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Asia Pacifi c/Middle East/Africa
Americas - West Coast
Europe
Corporate HQ
Integrated Research Ltd
Level 9/100 Pacifi c Highway
North Sydney NSW 2060
Australia
+61 (2) 9966 1066
+61 (2) 9966 1042
info.ap@ir.com
3 Temasek Avenue
Level 21, Centennial Tower
Singapore 039190
+65 6549 7038
+65 6549 7011
info.ap@ir.com
Singapore
Americas ‑ East Coast
Germany
Integrated Research (Singapore) Pte Ltd
Integrated Research Inc.
Integrated Research UK Ltd
Integrated Research Inc.
8055 East Tuft s Avenue
Suite 950 Denver CO 80237
USA
+1 (303) 390 8700
+1 (303) 390 8777
info.usa@ir.com
1818 Library Street
Suite 500 Reston VA 20190
USA
+1 (703) 956 3016
+1 (303) 390 8777
info.usa@ir.com
Integrated Research UK Ltd
The Atrium, Harefi eld Road
Uxbridge, Middlesex
UB8 1PH
United Kingdom
+44 (0) 189 581 7800
info.europe@ir.com
Münchner Büro der Integrated Research UK Ltd
Terminalstrasse Mitt e 18
85356 München, Germany
+49 (89) 97 007 132
info.germany@ir.com
Visit our website at www.ir.com or our community blog at www.realtime.ir.com
Integrated Research
Annual Report
Providing Business Insight™ 2014
ABN 76 003 588 449
Corporate Directory
Directors
Steve Killelea
Darc Rasmussen
Managing Director and CEO
Solicitors
Ashurst
225 George Street
Sydney, NSW, 2000
Chairman and Non-Executi ve Director
Level 36, Grosvenor Place
Alan Baxter
Independent Non-Executi ve Director
Bankers
Registered Offi ce
by shares.
Westpac Banking Corporati on
Securities
Exchange Listing
Australian Securiti es Exchange
Code IRI
Country of
Incorporation
Integrated Research Limited,
incorporated and domiciled in Australia,
is a publicly listed company limited
Notice of Annual
General Meeting
The Annual General Meeti ng of
Integrated Research Limited will
be held at 3:00pm on Thursday,
13 November 2014, at the Museum
of Sydney, Corner of Phillip and
Bridge Streets, Sydney.
Garry Dinnie
Independent Non-Executi ve Director
Kate Costello
Independent Non-Executi ve Director
Peter Lloyd
Non-Executi ve Director
Clyde McConaghy
Non-Executi ve Director
Secretary
David Purdue
Level 9, 100 Pacifi c Highway
North Sydney, NSW, 2060
Phone: (+61 2) 9966 1066
Share Registry
Computershare
Auditors
Ernst & Young
Ernst & Young Centre
680 George Street
Sydney, NSW, 2000
Access your 2014 Annual Report online.
Visit www.ir.com/annualreport2014
This report is proudly printed on 100% recycled carbon neutral
paper and is FSC® Certi fi ed from 100% post consumer waste.
Cover and text printed on Revive Pure 100% Recycled Silk.
100%
FSC® C023640
Selected employee photos: Colin Tan, Integrated Research Senior Soft ware Engineer, R&D
and Michael Halbwirth, Head of Marketi ng Europe.
4704 Designed and printed by RDA Creati ve www.rda.com.au
Corporate Directory
Directors
Steve Killelea
Chairman and Non-Executi ve Director
Darc Rasmussen
Managing Director and CEO
Solicitors
Ashurst
Level 36, Grosvenor Place
225 George Street
Sydney, NSW, 2000
Alan Baxter
Independent Non-Executi ve Director
Bankers
Garry Dinnie
Independent Non-Executi ve Director
Kate Costello
Independent Non-Executi ve Director
Peter Lloyd
Non-Executi ve Director
Clyde McConaghy
Non-Executi ve Director
Secretary
David Purdue
Registered Offi ce
Level 9, 100 Pacifi c Highway
North Sydney, NSW, 2060
Phone: (+61 2) 9966 1066
Share Registry
Contents
Computershare
Auditors
Westpac Banking Corporati on
Securities
Exchange Listing
Australian Securiti es Exchange
Code IRI
Country of
Incorporation
Integrated Research Limited,
incorporated and domiciled in Australia,
is a publicly listed company limited
by shares.
Notice of Annual
General Meeting
The Annual General Meeti ng of
Integrated Research Limited will
be held at 3:00pm on Thursday,
13 November 2014, at the Museum
of Sydney, Corner of Phillip and
Bridge Streets, Sydney.
2014 Highlights
Letter from the Chairman
Chief Executive Officer’s Report
Ernst & Young
3
Ernst & Young Centre
680 George Street
4
Sydney, NSW, 2000
6
Directors’ Report
Remuneration Report
Corporate Governance Statement
Financial Statements
15
28
40
45
Notes to the Financial Statements
Directors’ Declaration
Independent Auditor’s Report
51
78
79
Lead Auditor’s Independence Declaration 81
ASX Additional Information
Corporate Directory
82
85
4704 Designed and printed by RDA Creati ve www.rda.com.au
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Access your 2014 Annual Report online.
Visit www.ir.com/annualreport2014
This report is proudly printed on 100% recycled carbon neutral
paper and is FSC® Certi fi ed from 100% post consumer waste.
Cover and text printed on Revive Pure 100% Recycled Silk.
100%
FSC® C023640
Selected employee photos: Colin Tan, Integrated Research Senior Soft ware Engineer, R&D
and Michael Halbwirth, Head of Marketi ng Europe.
2
Integrated Research and its controlled entities • Annual Report 2014
2014 Highlights
Financial Summary
In millions of AUD (except earnings per share)
Year ended 30 June
Revenue from licence fees
Total revenue
Net profit after tax
Net assets
Cash at balance date
Americas revenue
Europe revenue
Asia Pacific revenue
Earnings per share (cents per share)
In millions
Year ended 30 June
Americas revenue (USD)
Europe revenue (UK Sterling)
Asia Pacific revenue (AUD)
2014
2013
% Change
28.0
53.2
8.5
30.7
13.3
38.1
7.9
8.1
5.0
2014
34.8
4.4
8.1
26.6
48.9
9.1
30.0
14.8
34.4
6.9
7.5
5.4
2013
35.2
4.5
7.5
↑ 5%
↑ 9%
↓ (6%)
↑ 2%
↓ (10%)
↑ 11%
↑ 14%
↑ 8%
↓ (7%)
% Change
↓ (1%)
↓ (2%)
↑ 8%
Total revenue
(AUD millions)
Net profit after tax
(AUD millions)
Revenue from licence sales
(AUD millions)
$53.2
$48.6 $48.9
$42.7
$44.6
$37.4
$38.2
$7.9
$7.5
$5.8
$5.4
$9.0
$9.1
$8.5
$28.9
$28.0
$26.6
$25.0
$21.7
$19.6
$18.4
2008 2009 2010 2011 2012 2013 2014
2008 2009 2010 2011 2012 2013 2014
2008 2009 2010 2011 2012 2013 2014
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Letter from the ChairmanDirectors and Senior ManagementDirectors’ ReportRemuneration ReportCorporate Governance StatementFinancial StatementsIndependent Audit ReportIntegrated Research and its controlled entities • Annual Report 2014
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Letter from the Chairman
Dear fellow shareholders,
The Company’s performance in 2014 was steady and for the first time in Integrated
Research’s history, Company-reported revenue exceeded $50 million. As a result of
growth in Unified Communications and Payments products together with the benefits
of a lower Australian dollar, the Company generated after-tax profit of $8.5 million on
revenue of $53.2 million.
After reporting a strong first half performance,
the momentum did not continue through the second
half primarily due to the absence of large licence
sale contracts, highlighting the lumpiness of the
business. However a strong customer retention rate of
95% ensured that recurring maintenance revenue was
up 16% to $20.6 million.
The Company’s net profit after tax result was down
6% to $8.5 million when compared to the prior year.
Underlying operating costs were up 5% due to strategic
investments to build capacity in Europe and Asia Pacific,
along with one-off recruiting and management
change costs. After taking into account the translation
effects of a lower Australian dollar, revenue was up
9% and operating costs were up 11%. The Company’s
effective tax rate was 20% due to the benefits of the
Company’s research and development (R&D) program.
The overall market for Unified Communications
continues to evolve with Microsoft Lync significantly
growing its market share. The Company is well placed
to take advantage of this market dynamic and is seeking
to advance its lead through continuing dedicated
innovation for Microsoft Lync. Prognosis already
manages the largest Microsoft Lync customer in
the world, which has deployed over 400,000 endpoints.
The high margin Infrastructure product line, including
HP NonStop, remained steady during the year.
The Company continues to deepen its relationship
with ACI Worldwide, leading provider of Payments
applications, through the development of leading edge
performance management products for the Payments
markets in which both ACI and IR operate. The Company
successfully delivered a new Prognosis module for
Integrated Research and its controlled entities • Annual Report 2014
“The fundamentals of the Company’s key markets remain
strong as we continue to expand the scope of our markets
by creating quality products that embrace changes in
market direction.“
the ACI Money Transfer System that is anticipated
to be shipped with every sale of that ACI solution,
extending the collaboration between the companies.
The Company’s consulting services business grew
for a fifth consecutive year and it is noted that the
consulting backlog is 30% higher at the end of the
financial year when compared to the end of the prior
reporting period. Although operating revenue for the
Company’s American and European regions was down
1% and 2% respectively, Asia Pacific achieved revenue
growth of 8% compared to the prior year driven by
licence sales growth in Payments products.
We continue to build on our solid foundation of
world-class R&D with the release of Prognosis 10 during
the year. Its new design enables the business to rapidly
deploy products to market, evidenced by the quick
release of Prognosis for Contact Centre toward the
end of the financial year. This adds to the portfolio of
products including Unified Communications, Payments,
and IT infrastructure in which the Company participates.
The Company will continue to invest in its core R&D
capability as it seeks to create innovative solutions to
meet the challenges of its customers.
During the year we appointed our new Chief Executive
Officer - Mr. Darc Rasmussen to the Board. Darc brings
new vigour to the role and has been placing an emphasis
on strategy, including building up our European and
Asia-Pacific operations, together with focus on strategic
marketing and partnering capabilities.
The fundamentals of the Company’s key markets
remain strong as we continue to expand the scope of
our markets by creating quality products that embrace
changes in market direction. Strong partnerships with
industry leaders like Avaya and ACI can deliver profitable
growth from existing markets, and embed Prognosis
deeper into our customers’ business. The strong
customer retention rate underscores the strength of
the underlying business.
The Board is pleased to announce a final dividend of
2.5 cents per share, franked to 35 per cent, bringing the
total dividend for the year to 5.0 cents per share franked
at 33 per cent. This compares with total dividends of
5.0 cents per share, of which 36 per cent was franked,
for the prior financial year.
I would especially like to thank you, our valued
shareholders, for your continued support.
Steve Killelea
Chairman
5
Directors and Senior ManagementDirectors’ ReportRemuneration ReportCorporate Governance StatementFinancial StatementsIndependent Audit ReportLetter from the ChairmanIntegrated Research and its controlled entities • Annual Report 2014 t
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Chief Executive Officer’s Report
Dear fellow shareholders,
I would like to take this opportunity to comment on the Company’s performance and
financial results for the 2014 financial year and to set out the key activities that will
deliver success for the future. In the past year we have embarked on a well-structured
agenda to take Integrated Research to the next level of growth. The plan builds on the
traditional strengths of the Company while adding new capabilities to support expansion.
Integrated Research achieved annual revenue
growth of 9% to $53.2 million over the prior year.
Maintenance revenues grew 16% to $20.6 million and
this recurring revenue base now represents 39% of
total revenues.
The Company is investing for mid and long-term
growth with a view to protecting short-term
profitability and growing shareholder returns. As such
the Company continues to focus on the creation,
sale and support of Prognosis-based products into
the Unified Communications (UC), Payments and
Infrastructure markets, as well as entering new
high-growth markets like Contact Centres.
To position itself firmly in these markets Integrated
Research recently launched the largest release in its
25-year history, Prognosis 10, with $10 million invested
into its research and development. The Prognosis
architecture has been re-engineered to support
the web, mobile access and cloud-based delivery as well
as rapid extensibility, meaning the Company is able to
develop new solutions faster and significantly reduce
time to market.
During 2014 the Company completed the rapid
development of a new solution for the Contact
Centre market. Delivered in May 2014, early customers
are already adopting and benefiting from its capabilities.
Contact Centres have evolved into high-value,
highly complex, mission-critical technology-driven
environments and increasingly require the proactive
management that Prognosis delivers. With over
15 million Contact Centre agents worldwide1 this
Integrated Research and its controlled entities • Annual Report 2014
achieved annual revenue
“Integrated Research
growth of 9%
to $53.2 million over the
prior year. Maintenance
revenues grew 16% to
$20.6 million and this
recurring revenue base
now represents 39% of
total revenues.“
Management would like to recognise and thank the
highly talented and professional team of employees
across the globe at Integrated Research for their
dedication and hard work during the course of the year,
and their passion and commitment to the future of
your Company.
We hope you share our excitement about your Company’s
path and the opportunities we have together.
Thank you for your support.
Darc Rasmussen
CEO & Managing Director
1.
Gartner Worldwide Contact Centre Forecast: Total Market,
2011-2018
2, 3 Gartner Market Statistics: Enterprise Telephony Equipment,
Worldwide, 2013 Update
By Megan Fernandez, 25 March 2014
represents a significant market opportunity for
Integrated Research. There is also synergy with the UC
offering as Contact Centre solutions become the entry
point to the rest of the business.
The Company’s UC revenues grew by 15% in 2014
outperforming the global UC market growth of 7%2.
Microsoft increased its UC market share by over 100%3,
albeit off a low base. With the release of two new
versions of Prognosis for Microsoft Lync planned for this
financial year, the Company is positioning itself to take
advantage of this growth opportunity.
The Company’s Payments revenues grew 31% supported
by the strategic partnership with the leading provider
for global payments software, ACI Worldwide.
The Payments industry is evolving with high growth in
payments transactions driven by new channels such
as the Internet and mobile phones, and the growth of
electronic payments in developing economies.
Revenue from Infrastructure solutions, including HP
NonStop again delivered a solid result of $19.5 million.
The Company has been invited by HP to conduct early
development of Prognosis on its new HP NonStop x86
platform due for release in 2H FY15. Management
expects this new release will continue to underpin the
Infrastructure solution revenue base.
Integrated Research has now delivered value to over
1,000 organisations in over 50 countries. These include
many of the world’s largest stock exchanges, banks,
financial services institutions, airlines, technology and
telecommunications companies. The Company is in
the process of re-inventing its marketing capability to
fully leverage its leadership position. A new marketing
team at Integrated Research is implementing smart
cost-effective customer-centric marketing to fully
exploit the leadership of the Company and the global
growth opportunities.
Over 70% of the Company’s revenues come from the
Americas driven by a professional, locally-based sales,
consulting and support organisation. In contrast only
35% of the market opportunity for the Company
is in the Americas, with 37% in Europe and 28% in
Asia Pacific. This provides opportunities for growth,
and management has implemented a well-structured
plan to build operations in Europe and Asia Pacific to
take full advantage of the potential in those markets.
7
Letter from the ChairmanDirectors and Senior ManagementDirectors’ ReportRemuneration ReportCorporate Governance StatementFinancial StatementsIndependent Audit ReportIntegrated Research and its controlled entities • Annual Report 2014 Building a Foundation for
Growth through Products,
Partnerships and People
About Integrated Research
Integrated Research (IR) designs, develops and
distributes Prognosis performance management
solutions for Unified Communications, Contact Centres,
payments and IT Infrastructure.
Prognosis is aligned to help today’s businesses succeed
and compete in a landscape where system performance
and customer engagement is everything. The deep
insight it provides into technology performance
minimises outages, reduces costs, delivers business
critical insight and ensures user satisfaction.
With over 1,000 enterprise customers in more than
50 countries and a world-class R&D capability we remain
profitable and debt free. Our customers include:
9 of the top 10 US banks,
5 of the world’s 10 largest companies,
4 of the 8 biggest stock exchanges,
8 of the 10 biggest telcos and
4 out of 5 of the biggest oil and gas companies.
We service our customers through direct sales offices in
the USA, UK, Germany, Singapore and Australia together
with a channel-driven global distribution network.
Everything we do is about understanding customers’
challenges and helping them solve them.
8
Integrated Research and its controlled entities • Annual Report 2014 “At Presidio we enable
thousands of customer
interactions through our
Contact Centre services daily.
With Prognosis for Contact
Centre we get full real‑time
visibility into the diversity of
applications and infrastructure
that support those interactions.
Prognosis allows us to
proactively identify and address
issues before they impact the
customer experience.“
Ricky Santos, Senior Vice President,
Presidio Managed Services
Customer First
Using Prognosis to bring insight to client interactions
and resolve issues with the user experience not only
solves problems, it creates new opportunities to market.
The latest release Prognosis 10, includes Contact Centre
and service provider specific solutions that reflect the
deep domain expertise we’ve gained from working
closely with our customers.
One of our largest customers - service provider Presidio,
is a leading provider of professional, cloud and managed
services for advanced IT solutions where every customer
interaction is critical. Prognosis 10 allows its staff to
proactively resolve problems such as dropped calls,
slow voice recognition response times and poor voice
quality before they affect Contact Centre services
and availability.
Our Customer Care programme and Voice of the Customer
strategy demonstrate how our customer-first philosophy
results in customer satisfaction and retention rates that
remain high and among the best in the industry.
Customer Care ensures that customers gain the most
benefit from their investment in Prognosis by helping
them implement it quicker and more effectively to meet
their needs. Our Voice of the Customer strategy enables
customers to identify and prioritise their needs and
wishes so that we can evaluate new concepts and ideas
and develop solutions for them.
To expand our regional footprint and customer focus in
every region, we’ve increased our presence in continental
Europe and opened a new office in Singapore. In the
coming year you will see us taking a bolder position in
our marketing and celebrating the successes we have
achieved with leading global companies.
9
Integrated Research and its controlled entities • Annual Report 2014 Prognosis for Contact Centre
In 2014 we released software designed to target
major contact centre system flaws capable of costing
businesses considerable revenue and driving their
customers to their competitors. Ground-breaking call
recording assurance software ensures customer calls
within contact centres are recorded and playable so they
comply with government regulations.
Prognosis for IT Infrastructure
Hewlett Packard continues to innovate in HP NonStop
with the release of a new product range supporting the
x86 chip set. As a long-term performance management
solution for HP systems and an AllianceONE partner,
HP has invited us to participate in pre-release
development that ensures it will be supported by
Prognosis when launched to the market in FY15.
Prognosis for Payments
The payments industry is dynamic with new players,
technologies and changing consumer behavior. We work
closely with ACI Worldwide to develop and deliver new
solutions including fraud management and money transfer
systems for ACI’s customers across the globe.
Our products
The systems Prognosis manages are complex and their
availability and performance require management
in real time. Our development teams understand
their design, implementation and use in the real world
to ensure that Prognosis provides the insights customers’
support teams need to resolve issues effectively.
Prognosis 10, released in December 2013 is the
foundation for rapid innovation, new solutions,
high-speed release delivery and entry into new markets.
It includes a mobile-friendly interface that lets busy
professionals stay in touch with system performance
on the go, and share information easily with their
colleagues so that issues can be managed around the
clock and around the globe.
Prognosis for Unified Communications (UC)
Prognosis for UC enables our customers to achieve
real-time performance management of communications
across multiple technologies, vendors and applications.
This gives them rapid insight to imminent problems and
enables them to prevent outages before customers or
the business is affected.
This deep insight across the complete UC ecosystem
resulted in Prognosis being chosen to manage the
largest Microsoft Lync customer in the world, which has
implemented over 400,000 endpoints.
“The payments industry is
dynamic with new players,
technologies and changing
consumer behavior.“
10 Integrated Research and its controlled entities • Annual Report 2014
Our partners
We continue to expand and scale our strategic partner
relationships and special priority will be placed on
transforming our engagements with them to grow our
business more effectively across the globe.
Avaya
Integrated Research has been chosen as the only
Avaya DevConnect Select Product Partner for real-time
voice quality performance management and monitoring
of Avaya environments and Prognosis now ships with
every Avaya order. As Avaya’s clients have direct access
to Prognosis through their Avaya representatives we
have appointed a Global UC Alliance Director to drive
joint go-to-market initiatives.
ACI Worldwide
ACI Alliance revenue has also increased considerably
and a Prognosis module is now embedded into
ACI’s solution. This has seen Prognosis make the
transition from IT departments into the business,
becoming an integral part of the business’s success.
A Global ACI Alliance Director was appointed in
January 2014 to grow the global strategic alliance
and further expand the mutually successful program.
“Extended solutions are
developed as a result of finding
answers to real world customer
problems. All customers
can benefit from our deep
domain expertise.“
Trish Taylor, Program Office Manager.
Consulting
For the fifth consecutive year IR’s Consulting Services
continue to grow ensuring that customers get the most
from their investment in Prognosis. IR’s consultants share
their knowledge with customers tailored to the size and
complexity of their environments.
The extended solutions developed as a result of finding
answers to real world customer problems may be
incorporated into future releases of Prognosis. This means
all customers can benefit from the deep domain expertise
gained from customer intimacy.
11
Integrated Research and its controlled entities • Annual Report 2014 Our employees
IR has 200 employees globally, many of whom have been
with us for five years or more. Some employees reach a
decade and more of employment with IR, having started
their careers as graduates and advanced through the
ranks of research and development to team leads,
product managers and solutions consultants.
This progression means that IR employees are in touch
with customers needs and can consistently show how
they’ve solved real problems for real customers and
made a real impact on their lives.
Recently Travis Polland, Principal Solutions Strategist,
with a wealth of experience at the digital coalface was
asked to join the ‘war room’ of a Prognosis customer.
After a system upgrade a global Contact Centre had
been down for 12 hours and there was no return.
They had to find the way forward.
This was a pivotal point
for the customer.
Travis joined a global virtual team from his Denver base
using Prognosis remotely to validate the subjective
measurements taken on the other side of the world.
Over the course of the next 3 hours the virtual team
of customer, vendor and consultant, isolated the
problem and the Contact Centre was able to resume its
high-quality customer service.
“Everybody received good value out of it.
By making changes ‘in‑flight’ we could see how
those changes impacted the agents. This was a
pivotal point for the customer; it was also a pivotal
point for IR because it was the first time we were in
a ‘war room’ with a customer.“
Travis Polland, Principal Solutions Strategist
Integrated Research employee, five years
Training is another key service delivered by IR consultants to ensure customers get the most out of Prognosis.
Denver-based Solutions Consultant Jitesh Harani, an Integrated Research employee for six years explains:
“We provided some training recently for one of
our customers, a leading distributor of broad‑based
maintenance, repair and operations products.
Before deploying Prognosis they often didn’t know
about a problem until someone told them about it.
Now using Prognosis they can be proactive, wherever
they are. In the office, on the road, or in an airport
transit lounge with a tablet or mobile phone they can
manage and even prevent these things from happening.
Our customer is very enthusiastic about how
robust Prognosis is and how it gives them
so much information outside the immediate
Unified Communications environment.“
Jitesh Harani, Solutions Consultant
Integrated Research employee, six years
12
Integrated Research and its controlled entities • Annual Report 2014 IR provides tools and expertise that optimise systems for
the real world.
As partnerships are vital to IR’s growth and scale, we ensure that our teams work closely
with each other.
“Our team worked with ACI in America with early
morning video calls to understand the different way
users rely on ACI’s products.
As a result of matching user personas like the wire
room manager and operator to user needs we
were able to show our progress at the end of every
development cycle and ensure we were on the
right track.“
Mina Gurgis, Advanced Software Engineer ACI Team
Integrated Research employee, four years
“Putting a face to the feature.“
“In the R&D department, we have always tried to
deliver value to our customers and to give users
clear insight into their systems. Now as part of our
Customer Care initiative, we are on a new path and
we are exploring it alongside the operators and
administrators that we service.
Personally, I am excited by the interactions and
feedback because I can see the difference we make.
We have raised quality to a whole new level,
we deliver more than ever before and our solutions
have targeted impact because now we can
‘put a face’ to the feature.“
Joel Tow, R&D Team Lead, Customer Care
Integrated Research employee, two years
13
Integrated Research and its controlled entities • Annual Report 2014 “With a keen focus on
driving channels to success
through partnering and
collaboration, we are
building and growing a
scalable Channel landscape
in different countries
and environments across
continental Europe.“
Hans-Joerg Friedrich
Head of Channels Continental Europe
14
Directors’ ReportIntegrated Research and its controlled entities • Annual Report 2014 Directors’ Report
Review of operations and activities
Principal activities
Integrated Research Limited’s principal activities are the design, development,
implementation and sale of systems and applications management computer
software for business-critical computing, Unified Communication networks and
Payment networks.
Group overview
Integrated Research has a twenty-six year heritage of
providing performance monitoring, diagnostics and
management software solutions for business-critical
computing environments.
Since its establishment in 1988, the Company has
provided its core Prognosis products to a cross section
of large organisations requiring high levels of computing
performance and reliability.
The Prognosis product range is an integrated suite of
monitoring and management software, designed to give
an organisation’s technical personnel operational insight
into their HP NonStop, distributed system servers,
Unified Communications (UC), and Payment
environments and the business applications that run
on these platforms.
Integrated Research has developed its Prognosis
products around a fault-tolerant, highly distributed
software architecture, designed to achieve high levels
of functionality, scalability and reliability with a low total
cost of ownership.
Integrated Research services customers in more
than 50 countries through direct sales offices in
the USA, UK, Germany, Singapore and Australia,
and via a global, channel-driven distribution network.
Integrated Research’s customer base consists of many
of the world’s largest organisations and includes
major stock exchanges, banks, credit card companies,
telecommunications companies, computer companies,
service providers and manufacturing companies.
The Company generates its revenue from licence fees,
recurring maintenance and consulting services.
Revenue from the sale of licences where there is no
post-delivery obligations is recognised in profit at the
date of the delivery of the licence key. Revenue from
maintenance contracts is recognised rateably over
the service agreement, which is typically one year.
Revenue from consulting services is recognised over
the period the services are delivered.
“The Company
achieved an annual
Profit After Tax result of
$8.5 million“
15
Letter from the ChairmanDirectors and Senior ManagementRemuneration ReportCorporate Governance StatementFinancial StatementsIndependent Audit ReportDirectors’ ReportIntegrated Research and its controlled entities • Annual Report 2014 Review and results of operations
Overview
The Company achieved an annual Profit After Tax result of $8.5 million compared to the prior year of $9.1 million.
The Company’s overall financial performance was contrasted by two distinct halves. Profitability in the first half was up
64% as a result of a significant transaction with Avaya toward the end of the period. The strong first half momentum
did not continue into the second half primarily due to the absence of further large licence sale contracts. Over 70% of
the Company’s Revenue comes from the Americas which represents approximately 30% of the global market for the
Company’s Unified Communications products. The Company is in the process of re-engineering its go to market with a
view to growing its operations in Asia Pacific and Europe to take advantage of this opportunity. The Company is also in
the process of bringing new product lines to market to service the growing Microsoft Lync market opportunity and the
under-served needs of performance management in the Contact Centre market.
Revenue
Revenue for the year was $53.2 million, an increase of 9% over 2013. Licence fees increased by 5% to $28.0 million
with both Unified Communications and Payments product lines continuing to grow, and Infrastructure remaining
flat compared to the prior year. Maintenance revenues grew 16% over the previous corresponding year due in part
to a strong retention rate of 95% and also due to the annualisation of growth from the installed base of Unified
Communications customers. Revenue from consulting services grew by 3% to $4.6 million.
Over 95% of the Company’s revenues are derived outside of Australia. Using prior year exchange rates, the Company’s
revenue would have remained flat compared to the prior year. The Company may benefit from a lower exchange rate
in 2015, although this will be partially offset by forward exchange contracts in place at 30 June 2014 as disclosed in
Note 20.
The following table presents Company revenues for each of the relevant product groups:
In thousands of AUD
Unified Communications
Infrastructure
Payments
Consulting
Total revenue
2014
25,118
19,530
3,962
4,633
53,243
2013
21,760
19,566
3,023
4,510
48,859
% Change
15%
(0%)
31%
3%
9%
Unified Communications (UC) revenue rose 15% over the previous year with a large first half transaction with Avaya
coupled with an overall increase in maintenance revenue driven by strong customer retention and growth in the
installed base. In the fourth quarter Avaya extended the territories in which it sells Prognosis to cover Europe and
parts of Asia Pacific. The overall Unified Communications market continues to evolve with Microsoft Lync significantly
growing its market share. Integrated Research is well placed to take advantage of this market dynamic.
Infrastructure revenues remained flat over the previous year as a consequence of customers continuing to move
toward new and evolving technological platforms that are not as reliant on fault tolerant high end systems such as
HP NonStop.
Payments revenue rose 31% over the previous year as the Company continues to progress from a direct to an indirect
sales model. Both the Company and ACI1 continue to work together to develop and deliver new solutions including
new fraud management and money transfer systems delivered in the fourth quarter of FY14.
Consulting services showed growth for a fifth year in a row, with revenue increasing 3% to $4.6 million as customers
increasingly look to extend their Prognosis solution to provide greater insight into their Unified Communications,
Payments and Infrastructure environments.
1 ACI Worldwide is the leading international provider of electronic payment and banking systems.
16
Directors’ ReportIntegrated Research and its controlled entities • Annual Report 2014 The following table presents Company revenues for each of the relevant geographic segments in underlying
natural currencies:
Americas (USD’000)
Europe (£’000)
Asia Pacific (A$’000)
2014
34,759
4,415
8,100
2013
35,247
4,519
7,496
% Change
(1%)
(2%)
8%
The Americas was down by 1% over the previous year with strong first half growth driven by Unified Communications
licence sales offset by the absence of large licence sales in the second half as a consequence of delays in purchasing
from customers. The US FY15 pipeline remains strong and the overall customer retention rate of 94% provides the
region with a platform for future growth.
Europe revenues were down 2% over the prior year as the regional operation went through a significant re-building
phase with changes in management and an increased investment in sales capability.
Asia Pacific revenue grew by 8% to $8.1 million driven by licence sales growth in Payments products. The Asia Pacific
region will continue to build with increasing investment in the Singapore office and the development of the sales team.
Expenses
Total expenses were $42.6 million, up 11% against the prior year. The higher expenses have been driven in part by
a lower Australian dollar giving rise to higher offshore translated costs. In constant currency, expenses were up 5%.
The number of staff at the end of the current year was 198 (2013: 200). The following table presents the Company’s
cost base compared to the preceding year:
In thousands of AUD
Research and development expenses
Sales, consulting and marketing expenses
General and administration expenses
Total expenses
2014
11,067
26,836
4,707
42,610
2013
10,777
23,279
4,280
38,336
Research and development expenditure of $11.1 million was 21% of total revenue and slightly higher than
historical averages. The major development initiative during the 2014 financial year was on Prognosis 10 which
was released toward the end of the first half. The new architectural release, Prognosis 10, delivers a new powerful
web-based interface, mobile user experience, a powerful business insights module as well as rapid extensibility
through the proprietary Prognosis frameworks2. Management believes these capabilities are important differentiators
to its competitors and important in supporting customers achieve their business objectives. The new architecture of
Prognosis 10 also allows the Company to increase the speed with which it can develop and deliver new innovations
to the market. Evidence of this has been seen through the rapid release of two additional versions of Prognosis
(Version 10.1 and 10.1.5) since the release of Prognosis 10.0.
Net research and development expenses are represented as follows:
In thousands of AUD
Gross research and development spending
Capitalisation of development expenses
Amortisation of capitalised expenses
Net research and development expenses
2
Proprietary Prognosis frameworks includes “PACE”: Prognosis Agile Component
Engine and “PQL”: Prognosis Query Language.
2014
12,294
(7,967)
6,740
11,067
2013
12,051
(7,880)
6,606
10,777
17
Letter from the ChairmanDirectors and Senior ManagementRemuneration ReportCorporate Governance StatementFinancial StatementsIndependent Audit ReportDirectors’ ReportIntegrated Research and its controlled entities • Annual Report 2014 Shareholder returns
Returns to shareholders remains strong through the payment of partly franked dividends:
Net profit ($’000)
Basic EPS
Dividends per share
Dividend franking percentage
Return on equity
Financial position
2014
$8,489
5.03¢
5.0¢
33%
28%
2013
$9,078
5.40¢
5.0¢
36%
30%
2012
$9,035
5.41¢
5.0¢
58%
31%
The following table presents key items from the consolidated statement of financial position:
In thousands of AUD
Assets:
Cash and cash equivalents (current)
Trade and other receivables (current and non-current)
Intangible assets (non-current)
Liabilities:
2014
2013
13,300
22,857
16,257
14,827
23,564
15,040
Deferred revenue (current and non-current)
16,369
14,729
Equity
30,747
30,010
The Company’s financial position remains strong with $13.3 million in cash and cash equivalents as a result of
continuing strong cashflow from operations. Cashflow from operations was $16.1 million for the year facilitating the
payment of dividends and reinvestment in research and development.
Trade and other receivables decreased by 3% over the preceding year due to an improvement in collections partially
offset by an increase in deferred payment terms with key managed service providers who have a need to match
payments with underlying cashflows from their customers.
The increase in intangible assets is a result of the capitalisation of development costs primarily on Prognosis 10 as
referenced in preceding paragraphs.
The consolidated statement of financial position presented at page 48 together with the accompanying notes provides
further details.
18
Directors’ ReportIntegrated Research and its controlled entities • Annual Report 2014 Outlook and Strategy for 2015
Prognosis derives its competitive advantage from
its unique design which enables real time insights,
monitoring, extreme scalability, high flexible and
very deep visibility into the diversity of systems and
applications that it manages. As such, Prognosis is
ideally suited to complex, high transaction volume
and high traffic environments.
Competition exists in each of the markets in
various forms. Firstly, some of the large telephony and
payments vendors provide their own performance
management software, although this is generally inferior
to the capability of Prognosis and does not solve the
problem where heterogeneous environments exist.
Secondly, some of the large solution software vendors
also provide performance management capabilities,
but this is typically not their core specialisation.
Lastly, the Company from time to time competes
with smaller, start-up niche vendors. The Company
remains focussed on sustaining its competitive
advantage through continuing innovation that comes
from its research and development program.
Through deep forensic analysis into the root cause of
problems and extensive reporting on service levels,
Prognosis enables proactive and rapid resolution of issues
as well as capacity optimisation and operational planning.
This provides insight into potential issues before
they become business-critical. Prognosis helps users
improve their operational maturity by proactively
minimizing expensive outages, improving user
satisfaction and optimizing IT operations and resources.
Prognosis is progressively using its real time access to
big data volumes to deliver insights into a customer’s
business that goes beyond improving and optimising
operational efficiency. Through real time access and
analysis, Prognosis Business Insights reveals business
and customer trends that are leveraged for economic,
fraud management and competitive advantage.
The Company’s growth strategy is to create, sell
and support Prognosis-based products and services
that deliver profitable growth from existing markets
and customers, as well as creating new products that
open new markets.
The Company currently focuses on three core markets:
Infrastructure, Communications and Payments.
The Company is actively building a fourth core market
in the Contact Centre space. This has not yet become a
material part of the business.
The Infrastructure market for Integrated Research includes
users of high-end computing systems such as the HP
NonStop platform for financial, telecommunication,
trading, manufacturing and other high-volume, high-value
transaction environments. NonStop is an important part
of HP’s server strategy and remains at the operational core
of many of the world’s largest companies. The Company
continues to invest in Prognosis for Nonstop to be aligned
with HP and its customers. Prognosis for Distributed
Systems (Windows, Unix and Linux) is mostly sold alongside
the Company’s NonStop and Unified Communications
products, as customers seek a common monitoring
interface for all platforms, or convert applications from
one platform to another.
The Communications segment includes users of IP
Telephony and Unified Communications (UC) applications
such as video, messaging, mobility and presence.
The Company anticipates growth in this segment through
the ongoing shipment of IP phones and endpoints as
well as the increasing value per endpoint through the
use of UC applications. UC networks are becoming
more pervasive, more critical and more complex and as
such they require effective performance management
and Prognosis is strongly positioned to benefit from
this need. The company will continue to invest in R&D to
expand the suite of Prognosis for UC products to cover
more platforms, vendors and applications, and by doing
so increase the Company’s addressable market and
revenue potential.
The Company has expanded its suite of Payments
products by adding new products for additional platforms,
vendors and applications, including fraud management
and wholesale money transfer applications. This expands
the Company’s addressable market in the Payments
segment and increases revenue potential. The Company
will maintain this strategy in the Payments market.
Our strategic alliance with ACI, the world’s largest
payments software vendor, has delivered revenue growth
in FY14 and continues to be an important channel to
market for the Company.
Consulting Services provide Prognosis customers with
implementation, customisation and training services to
ensure that they get the most out of their investment
in Prognosis. Consulting Services also help IR develop
unique and repeatable solutions that extend the use
and value of Prognosis. Consulting Services achieved
profitability in FY14 and the Company will continue
to invest in people and processes to grow consulting
revenue and margin.
The Company continues to invest in its R&D capability
through the addition of resources and its use of the
Agile development methodology which has improved
the rate and quality of software production for
the Company.
19
Letter from the ChairmanDirectors and Senior ManagementRemuneration ReportCorporate Governance StatementFinancial StatementsIndependent Audit ReportDirectors’ ReportIntegrated Research and its controlled entities • Annual Report 2014 Directors and senior management
Directors
The directors of the Company at any time during or since the end of the financial year are listed below:
Steve Killelea AM
Non‑Executive Director and Chairman
Steve founded Integrated Research in August 1988 and held the
position of Managing Director and Chief Executive Officer until
retiring from his executive position in November 2004. He was
appointed as a Non-Executive Director in November 2004 and
elected Chairman in July 2005. Steve is also Chairman of the
Institute for Economics and Peace and The Charitable Foundation
and for activities involved with these he has received a number of
international awards including the Order of Australia. He is also
active in the financial community with investments in many high
tech companies. Steve’s current term will expire no later than the
close of the 2015 Annual General Meeting.
Listed company directorships held in the past three years: None.
Age: 65 years.
Darc Dencker‑Rasmussen MAICD
Managing Director and Chief Executive Officer
Darc was appointed CEO and Managing Director of Integrated
Research in October, 2013. Darc is a seasoned 25-year IT and
enterprise software professional with extensive international
experience in building and growing Software as a Service
(SaaS) and Cloud based businesses. Darc was Chief Operating
Officer and served as Executive Director at TrustedCloud
(formerly IntraPower ASX:IPX). Prior to joining TrustedCloud,
Mr Rasmussen served as Senior Vice President of CRM
(Customer Relationship Management) at SAP in Germany
and led SAP’s Strategic Initiative to build and grow their CRM
business worldwide. Darc also served as Director and Vice
President for Asia Pacific for Softbrands (acquired by Infor)
and built their significant regional footprint.
Listed company directorships held in the past three years other
than listed above: None.
Age: 54 years.
Alan Baxter BSc, Dip Ed
Independent Non‑Executive Director
Alan was appointed as a Director in June 2009. Alan has over
forty years’ experience in Information Technology covering
a broad range of the industry’s activities. These include
many years in a variety of roles with IBM Australia, CEO of DMR
Consulting in Australia and COO of Fujitsu Consulting’s global
operations from London. He was non-executive Chairman of
Fujitsu Australia & New Zealand, a director of Mincom Ltd,
non-executive Chairman of Konekt Limited and also of
Innogence Limited. He is a non-executive director of CPT Global,
a publicly listed technology consulting company. Alan’s current
term will expire no later than the close of the 2015 Annual
General Meeting.
Listed company directorships held in the past three years other
than listed above: None.
Age: 69 years.
20
Kate Costello LLB, FAICD
Independent Non‑Executive Director
Kate was appointed as a Director in August 2005. She is a lawyer
and has over twenty years experience in corporate governance
and strategy development. She is also a Director of Governance
Matters Pty Ltd, LBT Innovations Ltd, and a number of other
private companies. Kate’s current term will expire no later than
the close of the 2014 Annual General Meeting.
Listed company directorships held in the past three years other
than listed above: None.
Age 61 years.
Directors and Senior ManagementIntegrated Research and its controlled entities • Annual Report 2014 Garry Dinnie
BCom, FCA, FAICD, FAIM, MIIA(Aust)
Clyde McConaghy
B.Bus., MBA, FAICD, FIOD ‑ UK
Independent Non‑Executive Director
Non‑Executive Director
Garry was appointed a Director in February 2013.
He is a Director & Chair of the Audit & Risk Committee of
CareFlight Limited, Inabox Group Limited, Australian Settlements
Limited and a Director of a number of private companies.
He is also the Chair or member of a number of Audit & Risk
Committees of NSW public sector and private sector entities.
He was previously a partner with Ernst & Young for 25 years
specialising in audit, advisory and IT services. Garry’s current
term will expire no later than the close of the 2016 Annual
General Meeting.
Listed company directorships held in the past three years other
than listed above: None.
Age: 62 years.
Clyde was appointed a Director in December 2007. He has
three decades of international strategic market development
experience in the technology, online and media industries.
Clyde is a Board Director of Infomedia Ltd (an ASX-listed
technology company) and Serko Ltd (a NZX-listed
technology company). Clyde was a Board Director of
WMRC Plc (now IHS Global Insight) on the London Stock
Exchange and a Director of the Economist Intelligence Unit
in London. Clyde is Managing Director of Optima Boards,
a board advisory firm for companies and not-for-profit entities.
Clyde’s current term will expire no later than the close of
the 2014 Annual General Meeting.
Listed company directorships held in the past three years other
than listed above: None.
Age: 52 years.
Peter Lloyd
Non‑Executive Director
Peter was appointed a Director in July 2010. He has 40 years’
experience in computing technology, having worked for
both computer hardware and software solution providers.
For the past 31 years Peter has been specifically involved
in the provision of payments solutions for banks and
financial institutions. He is also a Director of The Grayrock
Group Pty Ltd, Transacumen Pty Ltd and Limehouse Creative
Pty Ltd. Peter’s current term will expire no later than the close
of the 2016 Annual General meeting.
Listed companies directorships held in the past three years: None.
Age: 60 years.
Company Secretary
David Purdue
BEc, MBA, Grad Dip CSP, FCA, FGIA, FCIS, GAICD
David was appointed Company Secretary in July 2012.
David is also the Company’s Global Commercial Manager and
is responsible for the Company’s global commercial business.
Prior to this, David spent three years at Integrated Research’s
Colorado office to manage the Americas finance operations.
David is a Chartered Accountant and Chartered Secretary
with over 25 years experience in both professional practice
and industry.
Resigning Director during the year
Mark Brayan Managing Director and Chief Executive Officer (Resigned September 2013)
Mark Brayan was Managing Director and Chief Executive Officer between September 2007 and September 2013.
Mark contributed substantially to the development of the Company’s Unified Communications market and led the
Company through significant change in the capability and structure of the business.
Listed company directorships held in the past three years: None. Age 50 years.
21
Letter from the ChairmanDirectors’ ReportRemuneration ReportCorporate Governance StatementFinancial StatementsIndependent Audit ReportDirectors and Senior ManagementIntegrated Research and its controlled entities • Annual Report 2014 Senior management
Peter Adams B.Com, CA
Chief Financial Officer
Peter joined Integrated Research in March 2008 and is responsible
for overseeing the Company’s finance and administration,
including regulatory compliance and investor relations.
Peter is a Chartered Accountant with over 25 years experience.
He has held a number of senior accounting and finance roles,
including seven years as CFO with Infomedia (an ASX-listed
technology company), six years with Renison Goldfields
(ex ASX top 100 Resources Company) and two years with
Transfield Pty Ltd. Peter’s career began with Arthur Andersen,
where he was responsible for managing large audit clients.
Alex Baburin B.App. Sc
Chief Operations Officer
Alex Baburin joined Integrated Research in November 2006 and
is responsible for the Company’s software development and
global support activities. Alex has over 25 years experience in
the development, creation and management of high-technology
hardware and software products for Honeywell and Siemens.
Before joining Integrated Research he was responsible for general
management of the Siemens Access Control product line globally
and for much of that time was based in Germany.
Andre Cuenin BSc, MBA
President Americas & VP European Field Operations
Andre joined Integrated Research in October 2008 and is
responsible for all business operations in both the Americas
and Europe region. Andre has over 25 years experience in
IT sales, including VP of Field Operations at Stratavia, where he
was responsible for sales and professional services marketing
worldwide. Prior to this he spent 15 years with CA (previously
known as Computer Associates) in several senior management
positions including VP of Worldwide Sales Operations.
Kevin Ryder M.Mgt, MBA
Vice President, Global Marketing
Kevin joined Integrated Research in October 2013 and is
responsible for global marketing and ensuring IR’s sales and
marketing teams align to deliver revenue focused results.
Kevin has over 25 years sales and marketing experience
in the ICT industry, including leadership roles in Europe,
North America, Asia and Australia. Most recently he was the
Enterprise Marketing Director at Microsoft and prior to that,
GM of Marketing at KAZ Group (now owned by Fujitsu).
Kevin was also GM for Eicon Technology and in that role was
responsible for establishing the Asia Pacific regional office in
Sydney and successfully growing the business.
Melanie Newman GDip HR
General Manager ‑ Human Resources
Melanie is responsible for the Human Resources function at
Integrated Research which includes responsibility for aligning
Strategic HR initiatives with the Business Strategy to support
a high performance culture. Melanie has over 15 years HR
Management experience mostly within global organisations
in the Information Technology industry.
22
Directors and Senior ManagementIntegrated Research and its controlled entities • Annual Report 2014 The directors present their report together with the Financial Statements of
Integrated Research Limited (“the consolidated entity”), being the Company and its
controlled entities, for the year ended 30 June 2014 and the Auditor’s Report thereon.
Results
The net profit of the consolidated entity for the 12 months ended 30 June 2014 after income tax expense was $8.5 million.
Dividends
Dividends paid or declared by the Company since the end of the previous financial year were:
Final 2013 - Ordinary shares
Interim 2014 - Ordinary shares
Final 2014 - Ordinary shares
40% franked
30% franked
35% franked
3.0
2.5
2.5
5,055
4,223
4,224
13 Sep 2013
21 Mar 2014
12 Sep 2014
Cents
Per share
Total Amount
$’000
Date of
Payment
Events subsequent to reporting date
For dividends declared after 30 June 2014 see Note 19 in the financial statements. The financial effect of dividends
declared and paid after 30 June 2014 has not been brought to account in the financial statements for the year ended
30 June 2014 and will be recognised in subsequent financial statements.
No other transaction or event of a material or unusual nature has arisen in the interval between the end of the
financial year and the date of this report which is likely, in the opinion of the directors of the Company, to affect
significantly the operations of the consolidated entity, the results of those operations, or the state of affairs of the
consolidated entity, in future financial years.
Future developments
Likely developments in the operations of the consolidated entity in future financial years and the expected results of
those operations are referred to generally in the Review of Operations and Activities Report.
Further information on likely developments including expected results would in the Directors’ opinion, result in
unreasonable prejudice to the Company and has therefore not been included in this Report.
Directors and company secretary
Details of current directors’ qualifications, experience, age and special responsibilities are set out on pages 20 to 21.
Details of the company secretary and his qualifications are set out on page 21.
23
Letter from the ChairmanDirectors and Senior ManagementRemuneration ReportCorporate Governance StatementFinancial StatementsIndependent Audit ReportDirectors’ ReportIntegrated Research and its controlled entities • Annual Report 2014 Officers who were previously partners of the audit firm
No officers of the Company were partners of the current audit firm during the financial year.
Directors’ meetings
The numbers of meetings of the Company’s board of directors and of each board committee held during the year
ended 30 June 2014, and the numbers of meetings attended by each director were:
Audit and Risk
Committee
Meetings
Nomination and
Remuneration
Committee
Meetings
Strategy
Committee
Meetings
Board Meetings
A
11
2
9
10
11
11
12
11
B
12
2
9
12
12
12
12
12
A
-
-
-
-
-
3
3
3
B
-
-
-
-
-
3
3
3
A
2
-
-
3
3
-
-
-
B
3
-
-
3
3
-
-
-
A
-
1
2
3
3
3
-
-
B
-
1
2
3
3
3
-
-
Alan Baxter
Mark Brayan
Darc Rasmussen
Kate Costello
Steve Killelea
Peter Lloyd
Clyde McConaghy
Garry Dinnie
A: Number of meetings attended.
B: Number of meetings held during the time the directors held office or was a member of the board or committee
during the year.
State of affairs
In the opinion of the directors there were no significant changes in the state of affairs of the consolidated entity that
occurred during the financial year under review.
Environmental regulation
The consolidated entity’s operations are not subject to significant environmental regulations under either
Commonwealth or State legislation.
24
Directors’ ReportIntegrated Research and its controlled entities • Annual Report 2014 Directors’ interests
The relevant interest of each director in the shares, options or performance rights over ordinary shares issued by the
companies in the consolidated entity and other relevant bodies corporate, as notified by the directors to the Australian
Securities Exchange in accordance with S205G(1) of the Corporations Act 2001, at the date of this report is as follows:
Ordinary shares in Integrated Research
Options
Performance
rights
Directly held
Beneficially
held
-
-
-
-
197,000
8,700
199,622
-
Total
197,000
8,700
199,622
-
94,497,339
337,612
94,834,951
-
-
-
-
-
-
Number of
options
Number of
rights
-
-
-
-
-
-
-
-
350,000
-
-
-
-
-
Alan Baxter
Darc Rasmussen
Kate Costello
Garry Dinnie
Steve Killelea
Clyde McConaghy
Peter Lloyd
Share options and performance rights
Options and performance rights granted to directors and senior executives
During or since the end of the financial year, the Company granted performance rights for no consideration over
unissued ordinary shares in Integrated Research Limited to the following named directors and executive officers of the
consolidated entity as part of their remuneration:
Directors
Darc Rasmussen
Executive Officers
Andre Cuenin
Number of
performance
rights granted
Performance
hurdle
Exercise price
Expiry date
350,000
85,000
Yes
Yes
Nil
Nil
Oct 2016
Sep 2017
The performance rights were granted under the Integrated Research Performance Rights and Option Plan
(established November 2011). The performance rights vest on 8 October 2016 for Mr Rasmussen and 31 August 2017
for Mr Cuenin, subject to applicable performance hurdles. The performance rights are automatically exercised
upon vesting. The Company will issue shares upon vesting conditions being met for Executive Officers. The Company
will either issue shares or make an on-market purchase for Mr Rasmussen upon his vesting conditions being satisfied.
25
Letter from the ChairmanDirectors and Senior ManagementRemuneration ReportCorporate Governance StatementFinancial StatementsIndependent Audit ReportDirectors’ ReportIntegrated Research and its controlled entities • Annual Report 2014 Unissued shares under performance rights
Unissued ordinary shares of Integrated Research Limited under performance rights at the date of this report are as follows:
Performance rights
Expiry date
Sept 2014
Nov 2014
Sept 2015
Oct 2016
Oct 2016
Sep 2017
Total performance rights
Exercise price
Nil
Nil
Nil
Nil
Nil
Nil
Number of
shares
430,000
746,500
160,000
165,000
350,000
85,000
1,936,500
Performance rights do not entitle the holder to participate in any share issue of the Company or any other body corporate.
Shares issued on the exercise of options
During or since the end of the financial year, the Company issued ordinary shares as a result of the exercise of options
as follows (there were no amounts unpaid on the shares issued):
Number of shares
Amount paid on each share
582,000
10,000
$0.28
$0.31
Indemnification and insurance of officers and auditors
Indemnification
The Company has agreed to indemnify the directors of the Company on a full indemnity basis to the full extent
permitted by law, for all losses or liabilities incurred by the director as an officer of the Company including, but not
limited to, liability for negligence or for reasonable costs and expenses incurred, except where the liability arises out of
conduct involving a lack of good faith.
Insurance
During the financial year Integrated Research Limited paid a premium to insure the directors and executive officers of
the consolidated entity and related bodies corporate.
The liabilities insured include costs and expenses that may be incurred in defending civil or criminal proceedings that
may be brought against officers in their capacity as officers of the consolidated entity.
26
Directors’ ReportIntegrated Research and its controlled entities • Annual Report 2014 Remuneration report
The Company’s Remuneration Report, which forms part of this Directors’ Report, is on pages 28 to 39.
Corporate governance
A statement describing the Company’s main corporate governance practices in place throughout the financial year is
on pages 40 to 44.
Non‑audit services
During the year Ernst and Young, the Company’s auditor, has performed certain other services in addition to their
statutory duties.
The board has considered the non-audit services provided during the year by the auditor and in accordance with
written advice provided by resolution of the Audit & Risk Committee, is satisfied that the provision of those non-audit
services during the year by the auditor is compatible with, and did not compromise, the auditor independence
requirements of the Corporations Act 2001 for the following reasons:
All non-audit services were subject to the corporate governance procedures adopted by the Company and have
been reviewed by the Audit & Risk Committee to ensure they do not impact the integrity and objectivity of the
auditor, and
The non-audit services provided do not undermine the general principles relating to auditor independence as
set out in Professional Statement F1 Professional independence, as they did not involve reviewing or auditing the
auditor’s own work, acting in a management or decision making capacity for the Company, acting as an advocate
for the Company or jointly sharing risks and rewards.
A copy of the auditors’ independence declaration as required under Section 307C of the Corporations Act is on page 81
and forms part of the Directors’ Report.
Rounding of amounts to nearest thousand dollars
The Company is of a kind referred to in ASIC Class Order 98/100 dated 10 July 1998 and in accordance with that
Class order, amounts in the Financial Statements and the Directors’ Report have been rounded off to the nearest
thousand dollars, unless otherwise stated.
This report is made in accordance with a resolution of the directors.
Steve Killelea
Chairman
Darc Rasmussen
Chief Executive Officer
Dated at North Sydney this 19th day of August 2014
27
Letter from the ChairmanDirectors and Senior ManagementRemuneration ReportCorporate Governance StatementFinancial StatementsIndependent Audit ReportDirectors’ ReportIntegrated Research and its controlled entities • Annual Report 2014 Remuneration report (audited)
Remuneration policies
Remuneration levels for key management personnel
and secretaries of the Company, and relevant key
management personnel of the consolidated entity are
competitively set to attract and retain appropriately
qualified and experienced directors and senior executives.
The Nomination and Remuneration Committee
obtains independent advice on the appropriateness of
remuneration packages given trends in comparative
companies both locally and internationally and the
objectives of the Company’s remuneration strategy.
Key management personnel (including directors) have
authority and responsibility for planning, directing
and controlling the activities of the Company and the
consolidated entity.
The remuneration structures explained below are
designed to attract suitably qualified candidates,
reward the achievement of strategic objectives,
and achieve the broader outcome of creation of value
for shareholders. The remuneration structure takes
into account:
The capability and experience of the directors and
senior executives
The directors and senior executives ability to control
the relevant segment’s performance
The consolidated entity’s performance including:
The consolidated entity’s earnings
The growth in share price and returns on
shareholder wealth
Remuneration packages include a mix of fixed and
variable remuneration and short and long-term
performance based incentives.
Fixed remuneration
Fixed remuneration consists of base remuneration
(which is calculated on a total cost basis and includes
any FBT charges related to employee benefits including
motor vehicles), as well as employer contributions to
superannuation funds.
Remuneration levels are reviewed annually through a
process that considers individual, segment and overall
performance of the consolidated entity. In addition,
external remuneration surveys provide periodic
analysis to ensure the directors’ and senior executives’
remuneration is competitive in the market place.
A senior executive’s remuneration is also reviewed
on promotion.
Performance‑linked
remuneration
Performance linked remuneration includes both
short-term and long-term incentives and is designed
to reward executive directors and senior executives
for exceeding their financial and personal objectives.
The short-term incentive (STI) is an “at risk” bonus
provided in the form of cash, while the long-term
incentive (LTI) is provided as either options or
performance rights over ordinary shares of Integrated
Research Limited under the rules of the share plans.
Short‑term incentive bonus
The Nomination and Remuneration Committee is
responsible for setting the key performance indicators
(KPIs) for the Chief Executive Officer, and for approving
the KPIs for the senior executives who report to him.
The KPIs generally include measures relating to
the consolidated entity, the relevant segment,
and the individual, and include financial, people,
customer, strategy and risk measures. The measures are
chosen as they directly align the individual’s reward to
the KPIs of the consolidated entity and to its strategy
and performance.
The financial performance objectives vary with position
and responsibility and are aligned with each respective
year’s budget. The non-financial objectives vary with
position and responsibility and include measures such as
achieving strategic outcomes and staff development.
At the end of the financial year the Nomination
and Remuneration Committee assesses the actual
performance of the CEO against the KPIs set at the
beginning of the financial year. A percentage of the
predetermined maximum amounts for each KPI
is awarded depending on results. The committee
recommends the cash incentive to be paid to the
CEO for approval by the board.
28
Remuneration ReportIntegrated Research and its controlled entities • Annual Report 2014 Long‑term incentive
Prior to the 2012 financial year, options were issued to executive directors and other senior executives under the
Employee Share Option Plan. In November 2011, the Company established a new plan titled Integrated Research
Performance Rights and Options Plan (IRPROP). Performance rights are issued to executive directors and other
senior executives under the IRPROP. The ability of executive directors to exercise either options or performance rights is
conditional on the consolidated entity achieving certain profit after tax (PAT) performance hurdles over the vesting period.
PAT was considered the most appropriate performance hurdle given its intrinsic link to creating shareholder wealth.
Consequences of performance on shareholder wealth
In considering the consolidated entity’s performance and benefits for shareholder wealth, the Nomination and
Remuneration Committee has regard to the following indices in respect of the current financial year and the previous
four financial years:
New licences ($’000)
Net profit ($’000)
Dividends paid ($’000)
Closing share price
Change in share price
2014
28,048
8,489
9,278
$0.995
($0.04)
2013
26,632
9,078
8,413
$1.035
$0.37
2012
28,861
9,035
7,512
$0.665
$0.39
2011
25,005
7,465
4,171
$0.275
($0.125)
2010
18,413
5,401
7,506
$0.40
$0.125
Net profit and new licence sales are considered in setting the STI, as two of the financial performance targets are profit
after tax and new licences.
The Nomination and Remuneration Committee considers that the above performance linked structure is generating the
desired outcomes.
Key Management Personnel
The following were key management personnel of the consolidated entity at any time during the reporting period and
unless otherwise indicated were key management personnel for the entire period:
Directors (full year)
Directors (part year)
Steve Killelea ‑ Chairman
Darc Rasmussen ‑ Chief Executive Officer (appointed October 2013)
Mark Brayan ‑ Chief Executive Officer (resigned August 2013)
Alan Baxter
Kate Costello
Peter Lloyd
Clyde McConaghy
Garry Dinnie
Other key management personnel (full year)
Other key management personnel (part year)
Peter Adams ‑ Chief Financial Officer
Andrew Levido ‑ GM ‑ Global Sales (resigned July 2014)
Alex Baburin ‑ Chief Operations Officer
Kevin Ryder ‑ VP Global Marketing (appointed October 2013)
Andre Cuenin ‑ President Americas &
VP European Field Operations
Jonathan Stern ‑ Vice President ‑ Asia Pacific
David Purdue ‑ Company Secretary & Global
Commercial Manager
29
Letter from the ChairmanDirectors and Senior ManagementDirectors’ ReportCorporate Governance StatementFinancial StatementsIndependent Audit ReportRemuneration ReportIntegrated Research and its controlled entities • Annual Report 2014 Service agreements
Service contracts for current executive directors and
current senior executives are unlimited in term but
capable of termination by either party according to a
period specified in the employment contract and the
consolidated entity retains the right to terminate the
contract immediately by payment in lieu of notice or
a severance payment or an amount for redundancy
equal to the scale of payments prescribed in the
NSW Employment Protection Act.
Mr Darc Rasmussen, Chief Executive Officer, has a
contract of employment with Integrated Research
Limited dated 26 August 2013, which provides for
specific notice and severance undertakings of up
to three months compensation depending on the
particular circumstances. Mr Rasmussen can terminate
his employment by giving three months prior
notice in writing.
Mr Peter Adams, Chief Financial Officer, has a
contract of employment with Integrated Research
Limited dated 23 January 2008, which provides for
specific notice and severance undertakings of up
to three months compensation depending on the
particular circumstances. Mr Adams can terminate
his employment by giving three months prior
notice in writing.
Mr Alex Baburin, Chief Operations Officer, has a
contract of employment with Integrated Research
Limited dated 18 October 2006, which provides for
specific notice and severance undertakings of up
to one month’s compensation depending on the
particular circumstances. Mr Baburin can terminate his
employment by giving one month prior notice in writing.
Mr Andre Cuenin, President Americas & VP European
Field Operations, has a contract of employment with
Integrated Research Inc dated 22 September 2008,
which provides for specific notice and severance
undertakings of one month’s compensation depending
on the particular circumstances. Mr Cuenin can
terminate his employment by giving one month
prior notice in writing.
Mr David Purdue, Company Secretary and Global
Commercial Manager, has a contract of employment
with Integrated Research Limited dated 27 May 2008,
which provides for specific notice and severance
undertakings of one month compensation depending
on the particular circumstances. Mr Purdue can
terminate his employment by giving one month
prior notice in writing.
Mr Kevin Ryder - Vice President, Global Marketing,
has a contract of employment with Integrated
Research Limited dated 14 October 2013,
which provides for specific notice and severance
undertakings of one month compensation depending on
the particular circumstances. Mr Ryder can terminate his
employment by giving one month prior notice in writing.
Non‑executive Directors
Total remuneration for all non-executive directors
last voted upon at the Annual General Meeting in
November 2013 is not to exceed $750,000 per annum.
Director’s base fees in FY14 were $70,000
per annum inclusive of compulsory superannuation.
The chairman receives the base fee by a multiple of two.
Director’s fees cover all main board activities and
committee membership. Directors can elect to salary
sacrifice their directors fees into superannuation.
Non-executive directors do not receive performance
related compensation or retirement benefits.
Directors’ and executive
officers’ remuneration
Details of the nature and amount of each major element
of the remuneration of each of the key management
personnel director of the Company and each of the
executives and relevant group key management
executives are reported below.
The estimated value of options and performance
rights disclosed is calculated at the date of grant
using the Binomial option pricing model, adjusted to
take into account the inability to exercise options
during the vesting period. Further details of options
and performance rights granted during the year are
set out below.
Executive officers are officers who are involved in, or who
take part in, the management of the affairs of Integrated
Research Limited and/or related bodies corporate.
Remuneration for overseas-based employees has been
translated to Australian dollars at the average exchange
rates for the year.
No director or executive appointed during the year
received a payment as part of his or her consideration
for agreeing to hold the position.
30
Remuneration ReportIntegrated Research and its controlled entities • Annual Report 2014 Short term
Post-
employment
Share-
based
payments
Other
compen-
sation
Proportion of
remuneration
Salary
& fees
$
Bonus
$
Non-cash
benefits
$
Super-
annuation
contribution
$
Value of
options
and rights
$
Termi-
nation
benefit
$
Perfor‑
mance
related
Total
$
Value of
options
and
rights
2014
In AUD
Directors
Non‑executive
Alan Baxter
Kate Costello
Garry Dinnie
Peter Lloyd
(also see page 36)
Steve Killelea
(Chairman)
64,073
64,073
64,073
64,073
128,146
Clyde McConaghy
64,073
Executive
Mark Brayan
(resigned Aug 2013)
225,702
-
-
-
-
-
-
-
-
-
-
-
-
-
5,927
5,927
5,927
5,927
11,854
5,927
-
-
-
-
-
-
755
8,887
(24,718)
Darc Rasmussen
(appointed Oct 2013)
355,770
92,370
4,532
13,331
330,545
Executive officers (excluding directors)
Peter Adams
271,510
36,938
4,532
Alex Baburin
266,416
34,683
-
17,775
24,644
467
3,894
Andre Cuenin
259,615 244,293
1,615
7,788
14,310
Andrew Levido
(resigned July 2013)
106,557
David Purdue
202,693
-
-
378
4,532
5,599
(4,257)
17,775
6,105
154,277
22,016
-
14,271
232,233 110,993
4,532
17,775
-
-
Kevin Ryder
(appointed
October 2013)
Jonathan Stern
(resigned July 2014)
Total
compensation:
key management
(consolidated,
including
directors)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
70,000
70,000
70,000
70,000
140,000
70,000
-
-
-
-
-
-
-
-
-
-
-
-
210,626
0%
(12%)
796,548
12%
42%
331,222
329,637
527,621
108,277
231,105
11%
11%
46%
0%
0%
190,564
12%
365,533
30%
0%
1%
3%
(4%)
3%
0%
0%
2,523,284 541,293
20,876
169,334
326,346
- 3,581,133
31
Letter from the ChairmanDirectors and Senior ManagementDirectors’ ReportCorporate Governance StatementFinancial StatementsIndependent Audit ReportRemuneration ReportIntegrated Research and its controlled entities • Annual Report 2014 Short term
Post-
employment
Share-
based
payments
Other
compen-
sation
Proportion of
remuneration
Salary
& fees
$
Non-cash
benefits
$
Bonus
$
Super-
annuation
contribution
$
Value of
options
and rights
$
Termi-
nation
benefit
$
Perfor‑
mance
related
Total
$
Value of
options
and
rights
2013
In AUD
Directors
Non‑executive
Alan Baxter
60,665
John Brown
(Resigned
17 Dec 2012)
Kate Costello
Garry Dinnie
(Joined 17 Feb 2013)
Peter Lloyd
(also see page 36)
Steve Killelea
(Chairman)
26,274
60,665
26,758
60,665
121,330
Clyde McConaghy
60,665
Executive
-
-
-
-
-
-
-
-
-
-
-
-
-
-
5,460
2,365
5,460
2,408
5,460
10,920
5,460
-
-
-
-
-
-
-
-
-
-
-
-
-
-
66,125
28,639
66,125
29,166
66,125
132,250
66,125
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Mark Brayan
449,653
40,434
4,532
16,470
22,365
-
533,454
8%
4%
Executive officers (excluding Directors)
Peter Adams
264,510
39,381
4,532
Alex Baburin
241,789
28,290
Andre Cuenin
222,047 188,803
John Dunne
200,018
23,381
3,750
-
16,470
21,761
6,661
16,470
8,429
6,730
3,012
8,078
338
-
-
-
-
-
278,998 126,002
4,532
16,470
4,257
185,886
-
2,644
16,470
4,433
140,364
46,195
2,266
8,235
45,851
22,927
147,930
79,218
-
-
-
-
2,475
-
1,419
-
-
-
-
-
-
-
-
-
-
333,322
298,570
420,523
247,947
12%
9%
45%
9%
4,088
-
3%
2%
7%
3%
-
430,259
29%
1%
209,433
-
2%
197,060
23%
71,253
32%
-
-
228,567
35%
1%
2,597,818 594,631
18,506
159,353
58,723
3,429,031
David Leighton
(retired July 2012)
Andrew Levido
(resigned July 2013)
David Purdue
(appointed Company
Secretary July 2012)
Pierre Semaan
(resigned Dec 2012)
Jonathan Stern
(appointed April 2013)
Pim Van Der Poel
(appointed Oct 2012
resigned July 2013)
Total
compensation:
key management
(consolidated,
including directors)
32
Remuneration ReportIntegrated Research and its controlled entities • Annual Report 2014 Analysis of bonuses included in remuneration
Details of the vesting profile of the short-term incentive cash bonuses awarded as remuneration to each director of the
Company and each of the named Company executives and relevant group executives are detailed below:
Directors
Darc Rasmussen
Executives
Peter Adams
Alex Baburin
Andre Cuenin
Jonathan Stern
Kevin Ryder
Short term incentive bonuses
Included in
remuneration
$ (A)
%
vested in
year
% forfeited in
year
(B)
92,370
36,938
34,683
244,293
110,993
22,016
46%
74%
87%
72%
63%
67%
54%
26%
13%
28%
37%
33%
(A) Amounts included in remuneration for the financial year represents the amount that vested in the financial year
based on achievement of personal goals and satisfaction of specified performance criteria. No amounts vest in
future financial years in respect of the short-term incentive bonus scheme for the 2014 financial year.
(B) The amounts forfeited are due to the performance or service criteria not being met in relation to the current
financial year.
33
Letter from the ChairmanDirectors and Senior ManagementDirectors’ ReportCorporate Governance StatementFinancial StatementsIndependent Audit ReportRemuneration ReportIntegrated Research and its controlled entities • Annual Report 2014 Equity instruments
All options refer to options over ordinary shares of Integrated Research Limited, which are exercisable on a one-for-one
basis under the Employee Share Option Plan (ESOP).
Options and rights over equity instruments granted as compensation
No options have been granted to named executives either during or since the end of the financial year.
All options expire on the earlier of their expiry date or termination of the individual’s employment, except for
termination due to retirement. The options are exercisable on an annual basis on the first to fourth anniversaries of
the grant date. In addition to a continuing employment service condition, the ability of executives to exercise options
is conditional on the consolidated entity achieving certain performance hurdles.
Further details, including grant dates and exercise dates regarding options granted to executives under the ESOP are in
note 16 to the financial statements.
Exercise of options granted as compensation
During the reporting year the following shares were issued to executives on the exercise of options previously granted
as compensation.
Executives
Alex Baburin
Fair value
of options
exercised
during the year
($)
Payment value
of options
exercised
during the year
($)
Number of
shares issued
10,000
1,254
3,100
34
Remuneration ReportIntegrated Research and its controlled entities • Annual Report 2014
Analysis of rights over equity instruments granted as compensation
Performance rights
granted
Value yet to vest ($)
Number
Date
Percent
vested in
year
Percent
forfeited in
year (A)
Financial
year in which
grant expires
Min
(B)
Max
(C)
Directors
Darc Rasmussen
350,000
Nov-13
Mark Brayan
170,000
Dec-11
Executives
Peter Adams
170,000
Oct-12
100,000
Dec-11
30,000
Oct-12
Alex Baburin
75,000
Dec-11
30,000
Oct-12
Andre Cuenin
75,000
Dec-11
50,000
Oct-12
85,000
Apr-14
Andrew Levido
56,250
Oct-12
David Purdue
14,500
Dec-11
20,000
Oct-12
Pim Van Der Poel
25,000
Oct-12
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
100%
100%
100%
-
100%
-
100%
-
-
100%
-
-
100%
2016
2015
2016
2015
2016
2015
2016
2015
2016
2017
2016
2015
2016
2016
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
303,625
nil
nil
nil
26,520
nil
26,520
nil
44,200
79,639
nil
5,562
17,680
nil
(A) The percentage forfeited in the year represents the reduction from the maximum number of options available to
vest due to the performance hurdles not being achieved or due to the resignation of the executive.
(B) The minimum value of options yet to vest is $nil as the executives may not achieve the required performance
hurdles or may terminate their employment prior to vesting.
(C) The maximum values presented above are based on the values calculated using the Binomial option pricing model
as applied in estimating the value of options for performance rights for employee benefit expense purposes.
35
Letter from the ChairmanDirectors and Senior ManagementDirectors’ ReportCorporate Governance StatementFinancial StatementsIndependent Audit ReportRemuneration ReportIntegrated Research and its controlled entities • Annual Report 2014 Other Transactions with Key Management Personnel
The consolidated entity received consulting services totalling $159,480 for the year ended 30 June 2013 from
The Grayrock Group Pty Limited, a company in which Peter Lloyd is a director. There were no services received for the
year ended 30 June 2014.
Apart from the details disclosed in this note, no director has entered into a material contract with the consolidated
entity since the end of the previous financial year and there were no material contracts involving directors’ interests
existing at year-end.
Equity instruments
All options refer to options over ordinary shares of Integrated Research Limited, which are exercisable on a one-for-one
basis under the Employee Share Option Plan (ESOP).
All performance rights refer to performance rights over ordinary shares of Integrated Research Limited, which are
exercisable on a one-for-one basis under the Integrated Research Performance Rights and Option Plan (IRPROP).
Key management personnel compensation
The key management personnel compensation are as follows:
In AUD
Short-term benefits
Post-employment benefits
Equity compensation benefits
Consolidated
2014
2013
3,085,453
3,210,955
169,334
326,346
159,353
58,723
3,581,133
3,429,031
36
Remuneration ReportIntegrated Research and its controlled entities • Annual Report 2014 Options over equity instruments granted as compensation
The movement during the reporting year in the number of options over ordinary shares in Integrated Research Limited
held, directly, indirectly or beneficially, by each key management person, including their related parties, is as follows:
Held at
1 July 2013
Granted as
compensation
Exercised
Other
changes*
Held at
30 June 2014
Vested
during
the year
Vested and
exercisable at
30 June 2014
Current Year
Executives
Alex Baburin
10,000
-
(10,000)
-
-
-
-
Held at
1 July 2012
Granted as
compensation
Exercised
Other
changes*
Held at
30 June 2013
Vested
during
the year
Vested and
exercisable at
30 June 2013
Prior Year
Directors
Mark Brayan
1,000,000
Executives
Peter Adams
350,000
Alex Baburin
40,000
Andre
Cuenin
Pierre
Semaan
300,000
200,000
John Dunne
15,000
-
-
-
-
-
-
(500,000)
(500,000)
(87,500)
(262,500)
-
(75,000)
-
-
(50,000)
(150,000)
-
225,000
-
-
-
-
(7,500)
-
7,500
7,500
7,500
-
-
-
-
-
-
40,000
10,000
10,000
* Other changes represent options that expired or were forfeited during the year
There were no options granted as compensation during the current year.
25% of options granted vest annually on the anniversary of the grant date, and may also be subject to the consolidated
entity achieving certain performance hurdles. Options expire on the earlier of their expiry date or termination of the
individual’s employment. No options have been granted since the end of the financial year. The options were provided
at no cost to the recipients.
37
Letter from the ChairmanDirectors and Senior ManagementDirectors’ ReportCorporate Governance StatementFinancial StatementsIndependent Audit ReportRemuneration ReportIntegrated Research and its controlled entities • Annual Report 2014 Performance rights over equity instruments granted as compensation
The movement during the reporting year in the number of performance rights over ordinary shares in
Integrated Research Limited held, directly, indirectly or beneficially, by each key management person,
including their related parties, is as follows:
Held at
1 July 2013
Granted as
compensation
Exercised
Other
changes*
Held at
30 June 2014
Vested
during
the year
Vested and
exercisable at
30 June 2014
Current Year
Directors
Mark Brayan
340,000
-
Darc Rasmussen
-
350,000
Executives
Peter Adams
Alex Baburin
Andre Cuenin
Andrew Levido
David Purdue
Pim Van Der Poel
130,000
105,000
125,000
56,250
34,500
25,000
-
-
85,000
-
-
-
-
-
-
-
-
-
-
-
(340,000)
-
-
350,000
(100,000)
(75,000)
30,000
30,000
(75,000)
135,000
(56,250)
-
-
34,500
(25,000)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Held at
1 July 2012
Granted as
compensation
Exercised
Other
changes*
Held at
30 June 2013
Vested
during
the year
Vested and
exercisable at
30 June 2013
Prior Year
Directors
Mark Brayan
170,000
170,000
Executives
Peter Adams
100,000
Alex Baburin
Andre Cuenin
John Dunne
Andrew Levido
David Purdue
Pierre Semaan
Pim Van Poel
75,000
75,000
75,000
-
14,500
65,000
30,000
30,000
50,000
30,000
56,250
20,000
-
-
25,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
340,000
130,000
105,000
125,000
105,000
56,250
34,500
(65,000)
-
-
25,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
* Other changes represent performance rights that expired or were forfeited during the year
Performance rights expire on the earlier of their expiry date or termination of the individual’s employment.
No performance rights have been granted since the end of the financial year. The performance rights were provided at
no cost to the recipients.
38
Remuneration ReportIntegrated Research and its controlled entities • Annual Report 2014 Movements in shares
The movement during the reporting period in the number of ordinary shares in Integrated Research Limited held,
directly, indirectly or beneficially, by each key management person, including their related parties, is as follows:
Current Year
Directors
Non‑executive
Alan Baxter
Kate Costello
Steve Killelea
Executive
Mark Brayan
Darc Rasmussen
Executive officers
(excluding directors)
Peter Adams
Alex Baburin
David Purdue
Held at
1 July 2013
Purchases
Received
on exercise
of options
Other
changes*
Sales
Held at
30 June 2014
100,000
200,000
94,834,951
25,000
97,000
199,622
-
-
-
8,700
5,000
-
18,750
-
-
-
-
-
-
-
-
-
10,000
-
-
-
-
(25,000)
-
-
-
-
-
(200,000)
-
-
-
-
-
-
197,000
199,622
94,834,951
-
8,700
5,000
10,000
18,750
* Other changes represent net movement from ceasing to hold office.
Held at
1 July 2012
Purchases
Received
on exercise
of options
Other
changes*
Sales
Held at
30 June 2013
Prior Year
Directors
Non‑executive
Alan Baxter
John Brown
Kate Costello
Steve Killelea
Executive
Mark Brayan
100,000
101,000
200,000
94,834,951
25,000
Executive officers (excluding directors)
Peter Adams
John Dunne
Pierre Semaan
Andre Cuenin
David Purdue
-
-
-
-
18,750
-
-
-
-
-
-
-
-
-
-
-
-
-
-
500,000
87,500
7,500
50,000
75,000
-
-
(101,000)
-
-
-
-
-
-
-
-
-
-
-
100,000
-
200,000
94,834,951
500,000
25,000
(82,500)
(7,500)
(50,000)
(75,000)
5,000
-
-
-
-
18,750
Shareholdings at the date of the Directors’ Report for existing Key Management Personnel remain unchanged.
Other transactions with the consolidated entity
There were no other transactions between the key management personnel, or their personally-related entities, and the
consolidated entity.
39
Letter from the ChairmanDirectors and Senior ManagementDirectors’ ReportCorporate Governance StatementFinancial StatementsIndependent Audit ReportRemuneration ReportIntegrated Research and its controlled entities • Annual Report 2014 Corporate Governance Statement
This statement outlines the main corporate governance practices that were in place
throughout the financial year, which comply with the ASX Corporate Governance
Council recommendations, unless otherwise stated.
Board of Directors
and its Committees
Role of the board
The board’s primary role is the protection and
enhancement of long-term shareholder value.
To fulfil this role, the board is responsible for the
overall corporate governance of the consolidated
entity including evaluating and approving its
strategic direction, approving and monitoring capital
expenditure, setting remuneration, appointing,
removing and creating succession policies for directors
and senior executives, establishing and monitoring
the achievement of management goals and assessing
the integrity of internal control and management
information systems. It is also responsible for approving
and monitoring financial and other reporting.
Board process
To assist in the execution of its responsibilities,
the Board has established a number of
board committees including a Nomination
and Remuneration Committee, an Audit and
Risk Committee and a Strategy Committee.
These committees have written mandates and
operating procedures, which are reviewed on a
regular basis. The board has also established a
framework for the management of the consolidated
entity including board-endorsed policies, a system of
internal control, a business risk management process
and the establishment of appropriate ethical standards.
The full board currently holds twelve scheduled
meetings each year and any extraordinary meetings
at such other times as may be necessary to address
any specific matters that may arise.
The agenda for its meetings is prepared in conjunction
with the Chairman, Chief Executive Officer and
Company Secretary. Standing items include
strategic matters for discussion, the CEO’s report,
financial reports, key performance indicator reports
and presentations by key executives and external
industry experts. Board papers are circulated in advance.
Directors have other opportunities, including visits
to operations, for contact with a wider group
of employees.
Director education
The consolidated entity follows an induction process to
educate new directors about the nature of the business,
current issues, the corporate strategy and expectations
of the consolidated entity concerning performance
of directors. In addition executives make regular
presentations to the board to ensure its familiarity with
operational matters. Directors are expected to access
external continuing education opportunities to update
and enhance their skills and knowledge.
Independent advice and access to
company information
Each director has the right of access to all relevant
company information and to the company’s
executives and, subject to prior consultation with
the chairman, may seek independent professional
advice from a suitably qualified adviser at the
consolidated entity’s expense. A copy of the advice
received by the director is made available to all other
members of the board.
Composition of the board
The names of the directors of the Company in office at
the date of this report are set out on pages 20 to 21 of
this report.
The company’s constitution provides for the board
to consist of between three and twelve members.
At 30 June 2014 the board members were comprised
as follows:
Mr Steve Killelea - Non Executive Director (Chairman)
Mr Alan Baxter - Independent Non Executive Director
Ms Kate Costello - Independent Non Executive Director
Mr Garry Dinnie - Independent Non Executive Director
Mr Peter Lloyd - Non Executive Director
Mr Clyde McConaghy - Non Executive Director
Mr Darc Rasmussen - Executive Director
(Chief Executive Officer)
40
Corporate Governance StatementIntegrated Research and its controlled entities • Annual Report 2014 The election of Mr Killelea, who holds a majority of the
company’s issued shares, as non-executive chairman,
does not comply with the ASX Corporate Governance
Council recommendation that the chairman be an
independent director. However, the board is satisfied
that the company benefits from Mr Killelea’s experience
and knowledge gained through his long involvement
with Integrated Research and his associations
throughout the information technology industry.
Mr Killelea founded Integrated Research in 1988 and
was the CEO and managing director of the company
until his retirement in November 2004.
At each Annual General Meeting one-third of directors,
any director who has held office for three years and any
director appointed by directors in the preceding year
must retire, then being eligible for re-election. The CEO
is not required to retire by rotation.
The composition of the board is reviewed on a regular
basis to ensure that the board has the appropriate mix of
expertise and experience. When a vacancy exists, through
whatever cause, or where it is considered that the board
would benefit from the services of a new director with
particular skills, the Nomination and Remuneration
Committee, in conjunction with the board, determines
the selection criteria for the position based on the skills
deemed necessary for the board to best carry out its
responsibilities. The committee then selects a panel of
candidates and the board appoints the most suitable
candidate who must stand for election at the next general
meeting of shareholders.
Nomination and Remuneration Committee
The Nomination and Remuneration Committee is a
committee of the board of directors and is empowered
by the board to assist it in fulfilling its duties to
shareholders and other stakeholders. In general,
the committee has responsibility to: 1) ensure the
company has appropriate remuneration policies
designed to meet the needs of the company and to
enhance corporate and individual performance and
2) review board performance, select and recommend
new directors to the board and implement actions for
the retirement and re-election of directors.
Responsibilities Regarding Remuneration
The Committee reviews and makes recommendations
to the board on:
Executive remuneration and incentive policies.
Policies on employee incentive plans,
including equity incentive plans.
Superannuation arrangements.
The remuneration framework and policy for
non-executive directors.
Remuneration levels are competitively set to attract
and retain the most qualified and experienced
directors and senior executives. The Remuneration
Committee obtains independent advice on the
appropriateness of remuneration packages,
given trends in comparative companies and
industry surveys. Remuneration packages include
a mix of fixed remuneration, performance-based
remuneration and equity-based remuneration.
Responsibilities Regarding Nomination
The Committee develops and makes recommendations
to the board on:
The CEO and senior executive succession planning.
The range of skills, experience and expertise
needed on the board and the identification of the
particular skills, experience and expertise that will
best complement board effectiveness.
A plan for identifying, reviewing, assessing and
enhancing director competencies.
Board succession plans to maintain a balance
of skills, experience and expertise on the board.
Evaluation of the board’s performance.
Appointment and removal of directors.
Appropriate composition of committees.
The terms and conditions of the appointment
of non-executive directors are set out in a letter
of appointment, including expectations for attendance
and preparation for all board meetings, expected
time commitments, procedures when dealing with
conflicts of interest, and the availability of independent
professional advice.
The members of the Nomination and Remuneration
Committee during the year were:
Ms Kate Costello (Chairperson) - Independent
Non-Executive
The appointment, remuneration, performance
Mr Alan Baxter - Independent Non-Executive
objectives and evaluation of the chief
executive officer.
Mr Steve Killelea - Non-Executive
The remuneration packages for senior executives.
The Company’s recruitment, retention and termination
policies and procedures for senior executives.
The Nomination and Remuneration Committee meets at
least twice a year and as required. The Committee met
three times during the year under review.
41
Letter from the ChairmanDirectors and Senior ManagementDirectors’ ReportRemuneration ReportFinancial StatementsIndependent Audit ReportCorporate Governance StatementIntegrated Research and its controlled entities • Annual Report 2014 Audit and Risk Committee
The Audit and Risk Committee has a documented
charter, approved by the board. All members
must be non-executive directors with a majority
being independent. The chairman may not be the
chairman of the board. The committee advises on
the establishment and maintenance of a framework
of risk management and internal control of the
consolidated entity.
The members of the Audit and Risk Committee during
the year were:
Review the external auditor’s management letter
and responses by management.
Provide an avenue of communication between
the auditors, management and the board.
Monitor compliance with all financial statutory
requirements and regulations.
Review financial reports and other financial
information distributed to shareholders so that they
provide an accurate reflection of the financial health
of the company.
Mr Garry Dinnie - Independent Non-Executive
Monitor corporate risk management and
Mr Peter Lloyd - Non-Executive
assessment processes, and the identification and
management of strategic and operational risks.
Mr Clyde McConaghy - Non-Executive
Enquire of the auditors of any difficulties
During the year, the Audit and Risk Committee
provided the Board with updates to the Company’s
risk management register (with the Board approving
this document).
The external auditor, Chief Executive Officer and
Chief Financial Officer are invited to Audit and Risk
Committee meetings at the discretion of the committee.
The committee met three times during the year and
committee members’ attendance record is disclosed in
the table of directors’ meetings on page 24.
The external auditor met with the audit
committee/board three times during the year,
two of which included time without the presence
of executive management. The Chief Executive
Officer and the Chief Financial Officer declared in
writing to the board that the company’s financial
reports for the year ended 30 June 2014 comply with
accounting standards and present a true and fair view,
in all material respects, of the company’s financial
condition and operational results. This statement is
required annually.
The main responsibilities of the Audit and Risk
Committee include:
Serve as an independent party to monitor
the financial reporting process and internal
control systems.
Review the performance and independence of the
external auditors and make recommendations to the
board regarding the appointment or termination of
the auditors.
Review the scope and cost of the annual audit,
negotiating and recommending the fee for the
annual audit to the board.
encountered during the audit, including any
restrictions on the scope of their work, access
to information or changes to the planned scope
of the audit.
The Audit and Risk Committee reviews the performance
of the external auditors on an annual basis and normally
meets with them during the year as follows:
To discuss the external audit plans, identifying
any significant changes in structure, operations,
internal controls or accounting policies likely to
impact the financial statements and to review the
fees proposed for the audit work to be performed.
Prior to announcement of results:
To review the half-year and preliminary final
report prior to lodgement with the ASX, and any
significant adjustments required as a result of
the auditor’s findings.
To recommend the Board approval of
these documents.
Review the results and findings of the auditor,
the adequacy of accounting and financial
controls, and to monitor the implementation
of any recommendations made.
To finalise half-year and annual reporting:
Review the draft financial report and recommend
board approval of the financial report.
As required, to organise, review and report on any
special reviews or investigations deemed necessary
by the board.
42
Corporate Governance StatementIntegrated Research and its controlled entities • Annual Report 2014 Strategy Committee
The Strategy Committee has a documented charter,
approved by the board and is responsible for reviewing
strategy and recommending strategies to the board
to enhance the company’s long-term performance.
The committee is comprised of at least three members,
including the chairman of the board and the Chief
Executive Officer. The board appoints a member of
the committee to be chairman.
The members of the Strategy Committee during the
year were:
Mr Steve Killelea (Chairman) - Non-Executive
Mr Darc Rasmussen - Executive
Mr Peter Lloyd - Non-Executive
Ms Kate Costello - Independent Non-Executive
Mr Mark Brayan - Executive (resigned August 2013)
The Strategy Committee is responsible for:
Review and assist in defining current strategy.
Assess new strategic opportunities, including M&A
proposals and intellectual property developments
or acquisitions.
Stay close to the business challenges and monitor
operational implementation of strategic plans.
Endorse strategy and business cases for
consideration by the full board.
The Committee met three times during the year
under review.
Risk management
Under the Audit and Risk Charter, the Audit and Risk
Committee reviews the status of business risks to the
consolidated entity through integrated risk management
programs ensuring risks are identified, assessed
and appropriately managed and communicated to
the board. Major business risks arise from such matters
as actions by competitors, government policy changes
and the impact of exchange rate movements.
Comprehensive policies and procedures are established
such that:
Capital expenditure above a certain size requires
board approval.
Financial exposures are controlled, including the use
of forward exchange contracts.
Risks are identified and managed, including internal
audit, privacy, insurances, business continuity
and compliance.
Business transactions are properly authorised
and executed.
The Chief Executive Officer and the Chief Financial
Officer have declared, in writing to the board that the
Company’s financial reports are founded on a sound
system of risk management and internal compliance
and control which implements the policies adopted by
the board.
Internal control framework
The board is responsible for the overall internal
control framework, but recognises that no cost
effective internal control system will preclude all errors
and irregularities. The board has instigated the following
internal control framework:
Financial reporting - Monthly actual results
are reported against budgets approved by the
directors and revised forecasts for the year are
prepared monthly.
Continuous disclosure - Identify matters that
may have a material effect on the price of the
Company’s securities, notify them to the ASX and
post them to the Company’s website.
Quality and integrity of personnel -
Formal appraisals are conducted at least
annually for all employees.
Investment appraisals - Guidelines for
capital expenditure include annual budgets,
detailed appraisal and review procedures and
levels of authority.
Internal Audit
The Company does not have an internal audit function
but utilises its financial resources as needed to assist the
board in ensuring compliance with internal controls.
Ethical standards
All directors, managers and employees are expected to
act with the utmost integrity and objectivity, striving at
all times to enhance the reputation and performance
of the consolidated entity. Every employee has a
nominated supervisor to whom they may refer any
issues arising from their employment.
Conflict of interest
Each Director must keep the board advised, on an
ongoing basis, of any interest that could potentially
conflict with those of the Company. Where the board
considers that a significant conflict exists the director
concerned does not receive the relevant board papers
and is not present at the meeting whilst the item
is considered. The board has developed procedures to
assist directors to disclose potential conflicts of interest.
Details of director related entity transactions with the
consolidated entity are set out in Remuneration report
page 28 to 39.
43
Letter from the ChairmanDirectors and Senior ManagementDirectors’ ReportRemuneration ReportFinancial StatementsIndependent Audit ReportCorporate Governance StatementIntegrated Research and its controlled entities • Annual Report 2014 Code of conduct
The consolidated entity has advised each director,
manager and employee that they must comply with
the code of conduct. The code aligns behaviour of the
board and management with the code of conduct by
maintaining appropriate core values and objectives.
It may be reviewed on the company’s website
and includes:
Responsibility to the community and fellow
employees to act with honesty and integrity,
and without prejudice.
Compliance with laws and regulations in
all areas where the company operates,
including employment opportunity,
occupational health and safety, trade practices,
fair dealing, privacy, drugs and alcohol,
and the environment.
Dealing honestly with customers, suppliers
and consultants.
Ensuring reports and other information are accurate
and timely.
Proper use of company resources, avoidance of
conflicts of interest and use of confidential or
proprietary information.
Equal Employment Opportunity
The Company has a policy on Equal Employment
Opportunity with the provision that commits to a
workplace that is free of discrimination of all types.
It is Company policy to hire, develop and promote
individuals solely on the basis of merit and their
ability to perform without prejudice to race, colour,
creed, national origin, religion, gender, age, disability,
sexual orientation, marital status, membership or
non membership of a trade union, status of employment
(whether full or part-time) or any other factors
prohibited by law. The board is satisfied that the Equal
Employment Opportunity policy is sufficient without the
need to further establish a separate policy on gender
diversity as required by the ASX Corporate Governance
Council recommendation.
Trading in company securities by directors
and employees
Directors and employees may acquire shares in
the company, but are prohibited from dealing in
company shares whilst in possession of price sensitive
information, and except in the periods:
From 24 hours to 28 days after the release of the
company’s half-yearly results announcement or
following the wide dissemination of information on
the status of the corporation and current results.
From 24 hours after the release of the company’s
annual results announcement to a maximum of
28 days after the annual general meeting.
Directors must obtain the approval of the Chairman of
the board and notify the Company Secretary before they
buy or sell shares in the company, subject to board veto.
The Company advises the ASX of any transactions
conducted by directors in shares in the company.
Communication with
shareholders
The board provides shareholders with information
using a comprehensive continuous disclosure policy
which includes identifying matters that may have
a material effect on the price of the company’s
securities, notifying them to the ASX, posting
them on the Company’s website (www.ir.com),
and issuing media releases. Disclosures under this
policy are in addition to the periodic and other
disclosures required under the ASX Listing Rules and
the Corporations Act. More details of the policy are
available on the Company’s website.
The Chief Executive Officer and the Chief Financial Officer
are responsible for interpreting the Company’s policy
and where necessary informing the board. The Company
Secretary is responsible for all communication with the ASX.
The board encourages full participation of
shareholders at the Annual General Meeting to
ensure a high level of accountability and identification
with the consolidated entity’s strategy and goals.
Important issues are presented to the shareholders
as single resolutions. The external auditor is requested
to attend the Annual General Meetings to answer any
questions concerning the audit and the content of the
auditor’s report.
The shareholders are requested to vote on the
appointment and aggregate remuneration of directors,
the granting of options and shares to directors, the
Remuneration Report and changes to the Constitution.
Copies of the Constitution are available to any
shareholder who requests it.
44
Corporate Governance StatementIntegrated Research and its controlled entities • Annual Report 2014 Integrated Research
Financial Report 2014
Financial Statements
Contents
Consolidated statement of comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the financial statements
1. Significant accounting policies
2. Segment reporting
3. Finance income
4. Expenditure
5. Auditors’ remuneration
6.
Income tax expense
7. Earnings per share
8. Cash and cash equivalents
9. Trade and other receivables
10. Other current assets
11. Other financial assets
12. Property, plant and equipment
13. Deferred tax assets and liabilities
14. Intangible assets
15. Trade and other payables
16. Employee benefits
17. Provisions
18. Other liabilities
19. Capital and reserves
20. Financial instruments
21. Operating leases
22. Consolidated entities
23. Reconciliation of cash flows from operating activities
24. Key management personnel disclosures
25. Related parties
26. Parent entity disclosures
27. Subsequent events
46
Page
47
48
49
50
51
51
57
58
58
58
59
60
60
61
62
62
63
64
65
66
66
69
69
69
71
74
75
75
76
76
77
77
Financial StatementsIntegrated Research and its controlled entities • Annual Report 2014 Consolidated statement of comprehensive income
For the year ended 30 June 2014
In thousands of AUD
Revenue
Revenue from licence fees
Revenue from maintenance fees
Revenue from consulting
Total revenue
Expenditure
Research and development expenses
Sales, consulting and marketing expenses
General and administration expenses
Total expenditure
Other gains and losses
Currency exchange gains/(losses)
Profit before finance income and tax
Finance income
Profit before tax
Income tax expense
Profit for the year
Other comprehensive income
Items that may be reclassified subsequently to profit
Gain/(loss) on cash flow hedge taken to equity
Foreign exchange translation differences
Other comprehensive income
Total comprehensive income for the year
Profit attributable to:
Members of Integrated Research
Total comprehensive income attributable to:
Members of Integrated Research
Earnings per share attributable to members of Integrated Research:
Basic earnings per share (AUD cents)
Diluted earnings per share (AUD cents)
Consolidated
Notes
2014
2013
28,048
20,562
4,633
53,243
26,632
17,717
4,510
48,859
(11,067)
(26,836)
(4,707)
(10,777)
(23,279)
(4,280)
4
(42,610)
(38,336)
(364)
591
10,269
11,114
384
10,653
(2,164)
8,489
456
11,570
(2,492)
9,078
897
14
911
(777)
415
(362)
9,400
8,716
8,489
9,078
9,400
8,716
5.03
5.00
5.40
5.35
3
6
7
7
The consolidated statement of comprehensive income is to be read in conjunction with the notes to the financial
statements set out on pages 51 to 77.
47
Letter from the ChairmanDirectors and Senior ManagementDirectors’ ReportRemuneration ReportCorporate Governance StatementIndependent Audit ReportFinancial StatementsIntegrated Research and its controlled entities • Annual Report 2014 Consolidated statement of financial position
As at 30 June 2014
In thousands of AUD
Current assets
Cash and cash equivalents
Trade and other receivables
Current tax assets
Other current assets
Total current assets
Non-current assets
Trade and other receivables
Other financial assets
Property, plant and equipment
Deferred tax assets
Intangible assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Provisions
Income tax liabilities
Other current liabilities
Total current liabilities
Non‑current liabilities
Deferred tax liabilities
Provisions
Other non-current liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained earnings
Total equity
Consolidated
Notes
2014
2013
8
9
10
9
11
12
13
14
15
17
18
13
17
18
19
19
13,300
20,225
616
1,024
35,165
2,632
786
1,680
1,463
16,257
22,818
14,827
21,407
29
781
37,044
2,157
724
1,706
1,187
15,040
20,814
57,983
57,858
4,074
2,105
237
13,580
19,996
3,664
778
2,798
7,240
4,190
2,004
1,349
13,086
20,629
3,582
756
2,881
7,219
27,236
27,848
30,747
30,010
1,667
(361)
29,441
30,747
1,501
(1,721)
30,230
30,010
The consolidated statement of financial position is to be read in conjunction with the notes to the financial statements
set out on pages 51 to 77.
48
Financial StatementsIntegrated Research and its controlled entities • Annual Report 2014 Consolidated statement of changes in equity
For the year ended 30 June 2014
Consolidated
In thousands of AUD
Balance at 1 July 2013
Profit for the year
Other comprehensive income
for the year (net of tax)
Total comprehensive income for
the year
Share based payments expense
Shares issued
Dividends to shareholders
Share
capital
1,501
-
-
-
-
166
-
Hedging
reserve
Translation
reserve
Employee
benefit
reserve
Retained
earnings
Total
(777)
(1,368)
424
30,230
30,010
-
897
897
-
-
-
-
14
14
-
-
-
-
-
-
449
-
-
8,489
8,489
-
911
8,489
9,400
-
-
449
166
(9,278)
(9,278)
Balance at 30 June 2014
1,667
120
(1,354)
873
29,441
30,747
Balance at 1 July 2012
1,175
Profit for the year
Other comprehensive income
for the year (net of tax)
Total comprehensive income for
the year
Share based payments expense
Shares issued
Dividends to shareholders
-
-
-
-
326
-
-
-
(777)
(777)
-
-
-
(1,783)
276
29,565
29,233
-
415
415
-
-
-
-
-
-
148
-
-
9,078
9,078
-
(362)
9,078
8,716
-
-
148
326
(8,413)
(8,413)
Balance at 30 June 2013
1,501
(777)
(1,368)
424
30,230
30,010
The consolidated statement of changes in equity is to be read in conjunction with the notes to the financial statements
set out on pages 51 to 77.
49
Letter from the ChairmanDirectors and Senior ManagementDirectors’ ReportRemuneration ReportCorporate Governance StatementIndependent Audit ReportFinancial StatementsIntegrated Research and its controlled entities • Annual Report 2014 Consolidated statement of cash flows
For the year ended 30 June 2014
Net cash provided by operating activities
23
In thousands of AUD
Cash flows from operating activities
Cash receipts from customers
Cash paid to suppliers and employees
Cash generated from operations
Income taxes paid
Cash flows from investing activities
Payments for capitalised development
Payments for property, plant and equipment
Payments for intangible asset
Divestment of other non-current financial assets
Interest received
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issuing of shares
Payment of dividend
Net cash used in financing activities
Net (decrease)/ increase in cash and cash equivalents
Cash and cash equivalents at 1 July
Effects of exchange rate changes on cash
Cash and cash equivalents at 30 June
Consolidated
Notes
2014
2013
54,080
50,658
(35,627)
(30,683)
18,453
(2,434)
16,019
19,975
(2,519)
17,456
(7,967)
(7,882)
(609)
(173)
-
384
(495)
(121)
1,093
456
(8,365)
(6,949)
166
(9,278)
(9,112)
(1,458)
14,827
(69)
326
(8,413)
(8,087)
2,420
12,038
369
19
8
13,300
14,827
The consolidated statement of cash flows is to be read in conjunction with the notes to the financial statements set out
on pages 51 to 77.
50
Financial StatementsIntegrated Research and its controlled entities • Annual Report 2014 Notes to the
Financial Statements
For the year ended 30 June 2014
Note 1: Significant
accounting policies
Integrated Research Limited (the “Company”)
is a company domiciled in Australia. The financial
report of the Company for the year ended 30 June 2014
comprises the Company and its subsidiaries
(together referred to as the “consolidated entity”).
The financial report was authorised for issue by the
directors on 19 August 2014.
Integrated Research is a for-profit Company limited
by ordinary shares.
a) Statement of Compliance
The financial report is a general purpose financial report
which has been prepared in accordance with Australian
Accounting Standards, and Interpretations and the
Corporations Act 2001. Financial statements of the
consolidated entity comply with International Financial
Reporting Standards and interpretations adopted by the
International Accounting Standards Board.
b) Basis of Preparation
The financial statements are presented in Australian
dollars and are prepared on the historical cost basis,
with the exception of derivatives, which are at fair value.
The company is of a kind referred to in
ASIC Class Order (CO) 98/100 dated 10 July 1998
(updated by CO 05/641 effective 28 July 2005 and
CO 06/51 effective 31 January 2006) and in accordance
with that Class Order, amounts in the financial report
and Directors’ Report have been rounded off to the
nearest thousand dollars, unless otherwise stated.
The preparation of financial statements in conformity
with Australian Accounting Standards requires
management to make judgements, estimates and
assumptions that affect the application of policies
and reported amounts of assets and liabilities,
income and expenses. The estimates and associated
assumptions are based on historical experience and
various other factors that are believed to be reasonable
under the circumstances, the results of which form
the basis of making the judgements about carrying
values of assets and liabilities that are not readily
apparent from other sources. Actual results may
differ from these estimates. These accounting policies
have been consistently applied by each entity in the
consolidated entity.
The estimates and underlying assumptions are reviewed
on an ongoing basis. Revisions to accounting estimates
are recognised in the period in which the estimate is
revised if the revision affects only that period or in the
period of the revision and future periods if the revision
affects both current and future periods.
New accounting standards and Interpretations
The Company has applied the following standards and
amendments for first time for their annual reporting
period commencing 1 July 2013 and have not had any
material effect on its financial position or performance:
AASB 10 ‘Consolidated Financial Statement’
AASB 12 ‘Disclosure of Interests in Other Entities’
AASB 13 ‘Fair Value Measurement’
AASB 119 ‘Employee Benefits’
AASB 2012-2 ‘Amendments to Australian Accounting
Standards - Disclosures - Offsetting Financial Assets
and Financial Liabilities’
AASB 2012-5 ‘Amendments to Australian Accounting
Standards arising from Annual Improvements
2009-2011 Cycle’
AASB 2011-4 ‘Amendments to Australian Accounting
Standards to Remove Individual Key Management
Personnel Disclosure Requirements’
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Letter from the ChairmanDirectors and Senior ManagementDirectors’ ReportRemuneration ReportCorporate Governance StatementIndependent Audit ReportFinancial StatementsIntegrated Research and its controlled entities • Annual Report 2014 Note 1: Significant accounting policies (cont.)
Standards and Interpretations issued not yet effective
At the date of authorisation of the financial report, a number of standards and Interpretations were in issue but
not yet effective.
Initial application of the following Standards is not expected to materially affect any of the amounts recognised in
the financial statements, but may change the disclosures presently made in relation to the consolidated entity’s
financial statements:
Standard/Interpretation
AASB2012-3 ‘Amendments to Australian Accounting
Standards - Offsetting Financial Assets and Financial Liabilities’
AASB 9 ‘Financial Instruments’
AASB 2013-3 ‘Amendments to Australian Accounting Standards -
Recoverable Amount Disclosures for Non-Financial Assets’
AASB 1031 ‘Materiality’
AASB2013-9 ‘Amendments to Australian Accounting Standards -
‘Conceptual Framework, Materiality and Financial Instruments’
Annual Improvements 2010-2012 Cycle ‘Annual Improvements to
IFRSs 2010-2012 cycle’
Annual Improvements 2011-2013 Cycle ‘Annual Improvements to
IFRSs 2011-2013 cycle’
IAS 16 and IAS 38 ‘Clarification of Acceptable Methods of
Depreciation and Amortisation (Amendments to IAS 16 and IAS 38)’
IFRS 15 ‘Revenue from Contracts with Customers'
Effective for annual
reporting periods
beginning on or after
Expected to be
initially applied in the
financial year ending
1 Jan 2014
30 June 2015
1 January 2018
30 June 2019
1 Jan 2014
1 Jan 2014
30 June 2015
30 June 2015
1 Jan 2014
30 June 2015
1 July 2014
30 June 2015
1 July 2014
30 June 2015
1 Jan 2016
1 Jan 2017
30 June 2017
30 June 2018
The accounting policies set out below have been applied consistently to all periods presented in the consolidated
financial statements.
c) Basis of consolidation
Subsidiaries are entities controlled by the Company. Control is achieved when the Company is exposed, or has rights,
to variable returns from its involvement with the investee and has the ability to affect those returns through its
power over the investee. Specifically, the Company controls an investee if and only if the Company has: Power over
the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee).
Exposure, or rights, to variable returns from its involvement with the investee, and the ability to use its power over
the investee to affect its returns.
When the Company has less than a majority of the voting or similar rights of an investee, the Company considers
all relevant facts and circumstances in assessing whether it has power over an investee including: The contractual
arrangement with the other vote holders of the investee; rights arising from other contractual arrangements and the
Company’s voting rights and potential voting rights.
The Company re-assesses whether or not it controls an investee if facts and circumstances indicate that there are
changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Company
obtains control over the subsidiary and ceases when the Company loses control of the subsidiary. Assets, liabilities,
income and expenses of a subsidiary acquired or disposed of during the year are included in the statement of
comprehensive income from the date the Company gains control until the date the Company ceases to control
the subsidiary.
52
Financial StatementsIntegrated Research and its controlled entities • Annual Report 2014 Note 1: Significant
accounting policies (cont.)
Profit or loss and each component of other
comprehensive income (OCI) are attributed to the
equity holders of the parent of the Company and to
the non-controlling interests, even if this results in
the non-controlling interests having a deficit balance.
When necessary, adjustments are made to the financial
statements of subsidiaries to bring their accounting
policies into line with the Company’s accounting
policies. All intra-group assets and liabilities, equity,
income, expenses and cash flows relating to transactions
between members of the Company are eliminated in full
on consolidation.
A change in the ownership interest of a subsidiary,
without a loss of control, is accounted for as
an equity transaction. If the Company loses
control over a subsidiary, it: de-recognises the assets
(including goodwill) and liabilities of the subsidiary;
de-recognises the carrying amount of any
non-controlling interests; de-recognises the
cumulative translation differences recorded
in equity; recognises the fair value of the
consideration received; recognises the fair value of
any investment retained; recognises any surplus or
deficit in profit or loss; reclassifies the parent’s share of
components previously recognised in OCI to profit or
loss or retained earnings, as appropriate, as would be
required if the Company had directly disposed of the
related assets or liabilities.
d) Foreign currency
In preparing the financial statements of the individual
entities transactions in foreign currencies are
translated at the foreign exchange rate ruling at the
date of the transaction. Monetary assets and liabilities
denominated in foreign currencies at the year end
date are translated to Australian dollars at the foreign
exchange rate ruling at that date. Foreign exchange
differences arising on translation are recognised in
profit or loss. Non-monetary assets and liabilities that
are measured in terms of historical cost in a foreign
currency are translated using the exchange rate at
the date of the transaction. Non-monetary assets and
liabilities denominated in foreign currencies that are
stated at fair value are translated to Australian dollars at
foreign exchange rates ruling at the dates the fair value
was determined.
On consolidation, the assets and liabilities of
foreign operations, including goodwill and fair value
adjustments arising on consolidation are translated
to Australian dollars at foreign exchange rates ruling
at the year end date. The revenues and expenses of
foreign operations, are translated to Australian dollars
at rates approximating the foreign exchange rates ruling
at the dates of the transactions. Foreign exchange
differences arising on retranslation are recognised
directly in other comprehensive income and
accumulated in the translation reserve.
e) Derivative financial instruments
The consolidated entity uses derivative financial
instruments to hedge its exposure to foreign exchange
risks arising from operational activities. In accordance
with its treasury policy, the consolidated entity does
not hold or issue derivative financial instruments for
trading purposes.
Derivative financial instruments are recognised
initially at fair value. Subsequent to initial recognition,
derivative financial instruments are stated at fair value.
The gain or loss on remeasurement to fair value
is recognised immediately in profit or loss.
However, where derivatives qualify for hedge accounting,
recognition of any resultant gain or loss depends on the
nature of the item being hedged.
The fair value of forward exchange contracts is their
quoted market price at the year end date, being the
present value of the quoted forward price.
f) Hedging
On entering into a hedging relationship,
the consolidated entity normally designates and
documents the hedge relationship and risk management
objective and strategy for undertaking the hedge.
The documentation includes identification of the
hedging instrument, the hedged item or transaction,
the nature of the risk being hedged and how the entity
will assess the hedging instrument’s effectiveness in
offsetting the exposure to changes in the item’s fair
value or cash flows attributable to the hedged risk.
Such hedges are expected to be highly effective in
offsetting changes in fair value or cash flows and
are assessed on an ongoing basis to determine that
they actually have been highly effective throughout
the financial reporting periods for which they
are designated.
For cash flow hedges, the associated cumulative gain
or loss is removed from equity and recognised in profit
or loss in the same period or periods during which
the hedged forecast transaction affects profit or loss.
The ineffective part of any gain or loss is recognised
immediately in the profit or loss.
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Letter from the ChairmanDirectors and Senior ManagementDirectors’ ReportRemuneration ReportCorporate Governance StatementIndependent Audit ReportFinancial StatementsIntegrated Research and its controlled entities • Annual Report 2014 Note 1: Significant
accounting policies (cont.)
g) Property, plant and equipment
Items of property, plant and equipment are stated at
cost or deemed cost less accumulated depreciation and
impairment losses (see accounting policy (k)). The cost
of acquired assets includes (i) the initial estimate
at the time of installation and during the period
of use, when relevant, of the costs of dismantling and
removing the items and restoring the site on which
they are located, and (ii) changes in the measurement
of existing liabilities recognised for these costs resulting
from changes in the timing or outflow of resources
required to settle the obligation or from changes in the
discount rate.
Where parts of an item of property, plant and
equipment have different useful lives, they are
accounted for as separate items of property,
plant and equipment.
Depreciation is provided on property, plant and
equipment. Depreciation is calculated on a straight
line basis so as to write off the net cost of each
asset over its expected useful life to its estimated
residual value. Leasehold improvements are depreciated
over the period of the lease or estimated useful life,
whichever is the shorter, using the straight line method.
The estimated useful lives, residual values and
depreciation method are reviewed annually, with the
effect of any changes recognised on a prospective basis.
The following useful lives are used in the calculation
of depreciation:
Leasehold improvements
Plant and equipment
6 to 10 years
4 to 8 years
h) Intangible Assets
Research and development
Expenditure on research activities, undertaken with
the prospect of gaining new scientific or technical
knowledge and understanding, is recognised in profit
or loss as incurred.
Expenditure on development activities,
whereby research findings are applied to a plan or
design for the production of new or substantially
improved products and processes, is capitalised if the
product or process is technically and commercially
feasible and the consolidated entity has sufficient
resources to complete development.
The useful lives of the capitalised are assessed as finite.
The expenditure capitalised includes the cost
of materials, direct labour and an appropriate
proportion of overheads. Other development
expenditure is recognised in profit or loss as an expense
as incurred. Capitalised development expenditure
is stated at cost less accumulated amortisation and
impairment losses (see accounting policy (k)).
Amortisation is charged to profit or loss on a
straight-line basis over the estimated useful life,
but no more than three years.
Intellectual property
Intellectual property acquired from third parties is
amortised over its estimated useful life, but no more
than three years.
Computer software
Computer software is stated at cost and depreciated on
a straight-line basis over a 2½ to 3 year period.
i) Trade and other receivables
Trade and other receivables are stated at their
amortised cost less impairment losses. The carrying
amount of uncollectible trade receivables is reduced
by an impairment loss through the use of an
allowance account.
Allowance for returns is offset against trade
receivables for estimated warranty claims based
upon historical experience.
j) Cash and cash equivalents
Cash and cash equivalents comprises cash balances
and call deposits with an original maturity of three
months or less.
k) Impairment
The carrying amounts of the consolidated entity’s
assets are reviewed at each reporting date to determine
whether there is any indication of impairment.
If any such indication exists, the asset’s recoverable
amount is estimated.
For intangible assets that are not yet available for use,
the recoverable amount is estimated at each year
end date.
An impairment loss is recognised whenever the carrying
amount of an asset or its cash generating unit exceeds its
recoverable amount. Impairment losses are recognised
in profit or loss unless the asset has previously been
revalued, in which case the impairment loss is recognised
as a reversal to the extent of that previous revaluation
with any excess recognised through profit or loss.
The recoverable amount of other assets is the greater
of their fair value less costs to sell and value in use.
In assessing value in use, the estimated future cash
flows are discounted to their present value using a
pre-tax discount rate that reflects current market
assessments of the time value of money and the risks
specific to the asset. For an asset that does not generate
largely independent cash inflows, the recoverable
amount is determined for the cash-generating unit to
which the asset belongs.
54
Financial StatementsIntegrated Research and its controlled entities • Annual Report 2014
Note 1: Significant
accounting policies (cont.)
the expected future cash flows at a pre-tax rate that
reflects current market assessments of the time value
of money and, where appropriate, the risks specific to
the liability.
l) Employee benefits
Superannuation
Obligations for contributions to defined contribution
pension plans are recognised as an expense in profit
or loss as incurred. There are no defined benefit plans
in operation.
Long‑term service benefits
The consolidated entity’s net obligation in respect of
long-term service benefits, other than pension plans,
is the amount of future benefit that employees have
earned in return for their service in the current and
prior periods. The obligation is calculated using expected
future increases in wage and salary rates including
related on-costs and expected settlement dates,
and is discounted using the rates attached to the
Commonwealth Government bonds at the year end date
which have maturity dates approximating to the terms
of the consolidated entity’s obligations.
Share‑based payment transactions
The share option and performance rights programmes
allows the consolidated entity’s employees to acquire
shares of the Company. The fair value of options
and performance rights granted are recognised as
an employee expense with a corresponding increase
in equity. The fair value is measured at grant date and
spread over the period during which the employees
become unconditionally entitled to the options
or the performance rights. The fair value of the
instrument granted is measured using a binomial
option pricing model, taking into account the terms
and conditions upon which the options were granted.
The amount recognised as an expense is adjusted
to reflect the actual number of share options or
performance rights that are expected to vest.
Wages, salaries, annual leave, and
non‑monetary benefits
Liabilities for employee benefits for wages,
salaries and annual leave represent present obligations
resulting from employees’ services provided to the
year end date, calculated at undiscounted amounts
based on remuneration wage and salary rates that
the consolidated entity expects to pay as at the
year end date.
m) Provisions
A provision is recognised in the statement of
financial position when the consolidated entity has
a present legal or constructive obligation as a result
of a past event, and it is probable that an outflow
of economic benefits will be required to settle
the obligation. Provisions are determined by discounting
Employee benefits
Provisions for employee benefits include liabilities for
annual leave and long service leave and are measured
at the amounts expected to be paid when the liabilities
are settled.
Make good
The make good provision is for leases undertaken by
the Company. For each provision raised a corresponding
asset has been recognised and is amortised over the
shorter of the term of the lease or the useful life of
the asset.
n) Trade and other payables
Trade and other payables are stated at their
amortised cost.
o) Revenue
The consolidated entity allocates revenue to
each element in software arrangements involving
multiple elements based on the relative fair value of
each element. The typical elements in the multiple
element arrangement are licence and maintenance fees.
The Company’s determination of fair value is generally
based on the price charged when the same element is
sold separately.
Revenue from the sale of licences, where the
consolidated entity has no post delivery obligations to
perform is recognised in profit or loss at the date of
delivery of the licence key.
Revenue from maintenance contracts is recognised
rateably over the term of the service agreement,
which is typically one year. Maintenance contracts
are typically priced based on a percentage of licence
fees and have a one year term. Services provided
to customers under maintenance contracts include
technical support and supply of software updates.
Revenue from multiple element software arrangements,
where the fair value of an undelivered element cannot
be reliably measured are recognised over the period the
undelivered services are provided.
Revenue from consulting services is recognised over the
period the services are provided.
No revenue is recognised if there are significant
uncertainties regarding the recovery of the
consideration due, the costs incurred or to be incurred
cannot be measured reliably, there is a risk of return of
goods or there is continuing management involvement
with the goods.
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Letter from the ChairmanDirectors and Senior ManagementDirectors’ ReportRemuneration ReportCorporate Governance StatementIndependent Audit ReportFinancial StatementsIntegrated Research and its controlled entities • Annual Report 2014 Note 1: Significant
accounting policies (cont.)
Cash flows are included in the statement of cash flows on a
gross basis. The GST components of cash flows arising from
investing and financing activities, which are recoverable or
payable are classified as operating cash flows.
p) Expenses
Operating lease payments
Payments made under operating leases are recognised
in profit or loss on a straight-line basis over the term
of the lease. Lease incentives received are recognised
in profit or loss as an integral part of the total lease
expense and spread over the lease term.
Financing income
Financing income comprises interest receivable on
funds invested.
q) Income tax
Income tax on the profit or loss for the periods
presented comprises current and deferred tax.
Income tax is recognised in profit or loss except to
the extent that it relates to items recognised directly
in equity, in which case it is recognised in equity.
Current tax is the expected tax payable on the taxable
income for the year, using tax rates enacted or
substantively enacted at the year end date, and any
adjustment to tax payable in respect of previous years.
Deferred tax is recognised on temporary differences
between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used
for taxation purposes. The amount of deferred tax
provided is based on the expected manner of realisation
or settlement of the carrying amount of assets
and liabilities, using tax rates enacted or substantively
enacted at the year end date.
A deferred tax asset is recognised only to the extent that
it is probable that future taxable profits will be available
against which the asset can be utilised. Deferred tax
assets are reduced to the extent that it is no longer
probable that the related tax benefit will be realised.
Additional dividend franking deficit tax that arises from
the distribution of dividends are recognised at the same
time as the liability to pay the related dividend.
r) Goods and Services Tax
Revenue, expenses and assets are recognised net of the
amount of goods and services tax (GST), or similar taxes,
except where the amount of GST incurred is not
recoverable from the taxation authority. In these
circumstances, the GST is recognised as part of the cost
of acquisition of the asset or as part of the expense.
Receivables and payables are stated with the amount
of GST included. The net amount of GST recoverable or
payable is included as a current asset or liability in the
statement of financial position.
s) Significant accounting judgements, 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 significant risk of causing a material
adjustment to the carrying amounts of certain assets
and liabilities within the next annual reporting period are:
Intangible assets
An intangible asset arising from development
expenditure on an internal project is recognised only
when the consolidated entity 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 benefits,
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 benefits 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.
Share based payment transactions
The consolidated entity 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 using a binomial option pricing model and applying
management determined probability factors relating to
non-market vesting conditions.
Receivables
The consolidated entity assesses impairment of
receivables based upon assessment of objective
evidence for significant receivables and by placing
non significant receivables in portfolios of similar risk
profiles, based on objective evidence from historical
experience adjusted for any effects of conditions
existing at each reporting date. This assessment includes
judgements and estimates of future outcomes the
actual results of which may differ from the estimates at
the reporting date.
56
Financial StatementsIntegrated Research and its controlled entities • Annual Report 2014 Note 2. Segment reporting
The information reported to the CODM (being the Chief Executive Officer) for the purposes of resource
allocation and assessment of performance is focused on geographical performance. The principal geographical
regions are The Americas - Operating from the United States with responsibility for the countries in North,
Central and South America, Europe - operating from the United Kingdom with responsibility for the countries in
Europe, Asia Pacific - operating from Australia with responsibility for the countries in the rest of the world and
Corporate Australia - includes revenue and expenses for research and development and corporate head office
functions of the company.
Inter-segment pricing is determined on an arm’s length basis.
Segment profit represents the profit earned by each segment without allocation of investment revenue and income
tax expense. This is the measure reported to the chief operating decision maker for the purposes of resource allocation
and assessment of segment performance.
Information regarding these segments is presented below. The accounting policies of the reportable segments are the
same as the Group’s accounting policies.
Americas
Europe
Asia Pacific
Corporate
Australia1
Eliminations
Consolidated
In thousands of AUD
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
Sales to customers
outside the
consolidated entity
38,133 34,432
7,896
6,939
8,100
7,496
(886)
(8)
-
- 53,243 48,859
Inter-segment sales
-
-
-
-
-
- 28,714 27,675 (28,714) (27,675)
-
-
Total segment revenue 38,133 34,432
7,896
6,939
8,100
7,496 27,828 27,667 (28,714) (27,675) 53,243 48,859
Total revenue
53,243 48,859
Segment results
1,147
861
197
174
202
187 8,723 9,892
-
- 10,269 11,114
10,269 11,114
384
456
1,045
(1,045)
-
-
2
2
-
474
515
- 7,415 7,320
-
-
(2,164) (2,492)
8,489 9,078
-
782
616
- 7,555 7,445
Results from
operating activities
Financing income
(interest received)
Dividend received
from subsidiary
Income tax expense
Profit for the year
Capital additions3
Depreciation
and amortisation
expenditure
In thousands of
local currency2
Sales to customers
outside the
consolidated entity
91
76
215
25
106
97
32
27
Americas
(USD)
Europe
(GBP)
2014
2013
2014
2013
34,759 35,247
4,415
4,519
Inter-segment sales
-
-
-
-
Total segment revenue 34,759 35,247
4,415
4,519
Segment results
1,044
881
111
113
1 Corporate Australia includes both the research and development and corporate head office functions of the Integrated Research Limited.
2 Segment results represented in local currencies as reviewed by the Chief Operating Decision Maker.
3 Excludes internal development costs capitalised but includes third party assets acquired.
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Letter from the ChairmanDirectors and Senior ManagementDirectors’ ReportRemuneration ReportCorporate Governance StatementIndependent Audit ReportFinancial StatementsIntegrated Research and its controlled entities • Annual Report 2014 Note 3. Finance income
In thousands of AUD
Interest income
Note 4. Expenditure
Total expenditure includes:
In thousands of AUD
Employee benefits expense:
Defined contribution plans
Equity settled share-based payments
Other employee benefits
Depreciation and amortisation
Bad and doubtful debt expense
Operating lease rental expenses
Note 5. Auditors’ remuneration
2014 and 2013 Ernst and Young.
In AUD
Remuneration for audit and review of the financial reports of the Company or any
entity in the consolidated entity:
Audit and review of financial reports:
Auditors of the Company
Remuneration for other services by the auditors of the Company or any entity in the
consolidated entity:
Taxation services:
Auditors of the Company
Consolidated
2014
384
384
2013
456
456
Consolidated
2014
2013
1,617
453
29,798
31,868
7,555
288
1,514
1,513
148
27,507
29,168
7,445
182
1,221
Consolidated
2014
2013
135,000
162,740
121,361
75,389
58
Financial StatementsIntegrated Research and its controlled entities • Annual Report 2014 Note 6. Income tax expense
Recognised in profit for the year
In thousands of AUD
Current tax expense:
Current year
Prior year adjustments
Deferred tax expense:
Origination and reversal of temporary differences
13
Total income tax expense in profit and loss
Numerical reconciliation between income tax expense and profit before tax
In thousands of AUD
Profit before tax
Income tax using the domestic corporate tax rate of 30%
Increase in income tax expense due to:
Non-deductible expenses
Effect of tax rates in foreign jurisdictions
Decrease in income tax expense due to:
R&D tax incentive
Other
Prior year adjustments
Income tax expense
Consolidated
Note
2014
2013
2,203
(233)
1,970
194
2,164
2,430
(93)
2,337
155
2,492
Consolidated
2014
10,653
3,196
203
202
2013
11,570
3,471
105
76
(1,199)
(1,144)
(5)
(233)
2,164
77
(93)
2,492
59
Letter from the ChairmanDirectors and Senior ManagementDirectors’ ReportRemuneration ReportCorporate Governance StatementIndependent Audit ReportFinancial StatementsIntegrated Research and its controlled entities • Annual Report 2014 Note 7. Earnings per share
The calculation of basic and diluted earnings per share at 30 June 2014 was based on the profit attributable to
ordinary shareholders of $8,489,000 (2013: $9,078,000); a weighted number of ordinary shares outstanding during
the year ended 30 June 2014 of 168,719,799 (2013: 168,226,574); and a weighted number of ordinary shares (diluted)
outstanding during the year ended 30 June 2014 of 169,895,017 (2013: 169,659,715), calculated as follows:
In thousands of AUD
Profit for the year
Weighted average number of shares used as the denominator
(Number)
Number for basic earnings per share:
Ordinary shares
Effect of employee share plans on issue
Number for diluted earnings per share
Basic earnings per share (AUD cents)
Diluted earnings per share (AUD cents)
Note 8. Cash and cash equivalents
In thousands of AUD
Cash at bank and on hand
Consolidated
2014
8,489
2013
9,078
Consolidated
2014
2013
168,719,799 168,226,574
1,175,218
1,433,141
169,895,017 169,659,715
5.03
5.00
5.40
5.35
Consolidated
2014
2013
13,300
14,827
60
Financial StatementsIntegrated Research and its controlled entities • Annual Report 2014 Note 9. Trade and other receivables
In thousands of AUD
Current
Trade debtors
Less: Allowance for doubtful debts
GST receivable
Non-current
Trade debtors
Consolidated
2014
2013
20,934
(858)
20,076
149
22,451
(1,139)
21,312
95
20,225
21,407
2,632
2,157
The credit period on sales ranges from 30 to 90 days although in limited circumstances extended payment terms have
been offered. No interest is charged on trade debtors.
Ageing of past due but not impaired:
In thousands of AUD
Past due 90 days
Consolidated
2014
1,868
2013
3,770
The movement in the allowance for doubtful debts in respect of trade receivables is detailed below:
In thousands of AUD
Balance at beginning of year
Amounts written off during the year
Increase in provision
Balance end of year
Consolidated
2014
1,139
(569)
288
858
2013
1,237
(280)
182
1,139
The consolidated entity has used the following criteria to assess the allowance loss for trade receivables and as a result
is unable to specifically allocate the allowance to the ageing categories shown above:
historical bad debt experience;
the general economic conditions;
an individual account by account specific risk assessment based on past credit history; and
any prior knowledge of debtor insolvency or other credit risk.
Included in the consolidated entity’s trade receivable balance are debtors with a carrying amount of $1,010,000
(2013: $2,631,000) which are 90 days past due at the reporting date which the consolidated entity has not provided for
as there has been no significant change in credit quality and the consolidated entity believes that the amounts are still
considered recoverable. The consolidated entity does not hold any collateral over these balances.
61
Letter from the ChairmanDirectors and Senior ManagementDirectors’ ReportRemuneration ReportCorporate Governance StatementIndependent Audit ReportFinancial StatementsIntegrated Research and its controlled entities • Annual Report 2014 Note 10. Other current assets
In thousands of AUD
Other prepayments
Fair value of hedge asset - forward foreign exchange contracts
Note 11. Other financial assets
In thousands of AUD
Deposits
The carrying amount of other financial assets is a reasonable approximation of their fair value.
Consolidated
2014
847
177
1,024
2013
781
-
781
Consolidated
2014
786
2013
724
62
Financial StatementsIntegrated Research and its controlled entities • Annual Report 2014 Note 12. Property, plant and equipment
In thousands of AUD
Plant and Equipment
At cost
Accumulated depreciation
Leasehold Improvements
At cost
Accumulated depreciation
Total property, plant and equipment
At cost
Accumulated depreciation
Total written down amount
Plant and Equipment
Carrying amount at start of year
Additions
Effects of foreign currency exchange
Depreciation expense
Carrying amount at end of year
Leasehold Improvements
Carrying amount at start of year
Additions
Effects of foreign currency exchange
Depreciation expense
Carrying amount at end of year
Consolidated
2014
2013
3,148
4,899
(2,215)
(3,972)
933
927
2,174
2,021
(1,427)
(1,242)
747
779
5,322
6,920
(3,642)
(5,214)
1,680
1,706
927
427
-
(421)
933
779
182
(2)
(212)
747
863
482
11
(429)
927
957
13
9
(200)
779
63
Letter from the ChairmanDirectors and Senior ManagementDirectors’ ReportRemuneration ReportCorporate Governance StatementIndependent Audit ReportFinancial StatementsIntegrated Research and its controlled entities • Annual Report 2014 Note 13. Deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the following:
Consolidated
In thousands of AUD
Intangible assets
Trade and other payables
Employee benefits
Provisions
Other current liabilities
Unrealised foreign exchange gain
Unrealised foreign exchange loss
Assets
Liabilities
Net
2014
2013
-
252
965
416
893
-
115
-
416
745
533
587
-
-
2014
4,842
2013
4,485
2014
2013
(4,842)
(4,485)
-
-
-
-
-
-
-
-
-
-
191
-
252
965
416
893
-
115
416
745
533
587
(191)
-
Deferred tax assets/(liabilities)
2,641
2,281
4,842
4,676
(2,201)
(2,395)
Set off of deferred tax asset
(1,178)
(1,094)
(1,178)
(1,094)
-
-
Net deferred tax assets/(liabilities)
1,463
1,187
3,664
3,582
(2,201)
(2,395)
Movement in temporary differences during the year:
In thousands of AUD
For year ended 30 June 2014
Property, plant and equipment
Intangible assets
Trade and other payables
Employee benefits
Provisions
Other current liabilities
Unrealised foreign exchange gain
Unrealised foreign exchange loss
In thousands of AUD
For year ended 30 June 2013
Property, plant and equipment
Intangible assets
Trade and other payables
Employee benefits
Provisions
Other current liabilities
Unrealised foreign exchange gain
64
Consolidated
Balance
1 July 13
Recognised
in income
Recognised
in equity
Balance
30 June 14
-
(4,485)
416
745
533
587
(191)
-
(2,395)
-
(357)
(164)
220
(117)
306
191
115
194
-
-
-
-
-
-
-
-
-
-
(4,842)
252
965
416
893
-
115
(2,201)
Consolidated
Balance
1 July 12
Recognised
in income
Recognised
in equity
Balance
30 June 13
(50)
(4,063)
468
772
364
-
(41)
(2,550)
50
(422)
(52)
(27)
169
587
(150)
155
-
-
-
-
-
-
-
-
-
(4,485)
416
745
533
587
(191)
(2,395)
Financial StatementsIntegrated Research and its controlled entities • Annual Report 2014 Note 14. Intangible assets
The amortisation is recognised in the following line item in the statement of comprehensive income:
In thousands of AUD
Research and development expenses
The balance of capitalised intangible assets comprises:
Consolidated
2014
6,922
6,922
2013
6,816
6,816
Consolidated
Software
development
Third party
software
In thousands of AUD
Cost
Balance at 1 July 2012
Fully amortised & offset
Effects of foreign currency exchange
Internally developed
Acquired
Balance at 30 June 2013
Balance at 1 July 2013
Fully amortised & offset
Effects of foreign currency exchange
Internally developed
Acquired
Balance at 30 June 2014
Amortisation
Balance at 1 July 2012
Fully amortised & offset
Effects of foreign currency exchange
Amortisation for year
Balance at 30 June 2013
Balance at 1 July 2013
Fully amortised & offset
Effects of foreign currency exchange
Amortisation for year
Balance at 30 June 2014
Carrying amounts
Balance at 30 June 2013
Balance at 30 June 2014
20,964
(4,295)
-
7,882
-
24,551
24,551
(5,619)
-
7,967
-
26,899
7,422
(4,295)
-
6,607
9,734
9,734
(5,619)
-
6,740
10,855
14,817
16,044
Total
22,614
(4,295)
14
7,882
121
26,336
26,336
(6,408)
(2)
7,967
173
1,650
-
14
-
121
1,785
1,785
(789)
(2)
-
173
1,167
28,066
1,343
-
10
209
1,562
1,562
(789)
(1)
182
954
223
213
8,765
(4,295)
10
6,816
11,296
11,296
(6,408)
(1)
6,922
11,809
15,040
16,257
65
Letter from the ChairmanDirectors and Senior ManagementDirectors’ ReportRemuneration ReportCorporate Governance StatementIndependent Audit ReportFinancial StatementsIntegrated Research and its controlled entities • Annual Report 2014 Note 15. Trade and other payables
In thousands of AUD
Trade and other creditors
The average credit period on trade and other payables is 30 days.
Note 16. Employee benefits
In thousands of AUD
Current
Liability for annual leave
Liability for long service leave
Non-current
Liability for long service leave
Pension plans
Consolidated
2014
4,074
4,074
2013
4,190
4,190
Consolidated
2014
2013
1,498
607
2,105
1,549
455
2,004
361
374
Employees of the consolidated entity accumulate pension benefits through statutory contributions by the entities
in the consolidated entity as required by the laws of the jurisdictions in which they operate, supplemented by
individual contributions.
66
Financial StatementsIntegrated Research and its controlled entities • Annual Report 2014 Note 16. Employee benefits (cont.)
Share based payments
Performance Rights
On 21 November 2011, the consolidated entity established the Integrated Research Performance Rights and
Options Plan (IRPROP). The plan enables the Company to offer performance rights to eligible employees to obtain
shares in Integrated Research at no cost contingent upon performance conditions being met. The performance
conditions include either a service period with performance components or a service period with a net after tax
profit hurdle. The performance rights are automatically exercised into shares upon the performance conditions
being met. The following performance rights were granted during the period:
Grant Date
10 September 2013
14 November 2013
04 April 2014
Number of Rights Earliest Vesting Date
Expiry date
165,000
350,000
85,000
Sep 2016
Oct 2014
Aug 2017
Oct 2016
Oct 2016
Sep 2017
The fair value of the performance rights including assumptions used are as follows:
Grant date
10 Sep 2013
14 Nov 2013
04 Apr 2014
Fair value at measurement date
$0.7815
$0.8675
Share price
Exercise price
Expected volatility
Contractual life (expressed in days)
Expected dividends
Risk-free interest rate (based on 3 year treasury bonds)
$0.93
nil
50%
1,096
5.80%
2.68%
$0.98
nil
50%
2,080
4.19%
3.04%
$0.9369
$1.115
nil
50%
1,245
5.80%
3.00%
The fair values of services received in return for performance rights granted to employees is measured by reference to
the fair value of share options granted. The estimate of the fair value of the services received is measured based on a
Binomial option-pricing model.
During the year ended 30 June 2014, the consolidated entity recognised an expense through profit of $452,000 related
to the fair value of performance rights (2013: $156,000).
The following table provides the movement in performance rights during the year:
In thousands of performance rights
Outstanding at the beginning of the year
Forfeited during the year
Exercised during the year
Granted during the year
Outstanding at the end of the year
Exercisable at the end of the year (vested)
2014
1,853
(516)
-
600
1,937
-
2013
1,535
(93)
-
411
1,853
-
67
Letter from the ChairmanDirectors and Senior ManagementDirectors’ ReportRemuneration ReportCorporate Governance StatementIndependent Audit ReportFinancial StatementsIntegrated Research and its controlled entities • Annual Report 2014 Note 16. Employee benefits (cont.)
Share Options
On 4 October 2000, the consolidated entity established a share option programme that entitles employees to purchase
shares in the entity. In accordance with this programme, options are exercisable at the market price of the shares at
the date of grant.
The terms and conditions of the grants made and number outstanding at 30 June 2014 are as follows:
All options vest at the rate of 25% per annum, starting on the first anniversary of the grant date
The contractual life of each option is five years from the grant date
Exercises are settled by physical delivery of shares
The number and weighted average exercise prices of share options is as follows:
In thousands of options
Outstanding at the beginning of the year
Forfeited during the year
Exercised during the year
Granted during the year
Outstanding at the end of the year
Exercisable at the end of the year (vested)
There are no options outstanding at 30 June 2014.
Weighted
Average
exercise price
Number of
options
Weighted
Average
exercise price
Number of
options
2014
$0.29
$0.28
$0.30
$-
$-
$-
2014
872
(479)
(393)
-
-
-
2013
$0.36
$0.40
$0.38
$-
$0.29
$0.28
2013
2,645
(912)
(861)
-
872
467
During the year ended 30 June 2014, 392,500 options were exercised (2013: 860,500).
The fair values of services received in return for share options granted to employees is measured by reference to the
fair value of share options granted. The estimate of the fair value of the services received is measured based on the
Binomial option-pricing model. The contractual life of the option (five years) is used as an input into this formula.
Expectations of early exercise are incorporated into the Binomial formula.
There were no options granted during the 2014 financial year (2013:nil).
68
Financial StatementsIntegrated Research and its controlled entities • Annual Report 2014 Note 17. Provisions
In thousands of AUD
Current
Employee benefits
Non-current
Employee benefits
Lease make good
Note 18. Other liabilities
In thousands of AUD
Current
Fair value of hedge liabilities - forward foreign exchange contracts
Deferred revenue
Non-Current
Deferred revenue
Note 19. Capital and reserves
Share capital
In thousands of shares
On issue 1 July
Issued against employee options exercised
On issue 30 June
Consolidated
Note
2014
2013
16
16
2,105
2,105
361
417
778
2,004
2,004
374
382
756
Consolidated
2014
2013
9
13,571
13,580
1,238
11,848
13,086
2,798
2,881
Ordinary shares
2014
2013
168,367
167,507
393
860
168,760
168,367
Effective 1 July 1998, the Company Law reform Act abolished the concept of par value shares and the concept
of authorised capital. Accordingly, the company does not have authorised capital or par value in respect of its
issued shares.
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one
vote per share at meetings of the Company. All shares rank equally with regard to the Company’s residual assets.
Hedging reserve
The hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging
instruments related to hedged transactions that have not yet occurred.
69
Letter from the ChairmanDirectors and Senior ManagementDirectors’ ReportRemuneration ReportCorporate Governance StatementIndependent Audit ReportFinancial StatementsIntegrated Research and its controlled entities • Annual Report 2014 Note 19. Capital and reserves (cont.)
Translation reserve
The translation reserve comprises all foreign exchange differences arising from the translation of the financial
statements of foreign operations where their functional currency is different to the presentation currency of the
consolidated entity, as well as from the translation of liabilities that hedge the consolidated entity’s net investment
in a foreign subsidiary.
Employee benefit reserve
The employee benefit reserve arises on the grant of either share options or performance rights to employees under
the Integrated Research Performance Rights and Option Plan (established November 2011) or the Employee Share
Option Plan (established October 2000). Refer to note 16 for further details.
Dividends
Dividends recognised in the current year by the company are:
In thousands of AUD
Cents
per share
Total amount
Franked/
unfranked
Date of
payment
2014
Final 2013
Interim 2014
Total amount
2013
Final 2012
Interim 2013
Total amount
3.0
2.5
3.0
2.0
5,055
40% franked
13 Sep 2013
4,223
30% franked
21 Mar 2014
9,278
5,045
70% franked
14 Sep 2012
3,368
30% franked
15 Mar 2013
8,413
After the end of the financial year, the following dividend was proposed by the directors. The financial effect of this
dividend has not been brought to account in the financial statements for the year ended 30 June 2014 and will be
recognised in subsequent financial statements:
In thousands of AUD
Final 2014
Cents
per share
Total amount
Franked/
unfranked
Date of
payment
2.5
4,224
35% franked
12 Sep 14
The final dividend declared of 2.5 cents together with the interim dividend paid in March 2014 of 2.5 cents takes
total dividends for the 2014 financial year to 5.0 cents.
Franking account disclosure:
In thousands of AUD
Adjusted franking account balance
Impact on franking account balance of dividends not recognised
Company
2014
737
(634)
2013
944
(866)
70
Financial StatementsIntegrated Research and its controlled entities • Annual Report 2014 Note 20. Financial instruments
Capital risk management
The consolidated entity manages its capital to ensure that controlled entities will be able to continue as a going
concern while maximising the return to stakeholders through the optimisation of treasury management.
The capital structure of the consolidated entity consists of cash and cash equivalents and equity attributable
to equity holders of the company, comprising issued capital, reserves, and retained earnings as disclosed in
Notes 8 and 19 respectively.
Significant accounting policies
Details of the significant 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 financial asset,
financial liability and equity instrument are disclosed in Note 1 to the financial statements.
Financial risk management objectives
The Board of Directors has overall responsibility for the establishment and oversight of the consolidated entity’s
financial management framework. The Board has an established Audit and Risk Committee, which is responsible for
developing and monitoring the consolidated entity’s financial management policies. The Committee provides regular
reports to the Board of Directors on its activities.
The Audit and Risk Committee oversees how Management monitors compliance with risk management policies and
procedures and reviews the adequacy of the risk management framework in relation to the risks.
The main risks arising from the consolidated entity’s financial instruments are currency risk, credit risk, liquidity risk
and cash flow interest rate risk.
The consolidated entity seeks to minimise the effects of these risks, where deemed appropriate, by using
derivative financial instruments to hedge these risk exposures. The use of financial derivatives is governed by the
consolidated entity’s policies on foreign exchange risk, credit risk, the use of financial derivatives and non-derivative
financial instruments, and the investment of excess liquidity. The consolidated entity does not enter into or trade
financial instruments, including derivative financial instruments, for speculative purposes.
Market risk
The consolidated entity’s activities expose it primarily to the financial risks of changes in foreign currency exchange
rates and cash flow interest rate risks. The consolidated entity enters into foreign exchange forward contracts to hedge
the exchange rate risk arising from transactions not recorded in an entity’s functional currency.
71
Letter from the ChairmanDirectors and Senior ManagementDirectors’ ReportRemuneration ReportCorporate Governance StatementIndependent Audit ReportFinancial StatementsIntegrated Research and its controlled entities • Annual Report 2014 Note 20. Financial instruments (cont.)
Foreign currency risk management
The consolidated entity undertakes certain transactions denominated in foreign currencies, hence exposures to
exchange rate fluctuations arise. Exchange rate exposures are managed within approved policy parameters utilising
forward foreign exchange contracts.
The carrying amount of the consolidated entity’s foreign currency denominated monetary assets and monetary
liabilities at the reporting date that are denominated in a currency that is different to the functional currency of the
respective entities undertaking the transactions is as follows:
In thousands of AUD
US Dollar
Euro
UK Sterling
Foreign currency sensitivity
Consolidated
Liabilities
Assets
2014
188
-
-
2013
325
-
-
2014
2,153
1,889
1
2013
3,989
2,669
10
At 30 June 2014, if the US Dollar, Euro and UK Sterling weakened and strengthened against the Australian Dollar by the
percentage shown, with all other variables held constant, net profit for the year would increase (decrease) by:
In thousands of AUD
US Dollar Impact
Euro Impact
UK Sterling Impact
Change in currency (i) - 10% decrease
US Dollar Impact
Euro Impact
UK Sterling Impact
Change in currency (i) - 10% increase
Consolidated
Net profit
Retained earnings
2014
2013
2014
2013
218
210
-
(179)
(172)
-
407
297
1
(347)
(243)
(1)
218
210
-
(179)
(172)
-
407
297
1
(347)
(243)
(1)
(i) This has been based on the change in the exchange rate against the Australian Dollar in the financial years ended 30 June 2014 and 30 June 2013.
The sensitivity analysis has been based on the sensitivity rates used when reporting foreign currency risk internally
to key management personnel and represents management’s assessment of the possible change in foreign exchange
rates based on historical volatility.
In management’s opinion, the sensitivity analysis is not fully representative of the inherent foreign exchange risk as the year
end exposure does not necessarily reflect the exposure during the course of the year. The consolidated entity includes certain
subsidiaries whose functional currencies are different to the consolidated entity presentation currency. The main operating
entities outside of Australia are based in the United States, the United Kingdom and Singapore. As stated in the consolidated
entity’s accounting policies per Note 1, on consolidation the assets and liabilities of these entities are translated into Australian
Dollars at exchange rates prevailing at the year end date. The income and expenses of these entities is translated at the
average exchange rates for the year. Exchange differences arising are classified as equity and are transferred to a foreign
exchange translation reserve. The consolidated entity’s future reported profits could therefore be impacted by changes in rates
of exchange between the Australian Dollar and the United States Dollar and the Australian Dollar and the UK Sterling.
72
Financial StatementsIntegrated Research and its controlled entities • Annual Report 2014 Note 20. Financial instruments (cont.)
Forward foreign exchange contracts
The consolidated entity is exposed to foreign currency risk on sales and purchases that are denominated in a currency
other than the AUD. The currencies giving rise to this risk are primarily United States Dollar, UK Sterling and Europe Euro.
The consolidated entity uses forward exchange contracts to hedge its foreign currency risk. The forward exchange
contracts have maturities of less than two years after the year end date.
The consolidated entity classifies its forward exchange contracts hedging forecasted transactions as cash flow hedges
and measures them at fair value. The following table details the forward foreign currency contracts outstanding as at
reporting date:
Average Exchange Rate
Foreign Currency
Contract Value
Fair Value
Outstanding contracts
2014
2013
2014
FC’000
2013
FC’000
2014
A$’000
2013
A$’000
2014
A$’000
2013
A$’000
Consolidated
Sell US Dollar
Less than 3 months
3 to 6 months
6 to 9 months
9 to 12 months
Sell Euros
Less than 3 months
3 to 6 months
6 to 9 months
9 to 12 months
Sell Sterling
Less than 3 months
3 to 6 months
6 to 9 months
9 to 12 months
0.92
0.91
0.89
0.92
0.68
0.68
0.67
0.67
0.55
0.55
0.55
0.54
1.01
1.01
1.00
1.00
0.78
0.76
0.75
0.75
-
-
-
-
2,900
1,650
1,750
1,300
310
210
215
295
270
70
160
150
3,600
2,400
2,550
2,000
750
200
200
100
-
-
-
-
3,136
1,808
1,967
1,408
454
309
321
443
490
128
293
275
3,564
2,376
2,561
2,013
966
262
266
134
-
-
-
-
45
38
79
(1)
3
1
3
5
(2)
(1)
(2)
(2)
(357)
(257)
(255)
(209)
(104)
(26)
(20)
(10)
-
-
-
-
166
(1,238)
These hedge assets are classified as a level 2 fair value measurement, being derived from inputs provided from
financial institutes, rather than quoted prices that are observable for the asset either directly (i.e. as prices)
or indirectly (i.e. derived from prices). The fair value measurement of the OTC forward contact would not qualify
as Level 1 as there is not a quoted price for the actual contract, even though data used to value the contract may be
derived entirely from active foreign-exchange and interest-rate market.
Interest rate risk management
The consolidated entity is exposed to interest rate risk on the cash held in bank deposits. Cash in bank and term
deposits of $13,949,000 were held by the consolidated entity at the reporting date, attracting an average interest
rate of 3.01% (2013: 3.26%). If interest rates had been 50 basis points higher or lower and all other variables were
held constant, the consolidated entity’s net profit would increase/(decrease) by $69,745 (2013: $78,000).
73
Letter from the ChairmanDirectors and Senior ManagementDirectors’ ReportRemuneration ReportCorporate Governance StatementIndependent Audit ReportFinancial StatementsIntegrated Research and its controlled entities • Annual Report 2014 Note 20. Financial instruments (cont.)
Credit risk management
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to
the consolidated entity. The consolidated entity has adopted a policy of only dealing with creditworthy counterparties
and obtaining sufficient collateral where appropriate, as a means of mitigating the risk of financial loss from defaults.
Trade receivables consist of a large number of customers, spread across diverse industries and geographical areas.
Ongoing credit evaluation is performed on the financial condition of accounts.
The consolidated entity does not have any significant credit risk exposure to any single counterparty or any
consolidated entity of counterparties having similar characteristics. The credit risk on liquid funds and derivative
financial instruments is limited because the counterparties are banks with high credit ratings assigned by international
credit-rating agencies.
Liquidity risk management
Ultimate responsibility for liquidity risk management rests with the board of directors, who have built an appropriate
liquidity risk management framework for the management of the consolidated entity’s short, medium and long-term
funding and liquidity management requirements.
The consolidated entity manages liquidity risk by maintaining adequate reserves, by continuously monitoring forecast
and actual cash flows and matching the maturity profiles of financial assets and liabilities.
All creditor and other payables shown in Note 15 for both 2014 and 2013 carry no interest obligation and have
a maturity of less than three months.
Fair value of financial instruments
The carrying value of financial assets and financial liabilities of the consolidated entity is a reasonable approximation
of their fair value.
Note 21. Operating leases
Non-cancellable operating lease rentals is for office space with payables as follows:
In thousands of AUD
Less than one year
Between one and five years
Greater than five years
Consolidated
2014
1,078
1,768
-
2013
1,197
2,250
-
2,846
3,447
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Financial StatementsIntegrated Research and its controlled entities • Annual Report 2014 Note 22. Consolidated entities
Country of incorporation
2014
2013
Ownership interest
Parent entity:
Integrated Research Limited
Subsidiaries:
Integrated Research, Inc
Integrated Research UK Limited
Australia
USA
UK
Integrated Research Singapore Pty Limited
Singapore
Note 23. Reconciliation of cash flows from
operating activities
In thousands of AUD
Profit for the year
Depreciation and amortisation
Provision for doubtful debts
Interest received
Share-based payments expense
Net exchange differences
Change in operating assets and liabilities:
(Increase)/decrease in trade debtors
(Increase)/decrease in future income tax benefit
(Increase)/decrease in other operating assets
Increase/(decrease) in trade and other payables
Increase/(decrease) in other operating liabilities
Increase/(decrease) in provision for income taxes payable
Increase/(decrease) in provision for deferred income taxes
Increase/(decrease) in other provisions
Net cash from operating activities
100%
100%
100%
100%
100%
100%
Consolidated
2014
8,489
7,555
(281)
(384)
453
(805)
988
(276)
892
(116)
411
(1,112)
82
123
2013
9,078
7,445
(98)
(456)
148
(725)
(2,085)
(734)
261
(95)
4,082
(304)
579
360
16,019
17,456
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Letter from the ChairmanDirectors and Senior ManagementDirectors’ ReportRemuneration ReportCorporate Governance StatementIndependent Audit ReportFinancial StatementsIntegrated Research and its controlled entities • Annual Report 2014 Note 24. Key management personnel disclosures
Key management personnel compensation
The key management personnel compensation are as follows:
In AUD
Short-term benefits
Post-employment benefits
Equity compensation benefits
Consolidated
2014
2013
3,085,453
3,210,955
169,334
159,353
326,346
58,723
3,581,133
3,429,031
Other Transactions with Key Management Personnel
The consolidated entity received consulting services totalling $159,480 for the year ended 30 June 2013 from
The Grayrock Group Pty Limited, a company in which Peter Lloyd is a director. There were no services received for the
year ended 30 June 2014.
Apart from the details disclosed in this note, no director has entered into a material contract with the consolidated
entity since the end of the previous financial year and there were no material contracts involving directors’ interests
existing at year-end.
Note 25. Related parties
The consolidated entity has a related party relationship with its key management personnel (see remuneration report
pages 28-39).
At 30 June 2014 Mr Steve Killelea, the Chairman of the Company, owned either directly or indirectly 56.13%
of the Company (2013: 56.33%).
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Financial StatementsIntegrated Research and its controlled entities • Annual Report 2014 Note 26. Parent entity disclosures
In thousands of AUD
Financial Position
Assets
Current assets
Non-current assets
Total Assets
Liabilities
Current Liabilities
Non-current liabilities
Total Liabilities
Net Assets
Equity
Issued Capital
Employee benefits Reserve
Hedging reserve
Retained Earnings
Total Equity
Financial Performance
Profit for the year
Other comprehensive income
Total comprehensive income
Parent Entity
2014
2013
18,044
18,244
36,288
4,814
4,603
9,417
26,871
1,667
873
120
24,211
26,871
8,732
897
9,629
20,085
17,211
37,296
6,828
4,563
11,391
25,905
1,501
424
(777)
24,757
25,905
8,621
(777)
7,844
Investments in subsidiaries are included at cost.
Note 27. Subsequent events
For dividends declared after 30 June 2014 see Note 19 in the financial statements. The financial effect of dividends
declared and paid after 30 June 2014 have not been brought to account in the financial statements for the year ended
30 June 2014 and will be recognised in subsequent financial reports.
No other transaction or event of a material or unusual nature has arisen in the interval between the end of the
financial year and the date of this report, which is likely, in the opinion of the directors of the company, to affect
significantly the operations of the consolidated entity, the results of those operations, or the state of affairs of the
consolidated entity, in future financial years.
77
Letter from the ChairmanDirectors and Senior ManagementDirectors’ ReportRemuneration ReportCorporate Governance StatementIndependent Audit ReportFinancial StatementsIntegrated Research and its controlled entities • Annual Report 2014 Directors’ Declaration
In accordance with a resolution of the directors of Integrated Research Limited, we state that:
1.
In the opinion of the directors:
(a) the financial statements and notes of Integrated Research Limited for the financial year ended 30 June 2014
are in accordance with the Corporations Act 2001, including:
(i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2014 and of its
performance for the year ended on that date; and
(ii) complying with Accounting Standards and the Corporations Regulations 2001;
(b) the financial statements and notes also comply with International Financial Reporting Standards as disclosed
in Note 1; and
(c) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they
become due and payable.
2. This declaration has been made after receiving the declarations required to be made to the directors by the chief
executive officer and chief financial officer in accordance with section 295A of the Corporations Act 2001 for the
financial year ended 30 June 2014.
On behalf of the board
Dated at North Sydney this 19th day of August 2014.
Steve Killelea
Chairman
Darc Rasmussen
Chief Executive Officer
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Independent Audit ReportIntegrated Research and its controlled entities • Annual Report 2014 81
Letter from the ChairmanDirectors and Senior ManagementDirectors’ ReportRemuneration ReportCorporate Governance StatementFinancial StatementsIndependent Audit ReportIntegrated Research and its controlled entities • Annual Report 2014 ASX Additional Information
Shareholder information
Analysis of numbers of equity security holders by size of holding as at 1 September 2014.
1 -1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 and over
Class of equity security
Ordinary shares
Shares
Options
Performance
rights
555
1,826
996
1,246
79
4,702
-
-
-
-
-
-
-
29
43
29
5
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Integrated Research and its controlled entities • Annual Report 2014
Equity security holders
Twenty largest quoted equity security holders
The names of twenty largest holders of quoted equity securities as at 1 September 2014 are listed below:
1
2
3
4
5
6
7
8
9
10
11
MR STEPHEN JOHN KILLELEA
MR ANDREW RHYS RUTHERFORD
CITICORP NOMINEES PTY LIMITED
EQUITAS NOMINEES PTY LTD
KEY GLORY INVESTMENTS PTY LTD
JP MORGAN NOMINEES AUSTRALIA LIMITED
CUSTODIAL SERVICES LTD
FORSYTH BARR CUSTODIANS LTD
ABN AMRO CLEARING SYDNEY NOMINEES PTY LTD
SPECTROK PTY LTD
BELL POTTER NOMINEES LTD
12 MR KEVIN JOHN CAIRNS + MRS CATHERINE VALERIE CAIRNS
13 MR RODNEY WALTER ROSS
14
FERGFAM NOMINEES PTY LTD
15 MR GARY RONALD POOLE + MRS LEIGH MARGARET POOLE
16 MS FIONA CATHERINE MURPHY
17
BIPETA PTY LTD
18 MR COLIN GREGORY ORGAN
19
20
FARVEX CORPORATION PTY LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
Ordinary shares
Number held
Percentage of
issued shares
94,497,339
55.93
3,505,869
1,670,985
1,513,207
1,000,000
986,347
945,484
754,870
664,545
641,359
532,000
500,000
405,000
375,263
365,000
342,775
337,612
330,000
325,000
307,172
2.07
0.99
0.90
0.59
0.58
0.56
0.45
0.39
0.38
0.31
0.30
0.24
0.22
0.22
0.20
0.20
0.20
0.19
0.18
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Letter from the ChairmanDirectors and Senior ManagementDirectors’ ReportRemuneration ReportCorporate Governance StatementFinancial StatementsIndependent Audit ReportIntegrated Research and its controlled entities • Annual Report 2014 n
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Unquoted equity securities
Option issued under the Integrated Research Limited
Employee Option Plan to take up ordinary shares
Performance Rights issued under the Integrated Research Limited
Performance Rights and Option Plan to take up ordinary shares
* Number of unissued ordinary shares under the Performance Rights.
On-market buy-back
There is no current on-market buy-back.
Substantial holders
Substantial holders in the Company are set below:
Stephen John Killelea*
* Include direct and indirect holdings.
Voting rights
Number on
issue
Number of
holders
-
1,936,500*
-
108
Number held
Percentage
94,834,951
56.13
The voting rights attaching to each class of equity securities are set out below:
1. Ordinary shares.
On a show of hands every member present at a meeting in person or proxy shall have one vote and upon a poll
each share have one vote.
Registered Offi ce
by shares.
2. Options.
No voting rights.
3. Performance rights.
No voting rights.
Access your 2014 Annual Report online.
Other information
Visit www.ir.com/annualreport2014
Integrated Research Limited, incorporated and domiciled in Australia, is a publicly listed Company limited by shares.
This report is proudly printed on 100% recycled carbon neutral
paper and is FSC® Certi fi ed from 100% post consumer waste.
Cover and text printed on Revive Pure 100% Recycled Silk.
100%
FSC® C023640
Selected employee photos: Colin Tan, Integrated Research Senior Soft ware Engineer, R&D
and Michael Halbwirth, Head of Marketi ng Europe.
84
Corporate Directory
Directors
Steve Killelea
Darc Rasmussen
Managing Director and CEO
Solicitors
Ashurst
225 George Street
Sydney, NSW, 2000
Chairman and Non-Executi ve Director
Level 36, Grosvenor Place
Alan Baxter
Independent Non-Executi ve Director
Bankers
Westpac Banking Corporati on
Securities
Exchange Listing
Australian Securiti es Exchange
Code IRI
Country of
Incorporation
Integrated Research Limited,
incorporated and domiciled in Australia,
is a publicly listed company limited
Notice of Annual
General Meeting
The Annual General Meeti ng of
Integrated Research Limited will
be held at 3:00pm on Thursday,
13 November 2014, at the Museum
of Sydney, Corner of Phillip and
Bridge Streets, Sydney.
Garry Dinnie
Independent Non-Executi ve Director
Kate Costello
Independent Non-Executi ve Director
Peter Lloyd
Non-Executi ve Director
Clyde McConaghy
Non-Executi ve Director
Secretary
David Purdue
Level 9, 100 Pacifi c Highway
North Sydney, NSW, 2060
Phone: (+61 2) 9966 1066
Share Registry
Computershare
Auditors
Ernst & Young
Ernst & Young Centre
680 George Street
Sydney, NSW, 2000
4704 Designed and printed by RDA Creati ve www.rda.com.au
Integrated Research and its controlled entities • Annual Report 2014
Corporate Directory
Directors
Steve Killelea
Chairman and Non-Executi ve Director
Darc Rasmussen
Managing Director and CEO
Solicitors
Ashurst
Level 36, Grosvenor Place
225 George Street
Sydney, NSW, 2000
Alan Baxter
Independent Non-Executi ve Director
Bankers
Westpac Banking Corporati on
Securities
Exchange Listing
Australian Securiti es Exchange
Code IRI
Country of
Incorporation
Integrated Research Limited,
incorporated and domiciled in Australia,
is a publicly listed company limited
by shares.
Notice of Annual
General Meeting
The Annual General Meeti ng of
Integrated Research Limited will
be held at 3:00pm on Thursday,
13 November 2014, at the Museum
of Sydney, Corner of Phillip and
Bridge Streets, Sydney.
Garry Dinnie
Independent Non-Executi ve Director
Kate Costello
Independent Non-Executi ve Director
Peter Lloyd
Non-Executi ve Director
Clyde McConaghy
Non-Executi ve Director
Secretary
David Purdue
Registered Offi ce
Level 9, 100 Pacifi c Highway
North Sydney, NSW, 2060
Phone: (+61 2) 9966 1066
Share Registry
Computershare
Auditors
Ernst & Young
Ernst & Young Centre
680 George Street
Sydney, NSW, 2000
Access your 2014 Annual Report online.
Visit www.ir.com/annualreport2014
This report is proudly printed on 100% recycled carbon neutral
paper and is FSC® Certi fi ed from 100% post consumer waste.
Cover and text printed on Revive Pure 100% Recycled Silk.
100%
FSC® C023640
Selected employee photos: Colin Tan, Integrated Research Senior Soft ware Engineer, R&D
and Michael Halbwirth, Head of Marketi ng Europe.
4704 Designed and printed by RDA Creati ve www.rda.com.au
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Corporate HQ
Asia Pacifi c/Middle East/Africa
Integrated Research Ltd
Level 9/100 Pacifi c Highway
North Sydney NSW 2060
Australia
+61 (2) 9966 1066
+61 (2) 9966 1042
info.ap@ir.com
Singapore
Integrated Research (Singapore) Pte Ltd
3 Temasek Avenue
Level 21, Centennial Tower
Singapore 039190
+65 6549 7038
+65 6549 7011
info.ap@ir.com
Americas - West Coast
Integrated Research Inc.
8055 East Tuft s Avenue
Suite 950 Denver CO 80237
USA
+1 (303) 390 8700
+1 (303) 390 8777
info.usa@ir.com
Americas ‑ East Coast
Integrated Research Inc.
1818 Library Street
Suite 500 Reston VA 20190
USA
+1 (703) 956 3016
+1 (303) 390 8777
info.usa@ir.com
Europe
Integrated Research UK Ltd
The Atrium, Harefi eld Road
Uxbridge, Middlesex
UB8 1PH
United Kingdom
+44 (0) 189 581 7800
info.europe@ir.com
Germany
Integrated Research UK Ltd
Münchner Büro der Integrated Research UK Ltd
Terminalstrasse Mitt e 18
85356 München, Germany
+49 (89) 97 007 132
info.germany@ir.com
Visit our website at www.ir.com or our community blog at www.realtime.ir.com
Integrated Research
Annual Report
Providing Business Insight™ 2014
ABN 76 003 588 449