company becomes obliged to make future payments in respect of the purchase of these goods and services. (p) Provisions Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outﬂ ow of resources embodying economic beneﬁ ts will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where the Company expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the income statement net of any reimbursement. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash ﬂ ows at a pre-tax rate that reﬂ ects current market assessments of the time value of money and, where appropriate, the risks speciﬁ c to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as a borrowing cost. (q) Deferred revenue 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. (r) Contributed equity Ordinary shares are classiﬁ ed as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. Notes to the Financial Statements 37. Company Results 30 June 2011 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (s) Revenue recognition Revenue is recognised to the extent that it is probable that the economic beneﬁ ts will ﬂ ow to the entity and the revenue can be reliably measured. The following speciﬁ c 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. (t) Cost of sales Cost of sales includes the direct cost of raw materials, direct salary and wages, and agency costs associated with the manufacture and distribution of the product. (u) Derivative ﬁ nancial instruments and hedging Derivatives are carried as assets when their fair value is positive and as liabilities when their fair value is negative. Derivative ﬁ nancial instruments are measured at fair value. Any gains or losses arising from changes in the fair value of derivatives, except for those that qualify as cash ﬂ ow hedges, are taken directly to proﬁ t or loss for the year. The fair value of forward currency contracts are calculated by reference to current forward exchange rates for contacts with similar maturity proﬁ les. For the purpose of hedge accounting, hedges are classiﬁ ed as cash ﬂ ow hedges when they hedge the exposure to variability in cash ﬂ ows that is attributable either to a particular risk associated with a recognised asset or liability or to a forecast transaction. Infomedia Limited currently has cash ﬂ ow hedges attributable to future foreign currency sales. Cash ﬂ ow hedges Cash ﬂ ow hedges are hedges of the Group’s exposure to variability in cash ﬂ ows that is attributable to a particular risk associated with anticipated future sales that could affect proﬁ t or loss. The effective portion of the gain or loss on the hedging instrument is recognised directly in equity, while the ineffective portion is recognised in proﬁ t or loss. Amounts taken to equity are transferred out of equity and included in the measurement of the hedged transaction when the forecast transaction occurs. The Group tests each of the designated cash ﬂ ow hedges for effectiveness on a monthly basis both retrospectively and prospectively using the “matched terms” principle. At each balance date, hedge effectiveness is measured in the ﬁ rst instance by determining whether there have been any changes to these “matched terms”. When there have been no changes to these “matched terms”, the hedge is considered to be highly effective. Where there has been a change to these terms, effectiveness is measured using the hypothetical derivative method. 38. Notes to the Financial Statements Company Results 30 June 2011 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) The parent entity (Infomedia Ltd) sells software to its wholly owned subsidiaries (i.e. IFM North America Inc and IFM Europe Ltd). Sales to IFM North America Inc are denominated in USD. Sales to IFM Europe Ltd are denominated in Euros. Sales to these wholly owned subsidiaries (‘distributors’) are immediately on-sold to customers in the same currency. There is no inventory held by the subsidiaries with the exception of fulﬁ lling new ﬁ rst time through orders. First time through orders will not be hedged. The Group hedges foreign exchange exposure on intra-group sales as this exposure affects consolidated proﬁ t when the sale is made to the external customer. (v) Income tax Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the balance sheet date. Deferred income tax is provided on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for ﬁ nancial reporting purposes. Deferred income tax liabilities are recognised for all taxable temporary differences except: • when the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting proﬁ t nor taxable proﬁ t or loss; or • when the taxable temporary difference is associated with investments in subsidiaries, associates or interests in joint ventures, and the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and unused tax losses, to the extent that it is probable that taxable proﬁ t will be available against which the deductible temporary differences and the carry-forward of unused tax credits and unused tax losses can be utilised, except: • when the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting proﬁ t nor taxable proﬁ t or loss; or • when the deductible temporary difference is associated with investments in subsidiaries, associates or interests in joint ventures, in which case a deferred tax asset is only recognised to the extent that it is probable that the temporary difference will reverse in the foreseeable future and taxable proﬁ t will be available against which the temporary difference can be utilised. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date. Income taxes relating to items recognised directly in equity are recognised in equity and not in proﬁ t or loss. Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity and the same taxation authority. The tax consolidated current tax liability and other deferred tax assets are required to be allocated to the members of the tax Notes to the Financial Statements 39. Company Results 30 June 2011 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (v) Income tax (continued) consolidated group in accordance with UIG 1052. The group uses a group allocation method for this purpose where the allocated current tax payable, deferred tax assets and other tax credits for each member of the tax consolidated group is determined as if the company is a stand-alone taxpayer but modiﬁ ed as necessary to recognise membership of a tax consolidated group. Recognition of amounts allocated to members of the tax consolidated group has regard to the tax consolidated groups future tax proﬁ ts. (w) Other taxes Revenues, expenses and assets are recognised net of the amount of Goods and Services Tax (“GST”) except: • when the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and • receivables and payables, which 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 balance sheet. Cash ﬂ ows are included in the Cash Flow Statement on a gross basis and the GST component of cash ﬂ ows arising from investing and ﬁ nancing activities, which is recoverable from, or payable to, the taxation authority are classiﬁ ed as operating cash ﬂ ows. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority. (x) Employee leave beneﬁ ts (i) Wages, salaries and annual leave Liabilities for wages and salaries, including non-monetary beneﬁ ts, and annual leave expected to be settled within 12 months of the reporting date are recognised in other payables in respect of employees’ services up to the reporting date. They are measured at the amounts expected to be paid when the liabilities are settled. Liabilities for non-accumulating sick leave are recognised when the leave is taken and are measured at the rates paid or payable. (ii) Long service leave The liability for long service leave is recognised in the provision for employee beneﬁ ts and measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date. Consideration is given to expected future wage and salary levels, experience of employee departures, and period of service. Expected future payments are discounted using market yields at the reporting date on national government bonds with terms to maturity and currencies that match, as closely as possible, the estimated future cashﬂ ows. (iii) Post employment and termination beneﬁ ts A Superannuation expense at 9% of salaries is recognised on a straight line basis. Termination beneﬁ ts are recognised at the point of being incurred where relevant. (y) Share-based payment transactions The Company provides beneﬁ ts to employees in the form of share-based payment transactions, whereby employees render services in exchange for shares or options over shares (‘equity-settled transactions’). 40. Notes to the Financial Statements Company Results 30 June 2011 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (y) Share-based payment transactions (continued) There are currently two plans in place to provide these beneﬁ ts: (i) the Employee Share Plan (ESP), and (ii) the Employee Option Plan (EOP). The cost of these equity-settled transactions with employees is measured by reference to the fair value at the date at which they are granted. The fair value is determined by an external valuer using a binomial model. In valuing equity-settled transactions, no account is taken of any performance conditions, other than conditions linked to the price of the shares of Infomedia Ltd (‘market conditions’). The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance conditions are fulﬁ lled, ending on the date on which the relevant employees become fully entitled to the option (‘vesting date’). The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reﬂ ects (i) the extent to which the vesting period has expired and (ii) the number of options that, in the opinion of the Directors of the Company, will ultimately vest. This opinion is formed based on the best available information at balance date. No adjustment is made for the likelihood of market performance conditions being met as the effect of these conditions is included in the determination of fair value at grant date. Where the terms of an equity-settled option are modiﬁ ed, as a minimum an expense is recognised as if the terms had not been modiﬁ ed. In addition, an expense is recognised for any increase in the value of the transaction as a result of the modiﬁ cation, as measured at the date of modiﬁ cation. Where an equity-settled option is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the option is recognised immediately. However, if a new option is substituted for the cancelled option, and designated as a replacement option on the date that it is granted, the cancelled and new option are treated as if they were a modiﬁ cation of the original option, as described in the previous paragraph. The dilutive effect, if any, of outstanding options is reﬂ ected as additional share dilution in the computation of earnings per share. (z) Earnings per share Basic earnings per share is determined by dividing the proﬁ t attributed to members of the parent after related income tax expense by the weighted average number of ordinary shares outstanding during the ﬁ nancial year. Diluted earnings per share is calculated as net proﬁ t 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. Notes to the Financial Statements 41. Company Results 30 June 2011 Notes CONSOLIDATED 3. EXPENSES (i) Cost of sales Direct wages Other Total cost of sales (ii) Employee beneﬁ t expense Salaries and wages (including on-costs) Share based payment expense Total employee beneﬁ t expense (iii) Depreciation and amortisation Depreciation of non-current assets: - Leasehold improvements - Ofﬁ ce equipment - Furniture and ﬁ ttings - Plant and equipment Total depreciation of non-current assets Amortisation of non-current assets - Intellectual property - Deferred development costs Total amortisation of non-current assets Total depreciation and amortisation 19 2011 $’000 12,307 7,462 19,769 8,934 10 8,944 30 368 40 112 550 147 4,919 5,066 5,616 2010 $’000 13,413 8,491 21,904 10,662 43 10,705 106 510 30 131 777 147 2,821 2,968 3,745 (iv) Research & development costs Total research & development costs incurred during the period Less: development costs deferred Net research and development costs expensed 10 9,312 (5,245) 4,067 9,683 (6,688) 2,995 42. Notes to the Financial Statements Company Results 30 June 2011 4. INCOME TAX The major components of income tax expense are: Income statement Current income tax Current income tax charge Adjustments in respect of current income tax of previous years. Deferred income tax Relating to origination and reversal of temporary differences Income tax expense reported in the income statement (b) Disclosure of tax effects relating to each component of other comprehensive income Movement in cash ﬂ ow hedges CONSOLIDATED 2011 $’000 2010 $’000 3,089 (78) 306 3,317 (281) (281) 2,415 (488) 1,234 3,161 (367) (367) A reconciliation between tax expense and the product of accounting proﬁ t before income tax multiplied by the Company’s applicable income tax rate is as follows: Accounting proﬁ t before income tax 13,356 14,497 At the Company’s statutory income tax rate of 30% (2010: 30%) Adjustments in respect of income tax of previous years Additional research and development deduction Expenditure not allowable for income tax purposes Income tax expense reported in the income statement Tax consolidation 4,007 (153) (606) 69 3,317 4,349 (677) (596) 85 3,161 Effective 1 July 2002, for the purposes of income taxation, Infomedia Ltd and its 100% owned Australian subsidiaries have formed a tax consolidated group. Members of the group have entered into a tax sharing arrangement in order to allocate income tax expense to the wholly-owned subsidiaries. In addition the agreement provides for the allocation of income tax liabilities between the entities should the head entity default on its tax payment obligations. At the balance date, the possibility of default is remote. Members of the tax consolidated group have also entered into a tax funding agreement. The tax funding agreement provides for the funding of allocated tax liabilities, tax losses and foreign tax credits for the current period based on the recognition criteria set out in the accounting policy for income taxes. Allocations under the tax funding agreement are made after the ﬁ nalisation of the group’s income tax return. The allocation of taxes under the tax funding agreement is recognised as an increase/decrease in the subsidiaries’ intercompany accounts with the tax consolidated group head company, Infomedia Ltd. Notes to the Financial Statements 43. Company Results 30 June 2011 4. INCOME TAX (CONTINUED) Deferred income tax Deferred income tax at 30 June relates to the following: BALANCE SHEET INCOME STATEMENT 2011 $’000 2010 $’000 2011 $’000 2010 $’000 CONSOLIDATED Deferred tax liabilities Derivatives Deferred development costs Intellectual property Other Gross deferred income tax liabilities CONSOLIDATED Deferred tax assets Allowance for doubtful debts Other payables Employee entitlement provisions Other provisions Currency exchange Gross deferred income tax assets Deferred tax income/ (expense) 5. EARNINGS PER SHARE (627) (6,065) (37) - (6,729) 19 115 495 420 255 (908) (5,965) (81) (78) (7,032) 46 145 737 461 243 1,304 1,632 - 100 (44) (78) 27 30 242 41 (12) 306 - 1,160 (44) 78 102 62 (112) (115) 103 1,234 Basic earnings per share amounts are calculated by dividing net proﬁ t for the year attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year. Diluted earnings per share amounts are calculated by dividing the net proﬁ t attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year (adjusted for the effects of dilutive options). The following reﬂ ects the income and share data used in the total operations basic and diluted earnings per share computations: 30 June 2011 Net proﬁ t attributable to equity holders from continuing operations Weighted average number of ordinary shares for basic earnings per share Effect of dilution: Share options CONSOLIDATED 2011 $’000 10,039 2010 $’000 11,336 Number of shares 303,483,292 Number of shares 309,754,267 - 24,417 Adjusted weighted average number of ordinary shares for diluted earnings per share 303,483,292 309,778,684 Since the reporting date, prior to the completion of these ﬁ nancial statements, the company has not repurchased any further shares through its buy back program. Total equivalent shares outstanding on out-of-the-money options that were not dilutive for the respective periods but could potentially dilute earnings per share in the future were 1,000,000 (2010: 1,650,000) 44. Notes to the Financial Statements Company Results 30 June 2011 CONSOLIDATED 6. DIVIDENDS PROPOSED OR PAID (a) Dividends paid during the year: Interim dividend – 1.2 cents fully franked (2010: 1.2 cents unfranked) per share Prior year ﬁ nal dividend – 1.2 cents unfranked (2010: 2.1 cents, franked at 0.7c) per share Total dividends paid during the year (b) Dividends proposed and not recognised as a liability: Final dividend – 1.2 cents fully franked. (2010: 1.2 cents, unfranked) per share (c) Franking credit balance: The amount of franking credits available for the subsequent ﬁ nancial year are: franking account balance as at the end of the ﬁ nancial year franking credits that will arise from the payment of income tax payable as at the end of the ﬁ nancial year – – If fully franked, the tax rate on dividends is 30% (2010: 30%). 30 June 2011 7. TRADE AND OTHER RECEIVABLES (CURRENT) Trade debtors Allowance for impairment loss (a) Other debtors (a) Allowance for impairment loss 2011 $’000 3,641 3,641 7,282 3,639 716 1,647 2,363 2010 $’000 3,729 6,534 10,263 3,644 92 864 956 CONSOLIDATED 2011 $’000 4,133 (136) 3,997 47 4,044 2010 $’000 4,330 (218) 4,112 48 4,160 Trade receivables are non-interest bearing and are generally on 30 – 60 day terms. A provision for impairment loss is recognised when there is objective evidence that an individual trade receivable is impaired. An impairment loss of $41,000 (2010: $283,000 gain) has been recognised by the group in the current year. These amounts have been included in the other expenses item. The amount of the allowance/impairment loss is recognised as the difference between the carrying amount of the debtor and the estimated future cash ﬂ ows expected to be received from the relevant debtors. Movements in the provision for impairment loss were as follows: At 1 July Charge/(release) for the year Foreign exchange translation Amounts written off At 30 June 218 41 7 (130) 136 644 (283) (16) (127) 218 At 30 June the ageing analysis of trade receivables is as follows: Total 4,133 4,330 0-60 days NI* 0-60 days CI* 61-120 days NI* 61-120 days CI* 121+ days NI* 121+ days CI* 3,630 3,714 42 22 310 188 30 13 57 210 64 183 2011 Consolidated 2010 Consolidated * Not impaired (NI) Considered impaired (CI) Notes to the Financial Statements 45. Company Results 30 June 2011 8. INVENTORIES Raw materials At cost Total inventories at the lower of cost and net realisable value CONSOLIDATED 2011 $’000 48 48 30 June 2011 CONSOLIDATED 9. PROPERTY, PLANT & EQUIPMENT (a) Leasehold improvements At cost Accumulated amortisation Ofﬁ ce equipment At cost Accumulated depreciation Furniture and ﬁ ttings At cost Accumulated depreciation Plant and equipment At cost Accumulated depreciation Total property, plant and equipment At cost Accumulated depreciation and amortisation Total written down amount 2011 $’000 428 (402) 26 7,336 (6,308) 1,028 380 (193) 187 3,251 (3,084) 167 11,395 (9,987) 1,408 2010 $’000 56 56 2010 $’000 428 (373) 55 6,845 (6,003) 842 403 (161) 242 3,137 (2,971) 166 10,813 (9,508) 1,305 46. Notes to the Financial Statements Company Results 30 June 2011 9. PROPERTY, PLANT & EQUIPMENT (CONTINUED) CONSOLIDATED 2011 $’000 2010 $’000 (b) Reconciliation of property, plant and equipment carrying values Leasehold Improvements Carrying amount – opening balance Additions Disposals Depreciation Carrying amount – closing balance Ofﬁ ce equipment Carrying amount – opening balance Additions Disposals Depreciation Carrying amount – closing balance Furniture and ﬁ ttings Carrying amount – opening balance Additions Disposals Depreciation Carrying amount – closing balance Plant and equipment Carrying amount – opening balance Additions Depreciation Carrying amount – closing balance Total property, plant and equipment Carrying amount – opening balance Additions Disposals Depreciation Carrying amount – closing balance 55 - - (29) 26 842 561 (6) (369) 1,028 242 - (15) (40) 187 166 113 (112) 167 1,305 674 (21) (550) 1,408 306 - (145) (106) 55 1,209 148 (5) (510) 842 141 131 - (30) 242 181 116 (131) 166 1,837 395 (150) (777) 1,305 Notes to the Financial Statements 47. Company Results 30 June 2011 10. INTANGIBLE ASSETS AND GOODWILL At 1 July 2010 Cost (gross carrying amount) Accumulated amortisation Net carrying amount Year ended 30 June 2011 At 1 July 2010, net of accumulated amortisation and impairment Additions Amortisation At 30 June 2011, net of accumulated amortisation and impairment At 30 June 2011 Cost (gross carrying amount) Accumulated amortisation Net carrying amount 1. Internally generated 2. Purchased as part of business/territory acquisition CONSOLIDATED Development costs1 $’000 Intellectual Property2 $’000 Goodwill 2 $’000 28,671 (8,786) 19,885 19,885 5,245 (4,919) 20,211 33,916 (13,705) 20,211 2,537 (2,267) 270 270 - (147) 123 2,537 (2,414) 123 8,541 - 8,541 8,541 - - 8,541 8,541 - 8,541 Total $’000 39,749 (11,053) 28,696 28,696 5,245 (5,066) 28,875 44,994 (16,119) 28,875 Development costs that meet the recognition criteria as an intangible asset have been capitalised at cost. This intangible asset has been assessed as having a ﬁ nite life and is amortised using the straight-line method over a period not exceeding four years commencing from the commercial release of the project. If an impairment indication arises, the recoverable amount is estimated and an impairment loss is recognised to the extent that the recoverable amount is lower than the carrying amount. Intellectual property includes intangible assets acquired through business or territory acquisition and relates primarily to copyright and software code over key products. Intellectual property is amortised over its useful life being 3 years. 48. Notes to the Financial Statements Company Results 30 June 2011 10. INTANGIBLE ASSETS AND GOODWILL (CONTINUED) At 1 July 2009 Cost (gross carrying amount) Accumulated amortisation Net carrying amount Year ended 30 June 2010 At 1 July 2009, net of accumulated amortisation and impairment Additions Amortisation At 30 June 2010, net of accumulated amortisation and impairment At 30 June 2010 Cost (gross carrying amount) Accumulated amortisation Net carrying amount CONSOLIDATED Development costs1 Intellectual Property2 Goodwill 2 $’000 $’000 $’000 21,983 (5,965) 16,018 16,018 6,688 (2,821) 19,885 28,671 (8,786) 19,885 2,537 (2,120) 417 417 - (147) 270 2,537 (2,267) 270 8,541 - 8,541 8,541 - - 8,541 8,541 - 8,541 Total $’000 33,061 (8,085) 24,976 24,976 6,688 (2,968) 28,696 39,749 (11,053) 28,696 Notes to the Financial Statements 49. Company Results 30 June 2011 11. IMPAIRMENT TESTING OF GOODWILL Goodwill acquired through business combinations or territory acquisition have been allocated to four individual cash generating units, each of which is a reportable segment (refer note 24) for impairment testing as follows: • Asia Paciﬁ c; • Europe; • North America; and • Latin and South America The recoverable amount of each cash generating unit has been determined based on a value in use calculation using cash ﬂ ow projections as at 30 June 2011 based on ﬁ nancial budgets approved by The Board for the 2012 ﬁ nancial year extrapolated for a ﬁ ve year period on the basis of 5% growth together with a terminal value. The pre-tax discount rate applied to cash ﬂ ow projections is 14% (2010: 14%). The discount rate reﬂ ects management estimate of the time value of money and the rates speciﬁ c to the unit. Carrying amount of goodwill allocated to each of the cash generating units is as follows: Asia Paciﬁ c Europe North America $’000 1,938 $’000 4,074 $’000 1,954 Latin and South America $’000 575 2011 $’000 8,541 Total 2010 $’000 8,541 CONSOLIDATED Carrying amount of goodwill Key assumptions used in value in use calculations: The following describes each key assumption on which management has based its cash ﬂ ow projections when determining the value in use of its cash generating units: • • • • The Company will continue to have access to the data supply from automakers over the budgeted period; The Company will not experience any substantial adverse movements in currency exchange rates; The Company’s research and development program will ensure that the current suite of products remain leading edge; The Company is able to maintain its current gross margins; and The discount rates estimated by management are reﬂ ective of the time value of money. • • Management has used an AUD/USD exchange rate of $1.07 and an AUD/EUR exchange rate of $0.74 in its cash ﬂ ow projections. Sensitivity to changes in assumptions: Growth rate assumptions – Management notes if negative growth rates are applied to revenues, by 5% over the ﬁ ve year period, this still yields a recoverable amount to be above its carrying amount. Discount rate assumptions – Management recognises that the time value of money may vary from what they have estimated. Management notes that applying a discount rate of double the current rate still yields the recoverable amount to be above its carrying amount. Foreign exchange rate assumptions – Management notes that applying an AUD/USD exchange rate of $1.20 and an AUD/EUR exchange rate of $0.85 still yields the recoverable amount to be above its carrying amount. 50. Notes to the Financial Statements Company Results 30 June 2011 Notes CONSOLIDATED 12. TRADE AND OTHER PAYABLES (CURRENT) Trade creditors Other creditors (a) Trade creditors are non-interest bearing and are normally settled on 30 day terms. Due to the short term nature of these payables, their carrying value is assumed to approximate their fair value. 13. PROVISIONS (CURRENT) Employee beneﬁ ts Provision for non-cancellable surplus lease space and other lease incentives 14. DEFERRED REVENUE (CURRENT) Revenue in advance 12(a) 15(c) 15(a) 2011 $’000 326 2,341 2,667 1,770 - 1,770 356 356 2010 $’000 1,027 2,711 3,738 2,000 - 2,000 481 481 Notes to the Financial Statements 51. Company Results 30 June 2011 Notes CONSOLIDATED 15. PROVISIONS (NON-CURRENT) Employee beneﬁ ts Provision for non-cancellable surplus lease space and other lease incentives Make good provision 15(a) 15(b) (a) Movement in non-cancellable surplus lease space and other lease incentives provision: Carrying amount at the beginning of the year Utilised Reversal of provision due to new lease and revision of terms Discount rate adjustment Carrying amount at the end of the year The provision for non-cancellable lease space and other lease incentives has been made pursuant to the lease obligations under contract to the extent that no future beneﬁ ts are anticipated. (b) Movement in make good provision: Carrying amount at the beginning of the year Arising during the year Reversal of provision due to new lease and revision of terms Carrying amount at the end of the year The provision for make good has been estimated pursuant to the Company’s obligation to restore leased premises to original condition at the end of the lease term. (c) Movement in employee beneﬁ t provision: Carrying amount at the beginning of the year Utilised Arising during the year Carrying amount at the end of the year Current Non-current 13 2011 $’000 395 - - 395 - - - - - - - - - 2,306 (1,512) 1,371 2,165 1,770 395 2,165 2010 $’000 306 - - 306 619 (226) (422) 29 - 500 - (500) - 2,389 (1,798) 1,715 2,306 2,000 306 2,306 52. Notes to the Financial Statements Company Results 30 June 2011 CONSOLIDATED 16. CONTRIBUTED EQUITY AND RESERVES Ordinary shares 2011 $’000 10,798 10,798 2010 $’000 11,131 11,131 Fully paid ordinary shares carry one vote per share and carry the right to dividends. Movement in ordinary shares on issue: At 1 July 2009 Shares repurchased At 30 June 2010 Shares repurchased At 30 June 2011 Number $’000 311,269,994 (6,694,918) 304,575,076 (1,298,221) 303,276,855 12,863 (1,732) 11,131 (333) 10,798 On 1 April 2008 the company commenced a share buy back (on market within 10/12 limit). This was reinitiated on 1 April 2009 and 1 April 2010. As at 30 June 2011 the company had repurchased 22,694,717 shares for a total consideration of $6,939,000. Capital management When managing capital, the company’s objective is to ensure the entity continues as a going concern as well as to maintain optimal returns to shareholders and beneﬁ ts for other stakeholders. Subject to the company’s ﬁ nancial position and future ﬁ nancial performance, the company’s current dividend policy is to distribute, in the order of 75 – 85% of proﬁ t after tax. During the 2011 ﬁ nancial year, the company paid dividends of $7.3 million (2010: $10.3 million). The company has no current plans to issue further shares on the market but may further reduce the capital structure through its share buy back program. Notes to the Financial Statements 53. Company Results 16. CONTRIBUTED EQUITY AND RESERVES (CONTINUED) Employee Option Plan There were 250,000 (2010: nil) options issued during the current year at an average exercise price of $0.245 (2010: $nil). 30 June 2011 CONSOLIDATED Employee equity beneﬁ ts reserve Foreign currency translation reserve Cash ﬂ ow hedge reserve $’000 1,152 - 43 - 1,195 - 15 - 1,210 $’000 137 (290) - - (153) 141 - - (12) $’000 2,976 - - (857) 2,119 - - (656) 1,463 Movement in reserves: At 1 July 2009 Currency translation differences Share based payments Derivatives marked to market At 30 June 2010 Currency translation differences Share based payments Derivatives marked to market At 30 June 2011 Nature and purpose of reserves Employee equity beneﬁ ts reserve Total $’000 4,265 (290) 43 (857) 3,161 141 15 (656) 2,661 This reserve is used to record the value of equity beneﬁ ts provided to employees and Directors as part of their compensation. Refer to Note 19 for further details. Foreign currency translation reserve The foreign currency translation reserve is used to record exchange differences arising from the translation of the ﬁ nancial statements of foreign subsidiaries. It is also used to record the effect of hedging net investments in foreign operations. Cashﬂ ow hedge reserve The derivatives reserve is used to record the mark to market valuation of forward currency contracts at the balance sheet date that are considered effective hedges. 54. Notes to the Financial Statements Company Results 30 June 2011 CONSOLIDATED 17. STATEMENT OF CASH FLOWS (a) Reconciliation of proﬁ t after tax to the net cash ﬂ ows from operations Proﬁ t from ordinary activities after income tax expense Depreciation of non-current assets Amortisation of non-current assets Amortisation of employee options Disposal of property, plant, and equipment Changes in assets and liabilities (Increase)/decrease in trade and other debtors (Increase)/decrease in inventories (Increase)/decrease in prepayments (Increase)/decrease in deferred development costs Increase/(decrease) in trade and other creditors Increase/(decrease) in allowance for doubtful debts Increase/(decrease) in provision for employee entitlements Increase/(decrease) in other provisions Increase/(decrease) in income tax payable Increase/(decrease) in deferred income tax liability Increase/(decrease) in revenue in advance Net cash ﬂ ow from operating activities (b) Reconciliation of cash Cash balance comprises: – cash at bank – cash on deposit 2011 $’000 10,039 550 5,066 15 21 339 8 740 (5,245) (1,070) (82) (141) - 898 306 (124) 11,320 2010 $’000 11,336 777 2,968 43 150 371 (3) 446 (6,688) 134 (426) (83) (1,121) 1,013 1,234 23 10,174 2,478 6,342 8,820 898 4,891 5,789 Notes to the Financial Statements 55. Company Results 30 June 2011 18. COMMITMENTS & CONTINGENCIES (a) Lease expenditure commitments Operating leases (non-cancellable): Minimum lease payments – not later than one year – later than one year and not later than ﬁ ve years – later than ﬁ ve years – aggregate operating lease expenditure contracted for at balance date CONSOLIDATED 2011 $’000 2010 $’000 1,118 4,598 620 6,336 1,207 3,556 1,301 6,064 Operating lease commitments are for ofﬁ ce accommodation both in Australia and abroad. (b) Performance Bank Guarantee Infomedia Ltd has a performance bank guarantee to a maximum value of $700,000 (2010: $700,000) relating to the lease commitments of its corporate headquarters. 56. Notes to the Financial Statements Company Results 19. SHARE BASED PAYMENT PLANS 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 speciﬁ ed on the option certiﬁ cate or, if not speciﬁ ed, the volume weighted average price for Shares of the Company for the ﬁ ve 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: Balance at beginning of year - granted - expired - exercised Balance at end of year Notes 19(a) 19(b) 19(c) 19(d) 19(e) 2011 2010 Number of options 2,150,000 250,000 (1,400,000) - 1,000,000 Weighted average exercise price $0.45 $0.245 $0.51 - $0.30 Number of options 2,650,000 - (500,000) - 2,150,000 Weighted average exercise price $0.44 - $0.42 - $0.45 (a) Options held at the beginning of the year: The following table summarises information about options held by employees at 1 July 2010 Number of options Grant date Earliest vesting date Expiry date 1,000,000 250,000 250,000 250,000 250,000 150,000 1/01/2008 1/02/2009 1/01/2008 1/01/2009 1/10/2008 1/07/2008 1/01/2009 1/02/2010 1/01/2009 1/01/2010 1/10/2009 1/07/2009 5/02/2011 5/02/2012 5/02/2011 5/01/2012 31/10/2011 5/11/2011 Weighted average exercise price $0.53 $0.29 $0.53 $0.29 $0.37 $0.38 (b) Options granted during the year: The following table summarises information about options granted during the year. Number of options 250,000 (c) Options expired during the year: Grant date Earliest vesting date Expiry date Weighted average exercise price 21/11/2010 20/12/2011 20/12/2013 $0.245 The following table summarises information about options expired during the year. Number of options Grant date Earliest vesting date Expiry date Weighted average exercise price 1,000,000 250,000 150,000 1/01/2008 1/01/2008 1/07/2008 1/01/2009 1/01/2010 1/07/2009 5/02/2011 5/02/2011 5/11/2011 $0.53 $0.53 $0.38 (d) Options exercised during the year: There were no options exercised during the year. Notes to the Financial Statements 57. Company Results 19. SHARE BASED PAYMENT PLANS (CONTINUED) (e) Options held at the end of the year: The following table summarises information about options held by employees at 30 June 2011: Number of options Grant date Earliest vesting date Expiry date 250,000 250,000 250,000 250,000 1/02/2009 1/01/2009 1/10/2008 1/02/2010 1/01/2010 1/10/2009 21/11/2010 20/12/2011 5/02/2012 5/01/2012 31/10/2011 20/12/2013 Weighted average exercise price $0.29 $0.29 $0.37 $0.245 (e) Other details regarding options: The weighted average fair value of options granted during the year was $0.058 (2010: $nil). The fair value of the equity-settled options granted under the option plan is estimated as at the grant date using a binomial model taking into account the term and conditions upon which the options were granted. The following table lists the inputs to the model used for the year: Dividend yield (%) Expected volatility (%) Risk free rate (%) Option exercise price Weighted average share price at grant date Granted 1/10/2008 7.5% 35% 5.14% $0.37 $0.38 Granted 1/1/2009 10.0% 35% 3.21% $0.29 $0.29 Granted 1/2/2009 10.0% 35% 2.84% $0.29 $0.29 Granted 21/11/2010 7.5% 44% 5.59% $0.245 $0.245 The expense recognised for employee services received during the year is shown in the table below: 30 June 2011 Expense arising from equity-settled share-based payment transactions 20. PENSIONS AND OTHER POST-EMPLOYMENT PLANS Superannuation Commitments CONSOLIDATED 2011 $’000 15 2010 $’000 43 Contributions are made by the Company in accordance with the relevant statutory requirements. Contributions by the Company for the year ended 30 June 2011 were 9% (2010: 9%) of employee’s wages and salaries which are legally enforceable in Australia. The superannuation plans provide accumulation beneﬁ ts. 58. Notes to the Financial Statements Company Results 21. KEY MANAGEMENT PERSONNEL DISCLOSURES (a) Compensation of Key Management Personnel (i) Compensation by Category: Key Management Personnel 30 June 2011 Short-Term Post Employment Other Long-Term Termination beneﬁ ts Share-based Payments CONSOLIDATED 2011 $ 2010 $ 1,467,768 1,868,053 106,053 14,100 101,538 15,206 129,041 17,967 130,930 40,047 1,704,665 2,186,038 (b) Option holdings of Key Management Personnel (Consolidated) 30 June 2011 Balance at beginning of period Granted as compensation Options exercised Expired Balance at end of period Vested at 30 June 2011 Directors Gary Martin** Executives Karen Blunden*** Nick Georges Michael Roach Andrew Pattinson Jonathan Pollard 1 July 2010 1,000,000 - - 250,000 250,000 250,000 250,000 250,000 - - - - 2,000,000 250,000 30 June 2010 Balance at beginning of period Granted as compensation Options exercised Directors Gary Martin Executives Michael Bodner* Nick Georges Michael Roach Andrew Pattinson Jonathan Pollard 1 July 2009 1,000,000 500,000 250,000 250,000 250,000 250,000 2,500,000 * Resigned 31 May 2010. ** Resigned 31 August 2010 *** Appointed 21 November 2010 - - - - - - - 30 June 2011 Total Not exercisable Exercisable - - - - - - - - - - - - - - (1,000,000) - - 250,000 (250,000) - - - - 250,000 250,000 250,000 (1,250,000) 1,000,000 - - - - - - 166,667 166,667 166,667 500,001 166,667 166,667 166,667 500,001 - - - - - - - Net change other Balance at end of period Vested at 30 June 2010 30 June 2010 Total Not exercisable Exercisable - 1,000,000 666,666 666,666 (500,000) - - - - - 250,000 250,000 250,000 250,000 - - 166,666 166,666 83,333 83,333 83,333 83,333 83,333 83,333 (500,000) 2,000,000 1,083,331 1,083,331 - - - - - - - Notes to the Financial Statements 59. Company Results 21. KEY MANAGEMENT PERSONNEL DISCLOSURES (CONTINUED) (c) Shareholdings of Key Management Personnel 30 June 2011 Number of shares held in Infomedia Ltd Balance 30 June 2010 Granted as compensation On exercise of options Net change other Balance 30 June 2011 Directors Richard Graham Myer Herszberg Gary Martin* Frances Hernon Andrew Moffat** Executives Andrew Pattinson Nick Georges Michael Roach Jonathan Pollard Karen Blunden*** Total * Resigned 31 May 2010. ** Resigned 31 August 2010 *** Appointed 21 November 2010 103,004,060 23,421,589 655,590 5,000 300,000 2,447,567 24,421 18,721 1,996 - 129,878,944 - - - - - - - - - - - - - - - - - - - - - - 386,841 103,390,901 - 23,421,589 (655,590) - (300,000) - - - - - - 5,000 - 2,447,567 24,421 18,721 1,996 - (568,749) 129,310,195 30 June 2010 Number of shares held in Infomedia Ltd Balance 1 July 2009 Granted as compensation On exercise of options Net change other Balance 30 June 2010 Directors Richard Graham Myer Herszberg Gary Martin* Frances Hernon Andrew Moffat** Executives Andrew Pattinson Nick Georges Michael Roach Jonathan Pollard Total * Resigned 31 May 2010. ** Resigned 31 August 2010 102,204,060 23,421,589 607,590 5,000 - 2,447,567 24,421 18,721 1,996 128,730,944 - - - - - - - - - - - - - - - - - - - - 800,000 103,004,060 - 23,421,589 48,000 - 300,000 - - - - 655,590 5,000 300,00 2,447,567 24,421 18,721 1,996 1,148,000 129,878,944 All equity transactions with key management personnel other than those arising from the exercise of compensation options and compensation shares have been entered into under terms and conditions no more favourable than those the entity would have adopted if dealing at arm’s length. 60. Notes to the Financial Statements Company Results 21. KEY MANAGEMENT PERSONNEL DISCLOSURES (CONTINUED) (d) Loans to Key Management Personnel There were no loans at the beginning or the end of the reporting period to key management personnel. No loans were made available during the reporting period to key management personnel. 22. AUDITORS’ REMUNERATION CONSOLIDATED 2011 $ 2010 $ 159,650 180,250 - 159,650 47,825 228,075 Amounts received or due and receivable by the auditors of Infomedia Ltd for: – an audit or review of the ﬁ nancial report of the entity and any other entity in the consolidated entity – corporate advisory consulting services in relation to the entity and any other entity in the consolidated entity 23. RELATED PARTY DISCLOSURES Ultimate Parent Infomedia Ltd is the ultimate Australian parent company Wholly-owned group transactions (a) An unsecured, trade receivable of $270,693 (2010: $481,545) remains owing to IFM Europe Ltd from Infomedia Ltd. (b) An unsecured, trade receivable of $1,520,419 (2010: $1,650,603) remains owing from IFM North America Inc. to Infomedia Ltd. (c) During the year Infomedia Ltd received $15,475,220 (2010: $16,817,282) from IFM Europe Ltd for intra-group sales. (d) During the year Infomedia Ltd received $7,113,411 (2010: $7,467,452) from IFM North America Inc. for intra-group sales (e) During the year IFM Europe paid $483,820 (2010: $547,159) to IFM Germany GmbH for intra-group distribution services. Entity with deemed signiﬁ cant inﬂ uence over the Company Wiser Equity Pty Limited, a company in which Richard Graham is a Director, owns 34.10% of the ordinary shares in Infomedia Ltd (2010: 33.82%). Related party transactions During the year, Richard Graham provided human resource services to the Company on a consulting basis. The cost of these services was $2,954 and they were provided on normal commercial terms. Notes to the Financial Statements 61. Company Results 24. SEGMENT INFORMATION 30 June 2011 Notes Asia Paciﬁ c Europe $’000 $’000 North America $’000 Latin and South America $’000 Corporate $’000 Total $’000 Business Segments Revenue Sales revenue Consolidated revenue Segment result Finance revenue Consolidated proﬁ t before income tax Income tax expense 4 Consolidated proﬁ t after income tax 11,837 19,847 9,880 2,529 - 8,740 15,028 - - 8,740 15,028 6,292 - 6,292 2,054 - 2,054 (18,942) 184 (18,758) Assets Segment assets Unallocated assets Total assets Liabilities Segment liabilities Unallocated liabilities Total liabilities Capital Expenditure Amortisation Depreciation - - - - - 1,759 897 611 219 - - 7 - - 77 - - - - - 44,093 44,093 13,172 184 13,356 (3,317) 10,039 2,656 45,147 47,803 830 11,308 12,138 - - 674 674 5,066 466 5,066 550 62. Notes to the Financial Statements Company Results 24. SEGMENT INFORMATION (CONTINUED) 30 June 2010 Notes Asia Paciﬁ c Europe $’000 $’000 North America $’000 Latin and South America $’000 Corporate $’000 Business Segments Revenue Sales revenue Consolidated revenue Segment result Finance revenue Finance costs 10,285 21,627 10,374 3,053 - 6,796 16,221 5,955 2,329 (16,871) 14,430 - - - - - - - - 103 (36) Consolidated proﬁ t before income tax 6,796 16,221 5,955 2,329 (16,804) Income tax expense 4 Consolidated proﬁ t after income tax Assets Segment assets Unallocated assets Total assets Liabilities Segment liabilities Unallocated liabilities Total liabilities Capital Expenditure Amortisation Depreciation - - - - 56 2,166 (512) 788 457 - - 10 228 - 87 - - - - - Total $’000 45,339 45,339 103 (36) 14,497 (3,161) 11,336 1,654 44,638 46,292 1,245 11,306 12,551 - - 167 395 2,968 624 2,968 777 Identiﬁ cation of reportable segments The group has identiﬁ ed its operating segments based on the internal reports that are reviewed and used by the Board of Directors (the chief operating decision makers) in assessing performance and in determining the allocation of resources. The operating segments are identiﬁ ed by management based on the region in which the product is sold. Discrete ﬁ nancial information about each of these operating businesses is reported to the Board of Directors regularly. The reportable segments are based on aggregated operating segments determined by the similarity of the products produced and sold as these are the sources of the Group’s major risks and have the most effect on the rates of return. Accounting policies and inter-segment transactions The accounting policies used by the Group in reporting segments internally are the same as those contained in note 2 to the accounts and in the prior period. The group accounting policies for segments are applied to the respective segments up to the segment result level. Major customers The Group has many customers to which it provides products. There is no signiﬁ cant reliance of any single customer. Notes to the Financial Statements 63. Company Results 25. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES The Company’s principal ﬁ nancial instruments, other than derivatives, comprise cash and short-term deposits. The Company has various other ﬁ nancial assets and liabilities such as trade receivables and trade payables, which arise directly from its operations. The Company also enters into derivative transactions through forward currency and range forward contracts. The purpose is to manage the currency risks arising from the Company’s operations. It is, and has been throughout the period under review, the Company’s policy that no trading in ﬁ nancial instruments shall be undertaken. The main risks arising from the Company’s ﬁ nancial instruments are cash ﬂ ow interest rate risk, liquidity risk, foreign currency risk and credit risk. Details of the signiﬁ cant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each class of ﬁ nancial asset, ﬁ nancial liability and equity instrument are disclosed in Note 2 to the ﬁ nancial statements. (a) Interest rate risk The Company’s exposure to the risk of changes in market interest rates relates solely to the Company’s cash holding of $8,820,000 (2010: $5,789,000) with a ﬂ oating interest rate. The Company’s policy is to accept the ﬂ oating interest rate risk with both its cash holdings and bank loans. Cash is held primarily with leading Australian banks for periods not exceeding 30 days, as such any reasonably expected change in interest rates (+/- 1%) would not have a signiﬁ cant impact on post tax proﬁ t or other comprehensive income. (b) Foreign currency risk The Company has transactional currency exposures. These exposures mainly arise from the transactional sale of products and to a lesser extent the associated cost of sales component relating to these products. As the Company’s product offerings are typically made on a recurring monthly subscription basis, there is a relatively high degree of reliability in estimating a proportion of future cashﬂ ow exposures. Approximately 40% of the Company’s sales are denominated in United States Dollars and 40% are denominated in Euros (measured using the spot foreign exchange rates in existence in the current ﬁ nancial year). The Company seeks to mitigate exposure to movements in these currencies by entering into forward exchange derivative contracts under an approved hedging policy. As a result of the Company’s investment in both its European and United States subsidiaries, the Company’s balance sheet can be affected by movements in both the Euro and United States dollar against the Australian dollar. At 30 June 2011, the Group had the following exposure to US$ foreign currency that is not designated in cash ﬂ ow hedges: Financial Assets Cash and cash equivalents Derivatives Consolidated 2011 $’000 811 1,406 2,217 2010 $’000 11 1,585 1,596 64. Notes to the Financial Statements Company Results 25. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) At 30 June 2011, the Group had the following exposure to EUR foreign currency that is not designated in cash ﬂ ow hedges: Financial Assets Cash and cash equivalents Derivatives Consolidated 2011 $’000 1,013 605 1,618 2010 $’000 3 1,284 1,287 The following sensitivity is based on the foreign currency risk exposures in existence at the balance sheet date: At 30 June 2011, had the Australian Dollar moved, as illustrated in the table below, with all other variables held constant, post tax proﬁ t and total equity would have been affected as follows: Judgments of reasonably possible movements: Consolidated AUD/USD +10% AUD/USD – 15% AUD/EUR +10% AUD/EUR – 15% Post tax proﬁ t Higher/(Lower) Total equity Higher/(Lower) 2011 $’000 (51) 100 (64) 125 2010 $’000 (1) 2 - - 2011 $’000 578 (575) 529 (1,004) 2010 $’000 979 (1,486) 651 (1,286) Management believe the balance date risk exposures are representative of the risk exposure inherent in the ﬁ nancial instruments. (c) Credit risk The Company’s credit risk with regard to accounts receivables is spread broadly across three automotive groups – manufacturers, distributors and dealerships. Receivable balances are monitored on an ongoing basis with the result that the Company’s exposure to bad debts is not signiﬁ cant. As the products typically have a monthly life cycle and are priced on a relatively low subscription price, the concentration of credit risk is typically low with automotive manufacturers being the exception. With respect to credit risk arising from the other ﬁ nancial assets of the Company, which comprise cash and cash equivalents, and certain derivative instruments, the Company’s exposure to credit risk arises from default of the counter party, with a maximum exposure equal to the carrying amount of these instruments. Since the Company trades only with recognised third parties, collateral is not requested nor is it the Group’s policy to securitise its trade and other receivables. (d) Price risk There are no items on the balance sheet as at 30 June 2011 that are subject price risk. Notes to the Financial Statements 65. Company Results 25. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) (e) Liquidity risk The Company’s exposure to liquidity risk is minimal given the relative strength of the balance sheet and cash ﬂ ows from operations. Given the nature of the Company’s operations and no borrowings, the Company does not have ﬁ xed or contracted payments at balance sheet date other than with respect of its cash ﬂ ow hedges which are disclosed below. Consequently the remaining contractual maturity of the group entity’s ﬁ nancial liabilities is as stated in the balance sheet and is less than 60 days. Deferred revenue requires no cash outﬂ ow. Liquidity and Interest rate risk The following table sets out the carrying amount, by maturity, of the ﬁ nancial instruments exposed to interest rate or liquidity risk: YEAR ENDED 30 JUNE 2011 Floating rate Cash and cash equivalents Trade and other receivables Trade and other payables YEAR ENDED 30 JUNE 2010 Floating rate Cash and cash equivalents Trade and other receivables Trade and other payables CONSOLIDATED Less than one year $’000 Two to ﬁ ve years $’000 Greater than ﬁ ve years $’000 Weighted average effective interest rate % 8,820 4,044 (2,667) - - - - - - 3.2 - - CONSOLIDATED Less than one year $’000 Two to ﬁ ve years $’000 Greater than ﬁ ve years $’000 Weighted average effective interest rate % 5,789 4,160 (3,738) - - - - - - 3.7 - - Interest on cash and cash equivalents classiﬁ ed as ﬂ oating rate is repriced at intervals of less than one year. Interest on ﬁ nancial instruments classiﬁ ed as ﬁ xed rate is ﬁ xed until maturity of the instrument. The other ﬁ nancial instruments of the Group that are not included in the above tables are non-interest bearing and are therefore not subject to interest rate risk. 66. Notes to the Financial Statements Company Results 25. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) (f ) Fair value Derivative instruments use valuation techniques other than quoted prices in active markets with only observable market inputs for the asset or liability , either directly (as prices) or indirectly (derived from prices)to determine the fair value of foreign exchange contracts. Derivative contracts The following table summarises the forward exchange contracts on hand at 30 June 2011. Maturity Company sells United States Dollars (USD) Less than one year Company sells Euros (E) Less than one year Company sells United States Dollars (USD) Greater than one year and not greater than two years Company sells Euros (E) Greater than one year and not greater than two years Company buys $A’000 7,585 $A’000 8,396 $A’000 - $A’000 1,420 CONSOLIDATED Company sells USD’000 Exchange rate 6,361 E’000 5,665 USD’000 - E’000 1,000 0.839 0.675 - 0.704 The mark to market valuation of these contracts at 30 June 2011 was $2,055,000 which is booked directly in equity. The following table summarises the range forward contracts on hand at 30 June 2011. Maturity CONSOLIDATED Floor rate Ceiling rate Company sells USD’000 Greater than one year and not greater than two years 3,975 0.8825 1.100 The mark to market valuation of these range forwards at 30 June 2011 was $36,000 which has been included in the Statement of Comprehensive Income as Other Income. There were no range forwards held at 30 June 2010. Derivative contracts The following table summarises the forward exchange contracts on hand at 30 June 2010. Maturity Company sells United States Dollars (USD) Less than one year Company sells Euros (E) Less than one year Company sells United States Dollars (USD) Greater than one year and not greater than two years Company sells Euros (E) Greater than one year and not greater than two years Company buys $A’000 10,700 $A’000 8,909 $A’000 4,258 $A’000 2,714 CONSOLIDATED Company sells USD’000 Exchange rate 7,443 E’000 5,280 USD’000 3,401 E’000 1,700 0.696 0.593 0.799 0.626 The mark to market valuation of these contracts at 30 June 2010 was $3,028,000, which is booked directly in equity. Notes to the Financial Statements 67. Company Results 26. FINANCIAL INSTRUMENTS Fair values Set out below is a comparison by category of carrying amounts and fair values of all of the Company’s ﬁ nancial instruments recognised in the ﬁ nancial statements. The fair values of derivatives have been calculated by discounting the expected future cash ﬂ ows at prevailing interest rates. CONSOLIDATED Financial assets Cash and cash equivalents Trade and other debtors Derivatives Financial liabilities Trade and other creditors 27. SUBSEQUENT EVENTS Carrying Amount Fair Value 2011 $’000 8,820 4,044 2,091 2,667 2010 $’000 5,789 4,160 3,028 3,738 2011 $’000 8,820 4,044 2,091 2,667 2010 $’000 5,789 4,160 3,028 3,738 There has been no matter or circumstance that has arisen since the end of the ﬁ nancial year that has signiﬁ cantly affected the operations of the Company, the results of those operations, or the state of affairs of the Company. 28. PARENT ENTITY INFORMATION Parent Entity Current assets Total assets Current liabilities Total liabilities Contributed equity Retained earnings Employee equity beneﬁ t reserve Cashﬂ ow hedge reserve Total shareholders’ equity Proﬁ t or loss of the parent entity Total comprehensive income of the parent entity 2011 $’000 14,532 46,079 4,961 10,709 10,799 21,903 1,205 1,463 35,370 10,014 9,358 2010 $’000 13,154 44,923 5,674 11,307 11,131 19,171 1,195 2,119 33,616 11,765 10,908 68. Directors’ Declaration Company Results Directors’ Declaration In accordance with a resolution of the directors of Infomedia Limited, I state that: In the opinion of the directors: (a) the ﬁ nancial statements and notes of the consolidated entity are in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the consolidated entity’s ﬁ nancial position as at 30 June 2011 and of their performance for the year ended on that date; and (ii) complying with Accounting Standards and the Corporations Regulations 2001; and (b) the ﬁ nancial statements and notes also comply with International Financial Reporting Standards as disclosed in note 2b (c) there are reasonable grounds to believe that the consolidated entity will be able to pay its debts as and when they become due and payable. (d) this declaration has been made after receiving the declarations required to be made to the Directors in accordance with section 295A of the Corporations Act 2001 for the ﬁ nancial year ending 30 June 2011. On behalf of the Board Richard David Graham Executive Chairman Sydney 23 August 2011 Independent auditor's report to the members of Infomedia Ltd Report on the financial report We have audited the accompanying financial report of Infomedia Ltd, which comprises the consolidated balance sheet as at 30 June 2011, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, notes comprising a summary of significant accounting policies and other explanatory information, and the directors' declaration of the consolidated entity comprising the company and the entities it controlled at the year's end or from time to time during the financial year. Directors' responsibility for the financial report The directors of the company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal controls as the directors determine are necessary to enable the preparation of the financial report that is free from material misstatement, whether due to fraud or error. In Note 2, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that the financial statements comply with International Financial Reporting Standards. Auditor's responsibility Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. Those standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance about whether the financial report is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal controls relevant to the entity's preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Independence In conducting our audit we have complied with the independence requirements of the Corporations Act 2001. We have given to the directors of the company a written Auditor’s Independence Declaration, a copy of which is included in the financial report. Liability limited by a scheme approved under Professional Standards Legislation Opinion In our opinion: a. the financial report of Infomedia Ltd is in accordance with the Corporations Act 2001, including: i) giving a true and fair view of the consolidated entity's financial position as at 30 June 2011 and of its performance for the year ended on that date; and ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and b. the financial report also complies with International Financial Reporting Standards as disclosed in Note 2. Report on the remuneration report We have audited the Remuneration Report included in the directors’ report, on pages 19 to 25, for the year ended 30 June 2011. The directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. Opinion In our opinion, the Remuneration Report of Infomedia Ltd for the year ended 30 June 2011, complies with section 300A of the Corporations Act 2001. Ernst & Young J K Haydon Partner Sydney 23 August 2011 Corporate Governance 71. Company Results INFOMEDIA LTD CORPORATE GOVERNANCE STATEMENT FY2011 OVERVIEW Infomedia continually strives to ensure an acceptable level of compliance with the voluntary governance principles set out in the ‘Corporate Governance Principles and Recommendations 2nd Edition‘ published by the Australian Stock Exchange’s (ASX) Corporate Governance Committee (the ASX Principles). The ASX Principles are a voluntary code and compliance is not mandatory. Infomedia strives to meet the ASX Principles in a manner consistent with the resources, size and operational scope of the Company. To the extent that Infomedia is non-compliant with particular elements of the voluntary framework, the Company embraces the “If not, why not?” principle, and provides explanatory materials relating to its compliance. ASX – Corporate Governance Principles Principle 1 Lay solid foundations for management and oversight Principle 2 Structure the Board to add value Principle 8 Remunerate fairly and responsibly Principle 7 Recognise and manage risk ASX Corporate Governance Principles Principle 3 Promote ethical and responsible decision making Principle 6 Respect the rights of shareholders Principle 4 Safeguard integrity in financial reporting Principle 5 Make timely and balanced disclosures The ASX Principles provide a standard platform from which Infomedia implements and maintains a range of charters, policies and procedures applicable to the Company (the Policies). Infomedia’s Policies seek to instil and entrench the values, standards and behaviours required to ensure transparency, efﬁ cient resource allocation and protection of stakeholder interests. Further information about the Policies is available at www.infomedia.com.au/CorporateGovernance 72. Corporate Governance Company Results CORPORATE GOVERNANCE STATEMENT 1. PARTIAL NON-COMPLIANCE WITH THE ASX PRINCIPLES – “IF NOT, WHY NOT?” As a voluntary set of guidelines, compliance with the ASX Principles is not mandatory. In order to encourage participation, and in recognition of the fact that the resources and operating environments vary between participants, the ASX Principles provide organisations with the ﬂ exibility to comply in full or in part. This ﬂ exibility is tempered by the adoption of the “If not, why not?” principle, requiring the Company to provide reasons for non-compliance with particular parts of the ASX Principles. Whilst Infomedia strives to meet the ASX Principles, it does so in a manner consistent with the resources available to it, and within the context of its operating environment. During FY2011, Infomedia was non-compliant with some of the ASX Principles. The following sections contain commentary on the areas of both compliance and non-compliance, and provide relevant commentary in accordance with the “If not, why not?” framework. 2. THE BOARD, SUB-COMMITTEES AND SENIOR MANAGEMENT 2.1 Composition and structure of the Board The composition and size of Board has been primarily shaped by Infomedia’s Constitution. Relevantly, the Constitution provides that: (a) the Company must maintain a minimum of three and a maximum of seven directors; (b) one third of the Directors, and any other Director not in such one third who has held ofﬁ ce for three years or more, other than the Chief Executive Ofﬁ cer, must retire by rotation each year. If eligible, retiring directors may offer themselves for re-election. Careful consideration is given to the contribution each director is able to make both individually and collectively. There is strong emphasis on promoting, among other attributes, an appropriate mix of complementary skills, independence, expertise, business knowledge and executive and non-executive participation. As noted in the Directors’ Report, the Company received formal resignations from the following directors during FY2011: (a) Mr Gary Martin in his capacity as Chief Executive Ofﬁ cer and Director; and (b) Mr Andrew Moffat in his capacity as non-executive Director. At 30 June 2011, the Infomedia Board was comprised of three Directors. The details of each Director’s name, terms of ofﬁ ce, committee memberships, meeting attendance records, skills experience and expertise, appear herein. The Company has made progress in ﬁ lling the vacancy created as a result of Mr Moffat’s resignation and will present further information on this point prior to the 2011 Annual General Meeting. 2.2 Independence of the Chair Following the resignation of the Chief Executive Ofﬁ cer, Mr Richard Graham resumed the role of Executive Chairman of the Company after a six-year absence from the role of CEO. Mr Graham assumed this duty in addition to his continuing role as Chairman of the Board. Mr Graham also remains the Company’s largest shareholder. For the reasons outlined above, the Company does not comply with: (a) ASX Principle 2.2 – The chair should be an independent Director; and Corporate Governance 73. Company Results (b) ASX Principle 2.3 – The roles of the chair and the chief executive ofﬁ cer should not be exercised by the same individual. Nevertheless, the Board remains of the view that its independence as a whole is not compromised and that it is in the best interests of the Company for Mr Graham to continue as Executive Chairman given his wealth of experience. Additionally, the Board derives comfort from: (a) the Board Charter which permits Board members to elect a non-executive Director to chair informal discussion meetings of non-executive Directors; and (b) the ability of the Directors to seek independent professional advice which is made available at the expense of the Company. 2.3 Independence of the Board ASX Principle 2.1 calls for the majority of the Board to be independent, non-executive Directors. As currently comprised, the Board has two non-executive Directors in the form of Ms Frances Hernon and Mr Myer Herszberg. Whilst Ms Hernon meets the criteria for independence, Mr Herszberg’s independence is technically compromised by his standing as a majority shareholder of the Company. Accordingly, the Company does not comply with ASX Principle 2.1. However, in light of the relevant quantitative and qualitative considerations, the Board considers Mr Herszberg to be operating with independence and objectivity, notwithstanding his shareholding in the Company. The independence of the Board is subject to continual evaluation. Ultimately, however, the Board accepts that its members remain in ofﬁ ce upon the vote of the Company’s shareholders and that they may elect members to the Board regardless of their standing, independent or otherwise. 2.4 Establishment of nomination and remuneration committees The ASX Principles recommend that the Board should establish: (a) a nominations committee for the examination of selection, recruitment and succession practices of the Company (ASX Principle 2.4); and (b) a remuneration committee to focus on remuneration policies (ASX Principle 8.1). The Board as a whole has assumed responsibility for remuneration and nomination since July 2007. Given the relative size and resources available to the Company, the Board is of the view that neither a nominations or a remu- neration committee would add any signiﬁ cant corporate governance value for the following reasons: (a) given the size and structure of the Board, there is little efﬁ ciency to be derived from sub-committees other than the Audit, Risk & Governance Committee (Audit Committee); (b) ultimate responsibility for nominations and remuneration rests with the Board whether or not a nomination or remuneration sub-committee is established; (c) the Board has processes in place to raise issues relating to nomination and remuneration in the form of regular reporting by senior management (including detailed reports from the Human Resources Manager) on such matters; and (d) the Company maintains a formal policy for the nomination and induction of Directors (Director Nomination and Induction Policy), a summary of which is available on Infomedia’s website. 74. Corporate Governance Company Results The Company has formalised a policy for the nomination and induction of Directors (Director Nomination and Induction Policy), a summary of which is available on the Company website. 2.5 Board charter and responsibilities A formal charter documenting the appropriate division between the responsibilities of the Board and management has been in place since July 2004. The Charter mandates the Board’s focus on the following key matters: (a) developing the Company’s overall objectives; (b) developing and mandating strategies to achieve Company objectives; (c) setting overall policy framework within which the business of the Company is conducted; and (d) ensuring that the Company operates with integrity and in accordance with good management and governance practices. A summary of the Charter of the Board is available on the Company’s website at www.infomedia.com.au 2.6 Audit, Risk & Governance Committee Please refer to section 4.1 below for a report on the activities of the Audit, Risk and Governance Committee. 3. ETHICAL BUSINESS CONDUCT 3.1 Infomedia’s Code of Conduct Since its inception, Infomedia has placed emphasis on personal integrity, mutual respect and ethical business practices as core values (Core Values). The Company’s dedication to these Core Values was formalised by the introduction of a formal Code of Conduct in 2004. The Code was further reﬁ ned under the guidance of the Corporate Governance Committee during FY2006 to: (a) strengthen formal resolution strategies for intra-organisational disputes; and (b) provide clearer reporting guidelines with regard to compliance mechanisms. The Infomedia Code of Conduct strengthens the Company’s commitment the Core Values by articulating and formally entrenching positive cultural values within the Company, and by providing guidance on dealings with various stakeholders. A summary of the Code of Conduct is available on the Company’s website at www.infomedia.com.au. 3.2 Securities trading policy A formal policy on share trading by Company Directors, Ofﬁ cers and Employees was originally established in October 2001 and was reviewed, amended and adopted by the Infomedia Board in April 2004, upon the recommendation of the then Corporate Governance Committee. It was further reviewed in the last quarter of FY2006, and more recently in May 2008. On 29 May 2008, a revised ‘Policy on Securities Trading by Company Directors, Ofﬁ cers and Employees’ was adopted by the Board. The Policy sets clear directives on share transactions and speciﬁ es trading windows at appropriate intervals. A summary of the policy is available on the Company’s website. Corporate Governance 75. Company Results 4. FINANCIAL REPORTING, AUDIT, GOVERNANCE AND RISK MANAGEMENT 4.1 The Audit, Risk & Governance Committee Infomedia has maintained an Audit Committee in various forms since the year 2000. The current Audit Committee continued to meet throughout FY2011. During FY2011, the Board received Mr Moffat’s resignation as a director of the Company and, by implication, as Chairman of the Audit Committee. The Audit Committee is now comprised of Ms Frances Hernon (Chairperson) and Mr Myer Herszberg. The Audit Committee’s structure and doesn’t fully meet ASX Principle 4.2, requiring an audit committee to be structured so that it: (a) consists only of non-executive directors; (b) consists of a majority of independent directors; (c) is chaired by an independent chair, who is not the chair of the board; and (d) has at least three members. For the reasons discussed in section 2.3 above, the Board is of the view that the Audit Committee members meet the relevant quantitative and qualitative tests of independence. However, the Audit Committee fails to meet the minimum number of members (i.e. three) as suggested by the ASX Principles. The Company has made progress in ﬁ lling the vacancy created after Mr Moffat’s resignation in November 2010 and will present further information on this point prior to the 2011 Annual General Meeting. The objectives of the Board are clearly deﬁ ned within the Audit Committee’s Charter. A summary of the Audit Committee Charter is available via the Company’s website. 4.2 Independent auditors The current Audit Committee acknowledges the importance of external auditor independence and has formalised procedures for the rotation of responsible audit partners from Ernst & Young. The last rotation of the responsible audit partner occurred in FY2010. 4.3 Financial reporting obligations The Company’s ﬁ nancial reporting obligations for FY2011 were fulﬁ lled in accordance with applicable legal and accounting requirements. For further information, please refer to the ﬁ nancial statements and notes contained in the Directors’ Report and the Independent Audit Report. Having acted in accordance with the Risk Management Policy and Risk Management Plan, the Executive Chairman and the Chief Financial Ofﬁ cer have provided the Board with the necessary certiﬁ cations required pursuant to the Corporations Act 2001 (Cth) and the ASX Principles. 4.4 Risk Management Upon the recommendation of the Audit Committee, the Board adopted the Risk Management Policy in July 2004. Following a review by the Audit and Risk Committee during FY2006, a recommendation was made to the Board to adopt a revised Risk Management Policy and a Risk Management Plan. The revised plans promoted the establishment and implementation of a more effective and appropriate risk management framework for the Company. 76. Corporate Governance Company Results The revised Risk Management Policy allocates oversight responsibility to the Board and the Audit Committee, whilst the establishment of risk management procedures, compliance and control rests with the Chief Executive Ofﬁ cer, Chief Financial Ofﬁ cer and senior executives and, at a daily operating level, with departmental managers, line managers and individuals as part of regular business conduct. During the reporting period, both the Audit Committee and the Board received periodic presentations from management regarding strategies and procedures implemented by the Company to mitigate against signiﬁ cant risks to the business. A summary of the Company’s Risk Management Policy is available on the Company’s website; however, given the commercially sensitive nature of its content, details of the Company’s Risk Management Plan have not been made public. 5. MARKET DISCLOSURE & SHAREHOLDER RIGHTS 5.1 Market disclosure During FY2004, the Board adopted a Market Disclosure Policy, developed in accordance with the ASX Principles. A review of the Market Disclosure Policy during the ﬁ nal quarter of FY2006 concluded that both the continuous and periodic reporting obligations imposed under the ASX Listing Rules, and the Company’s internal procedures, were well understood by senior management. Infomedia remains committed to providing relevant, timely and accurate information to the market regarding ﬁ nancial information, performance, ownership and governance. A summary of the Market Disclosure Policy can be found on the Company’s website. 5.2 Communicating with shareholders Through a series of initiatives, Infomedia continues to demonstrate its commitment to promoting effective communication with all shareholders. The Company continues to embrace and develop its online content delivery for shareholders via the Company website where the following documents are located: • • • • this Corporate Governance Statement; summaries of the various corporate governance charters, policies and guidelines; annual, half yearly and quarterly reports; a synopsis of the Infomedia business model; • media releases, achievements, share price information; • • relevant notices relating to members’ meetings; and the Company’s July 2000 Prospectus. Infomedia has considered and adopted, as appropriate to its circumstances, the various methods of electronic communications contemplated by the ASX Principles. 5.3 Shareholder participation Shareholder participation at general meetings is always encouraged. As usual, Infomedia’s independent auditor, Ernst & Young, will be present during the FY2011 Annual General Meeting and will be available to answer shareholder questions at that time. Corporate Governance 77. Company Results 6. EXECUTIVE & NON-EXECUTIVE REMUNERATION 6.1 Infomedia’s remuneration and performance review policies Upon recommendation of the then Remuneration and Nomination Committee, the Board adopted a Remuneration and Performance Evaluation Policy (Remuneration Policy) for Directors and senior executives in July 2004. The Remuneration Policy outlines the criteria for assessing the performance of the Board as a whole, the Directors as individuals, the Chairman of the Board and the senior executives. Further, it aims to provide a framework for structuring total remuneration that: (a) facilitates both the short and long term growth and success of the Company; (b) implements a mixture of ﬁ xed, performance and equity based incentives; (c) is competitive with the market place; and (d) which is demonstrably linked to the Company’s overall performance. The Company also has two equity based incentive plans: (a) an Employee Option Plan, applicable to certain eligible employees, including senior executives and executive Directors; and (b) an Employee Share Plan, applicable to all permanent employees of one or more years of service, including senior executives but excluding both executive and non-executive Directors. These plans were established prior to Infomedia’s listing in August 2000 in accordance with both the Corporations Act and the ASX Listing Rules and were disclosed in the 14 July 2000 prospectus. In June 2005, the Board resolved to suspend the Employee Share Plan indeﬁ nitely. Further details of senior executive remuneration under the Employee Option Plan is included in the Remuneration Report. 6.2 Remuneration dichotomy – Executive versus Non-Executive The Remuneration Policy (refer paragraph 6.1 above) was formulated with regard to the best practice measures contained in the commentary to Principle 8 of the ASX Principles. The range of remuneration incentives available* to Executive and Non-Executive Directors and staff is summarised in the table below: Components of Executive Director Remuneration* Components of Non-Executive Director Remuneration Components of Non-Executive Staff Remuneration • Directors’ fees • Directors’ fees • Salary • Statutory Superannuation contributions • Statutory Superannuation contributions • Statutory Superannuation contributions • Incentive payments • Share options • Retirement beneﬁ ts * Note – the listed incentives for Executive Directors are optional and at the discretion of the Board 78. Additional Information Company Results Top 20 Holdings as at 02-09-2011 Holder Name WISER EQUITY PTY LTD HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED YARRAGENE PTY LTD CITICORP NOMINEES PTY LIMITED MR ANDREW PATTINSON J P MORGAN NOMINEES AUSTRALIA LIMITED EQUITAS NOMINEES PTY LIMITED <2874398 A/C> NATIONAL NOMINEES LIMITED TOM HADLEY ENTERPRISES PTY LTD MR PETER ALEXANDER BROWN WISER CENTRE PTY LTD MR RICHARD GRAHAM SPORRAN LEAN PTY LTD MR PETER PAUL RAUCHFUSS & MRS PATRICIA RAUCHFUSS WAUCHOPE & KILGOUR PTY LTD 127 VICTORIA PTY LTD INVESTMENT CUSTODIAL SERVICES LIMITED APPLIED SENSORS PTY LTD MR DAVID LEROY BOYLES MR PETER ANTHONY MCCARTHY & MRS MAUREEN HELENA MC CARTHY Balance at 02-09-2011 101,464,342 31,522,385 23,421,589 6,163,492 2,447,567 2,371,435 1,866,599 1,497,580 1,300,000 1,000,000 1,000,000 926,559 649,828 595,000 595,000 557,000 528,556 500,000 500,000 500,000 % 33.456 10.394 7.723 2.032 0.807 0.782 0.615 0.494 0.429 0.330 0.330 0.306 0.214 0.196 0.196 0.184 0.174 0.165 0.165 0.165 Security Classes Fully Paid Ordinary Shares Holdings Ranges 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 – 9,999,999,999 Totals Analysis of Holdings as at 02-09-2011 Holders 382 1,807 1,283 2,308 202 5,982 Total Units 306,161 5,785,590 10,727,314 72,757,122 213,700,668 303,276,855 % 0.101 1.908 3.537 23.990 70.464 100.000 Corporate Directory 79. Corporate Directory Infomedia Ltd Telephone: Facsimile: Internet: Directors Company Secretary Chief Financial Ofﬁ cer Registered Ofﬁ ce Auditor Share Registry Lawyers 357 Warringah Road Frenchs Forest NSW 2086 ABN 63 003 326 243 +61 (02) 9454 1500 +61 (02) 9454 1844 infomedia.com.au Richard Graham Frances Hernon Myer Herszberg Nick Georges Jonathan Pollard 357 Warringah Road Frenchs Forest NSW 2086 Ernst & Young Ernst & Young Centre 680 George Street Sydney NSW 2000 Boardroom Pty Ltd Level 7, 207 Kent Street Sydney NSW 2000 Thomsons Lawyers Level 25 Australia Square Tower 264 George Street Sydney NSW 2000 Infomedia, Microcat and PartFinder are registered trademarks, and LIVE, MARKET, PartsBridge 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. 80. Notes Notes The future is drawn by vision and shaped by tools. When vision and tools converge, The future doesn’t just arrive, It becomes.

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