Infomedia
Annual Report 2014

Plain-text annual report

Annual Report 2014 TABLE OF CONTENTS TABLE OF CONTENTS RESULTS AT A GLANCE CHAIRMAN’S REPORT CEO REPORT CFO REPORT AMERICAS REPORT EMEA REPORT ASIA PACIFIC REPORT CONNECTED VEHICLES: TECHNOLOGY DRIVES THE NEW AGE OF THE AUTOMOBILE DIRECTORS DIRECTORS’ REPORT AUDITOR’S INDEPENDENCE DECLARATION STATEMENT OF PROFIT & LOSS AND OTHER COMPREHENSIVE INCOME STATEMENT OF FINANCIAL POSITION STATEMENT OF CASH FLOWS STATEMENT OF CHANGES IN EQUITY NOTES TO THE FINANCIAL STATEMENTS DIRECTORS’ DECLARATION INDEPENDENT AUDIT REPORT CORPORATE GOVERNANCE ADDITIONAL INFORMATION CORPORATE DIRECTORY 1 3 5 8 10 12 14 16 19 20 30 31 32 33 34 35 62 63 65 70 71 © 2014 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. SUPERSERVICE.COM RESULTS AT A GLANCE AUD $m Sales Revenue AUD $m Net Profi t After Tax (NPAT) AUD $m EBITDA AUD ¢ Dividends per Share Key Figures Financial Year 2010 2011 Sales Revenue ($m) NPAT ($m) EBITDA ($m) DPS (¢) 45.3 11.3 18.2 2.40 44.1 10.0 18.8 2.40 2012 45.7 8.5 17.7 2.40 2013 2014 48.7 10.1 20.1 2.82 57.1 12.3 24.6 3.78 SUPERSERVICE.COM 1 LEADERS IN PARTS & SERVICE SELLING SYSTEMS FOR 25 YEARS. 199999909090 1990 20200000001 2001 2000000003 2003 20200000009 2009 2020001101010 2010 20001111 2011 20200013131313 2013 Elecctrtronic Parts CCatalogues Precision n SService QuQuoting Elecctrtrononiic Vehicle Inspections Wholesale Parts e-Commerce Real-timee Customer Survey Digital SeServrvice History Online Servicee Appointments Helping our automotive partners sell billions of dollars in parts and service every year. 75,838 Monthly Subscripti Monthly Subscriptions p y 150,000 Daily Users 5 Office Locations (Sydney, Melbourne, Shanghai, Detroit, Cambridge) SOLUTIONS Transparerency, reliability and accessibility y arare the keysys to our cutting edge solutions. y, p y PARTS PPPAPAPAPARTRTRRRTTSSS PARTS SERVICE SSS RV C SSSESESERVRVRVICICI EEEE SERVICE LUBRICANTS LUBRICANTS LULULUUUBRBRBRBRICICICANANANANTSTSTST BY THE NUMBERS BY THE N 186 31 Countries Countries Solution Solution Languages 24/7 Global Global Operations 14 Customer Suppport tomer Suppp Languages 4 tomer Suupport Cust Cent ters 39 Automaker brands use Infomedia’s solutions in their dealerships. (Australia, Japan, UK, USA) CUSTOMERS We are constantly innovatinng to We are constantly innovatitinng to stay ahead of customer nneeds. OEMs Data license agreements Data license agreements OEM DEALERSHIPS Parts and service selling systems Parts and service selling systems INDEPENDENT REPAIRERS Trade parts and technical publications Trade parts and technical publications OIL COMPANIES POS data solutions POS data solutions Meeting the needs for a smarter, more professional approach by OEMs and dealerships. CHAIRMAN’S LETTER This year the Board has undertaken a review of the Executive remuneration structure with the intent of ensuring we retain our best talent and optimise the performance of the business. The structure will be described in more detail in the notice to shareholders of the 2014 Annual General Meeting. As to the outlook, the opportunities in the automotive Aftersales market are substantial. As you will read later in this Report, the ever-increasing connectivity of devices, the “Internet of Things”, continues to empower consumers as never before. Added to this is the transformational eff ect of the exponentially increasing collection and storage of data, the potential of which is known as Big Data. As the digital world evolves, Big Data will provide the edge in customer service and retention for those who can understand and harness it. Here, Infomedia is well positioned. Digital value will continue to rise as we become a hyper-connected world. Infomedia’s investment in cloud technology provides us with the speed and capability to capitalise on these developments. This, combined with the depth of our knowledge and understanding of the Aftersales market, off ers opportunities to create new business and build competitive advantage. Against this backdrop, we will continue to invest in our technology research and development to ensure our products deliver a strong platform for growth. Infomedia’s model of recurring revenue through subscriptions remains unchanged and continues to deliver a sound fi nancial basis for creating shareholder value. In closing, the Board is confi dent in Infomedia’s ability to deliver long term, sustainable growth and remain at the forefront of innovation in our sector. I trust you will fi nd this Annual Report of interest and on behalf of the Board, I invite you to attend the Annual General Meeting at our head offi ce in Frenchs Forest, Sydney, on October 30. I look forward to welcoming you there. Frances Hernon Chairman Sydney, 21 August 2014 Dear fellow shareholders, I am pleased to report that during FY2014 your Company continued to achieve positive results. Infomedia increased sales to $57.1 million, an improvement of 17.4% over the prior fi nancial year, and net profi t after tax rose to $12.3 million, a 22% growth over FY2013. Your Directors declared a fully franked fi nal dividend of 1.89 cents per share, bringing the total dividend for FY2014 to 3.78 cents, an increase of 34% over the previous fi nancial year. These key results were supported by a focus on advancing our next generation product development, continuing improvements in productivity and expanding the acceptance of our Superservice product suite. I would like to take this opportunity to thank the entire Infomedia team for their eff orts in delivering these solid results. I write to you as Non-Executive Chairman following the decision of Infomedia’s founder, Richard Graham, to step down from his role as Executive Chairman in February 2014. Richard remained on the Board as a Non-Executive Director during the reporting period. During the fi rst half of FY2014, the Company delivered strong fi nancial results under Richard’s tenure as Executive Chairman. Infomedia continues to follow the strategy he established, based on the seminal research he commissioned into the future of Aftersales to 2020. An edited version of this research is available on our website at superservice.com. The Board appointed Andrew Pattinson, formerly the Director of Global Solutions and Systems, as CEO in September 2013. During his 25 year career with Infomedia, Andrew has developed a deep understanding of Infomedia’s business as well as the leadership, industry knowledge and product development credentials to take the Company forward. He is also a member of the Board of Directors. You will fi nd Andrew’s fi rst report as CEO on the following pages. In November 2013, the Board announced the appointment of Clyde McConaghy as a Non-Executive Director. Clyde also chairs the Audit and Risk Committee. Clyde fi lled a casual vacancy on the Board and in accordance with our constitution, will off er himself for election at the Annual General Meeting in October 2014. SUPERSERVICE.COM 3 CHAIRMAN’S LETTER “The opportunities in the automotive Aftersales market are substantial.” 4 SUPERSERVICE.COM It is a pleasure to be delivering my fi rst Annual Report as CEO of Infomedia. During FY2014, your Company continued to grow revenue, product development and infrastructure optimisation. You can be proud of the Infomedia teams throughout the organisation as they worked on our longstanding Company goal of contributing to our customers’ success and creating shareholder value. We move ahead in good fi nancial health and with optimism about our ability to continue on this growth trajectory. I believe the Company has a unique and focused culture that has served us well in the past, and we will continue to nurture and improve this over the coming years. The underlying positive momentum of our business has translated into signifi cant market capitalisation growth during the 2014 fi nancial year. The strong performance and renewed recognition from the investor community is affi rmation that our vision and tactical strategy is on track. Later in the report you will learn more about our global achievements and activities during the 2014 fi nancial year from our regional leaders. I am delighted with the strong operational performance in all regions and look forward to further success as we develop new market opportunities. Continued Growth I am pleased to report that during the year, our overall subscription equivalents grew to a total of 75,838. During the 2014 fi nancial year we also increased the global footprint of daily users to 150,000 for the fi rst time. The growth was experienced in all regions, supported by organic and new customer acquisitions. We continued to maintain good relationships with OEMs, signing 14 new or renewed data licence agreements during the year. The high number of renewals is testimony to our ability to keep innovating to meet the evolving needs of dealership fi xed operations departments globally. CEO REPORT Our Superservice fi xed operations platform is attracting a lot of interest from dealerships and OEM customers around the globe. Dealer pilots that had been conducted in Europe for Superservice products are now turning into revenue; KIA France and KIA Spain dealership networks are examples to run such pilots. We expect this will be the start of a growing product uptake as pilot programs that are running in all of our sales regions (The Americas, Europe, Middle East and Africa, and Asia Pacifi c) start moving into commercial releases. Auto PartsBridge (APB) is also gaining traction in North America. During the year we conducted a product roll out for KIA Canada, as well as signing agreements to release versions of the application for Hyundai Canada and Chrysler USA. Furthermore, we entered into discussions to expand the APB product line outside of the North America region. Microcat subscriptions continued to achieve organic growth, particularly in the Asia Pacifi c region where growth from China in particular provides a platform for more opportunity in the future. Product Innovation Infomedia has always stood for leading product innovation. This year was no diff erent as our teams continued our legacy of delivering cutting edge and aff ordable innovation, founded in a deep knowledge of the commercial and operational pressures dealership staff face. The combination of technology know-how and domain expertise has allowed us to release industry leading features and back-end optimisations for our Microcat and Superservice platforms that add value to all stakeholders. Infomedia has released many industry fi rsts in its 25 year history and this year I can report we have added to that list. During the year we included photo and video capability to our Superservice Triage vehicle health check system. This new genre of inspection system sophistication provides a customer experience beyond expectation. Visual evidence of repair recommendations empowers Service Advisors to engage the customer in the quotation process. It leads to a transparent service experience for the customer, increased sales conversions for the dealer, and improved prospects for customer retention within the automaker brand. In our Microcat solutions, we released next generation illustration handling. This example of product innovation provides signifi cantly more detail and scale to the parts images, and also handles the images with the same speed and display performance as the historically available lower resolution images. In another industry fi rst, our subject matter expertise and international language handling skills were put to good use to release augmented automaker data to vastly improve search performance and useability of parts information. SUPERSERVICE.COM 5 CEO REPORT “During the 2014 fi nancial year we also increased the global footprint of daily users to 150,000 for the fi rst time. ” 6 SUPERSERVICE.COM CEO REPORT Within the business, the investment in the new hosting environment has led to a reduction in the amount of resource required to maintain and manage the hosted environment. Whilst the Company continues to increase the number of hosted applications by the month, the team required to produce, test and deploy each product release remains stable. Era of Smart Mobility – Connected Vehicles The automotive and wider press seems to be full of stories of automakers working hard to introduce diff erentiated products and experiences. The advent of new technology has enabled the development of the so called ‘connected vehicle’ – vehicles that are connected via the internet to other devices. Using sensors and cloud technology, they can transmit and receive vehicle data to and from other devices including smart phones and tablets. This topic was partly covered in our Aftersales 2020 whitepaper last year, and recently this new trend has accelerated. Connected vehicles off er new and exciting opportunities for automakers to personalise the ownership experience. They also present potential for third parties to develop value add services such as predictive maintenance, risk minimised routing, parking information, internet radio, pay per use insurance and other new connected features and experiences. Infomedia is well placed to take advantage of new industry drivers and trends, and our leading edge cloud technology will be a key enabler to capture new market opportunities. Later in this report you can read more about the coming era of connected vehicles and the role that cloud computing will play to make that happen. Conclusion In closing, I want to assure you that your Company is in a healthy position. Our business model is sound and our market knowledge and capacity for continued innovation are strong. There were some signifi cant advancements made during FY2014 and looking to the future, we will continue to work towards contributing to our customers’ success, whilst continuing our own business expansion and adding shareholder value. Thank you for your ongoing support of your Company, and I hope to see you in person at our Annual General Meeting later in the year. Andrew Pattinson Chief Executive Offi cer SUPERSERVICE.COM 7 Continued IT Investment Our Research and Development activities continue to lead the industry curve to support product evolution and Software as a Service (SaaS) infrastructure optimisation. Aside from helping our customers to achieve outstanding performance metrics, our innovative cloud solutions have received recognition and praise from IT industry leaders in the global hosting environment. In harmony with our Development teams, the IT group are building new capabilities for the business. These are focused on creating a faster and more stable online experience for our customers and a lower impact, more cost eff ective infrastructure for the business. An example of the benefi t to customers is our Active/Active/ Active (AAA) hosting solution that went into production this year. This advanced hosting environment ensures that a cluster of servers in 3 diff erent geographic locations is always up to date with the most current information for every user accessing the system. In the event of an outage in one region, the user’s account is seamlessly pointed to another region, where their most up to date information is already maintained. Whilst hosting in multiple regions is a common practice, having the systems and infrastructure to maintain all regions in a fully up to date state is class leading and becoming a key market diff erentiator. CFO REPORT For the 2014 fi nancial year (FY2014) Infomedia Ltd (Infomedia) achieved Sales Revenue (Sales) of $57.1m and Net Profi t After Tax (Profi t) of $12.3m. This compares to fi nancial year 2013 (FY2013) where Sales totalled $48.7m and Profi t was $10.1m. Operating Cash fl ow increased by $1.3m to $12.5m. As previously reported, a fully franked fi nal dividend of 1.89 cents was paid to shareholders of record as at 3 September 2014, bringing the total dividends for the year to 3.78 cents (2.39 cents franked). This represents a payout ratio of 94% of Profi t. At 30 June 2014, the Company remained debt free, with $11.4m in cash on the balance sheet. Operational Performance During FY2014, the Company continued its core subscription infrastructure project which is expected to deliver fi scal and operational benefi ts in future reporting periods. Building on last year’s price book project, work commenced this year on a new subscription engine to allow for self-serve ordering, billing and the ability to off er sale of product components to an expanded customer base. As the customer base and subscriptions grow, it is increasingly important to streamline order processing and invoicing in order to maintain administrative cost control and improve profi t margins. The Company completed its installation of enhanced time recording systems to provide better tracking and reporting of project costs, enabling improved fi nancial modelling. The completion of all development under a single workfl ow platform is now yielding benefi ts across the Superservice platform. The tight cost control that has been exercised during the year is the result of careful management combined with a rigorous budgeting process. The budgeting process has improved substantially over recent years as management has capitalised on improvements to the Company’s reporting structures and systems. Financial Performance FY2014 delivered a solid set of results across all key business drivers: Sales Sales revenue increased $8.5m or 17.1%. This was driven by growth in both the Parts and Service solutions, across all regions. The Company reported record levels of subscription equivalents of 75,838 as of 30th June, 2014. Microcat LIVE EPC continued to grow its user base during the year, demonstrating consumer confi dence in the Company’s ability to deliver market leading software and provide mission critical functionality in dealerships all over the world. Superservice Menus continued its strong growth trajectory as more dealers realise the benefi ts of precision quoting for service operations. The following chart shows the geographical split and growth of Sales for FY2013 and FY2014: SALES REVENUE $’000 FY 2013 FY 2014 8 SUPERSERVICE.COM Operational Costs Operational costs showed a small increase compared to the prior year. Investment in Sales and Marketing was the primary reason for the increase as the company sought to capitalise on increasing sales opportunities. The Company maintained tight cost control and took advantage of its leveraged software business model. This is especially pleasing to see given the increase in frequency of product releases. This is testament to the constant focus on improving infrastructure and processes over recent years. These improvements will enable the Company to grow whilst maintaining a fi rm hold on margins. Research & Development We maintained our investment in R&D as we continued to work on further enhancing and integrating the new Superservice suite. DMS integration was a key theme during FY2014 as the industry continued to require IT systems to communicate more easily. The Company is committed to ensuring it remains a key integration partner in the industry and this will continue to be one of the drivers of the future R&D spend. Foreign Exchange The average Australian dollar spot rates versus the USD and EUR through FY2014 were lower than FY2013. This contributed to a positive variance in profi t compared to the prior year. The Company was hedged at rates higher than the CFO REPORT spot rates and thus achieved a hedging loss of $2.6m during the year. Despite this, the net FX impact relative to FY2013 was $1.4m. Based on current FX rates and the hedging in place for FY2015, the Company is anticipating a relatively neutral FX impact from hedging activity. Overall, the Company’s NPAT increased 22% or $2.2m to $12.3m. The Year Ahead Looking forward, the Company anticipates further subscription and sales revenue growth from both Parts and Service solutions. The Company expects a measured increase in operational costs to support the product and sales expansion; however, cost management will remain a core focus. We expect to maintain our investment in R&D. Given the Company’s foreign exchange hedging, it is likely that the relative FX impact will be neutral or positive for the year compared with FY2014 although the exact quantum is diffi cult to predict. Accordingly, the Company has provided guidance that it expects FY2015 NPAT to exceed $14.5m. Jonathan Pollard Chief Financial Offi cer SUPERSERVICE.COM 9 AMERICAS REPORT I’m pleased to have this opportunity to discuss the prospective landscape and success experienced across the Americas during the last fi nancial year. It’s been a year where our products have fl ourished and we have had revenue growth across all of our product lines. It has also been a year where we’ve executed a key component of our business growth strategy by establishing and growing our third party relationships with integration, training and reseller agreements. Where APB has extended parts sales beyond the dealership to the collision community, this past year we took that further to provide parts sales to the consumer, in this case to forklift truck service and repair technicians. In late 2013, we introduced a Microcat order manager solution to trade customers of Toyota Materials Handling in the US. The trade consumers now have the benefi t of having access to details only found in an Electronic Parts Catalogue (EPC) for part look up, illustration and then electronic ordering. It has greatly enhanced the accuracy of repairs and decreased the time a truck is out of service awaiting parts. The new Chrysler Microcat EPC was also introduced with an expanded data set and integration over the initial launch. Chrysler dealerships now have access, and the parts selling capability that comes with it, to all of their MOPAR (second line) parts; this is not provided in competitor off erings. Most importantly, is the growth of our Superservice suite of solutions. Superservice for Hyundai America will be introduced in FY2015, following the Chrysler, General Motors, Toyota, Jaguar, Hyundai Canada and Land Rover solutions that were launched throughout the fi scal year. Superservice is a key growth engine in support of FY2015 projections, not only in the United States, but also with targeted expansions within Canada and South America. Looking ahead, we move forward with a strong pipeline, and a product portfolio with unique competitive diff erentiation. We continue to grow our Americas team to cope with growing business needs, and we’re committed to building on the hard work of recent years to deliver on our regional growth strategy. Since the time of last year’s report, we have launched our wholesale solution Microcat Auto PartsBridge (APB) to KIA and Hyundai Canada dealerships, and their body shop customers. Their distributors, their dealerships and their partner body shops are experiencing the similar levels of success as Honda, with increased parts sales, improved repair times and greater customer satisfaction as a result of expanded genuine part utilisation. APB subscriptions have continued to grow in the US, with Chrysler APB set to be released later this year. Karen Blunden CEO IFM Americas 10 SUPERSERVICE.COM AMERICAS REPORT “It’s been a year where our products have fl ourished and we have had revenue growth across all of our product lines.” SUPERSERVICE.COM 11 EMEA REPORT Financial Year 2014 has been a positive year for Infomedia in Europe, Middle East and Africa (EMEA) as dealerships and automakers continue to emerge further from the fi nancial crisis that has impacted the Automotive sector in recent years. Although some of the Southern European markets such as Portugal and Greece continue to experience diffi culties, the northern markets such as Germany, France and the Nordics are largely completely recovered and back to pre-recession new car sales numbers. This improvement in new car sales has been matched by renewed investment in Aftersales, with manufacturers looking to support their dealerships with updated systems and processes. This has led to a signifi cant interest in the Superservice suite of products, as well as an eagerness to move away from legacy technologies. To that end, our customers in the region have been transitioning to the Microcat LIVE platform and we are seeing dealerships benefi t from instant parts pricing updates, and the improved functionality and fl exibility of being fully online without the need to install a disc, as they have done historically. IFM UK Head Offi ce In the service area, we are seeing strong traction with some of our newer products such as Superservice Connect, our online service booking off ering. In 2014, KIA Spain was the fi rst market to deploy Superservice Connect to their dealership network. With seamless integration to Superservice Menus data as a strong competitive diff erentiator to everything else in this market, we have a number of European markets looking to adopt the solution in 2015. Advances in the Superservice Triage platform such as the addition of photo and video capture are also benefi tting dealerships in a number of franchises across the region. The ability for customers to see images and videos of the work required on their vehicle and instantly authorise from the comfort of their home or workplace is further reinforcing the Superservice commitment of Accuracy, Certainty and Trust. This promise has driven strong interest in both Superservice Triage and Superservice Menus, with a number of full market launches anticipated in FY2015. A key part of our EMEA growth strategy has been our tighter integration with Dealer Management Systems (DMS). With such a diverse range of systems in use throughout Europe, we have invested in a dedicated integration team to work with DMS partners to enable seamless transfer of data between the Superservice suite of applications and the DMS. We are already beginning to reap the dividends from this investment as it further strengthens our position in the market, whilst providing tangible productivity benefi ts to our customers. As we look to the future, we are excited about furthering our partnerships with our existing automaker customers, and anticipate building some new OEM relationships as well. The integrated nature of the Superservice suite and our commitment to providing leading edge sales tools to our dealership and OEM partners puts us in a strong position for the years ahead in this region. Jason Thorpe Managing Director, IFM Europe 12 SUPERSERVICE.COM EMEA REPORT “We are seeing dealerships benefi t from instant parts pricing updates, and the improved functionality and fl exibility of being fully online... ” SUPERSERVICE.COM 13 ASIA PACIFIC REPORT This year in the Asia Pacifi c region, we have continued to make progress in achieving organic sales growth and also developing our new business pipeline. Characterised by a mix of growth and mature markets, the Asia Pacifi c region has unique qualities that present many challenges and opportunities. New car sales have continued to grow across the region, and the increased focus on fi xed operations is now prevalent amongst most tier one and tier two automakers. The parts and service business is not only seen as a strong revenue source, but also a way to foster brand engagement and loyalty. While the big three OEMs in Australia, Ford, Holden and Toyota, have announced the end of manufacturing in the country, their dealership networks remain strong and demand for our parts and service solutions remains solid. In other larger markets such as China and India, we are seeing new dealerships opening up every month. This is driving organic growth of our Microcat solutions, in particular for Ford and Land Rover. not only at automaker level, but also from larger dealership groups who want to automate their inspection selling process and improve the customer experience. Service customer retention continues to be a big focus for all automakers in the region, and Infomedia’s Superservice suite is seen as a complementary technology solution to pair with customer retention programs being deployed by automakers. In addition to improved customer experience, early adopters of Superservice Triage in Australia are reporting excellent ROI metrics. Dealerships are reporting signifi cant growth in labour, parts and tyre sales, with some dealerships increasing workshop effi ciency to 100% within one month of using the system. We’re using this information from our early adopters as key reference sites to support our future sales and marketing campaigns. Our CRM team have worked to strengthen our partnerships with automakers and distributors during FY2014, across a number of our product solutions. With Microcat EPC, we extended agreements with both Ford Asia Pacifi c and Honda Australia. We also renewed Superservice Menus agreements with Toyota New Zealand and Honda Australia. There has also been growth in the lubricant recommendations business, with more oil company subscriptions being added during the year. We welcomed six new oil companies as customers from Australia and New Zealand, and we expect more oil companies to subscribe to our leading edge lubricant data solution in the coming year. Going forward, I’m confi dent that our innovative solutions will underpin our growth in the Asia Pacifi c region. We are in good shape to capture new opportunities and expand Superservice product introductions to new customers in the region. Our new business pipeline is strong, and with 25 years of goodwill in the Asia Pacifi c market, we will be working to add value to our customers’ businesses whilst looking to expand the business as well. Our recent market development work for Superservice Triage is also starting to yield results. We are seeing growing interest Michael Roach Director Asia Pacifi c & Global Marketing 14 SUPERSERVICE.COM ASIA PACIFIC REPORT SUPERSERVICE.COM 15 CONNECTED VEHICLES TECHNOLOGY DRIVES THE NEW AGE OF THE AUTOMOBILE With 25 years of experience in the aftersales technology business, Infomedia has seen a considerable evolution both in the automotive industry itself and in the way dealerships do business. These changes have been driven in large part by advances in technology and customer expectations, and are increasing exponentially. In last year’s report we discussed our Aftersales 2020 industry research that reviews the future of dealership parts and service business. In the past year we have seen the industry move closer to making aspects of the 2020 vision a reality. As mentioned in the Chairman’s and CEO’s reports, one of the most signifi cant technological innovations that will drive change in the automotive industry is the ‘connected vehicle’ — intelligent, sensor-enabled vehicle, able to communicate with other devices and applications via the internet. The connected vehicle will play an integral role in a new digital paradigm where information collection is autonomous, mobile and real-time. Today’s sophisticated digital consumers are demanding transformative value experiences from their connected devices. Likewise, connected drivers will expect an enhanced ownership experience beyond just basic transportation. As the vehicle moves away from being an industrial product to becoming a digital one, its core activities will expand to increase the value propositions for drivers and passengers. Automakers and dealerships are fast adapting to successfully operate in this new era. Connected vehicles will enable automakers to capture real-time vehicle performance and driver behaviour data, as well as consumer preferences. In the future, the challenge for software creators like Infomedia will be to turn the explosion in available data – often referred to as “Big Data” - into actionable insights to build aftersales solutions that predict and personalise the customer experience both online and at the dealership. Infomedia’s agility, creativity and focus on innovation means we are well positioned to meet this challenge. A New Automobile: Connected Vehicles Cloud technology is enabling integrated vehicle sensors to transmit data-at-rest and data-in-motion to automakers, dealerships and third party technology providers. All major automakers are expected to deploy connected vehicle systems in their next generation vehicles. Today, some new Hybrid models already generate over 20GB of data per hour1. This real-time streaming information can be used to predict vehicle issues before safety or vehicle performance is compromised. Dealership technicians can analyse real- time vehicle status information and perform remote vehicle diagnosis – providing opportunity to strengthen customer relationships and improve service retention within the brand. Automakers and dealerships will be able to use insights to develop a better understanding of service requirements, environmental information, driver behavior and preferences. This vast amount of data will also be used by automakers to feed into future product planning and sales campaigns. As the industry moves from off ering basic transportation to off ering smart mobility, consumers will benefi t from new and creative ‘connected experiences’ powered by cloud computing. It is expected that 25% of automakers will monetise connected vehicles by 20172, allowing development of third party apps that use vehicle data to provide connected value services. Using geospatial analytics, connected vehicle apps will suggest detours to drivers located in traffi c, and communicate with infrastructure managers to help them better regulate traffi c in congested areas. The idea of ‘pay- as-you-drive’ insurance is already available in some North American markets today, governed by driving patterns and location data received from the vehicle sensors. With the advent of vehicle to home integration, in-vehicle payments, internet radio, risk-minimised routing and other location- based services, the automotive industry will move to a multi- product service industry. Connected vehicles will empower automakers to transition from focusing on their product to focusing on their customers’ experience, and dealerships will be presented with huge opportunities to drive increased revenue growth and loyalty. They will have a greater understanding of their customers and use predictive analytics to track maintenance issues, demand for service and facilitate personalised communication. Dealerships will be able to present transparent aftersales off ers to their customers at times when they are most receptive. To achieve this, they will need next-generation aftersales technology that converts vehicle and customer data into actionable insights for CRM purposes. 16 SUPERSERVICE.COM CONNECTED VEHICLES VEHICLE TO INFRASTRUCTURE VEHICLE TO HOME VEHICLE TO MOBILE DEVICE VEHICLE TO DEALER/OEM VEHICLE TO VEHICLE VEHICLE TO 3RD PARTY eSERVICE 1. Geo Location Advertising 2. Pay as you Drive Insurance 3. Traffic Management 4. Big Data SAFETY SENSORS INFOTAINME INFOTAINMENT APPS 360° CAMERA SYSTEM VEHICLE ST VEHICLE STATUS DATA ONBOARD DIAGNOSTICS GEO-LOCATION TRACKING SUPERSERVICE.COM 17 CONNECTED VEHICLES Big Data, Big Potential Connected vehicles will generate a vast amount of raw data (Big Data) from each vehicle on the road. For automakers and dealerships, capturing, organising and mining this data so that it can provide useful information will be one of the big challenges and opportunities in the years ahead. Data such as service reminders, error codes, odometer readings, engine status, braking performance, environmental conditions and parts wear status will help automakers and dealerships anticipate the customer service experience and optimise the supply chain. Big Data is already eff ectively used by Amazon and other online retailers to anticipate their customers’ needs, increase selling power and maximise the retail experience. In the automotive industry, the use of telematics has provided some basic data benefi ts in the area of safety, security and infotainment; however, current data platforms are proprietary and closed to third party technology providers. The data mined through telematics has also not off ered the interactive experiences that digital consumers demand. The coming era in smart mobility will utilise open data platforms. Vehicle owners will be able to integrate their car to their devices (and lifestyle) via value-add applications and services, much in the way they use apps on their smart phones today. At Infomedia, we are building Big Data into our innovation pipeline. We have a strong understanding of automaker data structures and data management systems and we have built dedicated cloud technology to store, manage and value-add automaker parts and service data. As connected vehicles 1 ZDNet.com 2 Gartner Research become more prevalent, our customer-facing applications will have the capacity to use new data streams in diff erent and creative ways – helping our dealership customers transform their retail aftersales business. Investment in the Cloud Cloud computing will be one of the greatest enablers of change – it will facilitate the aggregation and organisation of large amounts of vehicle and customer data, and will be the crucial delivery mechanism for many of the new and exciting features and experiences that are set to become a ubiquitous part of the fi xed operations businesses. Anticipating the role that cloud computing will play in the future, Infomedia has transitioned our solution services to the cloud. The transition was a three-year project that has resulted in a cloud infrastructure that is fi rst among the competition in terms of scalability, reliability and global performance. Infomedia’s cloud computing capabilities are designed to fl ex and expand to meet the needs of the future. We have ensured that we have robust capabilities to support our cloud infrastructure. We have developed leading edge IP for hosting, deploying, managing and optimising our cloud assets, ready for the challenges and opportunities ahead. Leading Innovation Our industry is on the verge of an exciting new age for the automobile. In the future, cloud computing, Big Data and digital lifestyle convergence will reshape our notions of what a vehicle can do and the role that automobiles play in our lives. Infomedia has invaluable automotive domain knowledge thanks to 25 years of experience building software systems for fi xed operations. And, as a software company with a culture based on agility and constant innovation, we are poised to help our global customers maximise the economic potential of this new era of connected vehicles. Our dealer solutions are accessible, aff ordable and dependable, leading the industry with data-driven innovation and intuitive cloud applications. We remain committed to generating value for all Infomedia stakeholders by maximising the value of these assets, as well as building new assets to drive future business. Peter Petrovski Director of Marketing 18 SUPERSERVICE.COM DIRECTORS Andrew Pattinson Clyde McConaghy Frances Hernon Myer Herszberg Richard Graham Directors were in offi ce from the beginning of the fi nancial year until the date of this report, unless otherwise stated. The names and details of the Directors of the Company in offi ce during the fi nancial year and until the date of this report are: Andrew Pattinson* Chief Executive Offi cer and Executive Director Andrew Pattinson is a 25-year veteran of the Company, having held several senior positions including Director of the Company between the period of October 2001 and October 2004. He joined the Company in 1988 and was appointed as COO in 1994, and in 2000 became General Manager of its fi rst corporate acquisition, Melbourne based Datateck Publishing Pty Ltd. There, he orchestrated the successful business integration and oversaw its evolution to become the Company’s second development centre and the eventual home of Superservice Menus. In 2004, Mr Pattinson established and became Managing Director of Infomedia’s UK based European subsidiary. He returned to Australia in 2009 as Director of the Company’s Global Solutions and Systems division. Mr Pattinson was appointed CEO and elected to the Board on 27 September 2013. Clyde McConaghy^ Non-Executive Director (Chairman of Audit, Risk & Governance Committee) Clyde McConaghy was appointed to the Infomedia Board of Directors on 1 November 2013. Mr McConaghy has in excess of 15 years’ experience as a senior international Board Director and Executive of publicly listed and private companies. Having lived in Germany, China, the UK and Australia, his experience encompasses both multinational and early stage companies, in the technology, media and publishing, and venture capital sectors. He held a number of senior positions within BMW Australia. He was a director at The Economist Intelligence Unit in London and a founding director of World Markets Research Centre Plc (LSX:WMRC), both including Automotive industry analysis divisions. He is also currently a director of Integrated Research Ltd (ASX:IRI) and Serko (NZX:SKO). He is also Managing Director of Optima Boards, a board advisory fi rm for companies and non-for- profi t entities worldwide. Mr McConaghy is Chairman of the Audit, Risk and Governance Committee, and his current term will expire at the close of the 2014 Annual General Meeting. Frances Hernon** Non-Executive Chairman Frances Hernon was appointed Chairman on 19 February 2014. Ms Hernon has extensive experience in media, publishing, marketing and technology and during her executive career she developed broad commercial experience across a wide range of companies. Ms Hernon serves the Board as Lead Non-Executive Director for all matters that formerly fell within the ambit of the Remuneration & Nomination Committee. Ms Hernon has served as a Non-Executive Director on Infomedia’s Board since 19 June 2000. She was last re-elected to the Board in October 2013. Myer Herszberg Non-Executive Director Myer Herszberg has been a Director of Infomedia since 1992. Mr Herszberg has extensive consumer electronics experience and was active in bringing home computers to Australia in the early 1980s, as well as many other leading edge electronic products. He also has extensive experience in the commercial property market, and is active in a number of community service organisations. Mr Herszberg was last re-elected to the Board in October 2012. Richard Graham Non-Executive Director Mr Richard Graham has held senior management positions in the American and Australian computer industry since 1977. In 1988, Mr Graham co-founded the Company and served as the Chairman and Managing Director/CEO of Infomedia from its establishment until he retired as CEO in December 2004. He continued his role as Chairman from 2004 until August 2010. In August 2010, Mr Graham returned to the Company in an operational role as Executive Chairman, until Mr Pattinson’s appointment as CEO in September 2013. Mr Graham retired from his role as Executive Chairman in February 2014, but remains on the Board as a Non-Executive Director. He was last re-elected to the Board in October 2008. *On 27 September 2013 Richard Graham became Non-Executive Chairman. Andrew Pattinson was made Chief Executive Offi cer and appointed to the Board. ** On 19 February 2014 Frances Hernon was appointed Non-Executive Chairman ^Appointed 1 November 2013 SUPERSERVICE.COM 19 DIRECTORS’ REPORT Interests in the shares and options of the Company and related bodies corporate Ordinary Shares Fully Paid Options over Ordinary Shares Yarragene Pty Ltd atf Yenzick Trust* Rentamobile Pty Ltd* Andrew Pattinson Clyde McConaghy Frances Hernon Myer Herszberg Richard Graham 10 15,000 2,447,567 - 5,000 - 2,750,001 - - 1,050,000 - - - - *Myer Herszberg is a Director and major shareholder of Yarragene Pty Limited and Rentamobile Pty Ltd. PRINCIPAL ACTIVITIES Infomedia Ltd is a company limited by shares that is incorporated and domiciled in Australia. The principal activities during the period of entities within the consolidated group were: • developer and supplier of electronic parts catalogues and service 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 242 (2013: 235) full time employees as at 30 June 2014. DIVIDENDS Final dividends recommended: On ordinary shares – fi nal – fully franked Dividends paid in the year: On ordinary shares – 2014 interim, 0.5c franked Final for the 2013 year: Cents $’000 1.89 5,798 1.8 9 5,777 On ordinary shares – as recommended in the 2013 report, fully franked 1.55 4,724 NET TANGIBLE ASSETS PER SECURITY Net tangible assets per share at 30 June 2014 Net tangible assets per share at 30 June 2013 REVIEW AND RESULTS OF OPERATIONS Cents 2.5 1.3 The following table presents sales revenue and profi t after tax. There were no non-recurring signifi cant items during the 2014 or 2013 fi nancial years: Sales revenue Profi t after tax 20 SUPERSERVICE.COM CONSOLIDATED 2014 $’000 57,143 12,279 2013 $’000 48,689 10,066 DIRECTORS’ REPORT REVIEW AND RESULTS OF OPERATIONS (CONTINUED) The results for the year ending 30 June 2014 show that the Company’s Net Profi t After Tax (NPAT) grew by 22.0% to $12.3m and Sales revenues grew by 17.4% to $57.1m. The Company’s NPAT exceeded previously advised guidance by $0.3m. The achievement of NPAT beyond guidance is attributed to sales growth combined with tight cost control and a small benefi t from a weaker Australian dollar compared with that used for guidance. The increase in Sales Revenue was driven by growth in all major product lines. Electronic Parts Catalogue Solutions (EPC) revenue grew $6.6m, Superservice revenue grew $2.2m and other revenue reduced $0.4m. Subscription Equivalents increased to an all-time high of 75,838 with Superservice products increasing 9.2% to 18,274 subscriptions, and EPC subscriptions by 1.5% to 57,564. In constant currency terms, sales revenue rose by $2.9m and operating costs increased $1.1m. Foreign currency translations favourably aff ected constant currency EBITDA over the prior year by $2.0m. Consequently, the Company achieved an EBITDA (excluding capitalisation of research and development) of $16.5m, an increase of $3.8m (30.0%). The Company saw increased capitalisation and amortisation during the year and a higher tax expense. Overall, NPAT increased $2.2m or 22.0% to $12.3m. Cash fl ows from operations increased $1.2m to $12.5m due to the higher profi t. The Company is debt free and had $11.4m of cash as at 30 June 2014. The Board has declared a fully franked fi nal dividend payment of 1.89 cents per share. This, together with the interim dividend of 1.89 cents (franked to 0.5 cents), results in a total dividend of 3.78 cents for the full year which is 34% higher than the prior year and represents a payout ratio of 94% of NPAT. The record date to determine entitlements to the dividend distribution is 3 September 2014 and the date on which the dividend is payable is 17 September 2014. With regards to FY2015, the Company advises that it expects both constant currency and reported AUD growth. Accordingly, the Company provides guidance that it expects NPAT to exceed $14.5 million in FY2015 driven by increasing sales. SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS There has been no signifi cant change in the state of aff airs of the Company since the last Directors’ Report. MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR There has been no matter or circumstance that has arisen since the end of the fi nancial year that has signifi cantly aff ected the operations of the Company, the results of those operations, or the state of aff airs of the Company. 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™ 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 4,630,000 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 3,190,000 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. SUPERSERVICE.COM 21 DIRECTORS’ REPORT 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 Clyde McConaghy^ Non-Executive Director Frances Hernon** Non-Executive Chairman Myer Herszberg Non-Executive Director Richard Graham* Non-Executive Director (ii) Executives Andrew Pattinson* Chief Executive Offi cer and Executive Director Jonathan Pollard Chief Financial Offi cer Karen Blunden CEO IFM Americas Michael Roach General Manager Asia Pacifi c Nick Georges Company Secretary and Legal Counsel *On 27 September 2013 Richard Graham became Non-Executive Chairman. Andrew Pattinson was made Chief Executive Offi cer and appointed to the Board. ** On 19 February 2014 Frances Hernon was appointed Non-Executive Chairman ^Appointed 1 November 2013 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 This year your Directors decided to review Infomedia’s approach to Senior Executive remuneration. Previously, Ms. Hernon, in her capacity as lead director for all matters that formerly fell within the former Remuneration & Nomination Committee of the Board of Directors was responsible for recommending to the Board the Company’s remuneration and compensation policy arrangements for all Key Management Personnel (KMP). Ms. Hernon, together with the Non-Executive members of the Board, assessed 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. Whilst the Board considers the Company’s current approach to senior executive remuneration to be in the interests of shareholders and its appropriateness is refl ected in the results of the Company, Ms. Hernon as Chairman, with the assistance of external advisors, is leading a Board review with the aim of providing recommendations to the Board prior to the Company’s next Annual General Meeting. Compensation Structure For the reporting year, Infomedia’s approach was in accordance with best practice corporate governance recommendations, to maintain the structure of Non-Executive Director and senior executive compensation as separate and distinct. 22 SUPERSERVICE.COM DIRECTORS’ REPORT REMUNERATION REPORT (CONTINUED) - AUDITED 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 ended 30 June 2014) Non-Executive Directors’ compensation totalled $297,593 (2013: $153,335). The increase was due to an increase in the number of Directors. 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. During the current review it was found that the Non-Executive Director remuneration was below the median compensation for Directors of companies of similar size and complexity. Consequently, a salary increase of 5% was approved for each Director. This was the fi rst salary increase since 2007 for Non-Executive Directors.. 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 and so as to: • 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. The Company’s policy is to pay at the median level for roles as measured against the Mercer data and/or market data to determine the salary levels. Structure In determining the level and make-up of executive compensation, the Company engages an external consultant from time to time to provide independent advice but more typically conducts its own market salary review of similar companies to determining the level and make-up of executive compensation. 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 KMP (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. Other executive salaries are determined by the CEO with reference to market conditions. For new CEO, Andrew Pattinson, the “at risk” component of his base salary is 19%. His KPIs include various measures relating to the Company’s general performance as well as fi nancial targets. Andrew’s base salary is $310,458 plus superannuation. 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 in conjunction with the Chairman for the KMP excluding the CEO where the Chairman has access to external advice independent of management. All other executive positions are reviewed periodically by the CEO or Chairman. SUPERSERVICE.COM 23 DIRECTORS’ REPORT REMUNERATION REPORT (CONTINUED) - AUDITED 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 STI compensation is to link the achievement of both individual performance and Company performance with the compensation received by the executive. Structure The structure of STI 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 which are very specifi c to the organisation and its operations. Company objectives include achieving budgetary targets that are set at the commencement of the fi nancial year (adjusted where necessary for currency fl uctuations). In FY2014 all fi nancial targets were exceeded and, therefore, KMP will receive at least 60% of their STI compensation. The STIs for FY2014 represent an amount equivalent to 19% of the KMP’s base salary. REMUNERATION REPORT (CONTINUED) - AUDITED 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 LTI compensation is in the form of share options pursuant to the Company’s employee option plans. Options granted to employees vest subject to the following hurdles: 1. Time: the options vest in three equal tranches over three years post the date of grant; 2. Share price appreciation: the traded share price of the Company must increase by 10% year on year over the exercise price of the options; and 3. Service: the option holders must remain in the employment of the Company at any relevant vesting date. Employees who depart the Company automatically forfeit any unexercised options. Contract for Services The table and notes below summarise current executive employment contracts with the Company as at the date of this report: Executives Andrew Pattinson Jonathan Pollard Karen Blunden Michael Roach Nick Georges Commencement date per latest contract Duration Notice Period – Company Notice Period – Executive 27-Sep-13 15-Jan-12 15-Jan-12 15-Jan-12 15-Jan-12 3 years 3 years 3 years 3 years 3 years 6 months 3 months 3 months 3 months 3 months 6 months 3 months 3 months 3 months 3 months The Company may terminate each of the contracts at any time without notice if serious misconduct has occurred. Options that have not yet vested upon termination will be forfeited. 24 SUPERSERVICE.COM DIRECTORS’ REPORT REMUNERATION REPORT (CONTINUED) - AUDITED Key Management Personnel for the year ended 30 June 2014 and 30 June 2013 is set out below. The amounts are based on individual contracts with each person. The proportion of remuneration that is based on performance is dependent on their individual achievement of KPI’s Short-Term Post Employment Share Based Payments Long Service leave Total Percentage Performance Related Percentage Attributable to Options 2014 Financial Year: Salary & Fees Bonus Non Monetary Benefi ts Superannuation Options $ $ $ $ $ $ $ % % Directors: Clyde McConaghy^ Frances Hernon1 Myer Herszberg Richard Graham1 Executives: 44,846 76,587 56,300 94,664 - - - - Andrew Pattinson1 310,813 58,987 Jonathan Pollard 249,076 47,270 - - - - - - Karen Blunden 290,029 52,650 1,091 Michael Roach 225,659 42,826 Nick Georges 215,014 40,806 - - 4,148 7,084 5,208 8,756 - - - - 28,750 65,895 23,040 - 20,873 19,937 4,262 4,262 4,262 4,262 - - - - 5,174 3,732 48,994 83,671 61,508 103,420 469,619 327,380 - 348,032 3,757 3,579 297,377 283,598 - - - - 13% 14% 15% 14% 14% - - - - 14% 1% 1% 1% 2% Total 1,562,988 242,539 1,091 117,796 82,943 16,242 2,023,599 Short-Term Post Employment Share Based Payments Long Service leave Total Percentage Performance Related Percentage Attributable to Options 2013 Financial Year: Salary & Fees Bonus Non Monetary Benefi ts Superannuation Options Frances Hernon Geoff Henderson* Myer Herszberg Richard Graham Executives: Andrew Pattinson Jonathan Pollard Karen Blunden Michael Roach Nick Georges Total $ $ $ 56,250 28,125 56,300 115,000 292,000 234,000 256,056 212,000 202,000 - - - - 55,480 44,460 44,890 40,280 38,380 - - - - - - 968 - - $ 5,062 2,531 5,067 10,350 26,280 21,060 - 19,080 18,227 $ $ $ % % - - - - 10,061 10,061 10,061 10,061 10,061 - - - - 4,867 3,120 - 3,533 3,367 61,312 30,656 61,367 125,350 388,688 312,701 311,975 284,954 272,035 - - - - 14% 14% 14% 14% 14% - - - - 3% 3% 3% 4% 4% 1,451,731 223,490 968 107,657 50,305 14,887 1,849,038 *Resigned 3rd January 2013 ^Appointed 1 November 2013 1 On 27 September 2013 Richard Graham resigned as Non-Executive Chairman. Andrew Pattinson was made Chief Executive Offi cer and appointed to the Board. On 19 February 2014 Frances Hernon was appointed Non-Executive Chairman. Bonuses were paid at a rate of 100% of maximum bonus potential (2013: 100%) SUPERSERVICE.COM 25 DIRECTORS’ REPORT REMUNERATION REPORT (CONTINUED) - AUDITED Option holdings of Key Management Personnel (Consolidated) Terms and Conditions for each Grant Vested Exercised Executives Options Issued No. Grant date Fair value per option at grant date ($) Exercise price per option ($) Expiry date No. % No. % Andrew Pattinson 450,000 15/1/2012 0.050 0.190 14/3/2015 300,000 66.7% 150,000 50.0% Andrew Pattinson 750,000 27/9/2013 Jonathan Pollard 450,000 15/1/2012 Karen Blunden 450,000 15/1/2012 Michael Roach 450,000 15/1/2012 Nick Georges 450,000 15/1/2012 0.110 0.050 0.050 0.050 0.050 0.565 31/10/2016 - 0.0% - 0.0% 0.190 0.190 0.190 0.190 14/3/2015 300,000 66.7% 300,000 100.0% 14/3/2015 300,000 66.7% 300,000 100.0% 14/3/2015 300,000 66.7% 300,000 100.0% 14/3/2015 300,000 66.7% 300,000 100.0% Total 3,000,000 1,500,000 50.0% 1,350,000 90.0% Terms and Conditions for each Grant Vested Exercised Executives Options Issued No. Grant date Fair value per option at grant date ($) Exercise price per option ($) Expiry date No. % No. % Andrew Pattinson 450,000 15/1/2012 Jonathan Pollard 450,000 15/1/2012 Karen Blunden 450,000 15/1/2012 Michael Roach 450,000 15/1/2012 Nick Georges 450,000 15/1/2012 Total 2,250,000 0.050 0.050 0.050 0.050 0.050 0.190 0.190 0.190 0.190 0.190 14/3/2015 300,000 14/3/2015 300,000 14/3/2015 300,000 14/3/2015 300,000 14/3/2015 300,000 33.3% 33.3% 33.3% 33.3% 33.3% - - 0.0% 0.0% 150,000 100.0% - 0.0% 150,000 100.0% 750,000 33.0% 300,000 40.0% REMUNERATION REPORT (CONTINUED) - AUDITED Shareholdings of Key Management Personnel - Number of shares held in Infomedia Ltd 2014 Financial Year: Executives Balance at beginning of period 1 July 2013 Granted as compensation Options exercised Expired Balance at end of period Vested at 30 June 2014 Andrew Pattinson 450,000 750,000 (150,000) Jonathan Pollard 450,000 Karen Blunden Michael Roach Nick Georges 300,000 450,000 300,000 - - - - (300,000) (150,000) (300,000) (150,000) Total 1,950,000 750,000 (1,050,000) 2013 Financial Year: Executives Andrew Pattinson Jonathan Pollard Karen Blunden Michael Roach Nick Georges Balance at beginning of period 1 July 2012 450,000 450,000 450,000 450,000 450,000 Granted as compensation Options exercised Expired - - - - - - - (150,000) - (150,000) Total 2,250,000 750,000 (1,050,000) 26 SUPERSERVICE.COM 30 June 2014 Not exercisable Exercisable 1,050,000 900,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 - - - - 1,650,000 1,500,000 150,000 Balance at end of period Vested at 30 June 2014 30 June 2013 Not exercisable Exercisable 450,000 450,000 300,000 450,000 300,000 300,000 300,000 300,000 300,000 300,000 150,000 150,000 - 150,000 - 1,950,000 1,500,000 450,000 - - - - - - - - - - - - DIRECTORS’ REPORT REMUNERATION REPORT (CONTINUED) - AUDITED Shareholdings of Key Management Personnel - Number of shares held in Infomedia Ltd 2014 Financial Year: Balance 30 June 2013 Granted as compensation On exercise of options Net change other Balance 30 June 2014 Directors Clyde McConaghy^ Frances Hernon Myer Herszberg Richard Graham Executives - 5,000 23,436,599 103,390,901 Andrew Pattinson 2,447,567 Jonathan Pollard Karen Blunden Michael Roach Nick Georges Total 1,996 150,000 18,721 153,000 129,603,784 - - - - - - - - - - - - - - 150,000 300,000 150,000 300,000 150,000 - - (23,421,589) - 5,000 15,010 (100,640,900) 2,750,001 (150,000) (200,000) - (300,000) (303,000) 2,447,567 101,996 300,000 18,721 - 1,050,000 (125,015,489) 5,638,295 2013 Financial Year: Balance 30 June 2012 Granted as compensation On exercise of options Net change other Balance 30 June 2013 Directors Frances Hernon Geoff Henderson* Myer Herszberg Richard Graham Executives Andrew Pattinson Jonathan Pollard Karen Blunden Michael Roach Nick Georges Total 5,000 - 23,436,599 103,390,901 2,447,567 1,996 - 18,721 24,421 129,325,205 - - - - - - - - - - - - - - - - 150,000 - 150,000 1,050,000 - - - - - - - - (21,421) (21,421) 5,000 - 23,436,599 103,390,901 2,447,567 1,996 150,000 18,721 153,000 129,603,784 *Resigned 3/01/13 ^Appointed 1 November 2013 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. 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. SUPERSERVICE.COM 27 DIRECTORS’ REPORT REMUNERATION REPORT (CONTINUED) - AUDITED Additional information Executive rewards are linked to the creation of shareholder value by providing incentives that positively impact the earnings of the company. The earnings of the consolidated entity for the fi ve years to 30 June 2014 are summarised below: EBITDA EBIT Profi t after income tax 2010 $’000 18,175 14,430 11,336 2011 $’000 18,788 13,172 10,039 2012 $’000 17,653 11,087 8,461 The factors that are considered to aff ect total shareholders return (‘TSR’) are summarised below: Dividends per share Share price at fi nancial year end 2010 Cents 2.4 28 2011 Cents 2.4 22 2012 Cents 2.4 20 2013 $’000 20,104 11,974 10,066 2013 Cents 2.82 47 2014 $’000 24,597 15,407 12,279 2014 Cents 3.78 75 Reconciliation of Net Profi t After Tax per the Statement of Profi t or Loss & Other Comprehensive Income to EBIT and EBITDA. Net Profi t After Tax Interest Tax EBIT Depreciation & Amortisation EBITDA 2010 11,336 (103) 3,161 14,394 3,745 18,139 2011 10,039 (184) 3,317 13,172 5,616 18,788 2012 8,461 (101) 2,727 11,087 6,567 17,654 2013 10,066 (76) 1,984 11,974 8,130 20,104 2014 12,279 (106) 3,233 15,406 9,192 24,598 At the AGM, no comments were received on the remuneration report and it was adopted by way of a show of hands. This concludes the remuneration report, which has been audited. 28 SUPERSERVICE.COM DIRECTORS’ REPORT DIRECTORS’ MEETINGS 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: Directors Andrew Pattinson1 Clyde McConaghy2 Frances Hernon Myer Herszberg Nick Georges3 Richard Graham Board Meeting Audit, Risk & Governance Committee Meetings Held Attended Held Attended 7 5 10 10 1 10 7 5 10 7 1 9 - 2 2 2 - - 2 2 2 1 - 2 1. Mr Pattinson commenced as a Director with effect from 27 September 2013. 2. Mr McConaghy commenced as a Director with effect from 1 November 2013. 3. Mr Georges acting as Alternate Director for Mr Herszberg with effect from 26 September 2013 and ceasing on 27 September 2013. 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. INDEMNITY AND INSURANCE OF AUDITOR The company has not, during or since the fi nancial year, indemnifi ed or agreed to indemnify the auditor of the company or any related entity against a liability incurred by the auditor. During the fi nancial year, the company has not paid a premium in respect of a contract to insure the auditor of the company or any related entity. NON-AUDIT SERVICES Details of the amounts paid or payable to the auditor for non-audit services provided during the fi nancial year are outlined in note 22 to the fi nancial statements . The Directors are satisfi ed that the provision of non-audit services during the fi nancial year, by the auditor (or by another person or fi rm on the auditor’s behalf), is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The Directors are of the opinion that the services as disclosed in note 22 to the fi nancial statements do not compromise the external auditor’s independence for the following reasons: All non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity of the auditor, and none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants issued by the Accounting Professional and Ethical Standards Board, including reviewing or auditing the auditor’s own work, acting in a management or decision-making capacity for the company, acting as advocate for the company or jointly sharing economic risks and rewards. Our Corporate Governance Statement can be found at www.infomedia.com.au. AUDITOR INDEPENDENCE The Directors received an auditor’s independence declaration from the auditor of the Company as required under section 307c of the Corporations Act 2001 (refer page 19). This report is made in accordance with a resolution of directors, pursuant to section 298 (2)(a) of the Corporations Act 2001. 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(cid:55)(cid:68)(cid:86)(cid:80)(cid:68)(cid:81)(cid:76)(cid:68)(cid:17)(cid:3) STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME YEAR ENDED 30 June 2014 Notes CONSOLIDATED Sales revenue Expenditure Research and development expenses Sales and marketing expenses General and administration expenses Total expenditure Other income and expenses Finance income Currency exchange gains/(losses) Profi t before income tax Income tax expense Profi t for the year Other comprehensive income Items that may be subsequently reclassifi ed to profi t or loss Foreign currency translation diff erences for foreign operations Eff ective cashfl ow hedges gain/(losses) recognised in equity Other comprehensive income 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) 2014 $’000 57,143 (13,778) (14,677) (11,780) (40,235) 106 (1,502) 15,512 (3,233) 12,279 132 1,079 1,211 13,490 4.02 4.00 3.78 2013 $’000 48,689 (12,362) (12,631) (11,868) (36,861) 76 146 12,050 (1,984) 10,066 854 (1,240) (386) 9,680 3.32 3.29 2.82 3 4 6 1The presentation of Statement of Profi t or Loss & Other Comprehensive Income has been revised during the year and the comparative amounts restated. See note 2 (aa) for further details. The above Statement of Profi t or Loss & Other Comprehensive Income should be read in conjunction with the attached notes. SUPERSERVICE.COM 31 STATEMENT OF FINANCIAL POSITION As at 30 June 2014 Notes CONSOLIDATED 17(b) 7 8 26 9 10 12 26 13 14 15 4 16 16 2014 $’000 11,410 6,162 - 926 460 18,958 1,269 34,322 35,591 54,549 2,601 - 2,339 1,149 477 6,566 498 5,496 5,994 12,560 41,989 11,476 1,569 28,944 41,989 2013 $’000 9,299 5,304 1 1,214 - 15,818 1,438 34,359 35,797 51,615 2,634 2,193 2,039 611 668 8,145 448 4,854 5,302 13,447 38,168 10,855 147 27,166 38,168 CURRENT ASSETS Cash and cash equivalents Trade and other receivables Inventories Prepayments Derivatives TOTAL CURRENT ASSETS NON-CURRENT ASSETS Property, plant and equipment Intangible assets and goodwill TOTAL NON-CURRENT ASSETS TOTAL ASSETS CURRENT LIABILITIES Trade and other payables Derivatives 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 The above Statement of Financial Position should be read in conjunction with the attached notes. 32 SUPERSERVICE.COM STATEMENT OF CASH FLOWS YEAR ENDED 30 June 2014 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 Proceeds from issue of share options Dividends paid on ordinary shares NET CASH FLOWS USED IN FINANCING ACTIVITIES 16 6 2014 $’000 55,085 (40,213) 106 (2,485) 12,493 (502) (502) 621 (10,501) (9,880) 2013 $’000 50,179 (37,063) 76 (1,944) 11,248 (642) (642) 57 (8,010) (7,953) NET INCREASE IN CASH HELD 2,111 2,653 Add opening cash brought forward CLOSING CASH CARRIED FORWARD 17(b) 9,299 11,410 6,646 9,299 The above Statement of Cash Flows should be read in conjunction with the attached notes. SUPERSERVICE.COM 33 STATEMENT OF CHANGES IN EQUITY YEAR ENDED 30 June 2014 CONSOLIDATED Contributed equity Retained earnings Employee equity benefi ts reserve Cashfl ow hedge reserve Foreign currency translation reserve Total $’000 $’000 $’000 $’000 $’000 $’000 At 1 July 2013 Profi t for the year Other comprehensive income Total comprehensive income for the year Transactions with shareholders: Share based payments Share option exercised Equity dividends At 30 June 2014 10,855 - - - - 621 - 11,479 27,166 12,279 - 12,279 - - (10,501) 28,944 252 - - - 211 - - 463 (755) - 1,079 1,079 - - - 650 - 132 132 - - - 324 782 38,168 12,279 1,211 13,490 211 621 (10,501) 41,989 YEAR ENDED 30 June 2013 CONSOLIDATED Contributed equity Retained earnings Employee equity benefi ts reserve Cashfl ow hedge reserve Foreign currency translation reserve Total $’000 $’000 $’000 $’000 $’000 $’000 At 1 July 2012 Profi t for the year Other comprehensive income Total comprehensive income for the year Transactions with shareholders: Share based payments Share option exercised Equity dividends At 30 June 2013 10,798 - - - - 57 - 10,855 25,110 10,066 - 10,066 - - (8,010) 27,166 56 - - - 196 - - 252 485 - (1,240) (1,240) - - - (204) - 854 854 - - - (755) 650 36,245 10,066 (386) 9,680 196 57 (8,010) 38,168 The above Statement of Changes in Equity should be read in conjunction with the attached notes. 34 SUPERSERVICE.COM NOTES TO THE FINANCIAL STATEMENTS 30 June 2014 1. CORPORATE INFORMATION The fi nancial report of Infomedia Ltd for the year ended 30 June 2014 was authorised for issue in accordance with a resolution of the Directors on 21 August 2014. Infomedia Ltd is a company limited by shares incorporated and domiciled in Australia whose shares are publicly traded on the Australian stock exchange (ASX:IFM). 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 and Interpretations as appropriate for profi t oriented entities. The fi nancial report has also been prepared on an historical cost basis, except for derivative fi nancial instruments that have been measured at fair value. b) Statement of compliance This fi nancial report complies with Australian Accounting Standards as issued by the Australian Accounting Standards Board. This fi nancial report also complies with the International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board. New, revised or amending Accounting Standards and Interpretations adopted The consolidated entity has adopted all of the new, revised or amending Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (‘AASB’) that are mandatory for the current reporting period. Any new, revised or amending Accounting Standards or Interpretations that are not yet mandatory have not been early adopted. Any signifi cant impact on the accounting policies of the consolidated entity from the adoption of these Accounting Standards and Interpretations are disclosed below. The adoption of these Accounting Standards and Interpretations did not have any signifi cant impact on the fi nancial performance or position of the consolidated entity. New Accounting Standards and Interpretations not yet mandatory or early adopted. Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet mandatory, have not been early adopted by the consolidated entity for the annual reporting period ended 30 June 2014. The consolidated entity’s assessment of the impact of these new or amended Accounting Standards and Interpretations, most relevant to the consolidated entity, are set out below. AASB 9 Financial Instruments and its consequential amendments This standard and its consequential amendments are applicable to annual reporting periods beginning on or after 1 January 2017 and completes phases I and III of the IASB’s project to replace IAS 39 (AASB 139) ‘Financial Instruments: Recognition and Measurement’. This standard introduces new classifi cation and measurement models for fi nancial assets, using a single approach to determine whether a fi nancial asset is measured at amortised cost or fair value. The accounting for fi nancial liabilities continues to be classifi ed and measured in accordance with AASB 139, with one exception, being that the portion of a change of fair value relating to the entity’s own credit risk is to be presented in other comprehensive income unless it would create an accounting mismatch. Chapter 6 ‘Hedge Accounting’ supersedes the general hedge accounting requirements in AASB 139 and provides a new simpler approach to hedge accounting that is intended to more closely align with risk management activities undertaken by entities when hedging fi nancial and non-fi nancial risks. The consolidated entity will adopt this standard and the amendments from 1 July 2017 but the impact of its adoption is yet to be assessed by the consolidated entity. c) Basis of consolidation The consolidated fi nancial statements comprise the fi nancial statements of Infomedia Ltd (the ‘Company’) and its subsidiaries (‘the Group’). 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. SUPERSERVICE.COM 35 NOTES TO THE FINANCIAL STATEMENTS 30 June 2014 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 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: • 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 and that the asset is expected to generate future economic benefi t. 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 diff erences in the consolidated fi nancial report are taken to the Statement of Profi t or Loss & Other Comprehensive Income. Translation of fi nancial reports of overseas operations Both the functional and presentation currency of Infomedia Ltd 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 Great British Pounds (GBP) IFM Germany GmbH Euros (EUR) IFM North America Inc United States Dollars (USD) Diff erent Aspect Software Ltd Great British Pounds (GBP) 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. The exchange diff erences 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 Statement of Cash Flows, cash includes cash on hand and in banks, and money market investments readily convertible to cash within three months, net of outstanding bank overdrafts. 36 SUPERSERVICE.COM NOTES TO THE FINANCIAL STATEMENTS 30 June 2014 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 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 uncollectible 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 eff ective 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 combination 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. 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 8 Operating Segments 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. SUPERSERVICE.COM 37 NOTES TO THE FINANCIAL STATEMENTS 30 June 2014 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) k) Intangible assets (continued) 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 de-recognition of an intangible asset are measured as the diff erence 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 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. 38 SUPERSERVICE.COM NOTES TO THE FINANCIAL STATEMENTS 30 June 2014 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 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: Major depreciation periods are: 2014 2013 Leasehold improvements: 5 to 20 years 5 to 20 years Other plant and equipment: 3 to 15 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. 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 diff erence 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 Statement of Profi t or Loss and Other Comprehensive Income on a straight-line basis over the lease term. Lease incentives are recognised in the statement of Profi t or Loss and Other Comprehensive Income as an integral part of the total lease expense. o) Trade and other payables Trade payables and other payables are carried at amortised cost 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 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. 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 Interest is recognised using the eff ective interest method. SUPERSERVICE.COM 39 NOTES TO THE FINANCIAL STATEMENTS 30 June 2014 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) t) 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 highly probable forecast transaction. Infomedia Ltd currently has cash fl ow hedges attributable to highly probable 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 aff ect profi t or loss. The eff ective portion of the gain or loss on the hedging instrument is recognised directly in equity, while the ineff ective 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 eff ectiveness on a monthly basis both retrospectively and prospectively using the “matched terms” principle. At each balance date, hedge eff ectiveness 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 eff ective. Where there has been a change to these terms, eff ectiveness is measured using the hypothetical derivative method. The parent entity (Infomedia Ltd) sells software to its customers and uses its subsidiary companies (i.e. IFM North America Inc and IFM Europe Ltd) to act as billing agents and provide sales and support services. Sales are denominated in USD and Euros. The Group hedges foreign exchange exposure on sales (net of sales and support service costs) as this exposure aff ects consolidated profi t when the sale is made to the external customer. u) 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 diff erences 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 diff erences 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, aff ects neither the accounting profi t nor taxable profi t or loss; or • when the taxable temporary diff erence is associated with investments in subsidiaries, associates or interests in joint ventures, and the timing of the reversal of the temporary diff erence can be controlled and it is probable that the temporary diff erence will not reverse in the foreseeable future. Deferred income tax assets are recognised for all deductible temporary diff erences, 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 diff erences 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 diff erence 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, aff ects neither the accounting profi t nor taxable profi t or loss; or • when the deductible temporary diff erence 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 diff erence will reverse in the foreseeable future and taxable profi t will be available against which the temporary diff erence can be utilised. 40 SUPERSERVICE.COM NOTES TO THE FINANCIAL STATEMENTS 30 June 2014 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) u) Income tax (continued) 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 off set 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 consolidated group in accordance with Interpretation 1052 – Tax Consolidation Accounting. 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. v) 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 Statement of Financial Position. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the Statement of Financial Position. Cash fl ows are included in the Statement of Cash Flows on a gross basis. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority. w) 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 and current provisions respectively 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 9.25% of salaries is recognised on a straight line basis. Termination benefi ts are recognised at the point of being incurred where relevant. x) 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’). 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). SUPERSERVICE.COM 41 NOTES TO THE FINANCIAL STATEMENTS 30 June 2014 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) x) Share-based payment transactions (continued) 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 eff ect 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 eff ect, if any, of outstanding options is refl ected as additional share dilution in the computation of diluted earnings per share. y) 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 eff ect 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. z) Business combinations The acquisition method of accounting is used to account for business combinations regardless of whether equity instruments or other assets are acquired. The consideration transferred is the sum of the acquisition-date fair values of the assets transferred, equity instruments issued or liabilities incurred by the acquirer to former owners of the acquiree and the amount of any non-controlling interest in the acquiree. For each business combination, the non-controlling interest in the acquiree is measured at either fair value or at the proportionate share of the acquiree’s identifi able net assets. All acquisition costs are expensed as incurred to profi t or loss. On the acquisition of a business, the consolidated entity assesses the fi nancial assets acquired and liabilities assumed for appropriate classifi cation and designation in accordance with the contractual terms, economic conditions, the consolidated entity’s operating or accounting policies and other pertinent conditions in existence at the acquisition-date. Where the business combination is achieved in stages, the consolidated entity remeasures its previously held equity interest in the acquiree at the acquisition-date fair value and the diff erence between the fair value and the previous carrying amount is recognised in profi t or loss. Contingent consideration to be transferred by the acquirer is recognised at the acquisition-date fair value. Subsequent changes in the fair value of contingent consideration classifi ed as an asset or liability is recognised in profi t or loss. Contingent consideration classifi ed as equity is not remeasured and its subsequent settlement is accounted for within equity. The diff erence between the acquisition-date fair value of assets acquired, liabilities assumed and any non-controlling interest in the acquiree and the fair value of the consideration transferred and the fair value of any pre-existing investment in the acquiree is recognised as goodwill. If the consideration transferred and the pre-existing fair value is less than the fair value of the identifi able net assets acquired, being a bargain purchase to the acquirer, the diff erence is recognised as a gain directly in profi t or loss by the acquirer on the acquisition-date, but only after a reassessment of the identifi cation and measurement of the net assets acquired, the non- controlling interest in the acquiree, if any, the consideration transferred and the acquirer’s previously held equity interest in the acquirer. 42 SUPERSERVICE.COM NOTES TO THE FINANCIAL STATEMENTS 30 June 2014 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) z) Business combinations Business combinations are initially accounted for on a provisional basis. The acquirer retrospectively adjusts the provisional amounts recognised and also recognises additional assets or liabilities during the measurement period, based on new information obtained about the facts and circumstances that existed at the acquisition-date. The measurement period ends on either the earlier of (i) 12 months from the date of the acquisition or (ii) when the acquirer receives all the information possible to determine fair value. aa) Restatement of comparatives Over recent years the Company has invested signifi cant resources in changing the way customers use its software by migrating users from physical DVD discs and applications installed on end user infrastructure (Disc based), to products accessible online via internet browsers (Software as a Service or ‘SaaS’). As customers increasingly migrate to the online ‘SaaS’ versions, the Company has seen a change to the nature of its business in certain areas. In accordance with the provisions of AASB101 Presentation of Financial Statements which requires classifi cation of items of income and expense on the most reliable and relevant basis, the Company has now adopted a functional approach to presenting its Statement of Profi t or Loss and Other Comprehensive Income showing Research & Development expenses, Sales & Marketing expenses and General & Administrative expenses which it believes gives readers a more intuitive view of the Company’s activities. The approach adopted by the Company for creation and maintenance of the Software as a Service products has led to the lack of distinction between ‘Direct Wages’ and ‘Employee benefi ts expense (Salary and wages). These costs are now included within the three functional areas of expense listed above. Consequently ‘Cost of Sales’ is no longer presented. Reconciliation of cost of sales and employee benefi t expense to Sales & Marketing, General & Administrative and Research & Development expense due to the change in presentation of the Statement of Profi t or Loss and Other Comprehensive Income. Cost of sales Direct wages Other Total cost of sales Reported as: Sales & Marketing expense General & Administrative expense Research & Development expense Total Direct wages 2013 $’000 12,032 7,267 19,299 11,207 3,517 4,575 19,299 SUPERSERVICE.COM 43 NOTES TO THE FINANCIAL STATEMENTS 3. EXPENSES (i) Research & development costs Total research & development costs incurred during the period Amortisation of deferred development costs Less: development costs capitalised Net research and development costs expensed Notes CONSOLIDATED 2014 $’000 13,771 8,113 (8,106) 13,778 2013 $’000 12,601 7,178 (7,417) 12,362 Profi t before income tax from continuing operations includes the following specifi c expenses: Depreciation Amortisation Minimum lease payments for rental expense Superannuation expense Share based payment expense Employee benefi ts expense 4. INCOME TAX Notes CONSOLIDATED 2014 $’000 662 8,530 1,359 1,443 211 2013 $’000 593 7,537 1,208 1,328 196 24,828 22,743 The major components of income tax expense are: (a) 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 diff erences Income tax expense reported in the income statement (b) Disclosure of tax eff ects relating to each component of other comprehensive income Movement in cash fl ow hedges Notes CONSOLIDATED 2014 $’000 2013 $’000 3,128 (68) 173 3,233 469 469 2,404 (711) 291 1,984 (542) (542) 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 15,512 12,050 At the Company’s statutory income tax rate of 30% (2013: 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 for the year 4,653 (151) (1,345) 76 3,233 3,615 (487) (1,214) 70 1,984 44 SUPERSERVICE.COM NOTES TO THE FINANCIAL STATEMENTS Notes STATEMENT OF FINANCIAL POSITION STATEMENT OF PROFIT OR LOSS & OTHER COMPREHENSIVE INCOME 2014 $’000 2013 $’000 2014 $’000 2013 $’000 (138) (6,380) (6,518) 658 (6,382) (5,724) 327 (2) (324) 72 872 40 110 1,022 679 50 141 870 (5,496) (4,854) (193) 10 31 173 408 17 118 291 4. INCOME TAX (CONTINUED) Deferred income tax Deferred income tax at 30 June relates to the following: CONSOLIDATED Deferred tax liabilities Derivatives Deferred development costs Gross deferred income tax liabilities CONSOLIDATED Deferred tax assets Provisions Other payables Currency exchange Gross deferred income tax assets Deferred tax income/ (expense) Net deferred income tax liabilities 5. EARNINGS PER SHARE 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 eff ects of dilutive options). The following refl ects the income and share data used in the total operations basic and diluted earnings per share computations: Net profi t attributable to equity holders from continuing operations Weighted average number of ordinary shares for basic earnings per share Eff ect of dilution: Share options Adjusted weighted average number of ordinary shares for diluted earnings per share Diluted EPS (cents) CONSOLIDATED 2014 $’000 12,279 2013 $’000 10,066 Number of shares Number of shares 305,173,135 303,382,350 2,003,292 2,801,407 307,176,427 306,183,757 4.00 3.29 SUPERSERVICE.COM 45 NOTES TO THE FINANCIAL STATEMENTS 6. DIVIDEND PROPOSED OR PAID (a) Dividends paid during the year: Interim dividend - 1.89 cents, 0.5c franked (2013: 1.27 cents, 0.5 cents franked) per share Prior year fi nal dividend - 1.55 cents fully franked (2013: 1.37 cents fully franked) per share Total dividends paid during the year (b) Dividends proposed and not recognised as a liability: Final dividend - 1.89 cents per share fully franked. (2013: 1.55 cents per share, fully franked) (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/(debits) that will arise from the payment/(receipt) of income tax payable/ (receivable) as at the end of the fi nancial year If fully franked, the tax rate on dividends is 30% (2013: 30%). 7. TRADE AND OTHER RECEIVABLES (CURRENT) Notes CONSOLIDATED 2014 $’000 5,777 4,724 10,501 2013 $’000 3,855 4,155 8,010 5,798 4,713 10 1,133 1,143 217 656 873 Trade debtors Allowance for impairment loss (a) Other debtors Notes CONSOLIDATED 2014 $’000 6,218 (188) 6,030 132 6,162 2013 $’000 5,459 (224) 5,235 69 5,304 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 $53,000 (2013: $76,000 loss) has been recognised by the group in the current year. These amounts have been included in the General & Administration expenses item. The amount of the allowance/impairment loss is recognised as the diff erence between the carrying amount of the debtor and the estimated future cash fl ows expected to be received from the relevant debtors. At 1 July Charge/(release) for the year Foreign exchange translation Amounts written off At 30 June Notes CONSOLIDATED 2014 $’000 224 53 4 (93) 188 2013 $’000 210 76 10 (72) 224 At 30 June the aging analysis of trade receivables is as follows: Total 0-60 days NI* 0-60 days CI* 61-120 days NI* 61-120 days CI* 121+ days NI* 121+ days CI* 2014 Consolidated ($’000) 6,218 2013 Consolidated ($’000) 5,459 4,547 4,795 21 30 959 296 31 43 524 144 136 151 * Not impaired (NI) Considered impaired (CI) All trade receivables over 60 days are considered past due. 46 SUPERSERVICE.COM 8. INVENTORY Raw materials At cost Total inventories at the lower of cost and net realisable value 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 carrying amount NOTES TO THE FINANCIAL STATEMENTS Notes CONSOLIDATED 2014 $’000 - - 2013 $’000 1 1 Notes CONSOLIDATED 2014 $’000 491 (426) 65 8,893 (7,836) 1,057 436 (329) 107 3,331 (3,291) 40 13,151 (11,882) 1,269 2013 $’000 481 (413) 68 8,455 (7,300) 1,155 446 (287) 159 3,301 (3,245) 56 12,683 (11,245) 1,438 SUPERSERVICE.COM 47 NOTES TO THE FINANCIAL STATEMENTS 9. PROPERTY, PLANT & EQUIPMENT (CONTINUED) (b) Reconciliation of property, plant and equipment carrying values Notes CONSOLIDATED 2014 $’000 2013 $’000 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 68 30 - (33) 65 1,155 439 (536) 1,057 159 3 (8) (47) 107 56 30 (46) 40 1,438 502 (9) (662) 1,269 27 46 - (5) 68 1,087 544 - (476) 1,155 162 38 - (41) 159 113 14 (71) 56 1,389 642 - (593) 1,438 48 SUPERSERVICE.COM 10. INTANGIBLE ASSETS AND GOODWILL At 1 July 2013 Cost (gross carrying amount) Accumulated amortisation Net carrying amount Year ended 30 June 2014 NOTES TO THE FINANCIAL STATEMENTS CONSOLIDATED Development costs1 Intellectual Property2 Other Intangibles2 Goodwill2 Total $’000 $’000 $’000 $’000 $’000 47,729 3,167 (26,458) (2,825) 21,271 342 1,167 (429) 738 12,008 - 12,008 64,071 (29,712) 34,359 342 738 12,008 34,359 At 1 July 2013, net of accumulated amortisation and impairment Purchase from wholly owned subsidiary Additions Revaluation on cost Amortisation Revaluation on amortisation 21,271 - 8,106 - (8,113) - At 30 June 2014, net of accumulated amortisation and impairment 21,264 - - 54 (168) (28) 200 At 30 June 2014 Cost (gross carrying amount) Accumulated amortisation Net carrying amount 1. Internally generated 55,835 (34,571) 21,264 3,221 (3,021) 200 - - 101 (249) (40) 550 1,268 (718) 550 - - 300 - - - 8,106 455 (8,530) (68) 12,308 34,322 12,308 72,632 - (38,310) 12,308 34,322 2. Purchased as part of business/territory acquisition 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. At 1 July 2012 Cost (gross carrying amount) Accumulated amortisation Net carrying amount Year ended 30 June 2013 At 1 July 2012, net of accumulated amortisation and impairment Additions Foreign exchange movements Amortisation At 30 June 2013, net of accumulated amortisation and impairment At 30 June 2013 Cost (gross carrying amount) Accumulated amortisation Net carrying amount CONSOLIDATED Development costs1 Intellectual Property2 Other Intangibles2 Goodwill2 Total $’000 $’000 $’000 $’000 $’000 40,312 (19,280) 21,032 3,115 (2,656) 459 21,032 7,417 - (7,178) 21,271 459 - 28 (145) 342 47,729 (26,458) 21,271 3,167 (2,825) 342 1,071 (179) 892 892 - 60 (214) 738 1,167 (429) 738 11,723 - 11,723 56,221 (22,115) 34,106 11,723 34,106 - 285 - 12,008 12,008 - 12,008 7,417 373 (7,537) 34,359 64,071 (29,712) 34,359 SUPERSERVICE.COM 49 NOTES TO THE FINANCIAL STATEMENTS 30 June 2014 11. IMPAIRMENT TESTING OF GOODWILL Goodwill acquired through business combinations or territory acquisition has 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, Middle East & Africa; • 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 2014 based on fi nancial budgets approved by The Board for the 2015 fi nancial year extrapolated for a fi ve year period on the basis of 5% growth together with a terminal value. The NPV of this calculation was $109,404,000. The discount rate applied to cash fl ow projections is 14% (2013: 14%). The discount rate refl ects management estimate of the time value of money and the rates specifi c to each unit. Carrying amount of goodwill allocated to each of the cash generating units is as follows: CONSOLIDATED Asia Pacifi c Europe, Middle East & Africa North America Latin and South America $’000 $’000 $’000 $’000 Carrying amount of goodwill 2013 Foreign exchange movement Carrying amount of goodwill 2014 2,725 68 2,793 5,727 143 5,870 2,701 67 2,768 855 22 877 Total $’000 12,008 300 12,308 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; • The discount rates estimated by management are refl ective of the time value of money; and • Management has used an AUD/USD exchange rate of $0.93 and an AUD/EUR exchange rate of $0.66 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 SUPERSERVICE.COM NOTES TO THE FINANCIAL STATEMENTS 12. TRADE AND OTHER PAYABLES (CURRENT) Trade creditors Other creditors Notes CONSOLIDATED 12(a) 2014 $’000 411 2,190 2,601 2013 $’000 411 2,223 2,634 (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) Notes CONSOLIDATED Employee benefi ts 15(a) Employee benefi ts obligation expected to be settled within 12 months is $1,551,000 14. DEFERRED REVENUE (CURRENT) 2014 $’000 2,339 2,339 2013 $’000 2,039 2,039 Revenue in advance 15. PROVISIONS (NON-CURRENT) Notes CONSOLIDATED 2014 $’000 477 477 2013 $’000 477 668 Notes CONSOLIDATED Employee benefi ts (a) 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 2014 $’000 498 498 2,487 (1,219) 1,569 2,837 2,339 498 2,837 2013 $’000 448 448 2,239 (1,208) 1,456 2,487 2,039 448 2,487 SUPERSERVICE.COM 51 NOTES TO THE FINANCIAL STATEMENTS 16. CONTRIBUTED EQUITY AND RESERVES Revenue in advance Notes CONSOLIDATED 2014 $’000 11,476 11,476 2013 $’000 10,855 10,855 $’000 10,855 - 10,855 621 11,476 Fully paid ordinary shares carry one vote per share and carry the right to dividends. Movement in ordinary shares on issue: Notes Number At 1 July 2013 Shares repurchased At 30 June 2013 Share options exercised At 30 June 2014 Capital management 303,576,855 - 303,576,855 3,190,000 306,766,855 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 2014 fi nancial year, the company paid dividends of $10.5 million (2013: $8.0 million). Employee Option Plan There were 2,170,000 (2013: 600,000) options granted during the current year at an average exercise price of $0.565 (2013: $0.28). Notes CONSOLIDATED Employee equity benefi ts reserve Foreign currency translation reserve Cashfl ow hedge reserve Movement in reserves: $’000 At 1 July 2012 Currency translation diff erences Share based payments Transfer to retained profi t Derivatives marked to market At 30 June 2013 Currency translation diff erences Share based payments Derivatives marked to market At 30 June 2014 Nature and purpose of reserves Employee equity benefi ts reserve 56 - 196 - - 252 - 211 - 463 $’000 (204) 854 - - - 650 132 - - 782 $’000 485 - - - (1,240) (755) - - 1,079 324 Total $’000 337 854 196 - (1,240) 147 132 211 1,079 1,569 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 diff erences arising from the translation of the fi nancial statements of foreign subsidiaries. It is also used to record the eff ect 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 eff ective hedges. 52 SUPERSERVICE.COM 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 Share based payment Ineff ective (gains)/loss on hedgeing instruments 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 intangible assets Increase/(decrease) in trade and other creditors Increase/(decrease) in allowance for doubtful debts Increase/(decrease) in provision for employee entitlements 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 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 NOTES TO THE FINANCIAL STATEMENTS Notes CONSOLIDATED 2014 $’000 12,279 662 8,530 211 (1,112) 7 (687) 1 129 (8,106) (387) 126 (37) 350 538 179 (190) 12,493 6,017 5,393 11,410 2013 $’000 10,066 593 7,537 196 1,112 - (430) 6 (199) (7,417) (373) (267) 15 250 (224) 279 104 11,248 4,877 4,422 9,299 Notes CONSOLIDATED 2014 $’000 2013 $’000 1,268 1,990 - 3,258 1,290 3,264 - 4,554 - aggregate operating lease expenditure contracted for at balance date 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 $508,000 (2013: $508,000) relating to the lease commitments of its corporate headquarters SUPERSERVICE.COM 53 NOTES TO THE FINANCIAL STATEMENTS 19. SHARE BASED PAYMENT PLANS Employee Option Plan The Employee Option Plan entitles the Company to off er ‘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: Notes 2014 2013 Number of options Weighted average exercise price Number of options Weighted average exercise price Balance at beginning of year - granted - expired - exercised Balance at end of year 19(a) 19(b) 19(c) 19(d) 19(e) 5,850,000 2,170,000 (200,000) (3,190,000) 4,630,000 $0.200 $0.565 $0.190 $0.230 $0.370 5,670,000 600,000 (120,000) (300,000) 5,850,000 $0.190 $0.280 $0.280 $0.190 $0.200 (a) Options held at the beginning of the year: The following table summarises information about options held by employees at 1 July 2013 Number of options Grant date Earliest vesting date Expiry date Weighted average exercise price 1,950,000 3,420,000 480,000 15/1/2012 30/5/2012 12/3/2013 15/1/2012 30/5/2012 15/1/2012 14/3/2015 30/5/2012 1/2/2016 $0.190 $0.190 $0.280 (b) Options granted during the year: The following table summarises information about options granted during the year. Number of options Grant date Earliest vesting date Expiry date Weighted average exercise price 750,000 1,420,000 27/9/2013 16/12/2013 27/9/2014 15/12/2014 31/10/2016 31/12/2016 $0.565 $0.565 (c) Options forfeited during the year: The following table summarises information about options granted during the year. Number of options Grant date Earliest vesting date Expiry date Weighted average exercise price 120,000 80,000 30/5/2012 12/3/2013 30/5/2013 15/1/2014 30/5/2016 1/2/2016 $0.190 $0.280 (d) Options exercised during the year: The following table summarises information about options granted during the year. Number of options Grant date Earliest vesting date Expiry date Weighted average exercise price 1,050,000 1,980,000 160,000 15/1/2012 30/5/2012 12/3/2013 15/1/2013 30/5/2013 15/1/2014 14/3/2015 30/5/2012 1/2/2016 $0.190 $0.190 $0.280 54 SUPERSERVICE.COM NOTES TO THE FINANCIAL STATEMENTS 19. SHARE BASED PAYMENT PLANS (CONTINUED) (e) Options held at the end of the year Number of options Grant date Earliest vesting date Expiry date 900,000 1,320,000 240,000 750,000 1,420,000 15/01/2012 30/05/2012 12/03/2013 27/09/2013 16/12/2013 15/01/2013 30/05/2013 15/01/2014 27/09/2014 15/12/2014 14/03/2015 30/05/2015 1/02/2016 31/10/2016 31/12/2016 Weighted average exercise price $0.190 $0.190 $0.280 $0.565 $0.565 (f) Options held at the end of the year The weighted average fair value of options granted during the year was $0.295 (2013: $0.21). 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 15/01/2012 Granted 30/05/2012 Granted 12/03/2013 Granted 27/09/2013 Granted 16/12/2013 10.00% 41% 3.95% $0.190 $0.190 10.00% 39% 3.08% $0.190 $0.190 4.33% 42% 3.22% $0.280 $0.280 3.87% 42% 3.09% $0.565 $0.565 4.98% 42% 3.17% $0.565 $0.565 The expense recognised for employee services received during the year is shown in the table below Expense arising from equity-settled share-based payment 20. PENSIONS AND OTHER POST-EMPLOYMENT PLANS Superannuation Commitments Notes CONSOLIDATED 2014 $’000 211 2013 $’000 196 Contributions are made by the Company in accordance with the relevant statutory requirements. Contributions by the Company for the year ending 30 June 2014 were 9.25% (2013 : 9.00%) of employee’s wages and salaries which are legally enforceable in Australia. The superannuation plans provide accumulation benefi ts. 21. KEY MANAGEMENT PERSONNEL DISCLOSURES Compensation of Key Management Personnel Short-Term Post Employment Other Long-Term Share-based Payments CONSOLIDATED 2014 $’000 2013 $’000 1,806,618 1,676,189 117,796 16,242 82,943 107,657 14,887 50,305 2,023,599 1,849,038 SUPERSERVICE.COM 55 NOTES TO THE FINANCIAL STATEMENTS 22. AUDITOR’S REMUNERATION Amounts received or due and receivable by the auditors of Infomedia Ltd: BDO East Coast Partnership (formerly PKF East Coast Practice) -An audit or review of the fi nancial report of the entity and any other entity in the consolidated entity -Tax compliance 23. RELATED PARTY DISCLOSURES Ultimate Parent Infomedia Ltd is the ultimate Australian parent company Wholly-owned group transactions CONSOLIDATED 2014 $’000 105,000 61,330 166,330 2013 $’000 105,000 74,090 179,090 (a) An unsecured, trade receivable of $125,130 (2013: $126,042) remains owing to IFM Europe Ltd from Infomedia Ltd. (b) An unsecured, trade receivable of $744,265 (2013: $1,090,359) remains owing from IFM North America Inc. to Infomedia Ltd. (c) An unsecured, trade receivable of $Nil (2013: $Nil) remains owing to Diff erent Aspect Software Ltd. from Infomedia Ltd. (d) During the year Infomedia Ltd received $Nil (2013: $Nil) from IFM Europe Ltd for intra-group sales. (e) During the year Infomedia Ltd received $Nil (2013: $Nil) from IFM North America Inc. for intra-group sales. (f) During the year Infomedia Ltd paid $3,989,036 (2013: $3,507,668) to IFM Europe Ltd for intra-group distribution services. (g) During the year Infomedia Ltd paid $4,065,682 (2013: $2,969,538) to IFM North America Inc. for intra-group distribution services. (h) During the year IFM Europe paid $22,441 (2013: $307,221) to IFM Germany GmbH for intra-group distribution services. 24. SEGMENT INFORMATION Business Segments REVENUE Sales revenue Consolidated revenue Segment result Finance revenue Finance cost Notes Asia Pacifi c Europe, Middle East, Africa North America $’000 $’000 $’000 Latin & South America $’000 Corporate Total $’000 $’000 13,863 27,161 13,082 3,037 - 57,143 57,143 10,965 22,219 8,801 2,860 (29,439) 15,406 - - - - - - - - 106 - Consolidated profi t before income tax 10,965 22,219 8,801 2,860 (29,333) 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 - - - - - 7,941 486 504 461 51 417 93 21 - 66 - - - - - - - 430 8,113 503 106 - 15,512 (3,233) 12,279 8,427 46,122 54,549 965 11,595 12,560 502 8,530 662 * Corporate contains all business functions excluding direct sales & support costs of the other business segments. Unallocated assets/liabilities are all group assets and liabilities not directly attributable to the business segments. 56 SUPERSERVICE.COM 24. SEGMENT INFORMATION (CONTINUED) NOTES TO THE FINANCIAL STATEMENTS Business Segments REVENUE Sales revenue Consolidated revenue Segment result Finance revenue Finance cost Notes Asia Pacifi c Europe, Middle East, Africa North America $’000 $’000 $’000 Latin & South America $’000 Corporate Total $’000 $’000 13,275 22,184 10,555 2,675 - 48,689 48,689 10,610 18,086 7,943 2,190 (26,855) 11,974 - - - - - - - - 76 - Consolidated profi t before income tax 10,610 18,086 7,943 2,190 (26,779) 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 - - - - - 7,927 359 625 505 22 359 36 16 - 73 - - - - - - - 604 7,178 484 76 - 12,050 (1,984) 10,066 8,286 43,329 51,615 1,130 12,317 13,447 642 7,537 593 * Corporate contains all business functions excluding direct sales & support costs of the other business segments. Unallocated assets/liabilities are all group assets and liabilities not directly attributable to the business segments. 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 eff ect of 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 on any single customer. SUPERSERVICE.COM 57 NOTES TO THE FINANCIAL STATEMENTS 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 $11,410,000 (2013: $9,299,000) 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 off erings 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 statement of fi nancial position can be aff ected by movements in both the Euro and United States dollar against the Australian dollar. At 30 June, the Group had the following exposure to foreign currency that is not designated in cash fl ow hedges: Financial Assets Cash and cash equivalents CONSOLIDATED USD $ CONSOLIDATED EUR € 2014 $’000 2,512 2,512 2013 $’000 1,242 1,242 2014 €’000 853 853 2013 €’000 1,833 1,833 The following sensitivity is based on the foreign currency risk exposures in existence at the balance date: At 30 June, 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 Post tax profi t Higher/(Lower) Total equity Higher/(Lower) AUD/USD +10% AUD/USD - 15% AUD/EUR +10% AUD/EUR - 15% 2014 $’000 (160) 310 (54) 105 2013 $’000 (79) 153 (117) 226 2014 $’000 (160) 310 (54) 105 2013 $’000 (79) 153 (117) 226 Management believe the balance date risk exposures are representative of the risk exposure inherent in the fi nancial instruments. 58 SUPERSERVICE.COM NOTES TO THE FINANCIAL STATEMENTS 25. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINED) (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 statement of fi nancial position as at 30 June 2014 that are subject price risk. (e) Liquidity risk The Company’s exposure to liquidity risk is minimal given the relative strength of the statement of fi nancial position 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 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 statement of fi nancial position 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: 30 June 2014 Less than one year Two to fi ve years Greater than fi ve years Weighted average eff ective interest rate CONSOLIDATED Floating rate Cash and cash equivalents Trade and other receivables Trade and other payables $’000 11,410 6,162 (2,601) $’000 $’000 - - - - - - CONSOLIDATED % 1.4 - - 30 June 2013 Less than one year Two to fi ve years Greater than fi ve years Weighted average eff ective interest rate Floating rate Cash and cash equivalents Trade and other receivables Trade and other payables $’000 9,299 5,304 (2,634) $’000 $’000 - - - - - - % 1.5 - - 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. (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. SUPERSERVICE.COM 59 NOTES TO THE FINANCIAL STATEMENTS 25. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINED) Derivative contracts The following table summarises the forward exchange contracts on hand at 30 June 2014. Maturity - Forward exchange contracts Less than one year Maturity - Forward exchange contracts Less than one year CONSOLIDATED Company buys Company sells Exchange rate $A’000 9,408 $A’000 9,301 USD’000 8,445 EUR’000 6,245 0.898 0.671 The mark to market valuation of these contracts at 30 June 2014 was $460,000 which is booked directly in equity. The following table summarises the range forward contracts on hand at 30 June 2013. CONSOLIDATED Company buys Company sells Exchange rate Maturity - Forward exchange contracts $A’000 USD’000 Less than one year Greater than one year and not greater than two years Maturity - Forward exchange contracts Less than one year Greater than one year and not greater than two years 3,713 4,759 $A'000 3,681 4,420 3,500 4,400 EUR'000 2,760 3,000 0.943 0.925 0.750 0.679 The mark to market valuation of these contracts at 30 June 2013 was ($688,000) which is booked directly in equity. 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 Carrying Amount Fair Value Financial assets Cash and cash equivalents Trade and other debtors Derivatives Financial liabilities Trade and other creditors Derivatives 2014 $’000 11,410 6,162 460 $’000 2,601 - 2013 $’000 9,299 5,304 - $’000 2,634 2,193 Recurring fair value measurements The following fi nancial instruments are subject to recurring fair value measurements: Foreign exchange contracts - Level 2 2013 $’000 9,299 5,304 - $’000 2,634 2,193 2014 $’000 11,410 6,162 460 $’000 2,601 - 30 Jun 14 $’000 460 60 SUPERSERVICE.COM NOTES TO THE FINANCIAL STATEMENTS 26. FINANCIAL INSTRUMENTS (CONTINUED) Fair value hierarchy AASB 13 Fair Value Measurement requires disclosure of fair value measurements by level in the fair value measurement hierarchy as follows: - Level 1 - the instrument has quoted prices (unadjusted) in active markets for identical assets or liabilities - Level 2 - a valuation technique is used using inputs other than quoted prices within level 1 that are observable for the fi nancial instrument, either directly (i.e. as prices), or indirectly (i.e. derived from prices) - Level 3 - a valuation technique is used using inputs that are not observable based on observable market data (unobservable inputs). Transfers During the year ended 30 June 2014, there were no transfers of available-for-sale equity securities or derivatives between levels 1 and 2 of the fair value hierarchy. There were also no transfers into or out of level 3 during the period. Valuation techniques used to derive level 2 fair values 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. Fair values of fi nancial instruments not measured at fair value Due to their short-term nature, the carrying amounts of cash and cash equivalents, current receivables and current trade and other payables is assumed to approximate their fair value. 27. PARENT ENTITY INFORMATION 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 PARENT ENTITY 2014 $’000 14,362 51,125 5,673 11,596 11,476 27,268 463 322 39,529 12,106 13,185 2013 $’000 11,596 48,332 7,075 12,317 10,856 25,663 252 (756) 36,015 10,054 8,812 28. INTERESTS IN CONTROLLED ENTITIES Name Country of incorporation Percentage of equity interest held by the Company (directly or indirectly) IFM Europe Ltd -Ordinary shares Diff erent Aspect Software Ltd** -Ordinary shares IFM North America Inc -Ordinary shares IFM Germany GmbH* -Ordinary shares United Kingdom United Kingdom United States of America Germany * Investment is held by IFM Europe Ltd. ** Entity was purchased on 2 September 2011 2014 % 100 100 100 100 2013 % 100 100 100 100 Parent entity 2014 $ 2013 $ 247 247 4,719 4,719 1 - 1 - SUPERSERVICE.COM 61 DIRECTOR’S DECLARATION 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 2014 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 2014. 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(cid:70)(cid:82)(cid:81)(cid:71)(cid:88)(cid:70)(cid:87)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:68)(cid:70)(cid:70)(cid:82)(cid:85)(cid:71)(cid:68)(cid:81)(cid:70)(cid:72)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:36)(cid:88)(cid:86)(cid:87)(cid:85)(cid:68)(cid:79)(cid:76)(cid:68)(cid:81)(cid:3)(cid:36)(cid:88)(cid:71)(cid:76)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:54)(cid:87)(cid:68)(cid:81)(cid:71)(cid:68)(cid:85)(cid:71)(cid:86)(cid:17)(cid:3)(cid:3) (cid:50)(cid:83)(cid:76)(cid:81)(cid:76)(cid:82)(cid:81)(cid:3) (cid:44)(cid:81)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:82)(cid:83)(cid:76)(cid:81)(cid:76)(cid:82)(cid:81)(cid:15)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:53)(cid:72)(cid:80)(cid:88)(cid:81)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3)(cid:44)(cid:81)(cid:73)(cid:82)(cid:80)(cid:72)(cid:71)(cid:76)(cid:68)(cid:3)(cid:47)(cid:87)(cid:71)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:92)(cid:72)(cid:68)(cid:85)(cid:3)(cid:72)(cid:81)(cid:71)(cid:72)(cid:71)(cid:3)(cid:22)(cid:19)(cid:3)(cid:45)(cid:88)(cid:81)(cid:72)(cid:3)(cid:21)(cid:19)(cid:20)(cid:23)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:79)(cid:76)(cid:72)(cid:86)(cid:3) (cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:86)(cid:72)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:22)(cid:19)(cid:19)(cid:36)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:36)(cid:70)(cid:87)(cid:3)(cid:21)(cid:19)(cid:19)(cid:20)(cid:17)(cid:3)(cid:3) (cid:37)(cid:39)(cid:50)(cid:3)(cid:40)(cid:68)(cid:86)(cid:87)(cid:3)(cid:38)(cid:82)(cid:68)(cid:86)(cid:87)(cid:3)(cid:51)(cid:68)(cid:85)(cid:87)(cid:81)(cid:72)(cid:85)(cid:86)(cid:75)(cid:76)(cid:83)(cid:3) (cid:42)(cid:85)(cid:68)(cid:81)(cid:87)(cid:3)(cid:54)(cid:68)(cid:91)(cid:82)(cid:81)(cid:3) (cid:51)(cid:68)(cid:85)(cid:87)(cid:81)(cid:72)(cid:85)(cid:3) (cid:54)(cid:92)(cid:71)(cid:81)(cid:72)(cid:92)(cid:15)(cid:3)(cid:21)(cid:20)(cid:3)(cid:36)(cid:88)(cid:74)(cid:88)(cid:86)(cid:87)(cid:3)(cid:21)(cid:19)(cid:20)(cid:23)(cid:3) CORPORATE GOVERNANCE INFOMEDIA LTD CORPORATE GOVERNANCE STATEMENT FY2014 OVERVIEW Infomedia’s adoption of ‘best practice’ Corporate Governance Principles Infomedia strives to ensure an acceptable level of compliance with the voluntary governance principles set out in the ‘Corporate Governance Principles and Recommendations 2nd Edition with 2010 Amendments‘ published by the Australian Stock Exchange’s (ASX) Corporate Governance Committee (CGC) (the ASX Principles). Infomedia endeavours to meet the ASX Principles in a manner consistent with the resources, size and operational scope of the Company. Where 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 those compliance discrepancies. 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 http://www.infomedia.com.au/our-company/investors/145-corporate-governance 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, encouraging 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 FY2014, Infomedia was non-compliant with several 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. SUPERSERVICE.COM 65 CORPORATE GOVERNANCE 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 fi ve 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 (CEO), must retire by rotation each year. If eligible, retiring directors may off er 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, on 27 September 2013, Mr Richard Graham became Non-Executive Chairman and Mr Andrew Pattinson was appointed CEO and Director. In the same year Mr Clyde McConaghy was appointed as Non-Executive Director, eff ective from 1 November 2013. Following the appointment of Mr Pattinson and Mr McConaghy, the Board is comprised of fi ve Directors. The details of each Director’s name, terms of offi ce, meeting attendance records, skills experience and expertise, appear in the Directors’ Report. 2.2 Independence of the Chair On 19 February 2014 Ms Frances Hernon was appointed independent Non-Executive Chairman of the Board. Prior to her appointment Mr Graham was Executive Chairman and his independence was compromised owing to: (a) he being the Company’s largest shareholder until 28 August 2013; and (b) eff ectively occupying the role of both CEO and Chairman. For the reasons outlined above, the Company did not comply with the following principles for part of FY2014: (a) ASX Principle 2.2 - The chair should be an independent Director; and (b) ASX Principle 2.3 - The roles of the chair and the chief executive offi cer should not be exercised by the same individual. 2.3 Independence of the Board ASX Principle 2.1 calls for the majority of the Board to be independent, Non-Executive Directors. For the fi rst half of FY2014, the Board was comprised of four Non-Executive Directors in the form of Ms Hernon, Mr Clyde McConaghy, Mr Graham and Mr Myer Herszberg. Whilst Ms Hernon and Mr McConaghy meet the criteria for independence, Mr Herszberg’s independence was technically compromised by his standing as a substantial shareholder of the Company for the relevant period prior to his selling down of his shares on 30 August 2013. Accordingly, the Company only partially complied with ASX Principle 2.1. 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 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 nor a remuneration 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) (d) 66 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 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. SUPERSERVICE.COM CORPORATE GOVERNANCE 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. 2.6 Audit, Risk & Governance Committee Please refer to section 3.1 below for a report on the activities of the Audit 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 to 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. 3.2 Workplace Diversity The Company has historically dedicated itself to principles of equality and diversity within the workplace, and remains committed to that goal. The Company has consistently achieved annual accreditation from the Department of Equal Opportunity for Women in the Workplace (EOWA) for over a decade. Given the relative size and resourcing of the Company, it did not maintain formal measurable objectives or policies relating to diversity during the reporting period, therefore placing it outside of technical compliance with ASX Principles 3.2 and 3.3. In accordance with ASX Principle 3.4, the following proportional split of Australian based employees was recorded as at 31 May 2014: Category Females Males Total Directors Key Management Personnel Employees 1 (33%) 1 (20%) 2 (66%) 4 (80%) 34 (18.4%) 157 (81.6%) 3 5 191 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 its IPO in August 2000. The last Audit Committee continued to meet throughout the fi rst half of FY2014, however, its functions were temporarily incorporated by the full Board upon the resignation of Mr Henderson, the then Chairman of the Committee, on 3 January 2013. The Audit Committee was re-established upon the appointment on 1 November 2013 of Mr McConaghy. The composition of the current Audit Committee meets all of the requirements contained in ASX Principle 4.2 on the basis 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. The objectives of the Committee are clearly defi ned within the Company’s Audit Committee Charter. A summary of the Audit Committee Charter is available via the Company’s website. SUPERSERVICE.COM 67 CORPORATE GOVERNANCE 4.2 Independent auditors The Board acknowledges the importance of external auditor independence and the rotation of not only responsible audit partners but also audit fi rms. The appointment of BDO as auditors during FY2012, after many years of commendable service from the Company’s previous auditors, Ernst & Young, represents a commitment towards this objective. Additionally, the Committee has formalised procedures for the rotation of responsible audit partners from BDO on a regular basis. 4.3 Financial reporting obligations The Company’s fi nancial reporting obligations for FY2014 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 revised Risk Management Plan and Policy, the CEO and the Chief Financial Offi cer (CFO) 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 a revised Risk Management Plan and Policy (Risk Policy) during FY2014. The revised plans promotes the establishment and implementation of a more eff ective and appropriate risk management framework for the Company. The Risk Policy allocates oversight responsibility to the Board and the Audit Committee, whilst the establishment of risk management procedures, compliance and control rests with the CEO, CFO and senior executives and, at a daily operating level, with departmental managers, line managers and individuals as part of regular business conduct. A summary of the Company’s Risk Policy is available on the Company’s website. 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. Internal reviews of the Market Disclosure Policy indicate that both the continuous and periodic reporting obligations imposed under the ASX Listing Rules, and the Company’s internal procedures, are 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 eff ective communication with all shareholders. The Company continues to 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, and half yearly 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, BDO, will be present during the 2014 Annual General Meeting, and will be available to answer shareholder questions at that time. 68 SUPERSERVICE.COM CORPORATE GOVERNANCE 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 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 Senior Executive and Staff Remuneration* • Directors’ fees • Directors’ fees • Salary • Statutory Superannuation contributions • Statutory Superannuation contributions • Statutory Superannuation contributions • Incentive payments • Share options and/or Performance Rights • Retirement benefi ts • Bonuses • Share options and/or Performance Rights • Commissions * Note – the listed incentives for each category is optional and at the discretion of the Board. Differing combinations of remuneration and incentives are offered on a case by case basis. SUPERSERVICE.COM 69 ADDITIONAL INFORMATION Infomedia Ltd – Fully Paid Ordinary Shares Top 20 Holdings as at 04-09-2014 Holder Name NATIONAL NOMINEES LIMITED HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED J P MORGAN NOMINEES AUSTRALIA LIMITED CITICORP NOMINEES PTY LIMITED BNP PARIBAS NOMS PTY LTD RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED CITICORP NOMINEES PTY LIMITED MR RICHARD DAVID GRAHAM BNP PARIBAS NOMS (NZ) LTD MR ANDREW PATTINSON PERSHING AUSTRALIA NOMINEES PTY LTD MR PETER ALEXANDER BROWN SANDHURST TRUSTEES LTD BRISPOT NOMINEES PTY LTD UBS NOMINEES PTY LTD MORGAN STANLEY AUSTRALIA SECURITIES (NOMINEE) PTY LIMITED HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED-GSCO ECA SPANDOU INVESTMENTS PTY LTD 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 AUST EXECUTOR TRUSTEES LTD Balance at 04-09-2014 % 40,256,422 38,871,436 28,191,722 17,498,005 14,458,854 12,905,584 12,794,480 5,315,568 4,043,001 2,452,500 2,447,567 1,714,061 1,350,000 1,310,701 1,264,894 1,210,255 1,015,394 896,402 850,000 826,113 13.115 12.664 9.184 5.701 4.710 4.204 4.168 1.732 1.317 0.799 0.797 0.558 0.440 0.427 0.412 0.394 0.331 0.292 0.277 0.269 189,672,959 61.791 306,954,355 Total IC 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 Infomedia Ltd – Analysis of Holdings as at 04-09-2014 Holders 488 2,129 1,391 2,269 173 6,450 Total Units 364,668 6,760,135 11,499,747 68,035,864 220,293,941 306,954,355 % 0.119 2.202 3.746 22.165 71.768 100.000 70 SUPERSERVICE.COM CORPORATE DIRECTORY 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 Clyde McConaghy Andrew Pattinson Nick Georges Jonathan Pollard 357 Warringah Road Frenchs Forest NSW 2086 BDO Australia Level 10, 1 Margaret Street Sydney NSW 2000 Boardroom Pty Ltd Level 7, 207 Kent Street Sydney NSW 2000 Thomson Geer Level 25, 1 O’Connell Street Sydney NSW 2000 SUPERSERVICE.COM 71 NOTES 72 SUPERSERVICE.COM www.twitter.com/infomedialtd www.linkedin.com/company/infomedia-ltd http://www.superservice.com/counterview www.youtube.com/superservicesolution 

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