Integrated Research
Annual Report 2015
ABN 76 003 588 449
The 2015
financial year
has been one to
celebrate...
This Annual Report is printed on Titan Plus Satin. Fibre is sourced from certified and well managed forests in compliance with the
environmental and social standards of the FSC® Council.
2
Not only does it represent 27
years of delivering customers'
management software solutions
for business‑critical computing
environments but it’s also the year
that has seen us refresh and bring
our brand and business strategies
to life in a way that has unified our
business, optimised our strengths
and raised us to new heights.
Achieving our vision means getting a lot closer to our
customers. Everything we do is about understanding
their world. We stand beside them, making sure
the ever‑changing array of systems that keeps
our world running, operates as well as it possibly
can. We craft customers’ solutions, we share their
challenges, and we celebrate their victories.
When we work together with our partners, customers
and users we achieve success in unity.
Contents
05 2015 highlights
06 Chairman's letter
08 CEO's report
11 About Integrated Research
12 Marketing highlights
17 Directors' report
31 Remuneration report (audited)
41 Corporate governance
49 Financials
81 Directors' declaration
82
Independent auditor's report
85 ASX additional information
87 Corporate directory
3
Integrated Research and its controlled entities Annual Report 2015 Achievements
We have successfully executed our 4 key strategies:
solutions, partnering, strategic marketing and
regional growth.
3
significant releases
of Prognosis
in 2015
1,000+
enterprise
customers
globally
Unified Communications
10 year
CAGR 24%
6 Global
Offices
Australia, UK,
Germany, Singapore,
US Denver (CO),
Herndon (VA)
4
4
Financial
highlights
OUR CUSTOMERS
9/10
Top US banks
7/10
World's biggest
Telcos
4/10
World's largest
companies
4/10
Largest oil &
gas companies
6/10
Biggest stock
exchanges
Total revenue (AUD millions)
IN MILLIONS OF AUD (EXCEPT EARNINGS PER SHARE)
Year ended 30 June
2015
2014
% Change
Revenue from licence fees
41.0
28.0
46% ↑
44.6
48.6
48.9
53.2
70.3
Total revenue
70.3
53.2
32% ↑
2011
2012
2013
2014
2015
Net profit after tax
Net profit after tax (AUD millions)
Net assets
Cash at balance date
Americas revenue
Europe revenue
7.5
9.0
9.1
8.5
14.3
Asia Pacific revenue
2011
2012
2013
2014
2015
Earnings per share (cents per share)
Revenue from licence sales (AUD millions)
14.3
36.1
15.3
52.7
10.2
8.9
8.4
8.5
68% ↓
30.7
18% ↑
13.3
38.1
7.9
8.1
15% ↓
38% ↑
29% ↑
9% ↑
5.0
67% ↓
Year ended 30 June
2015
2014
% Change
Americas revenue (USD)
43.6
34.8
25% ↓
25.0
28.9
26.6
28.0
41.0
Europe revenue (UK Sterling)
2011
2012
2013
2014
2015
Asia Pacific revenue (AUD)
5.3
8.9
4.4
8.1
21% ↓
9% ↑
Integrated Research and its controlled entities Annual Report 2015
5
5
Integrated Research and its controlled entities Annual Report 2015 Letter from
the Chairman
It is my pleasure to comment on the strong
performance of Integrated Research for the financial
year to June 2015. The Company’s performance can
only be described as excellent, with the Company
recording high growth in both profit and revenue to
further cement its leading global position.
Dear fellow shareholders,
The Company achieved an increase
of 68% in net profit after tax over the
prior year to $14.3 million; licence sales
increased by 46% and total revenue
increased by 32% to $70.3 million with
revenue coming from a wide range
of customers, products and regions.
This underscores the strength of the
Company’s global business, with 95%
of its revenue being derived outside
of Australia.
The Company achieved growth across
all product lines and in all geographic
segments. Strong customer retention
rates of 95% enabled recurring
maintenance revenue to increase by
15% to $23.7 million.
IR’s consulting services business
achieved a sixth consecutive year of
growth, with revenue increasing by
20% to $5.5 million.
The global increase in revenue
outpaced the increase in expenses
enabling an improvement in profit
margin. Total expenses were $52.8 million,
up 24% against the prior year driven
through strategic investments
into partnering, regional expansion,
sales and strategic marketing.
The Americas region increased
revenue by 25% through new customer
acquisitions and key account growth.
Europe revenues grew by 21% supported
by sales from the new Contact Centre
solution; Asia Pacific revenue increased
by 9% driven by licence sales growth
across all product lines.
While results were in part assisted by a
depreciating Australian dollar, underlying
organic growth remains strong. In constant
currency, new licence sales would have
increased by 37%, revenue by 24%, and
profit after tax by 41%.
6
All product lines recorded strong growth:
the Company’s leading product line
Unified Communications increased by
45% to $36.5 million, driven through
an array of software sales agreements
including BT, Citigroup, Dimension Data,
General Motors, Presidio Managed
Services, Standard Chartered Bank
and Zurich Insurance.
Payments revenue rose 28% over the
previous year to $5.1 million with strong
licence sale growth coming from the
Americas. The Company has expanded
its suite of Payments products by adding
new products for additional platforms,
vendors and applications, including fraud
management, payments analytics and
wholesale money transfer applications.
Infrastructure revenues increased by 19%
over the previous year to $23.2 million, as
the Company benefited from an upswing
in customers’ purchasing cycle.
Research and development expenditure
of $12.4 million was 18% of total revenue.
There were three significant new versions
of Prognosis released during the year
containing new functionality opening new
markets and benefiting customers across
all product lines.
On July 1, 2015 IR completed the
acquisition of the US-based IQ Services
business. This provides the Company
with a number of strategically significant
growth opportunities in its existing
markets and into new allied markets.
The significant growth of the Microsoft
Skype for Business (previously Lync)
market presents new opportunities
and the Company is advantageously
positioned by virtue of its existing
strength in the UC market.
Innovation is a core competency of IR,
coupled with deep domain expertise
in our target markets. Its aggressive
research agenda has included being the
first to market with support for new Skype
for Business interfaces. The Company has
a patent pending on the technology.
The future outlook for the Company
remains solid, and with a strong
balance sheet it is well positioned to
leverage its growth further. The core
technologies that the Company’s
business units are based upon, and
their underlying markets, including
HP-NonStop, remain healthy. Expansion
is expected to continue in the
company’s product lines with special
emphasis on Unified Communications,
Contact Centre and Payments while
the company broadens its product
offerings into new adjacent markets.
The Company has reduced the volume
of perpetual licence arrangements
with unified communication customers
through changes in pricing structures to
favour term and subscription licencing.
This enables customers to manage their
software investment through regular
annual purchases. Whilst this change
has resulted in an increase in accounts
receivable through the offering of
deferred payment terms, it is anticipated
the Company will benefit over time as the
recurring revenue base continues to grow.
The Company maintains strong
partnerships and continues to build on
its close relationship with Avaya,
releasing support for Avaya IP
Office which was developed in close
collaboration with Avaya under its
Select Product Program (SPP). This
extends Prognosis performance
management capabilities to enterprise
branch offices and the mid-market.
The Board is pleased to announce a
final dividend of 4.0 cents per share
franked to 35% bringing the total
dividend for the year to 7.5 cents per
share franked at 35%. This compares
with total dividends of 5.0 cents per share
franked at 33 per cent for the prior
financial year.
I would especially like to thank you,
our valued shareholders, for your
continued support.
Steve Killelea
Chairman
IR’s new global partner program
will provide IR’s ecosystem of
channel partners with recognition
and support that will enable them
to grow revenue and profitability while
scaling the Company’s sales reach
and revenue growth.
During the year we saw some changes
on the Board with Kate Costello
retiring after nine years of service in
September 2014 and Clyde McConaghy
retired after seven years of service in
November 2014. Both Ms. Costello’s
and Mr. McConaghy’s contributions to
Integrated Research, including active
participation in Board Committees have
been greatly appreciated.
In September 2014 the Company
welcomed Mr. Nick Abrahams to the
Board and more recently Mr. Paul
Brandling was also welcomed to
the Board. Both Mr. Abrahams and
Mr. Brandling carry many decades of
experience in the technology industry.
We look forward to both Nick and
Paul’s contributions toward the future
prosperity of Integrated Research.
Net profit after tax ↑ 68%
$14.3M
Integrated Research and its controlled entities Annual Report 2015
7
Chief Executive
Officer's Report
“The Company’s execution over the past 18 months
across four strategic initiatives: solutions strategy,
partnering, regional growth and strategic marketing
delivered record results.”
Dear fellow shareholders,
The past financial year represents a
breakthrough for your Company across a
number of significant dimensions. Record
growth and profits are strong indicators
that the new strategy the Company
embarked on in 2014 is now beginning to
have an impact.
We are very pleased by the endorsement
of our customers and the market that
we see reflected in these results, and will
continue to execute accordingly.
In the following, Management will
provide insight into the impact of each
and how it positions the Company for
growth in the future.
The underlying sustainability of the
Company’s future revenues has been
significantly boosted by a shift in the
nature of the licences it sells.
Historically a large portion of the
Company’s Unified Communications (UC)
licences was sold as perpetual licences –
a one-time fee that granted the customer
access to the software in perpetuity.
Management has progressively shifted
that model to the sale of term-limited
licences that grant a one to five year
limited licence. This creates a recurring
licence revenue event on average every
three years, thereby increasing the long
term licence revenue. This will result in
a build-up of debtors over the next
two years.
Approximately 75% of the Company’s UC
licence revenue is now recurring in nature.
All Payments and Infrastructure licence
revenues are also recurring.
With a very high 95% licence renewal rate
this creates a much more sustainable
licence revenue stream going forward
and a solid base for future growth.
Coupled with the growing recurring
nature of the Company’s licence revenue,
annually recurring maintenance revenues
grew 15% over the previous year backed
by a customer retention rate of 95%.
The solution strategy initiative was
established to drive agile innovation
based on intimate collaboration with our
customers and new market trends.
This is now delivering strong early results.
There were three significant new versions
of Prognosis released during the year
highlighting the aggressive cadence of
delivering new and impactful solutions
for our customers.
Revenue ↑ 32%
$70.3M
8
With broader, deeper and more
proactive visibility, the Company’s
customers can achieve higher levels of
operational efficiencies and an optimised
customer experience.
Management would like to recognise
and thank the highly talented and
professional team of employees and
welcome our newest colleagues to IR’s
global team.
As we start FY16 we look forward to
working together to realise our vision and
mission and take advantage of the great
opportunities in the year ahead to offer
our customers and partners more of what
they’re asking for.
Thank you for your support.
Darc Rasmussen
CEO & Managing Director
Using Prognosis 10 as the platform,
the Company delivered exciting new
solutions for Contact Centre, an initial
release of Call Recording Assurance,
a new version of Prognosis for
Microsoft Skype for Business and a
new automation framework.
All these innovations made important
contributions to the Company’s results
and are expected to support further
growth in the coming years. The
Company’s leading product line,
Unified Communications grew by
45% to $36.5 million over the prior year.
Call Recording Assurance was a good
example of the Company’s improved
agility. Through direct customer
engagement and rapid development
capability, a solution was delivered
that responded quickly to emerging
market needs. This solution primarily
assists customers in the highly regulated
financial services and banking
industries to meet stringent regulatory
requirements, avoid very high penalties
for non-compliance and improve
customer service. Initial market response
shows strong growth potential from
this solution.
The Company will continue its
investment in R&D and maintains a
strong pipeline of innovation projects
that it is testing with customers and
early adopters in new potential markets.
Late in 2015, the Company launched
a new global partner program to provide
IR’s channel partners with the platform,
tools, solutions and support to help them
address new market challenges. The
results of the partnering initiative have
shown good early outcomes through
pipeline growth, acceleration to closure
and more scalable access to market.
As a result of the Company’s investment
in regional growth it now has offices in
six cities across the globe, significantly
increasing IR’s organisational capability
and reach. This growth has seen
increased sales coming from the UK,
Continental Europe and Asia Pacific
with new customers like BarclayCard,
Zurich Insurance, BT and Standard
Chartered Bank.
The Company’s strategic marketing
initiative has expanded its reach,
using state-of-the-art technologies to
connect with new audiences, improve
upselling and retention, and enhance the
Company’s thought-leadership position.
After extensive research the Company
launched a new award winning corporate
brand in November 2014.
On 1 July 2015, the Company completed
the acquisition of the US based
IQ Services business. The resulting
combination of IR Prognosis software
and IR Testing Solutions is anticipated to
provide the world’s most complete view of
cloud, hybrid and traditional on-premises
operations for Unified Communications
and Contact Centre solutions.
This business combination provides
the Company with a number of
strategically significant growth
opportunities in its existing markets
and into new allied markets.
9
Integrated Research and its controlled entities Annual Report 2015 Every second, millions
of critical systems
and networks keep
the phones and cash
registers ringing and
keep the world ticking.
And every second,
thousands of teams
work tirelessly to maintain
order but the threat
of a problem is never
far away.
That’s where we come in.
We optimise systems and
networks to help them
run at their best and
predict vulnerabilities
before they arise.
Stretching and shaping
our products to
strengthen businesses
and make the lives of
our customers easier.
A thousand
points of reference,
a single point
of view.
About IR
Denver (CO)
Herndon (VA)
London
Munich
Sydney
Singapore
Today IR Prognosis solutions for
payment hubs, unified communications
ecosystems and contact centres are
trusted by Fortune 500 companies to
keep their businesses running.
IR continues to be an industry pioneer
with innovations in predictive and
prescriptive analytics as well as advances
in automation, allowing IT to stop a
problem even before it happens.
IR Prognosis is sold and supported
through IR offices, resellers, and
managed service providers. IR’s corporate
headquarters is located in Sydney,
Australia with offices in the USA, UK,
Germany and Singapore.
The IR brand is owned by Integrated
Research Ltd, which is listed on the
Australian Stock Exchange (ASX:IRI).
Our vision is to make
the world a smarter,
easier place to live and
work, where people and
technology interact in a
frictionless way.
Our mission is to create
innovative technology
that optimises
operations, predicts
business disruption and
automates the steps to
improve the experience
of every interaction.
IR is the corporate brand name
of Integrated Research Limited, a
leading global provider of proactive
performance management software for
critical IT infrastructure, payments and
communications ecosystems.
More than 1,000 organisations in over
60 countries - including some of the
world’s largest banks, airlines and
telecommunication companies, rely on
IR Prognosis software to provide business-
critical insights and ensure continuity-
critical systems deliver high availability
and performance for millions of their
customers across the globe.
We have unique competencies that
revolve around what we are passionate
about, what we can be best at and what
drives our economic engine. We believe
in customer intimacy, innovation using
our deep domain expertise and superior
product architecture.
Since we started providing real-time,
fault-tolerant management in 1988 for
business-critical computer systems and
applications running on HP NonStop
server technology, our products have
stood the test of time.
11
Integrated Research and its controlled entities Annual Report 2015 Marketing Highlights
Customer first
Everything we do is
about understanding our
customers’ world and making
things happen for them.
Our customers’ success
is our goal.
We achieve this by
understanding how the
systems that support
their enterprises,
workplaces and everyday
lives can be made to
work better.
We know that this is only
possible when we truly
understand how they’re
designed, run and used
in the real world.
The real and sometimes messy world
where things can fail without warning,
where forces outside anyone’s control
can wreak havoc; and where real-life
people interact with technology, with all
the emotion and frustration that entails.
Every day we’re working to stay on top
of change; our eyes open to opportunity
and maintaining our calm in the face of
chaos and complexity.
Reducing complexity
A greater understanding of our
customers’ needs has inspired our vision
– to make the world a smarter, easier
place to live and work, where people and
technology interact and transact in a
frictionless way.
Through automation and prediction,
we can reduce the friction between
humans and machines. We join the
dots so they get the most out of what
Prognosis has to offer and ensure
business continuity for them.
“Our mission is to create innovative
technology that optimises operations,
predicts business disruptions and
automates the necessary steps to
improve the experience of every
interaction” says Chris Dorrington,
Team lead, User Experience.
“We are always putting the customer
first. What we create for them is driven
through customer conversations and
visits to their premises. We can quickly
implement solutions to their problems
and allow Prognosis to become the
predictive, automatic self-healing product
that our vision is aiming for.”
Mick Dean, 3rd level team lead support,
IR Sydney adds “One of our customers
needed customised event detection so
we built a solution to count and combine
events for them.
“Not only does this simplify what was
previously a labour-intensive manual task
– it has made us even more integral to
their business”.
Reducing risk
Currently most performance
management solutions are reactive,
diagnosing and fixing problems after
they happen.
This means that businesses can be
losing time, money and potentially
customers before they’re even aware
a problem exists.
IR’s research and development
teams have worked on innovative
transformational projects to create
state-of-the-art technology that
optimises operations, predicts business
disruptions, and automates the necessary
steps to improve the experience of
every interaction.
Machine learning can detect anomalies
in previously gathered data as well
as predict a problem before it arises.
With these innovations IR is taking the
industry into the next phase toward
complete system automation and self-
healing, pushing Prognosis right up the
evolutionary chart.
IR’s Consulting team plays a vital part in
unleashing the creative potential of how
Prognosis can deliver the most value for
our customers.
Trish Taylor, Program Office Manager says
"Our teams are helping organisations
around the globe using many different
technologies to ensure their Prognosis
implementation goes as smoothly as
possible and delivers rapid time to value."
12
Increasing business insight
The combination of IR as a company
and Prognosis as a solution gives
our customers insight into their entire
technology environment from a
single point of view – in a human
and relatable way.
It’s one of the reasons behind the
year-on-year growth of IR’s Consulting
Services. In its sixth year of consecutive
growth it has helped customers translate
data into information, delivering even
greater business value.
Consulting mobilises IR’s customers to
extend, integrate and reveal innovations
early so they can reach their goals of
turning information into business insight.
It helps speed deployment and
implementation, specialised data
collections, data and applications
integration and develop business
and executive dashboards to visualise
the results.
Building a network of partners
Resellers and channel partners play an
important role in scaling IR’s business,
providing sales, implementation, support,
customisation and consulting services to
our mutual customers.
Adding Prognosis performance
management to partners’ service
portfolios ensures their customers
are effectively managing risk and
complex services.
The goal of IR’s recently launched Global
Partner Program is to be recognised as
world-class, delivering a value-based,
productive and profitable channel to
support our mutual global customer base.
IR’s Global Partner Program Manager
Mona Lolas says “We created the
structure across our existing partner
landscape to drive global clarity
and consistency.
“This enables our partners to uncover
opportunities and find new avenues
of growth while delivering exceptional
customer experience."
IR has been working with partners for
nearly 25 years to increase awareness
and engagement and strengthen IR’s
relevancy to fuel sales through alliance
partners like ACI Worldwide and Avaya.
We will expand our reach, achieve
out-sized growth and be recognised as
the undisputed leader in user experience
management in the Skype for Business
market.
Living for innovation
We are building the stickiness of future
business by ensuring that we leverage
cutting-edge technologies and trends,
innovating Prognosis to solve the
problems our customers face with
new technologies.
Using leading edge languages and
processes our agile teams can turn
around customer-focused solutions
rapidly and implement solutions to
customer problems.
Innovation days within IR open the doors
for Prognosis to enter the world of the
Internet of Things.
An innovation day recently enabled
Prognosis to run on a Raspberry Pi.
This low cost, credit-card sized computer
has the ability to interact with the outside
world, hence the name of the innovation
project: ‘Prognosis In The Sky.’
Advanced software engineer Mina Gurgis
says "This sows the seeds of innovation,
allowing everyone in the company to
be innovative, and quickly implement
solutions to customer problems."
“We want a bigger universe to discover
opportunities” says Ergun Coruh,
Principle Software Engineer. “Ensuring the
“stickiness” of our business, our focus is
on products and software that will be sold
in the coming financial years, as well as
the current financial year.”
Prognosis and ACI together provide
a unified monitoring and management
product suite to help optimise ACI
payments applications and supporting
infrastructure.
And thanks to Avaya’s strategic
relationship with IR, Prognosis real-
time experience management means
customers can manage the entire
UC lifecycle with one perfectly
integrated solution.
Prognosis also delivers a unified
experience management solution that
scales to deliver first class UC services
across technology solutions from partners
like Cisco and Microsoft.
In 2015 IR achieved
Microsoft Gold
Communications
Partner status which
acknowledges our
skills and expertise in
delivering the highest
levels of service quality,
expertise and customer
satisfaction.
Gold competency partners are
recognised for their deep expertise that
puts them in the top one percent of the
Microsoft partner ecosystem.
It demonstrates proficiencies that
will help customers drive innovative
solutions based on the latest Microsoft
technologies.
We’ve created a Skype for Business task
force to exploit the exponential growth
within the Skype for Business market.
Customers benefit from:
Reduced complexity
Reduced risk
Increased business insight
A network of partners
A company that lives for innovation
A company that listens
13
Integrated Research and its controlled entities Annual Report 2015 Marketing Highlights
Listening to our customers
We spent hundreds of hours with our
customers around the globe to learn how
our customers use Prognosis, and listened
to their stories.
Because we are helping our partners,
customers and users optimise their
systems for the real world we knew that
we wanted to relate to them in a less
technical and more human way.
We illustrated our customers’ stories
with dots and dashes, and punctuated
them with colour to help tell stories of
optimisation – blue represents ‘optimal’,
while red represents ‘sub-optimal’ to
illustrate the complex problems Prognosis
solves in a fun, accessible way.
These simple illustration elements
helped us create an optimised logo.
White dashes paired with red and
blue dots to form the i and the r of the
company’s name.
Recognition of the hard
work that has gone into
the design of our new
brand came in the form
of the prestigious D&DA
Graphite Pencil award.
Ultimately the long-term success of a
brand is driven by the way that every one
of us represents our company.
Our brand is more than graphical
design, it’s the clever way that it shows
how we simplify complex problems for
our customers.
We have a great platform to build upon
and the onus is now on us to carry this
forward and make IR the most respected
and recognised brand in our market.
Our products
Prognosis for
Payments
Prognosis for
Contact Center
Prognosis for
Infrastructure
Performance
management for
Payments is specifically
designed to give our
customers complete
real-time visibility into
payments processors
like ACI, FIS, other
vendors and in-house
developed payments.
This system allows
them to see their entire
payments environment
like never before, beat
fraud, stay compliant
and get the insights
they need to improve
performance and
productivity.
The richer that UC
and contact center
ecosystems become,
the greater the need
enterprises have for
help managing their
complexity.
Prognosis user
experience
management for
Contact Centres keeps
systems humming, nips
issues in the bud and
validates 100% call
recording and service
guarantees are being
met – all in real time.
Prognosis IT
Infrastructure
performance
management spots
patterns in data so
customers can stop
problems in their tracks.
They can optimise their
systems and get more
out of every day with
control over physical
and virtual servers from
a single point of view.
To broaden the scope
of what Prognosis
can do to address our
customers’ challenges
IR announced the
strategic acquisition
of the US based IQ
Services business
in May 2015. This
provides us with a
number of strategically
significant growth
opportunities both in
our existing markets
and into new allied
markets. The IQ
Services brand and
team have transitioned
to the newly formed
IR brand and Testing
Solutions division
providing the most
complete performance
management solution
on the market today.
Prognosis for
United
Communications
Prognosis simplifies
the management of
complex and diverse
UC environments
incorporating
technologies and
devices from
multiple vendors.
With an intelligent
combination of
historical and real
time information
using leading edge
technologies like
software defined
networks Prognosis
provides simple
solutions to complex
problems.
14
Our customers
Global commerce
depends on IR
IR’s customers include 9 of the top 10 US banks, 7 of
the world's 10 biggest telcos, 4 out of 10 of the world’s
largest companies, 4 out of the 10 largest oil and gas
companies and 6 of the 10 biggest stock exchanges.
Prognosis gives our customers insight into their entire
technology environment from a single point of view.
And with an increasing number of our customers
using multiple solutions, decisions can be made faster
resulting in fewer outages.
Finding the needle
in the haystack
Prudential Global Data Services
Industry: International Financial
Services Group.
Profile: Listed on 4 global stock
exchanges, over 23 million customers and
£443 billion assets under management.
Challenge: Predict, avoid and rapidly
repair system outages for more than
6,000 UC endpoints across Europe and
the US.
Solution: Prognosis end‑to‑end proactive
performance management and reporting
for Unified Communications
Benefits: Accurate troubleshooting and
predictive analytics to avoid future
outages.
Prudential Global Data Services (PGDS) is
the IT management arm of the Prudential
Group of Companies and manages over
six thousand UC end points. Spread
across the US and Europe, staff found
that troubleshooting quality issues was
time-consuming and labor intensive.
They needed deeper insight to resolve
quality issues.
Telecommunications Team Manager,
Gary Foulger says: “We looked at various
tools but nothing gave us the deep
information Prognosis does. It’s key for us
to be able to look beyond the call itself so
I know without doubt whether the issue is
inside or outside our network.”
Gaining this insight was like turning the
lights on. What could previously take
hours could be done in minutes.
Predictive analytics established the root
cause of problems, and by leveraging the
blended-vendor capabilities of Prognosis,
a single viewpoint instantly provided end-
to-end insight.
“We’ve found everything is quicker with
Prognosis and the reporting is good.”
Prognosis translates cryptic machine-to-
machine communications from multiple
UC endpoints, devices and technologies
into a language that people understand.
Staff can look at the screen and know
which data requires attention. They can
drill right down to the nuts and bolts of
the calls’ network path and identify the
causes behind the issues. Foulger adds
“I drill down if I think anything needs to
be looked at further. It’s a quick and easy
way for me to assess what’s going on.
Rabobank
Industry: Banking
Profile: The Netherlands‑based
Rabobank is among the world's 30
largest financial institutions (based on
Tier 1 Capital) and is one of Europe’s
most recognised financial institutions.
Operating in over 40 countries,
it services the financial needs of
approximately ten million clients
worldwide through a network of more
than 1,600 offices and branches.
Challenge: Migration and coexistence of
payments processing systems.
Solution: Prognosis to monitor
performance of old and new systems in a
unified dashboard.
Benefits: Ensure no customers are
negatively impacted by the migration.
IR and Rabobank have a long relationship
built on managing the performance of
the hardware supporting its Payments
platform. With a need to authorise 1.3
billion transactions a year Rabobank
needed a solution that was robust and
something it was familiar with. While
our customer relationship played a
significant part it was that Prognosis was
‘fit for purpose’ that made it successful a
second time.
Fred Khoshsegal, Delivery Manager
Card Payments said “Your first
consideration must be your migration
strategy and then you choose the tools
that fit. Many organisations migrate for
technical reasons like needing upgrades
to POS or ATMs but we looked at it the
other way and migrated from a
functional perspective.
“Some transaction types will go through
the new system, others will remain on the
old system. We use Prognosis to make
sure the new system is performing at least
as well as, if not better than the old.
“The team from IR helped us to look at
the entire picture, and had great product
knowledge. Many of the alerts we rely
on are out of the box and the consulting
team customised them to fit our needs.
They set it up the way that we like it. As
soon as it was connected we saw the
activity in the dashboard and from there
we could fine tune it so that we only
saw the alerts we wanted. They made it
specific for us.
“Prognosis works out of the box which
delivers great value to us."
15
Integrated Research and its controlled entities Annual Report 2015 16
Directors'
Report
Contents
18 Review of operations
22 Outlook and strategy for 2016
24 Board of Directors
26 Senior management
28 Directors' interests
29 Share options and performance rights
31 Remuneration report (audited)
33 Service agreements
Integrated Research and its controlled entities Annual Report 2015
17
Directors' Report
Directors’
Report
Annual after tax profit ↑ 68%
$14.3M
Annual revenue ↑ 32%
$70.3M
Annual licence fees ↑ 46%
$41.0M
Annual consulting revenue ↑ 20%
$5.5M
18
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.
Review and results
of operations
Overview
The Company achieved 68% increase
in annual after tax profit over the prior
year to $14.3 million, which is within the
guidance provided to the Australian Stock
Exchange on July 9, 2015. The strong
result was driven globally through licence
sale growth across all product lines.
The performance was enhanced by a
stronger US dollar relative to the prior
year. In constant currency, annual after
tax profit increased by 41% compared
to the prior year.
Revenue
Revenue for the year was $70.3 million, an
increase of 32% over 2014. Licence fees
increased by 46% to $41.0 million with
strong growth across all product lines.
Maintenance revenues grew 15% over the
previous corresponding year backed by a
customer retention rate of 95%. Revenue
from consulting services grew by 20% to
$5.5 million.
Over 95% of the Company’s revenues
are derived outside of Australia. Using
prior year exchange rates, the Company’s
revenue would have increased by
24% over the prior year. The Company
anticipates further benefits will be derived
from a lower exchange rate in 2016,
although this will be partially offset by
forward exchange contracts in place at
30 June 2015 as disclosed in Note 20.
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 27 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
for mission critical business operations.
The Prognosis product range is an
integrated suite of monitoring and
management software, designed to
give an organisation’s management
and 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 following table presents Company
revenues for each of the relevant
product groups:
In thousands of AUD
Unified Communications
Infrastructure
Payments
Consulting
Total revenue
Unified Communications (UC) revenue
rose 45% over the previous year driven
through an array of large software deals
with customers including Citigroup,
British Telecom, Dimension Data, General
Motors, Presidio Managed Services,
Standard Chartered Bank and Zurich
Insurance Group.
The Company achieved global UC
licence sales growth as a result of strong
demand for Prognosis 10 and subsequent
dot releases.
Infrastructure revenues increased by 19%
over the previous year as the Company
benefitted from an upswing in customers
purchasing cycle. The increase in current
year revenue was a break from trend
where revenues in the preceding year
were flat.
2015
36,485
23,177
5,069
5,548
70,279
2014 % Change
25,118
19,530
3,962
4,633
53,243
45%
19%
28%
20%
32%
Payments revenue rose 28% over the
previous year with strong licence sale
growth coming from the Americas.
The Company has expanded its suite
of Payments products by adding new
products for additional platforms,
vendors and applications, including fraud
management, payments analytics and
wholesale money transfer applications.
Consulting services showed growth
for a sixth year in a row, with revenue
increasing 20% to $5.5 million as
customers increasingly look to extend
their Prognosis solution to provide
greater insight into their Unified
Communications, Payments and
Infrastructure environments.
The following table presents Company
revenues for each of the relevant
geographic segments in underlying
natural currencies:
Americas (USD’000)
Europe (£’000)
Asia Pacific (A$’000)
2015
43,621
5,338
8,866
2014 % Change
34,759
4,415
8,100
25%
21%
9%
The Americas performance was strong
across the year driven through an
increase in all product lines resulting
in an increase of 25% in revenue over
the preceding year. The Americas
region continues to grow through both
new customer acquisitions as well as
growing existing key accounts. A strong
performance in Unified Communications
was coupled through growing revenue
from Contact Centres.
Europe revenues grew 21% over the prior
year with strong licence sales coming
through late in the second half with a
key sale into a Unified Communication
and Contact Centre business. The overall
performance was underpinned by sales
in both Continental Europe and the
United Kingdom. Pipeline development
and sales discipline bodes well for the
region going forward.
Asia Pacific revenue grew by 9% to $8.9
million driven by licence sales growth
across all product lines. The Asia Pacific
region will continue to build with an
increased investment in the Singapore
office and the development of the
sales team.
19
Integrated Research and its controlled entities Annual Report 2015 Directors' Report
Expenses
The Company continued to focus on expanding its capabilities and improving productivity. Total expenses were $52.8 million, up
24% against the prior year. The increase in cost was driven through investments into regional expansion, sales and marketing. The
higher cost base was also driven through a lower Australian dollar giving rise to higher offshore translated costs. In constant currency,
expenses were up 19%. The number of staff at the end of the current year was 222 (2014: 198). 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
2015
12,431
35,161
5,220
52,812
2014
11,067
26,836
4,707
42,610
Research and development expenditure of $12.4 million was 18% of total revenue. There were three significant new versions of
Prognosis released during the year. This aggressive cadence of significant new functionality was well received by customers. The
new versions contained new functionality opening new markets and benefiting customers across all product lines. Highlights of
new product capability released during the year include significant new capability in the rapidly growing Skype market, a new
automation framework that will lead Prognosis to not only recognising problems but automatically rectifying them and the initial
release of a call recording assurance product that will primarily assist customers in the financial services and banking industries to
improve customer service and meet stringent regulatory requirements.
Net research and development expenses are represented as follows:
In thousands of AUD
Gross research and development spending
Capitalisation of development expenses
Amortisation of capitalised expenses
Net research and development expenses
2015
13,215
(9,037)
8,253
12,431
2014
12,294
(7,967)
6,740
11,067
20
Shareholder
returns
Returns to shareholders remain strong
through the payment of partly franked
dividends:
In thousands of AUD
Net profit ($’000)
Basic EPS
Dividends per share
Dividend franking percentage
Return on equity
2015
$14,251
8.41¢
7.5¢
35%
39%
2014
$8,489
5.03¢
5.0¢
33%
28%
2013
$9,078
5.40¢
5.0¢
36%
30%
Financial
position
In thousands of AUD
2015
2014
Assets:
The following table presents key items
from the consolidated statement of
financial position:
Cash and cash equivalents (current)
Trade and other receivables (current and non-current)
Intangible assets (non-current)
15,323
38,272
17,020
13,300
22,857
16,257
Liabilities:
Deferred revenue (current and non-current)
22,523
16,369
Equity
36,132
30,747
terms with customers who seek to make
regular annual payments over the term of
their committed contract.
The consolidated statement of financial
position presented at page 51 together
with the accompanying notes provides
further details.
The Company’s financial position
remains strong with $15.3 million in
cash and cash equivalents as a result
of continuing strong cashflow from
operations. Cashflow from operations was
$21.4 million for the year facilitating the
payment of dividends and reinvestment
in research and development.
Trade and other receivables increased by
67% over the preceding year due to three
factors. Firstly, a strong increase in sales
toward the end of the year; secondly
a weaker Australian dollar resulting in
higher translated US dollar debtors; and
thirdly an increase in deferred payment
21
Integrated Research and its controlled entities Annual Report 2015 Directors' Report
Thousands of businesses
rely on millions of Unified
Communications
interactions everyday;
IR Prognosis ensures the
quality of experience
and optimises these
mission critical internal
and external customer
interactions.
On the Payments side of
the business hundreds
of millions of people rely
on billions of payments
transactions daily, IR
Prognosis oils the smooth
operation of their daily
lives and of the business
economy that we all
depend on.
Outlook and
strategy for 2016
22
Prognosis derives its competitive
advantage from its unique intellectual
property (IP) and design that enables
real time insight, monitoring, fault
root cause analysis, business and
operational analytics, performance
management and optimisation. The
solution is highly scalable, extremely
flexible and delivers very deep visibility
into the diversity of systems and
applications that it manages. As such,
Prognosis is ideally suited to complex,
high transaction volume, mission
critical and high traffic environments.
Competition exists in each of the
markets in various forms. Firstly, some
of the large telephony and payment
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 focused on sustaining
its competitive advantage through
continuing innovation that comes from
its research and development program.
Through deep visibility and forensic
analysis into the root cause of problems
as well as extensive analytics at multiple
levels, Prognosis enables proactive and
rapid resolution of issues as well as
capacity and operational optimisation
and operational planning.
The solution provides insight into potential
issues before they become business-
critical. Prognosis helps users improve
their operational maturity by proactively
minimising expensive outages, lowering
costs, improving user satisfaction,
retaining and growing customers and
optimising 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. While growth in the
Contact Centre solutions has been
strong, 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 mission critical 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 based video,
telephony and other endpoints as well
as the increasing value per endpoint
through the use of UC applications. UC
networks are becoming more pervasive,
more mission critical and more complex
and as such they require effective
performance management. 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
for our Payments solution in FY2015 and
continues to be an important channel to
market for the Company.
IR 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 growth in FY2015 and
the Company will continue to invest in
people and processes to grow consulting
revenue and margin.
On 1 July 2015 IR completed the
acquisition of US based IQ Services.
The acquisition expands IR’s Prognosis
product line to now include best in class
Virtual Customer® testing capabilities.
Automated Virtual Customers® behave
like an army of secret shoppers that test
Unified Communications and Contact
Center systems to ensure they deliver
the high quality customer experience
real customers expect and demand.
Embedded into Prognosis, the cloud
based end-to-end automated testing
as a service becomes the markets
only fully integrated proactive systems
management and testing product
solution for UC and contact centers.
The acquisition provides IR with an
expanded offering to new and existing
customers with unique competitive
advantage as well as geographic
expansion opportunities for the acquired
products into Europe and Asia, as IQ
Services previously only operated in
North America.
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.
23
Integrated Research and its controlled entities Annual Report 2015
Directors' Report
Directors
The Directors of the Company at any
time during or since the end of the
financial year are shown below:
Steve Killelea
AM
Non‑Executive Director
and Chairman
Darc Dencker‑
Rasmussen
MAICD
Managing Director and
Chief Executive Officer
Alan Baxter
BSC, DIP ED
Independent
Non‑Executive Director
Peter Lloyd
MAICD
Non‑Executive Director
Listed company directorships
held in the past three years:
None.
Age: 66 years
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 as well
as 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.
24
Listed company directorships
held in the past three years
other than listed below:
None.
Listed company directorships
held in the past three years
other than listed below:
None.
Listed company directorships
held in the past three years
other than listed below:
None.
Age: 55 years
Age: 70 years
Age: 61 years
Peter was appointed Director
in July 2010. He has over 40
years' experience in computing
technology, and in the sales
and marketing of computer
software products and services.
For the past 31 years, Peter
has been specifically involved
in the provision of payments
solutions for banks and financial
institutions. He is currently the
proprietor of The Grayrock
Group Pty Ltd, a management
consultancy company focusing
on the payments industry.
Peter’s current term will expire
no later than the close of the
2016 Annual General Meeting.
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 its CRM business
worldwide. Darc also served
as Director and Vice President
for Asia Pacific for Softbrands
(acquired by Infor) and built its
significant regional footprint.
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.
Retired Directors during the year
Kate Costello, LLB, FAICD
(retired September 2014)
Ms. Costello retired as Director of
Integrated Research in September
2014. Ms. Costello served on the
Board for nine years. Ms. Costello’s
contribution to Integrated
Research has been immense
and was greatly appreciated by
Directors past and present.
During her time as a Director,
Ms. Costello served as Chair of
the Nomination & Remuneration
Committee and has been a
member of both the Strategy
and Audit & Risk Committees.
Clyde McConaghy, B.Bus.,
MBA, FAICD, FIOD – UK
(retired November 2014)
Mr. McConaghy retired as
Director of Integrated Research
in November 2014. Mr.
McConaghy served on the
Board for seven years. Mr.
McConaghy’s contribution to
Integrated Research has been
substantial and was greatly
appreciated by Directors past
and present. During his time
as a Director, Mr. McConaghy
served as Interim Chair of
the Audit & Risk Committee
and has been a member of
the Strategy Committee.
Garry Dinnie
BCom, FCA, FAICD,
FAIM, MIIA(Aust)
Independent
Non‑Executive Director
Nick Abrahams
B COMM, LLB (Hons), MFA
Non‑Executive Director
Paul Brandling
BSC HONS, MAICD
Independent
Non‑Executive Director
Company Secretary
David Purdue
BEc, MBA, Grad Dip CSP,
FCA, FGIA, FCIS, GAICD
Listed company directorships
held in the past three years
other than listed below:
Inabox Group Limited
Listed company directorships
held in the past three years
other than listed below:
None.
Listed company directorships
held in the past three years
other than listed below:
None.
Age: 63 years
Age: 49 years
Age: 57 years
Garry was appointed a Director
in February 2013. He is a
Director & Chair of the Audit &
Risk Committee of CareFlight
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.
Paul was appointed a Director
in August 2015. He worked in
the information technology
industry for 28 years and has
broad experience in hardware,
services and software. He has
previously held the positions of
Vice President and Managing
Director of Hewlett-Packard
South Pacific plus Vice President
and Managing Director of
Compaq South Pacific. From
2001 to 2012, Paul was a
member of the International
CEO Forum (Australia) and
served as a Director of the
Australian Information Industry
Association (AIIA) from
2002 to 2011. Mr Brandling
was a Director of Amcom
Telecommunications Limited
until its recent acquisition and
is currently a Director of Vocus
Communications Limited.
Nick was appointed as a
Director in September 2014.
He is highly experienced in
corporate, intellectual property
and international law pertaining
to the technology industry,
with over 20 years’ experience
as a private practice lawyer.
He has worked extensively
internationally representing
Australian high-tech companies
as well as working for three
years with a law firm in Japan.
Mr Abrahams also spent time
working in the United States
in the late nineties and was an
executive with Warner Brothers
in Los Angeles, followed by a
period as a senior executive
at listed technology company,
Spike Networks, also in Los
Angeles. Mr Abrahams returned
to legal practice in 2002 and
is a partner of and leads the
Asian technology practice
of a global law firm. Nick’s
current term will expire no later
than the close of the 2017
Annual General Meeting.
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.
25
Integrated Research and its controlled entities Annual Report 2015 Directors' Report
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.
Jason Barker
BA (HONS)
Senior Vice President,
Asia Pacific, Middle East
& Africa
Jason joined Integrated Research in October 2014 and is
responsible for all business operations across the Asia Pacific,
Middle East & Africa regions. Jason joins with 20 years' experience
in technology, media & telecommunications most recently as
Vice President Sales, Asia Pacific at Acision where, based out of
Singapore, he was responsible for leadership of the sales team
across the region . Prior to this Jason spent 5 years in Australia
leading Asia Pacific teams with Subex and Surfkitchen and before
this held several European focussed roles, based out of the UK.
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.
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.
Kevin Ryder
M.MGT, MBA
Chief Marketing Officer
Kevin joined Integrated Research in October 2013 and as
Chief Marketing Officer is responsible for product marketing,
strategic alliances, partner programs and marketing
communications. 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.
26
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 2015 and the Auditor’s Report thereon.
Results
The net profit of the consolidated entity for the 12 months ended 30 June 2015 after income tax expense was $14.3 million.
Dividends
Dividends paid or declared by the Company since the end of the
previous financial year were:
Cents
per share
Total amount
$'000
Date of
payment
Final 2014 – Ordinary shares
Interim 2015 – Ordinary shares
Final 2015 – Ordinary shares
35% franked
35% franked
35% franked
2.5
3.5
4.0
4,224
5,938
6,787
12 Sep 2014
20 Mar 2015
22 Sep 2015
Directors
and Company
Secretary
Details of current directors’ qualifications,
experience, age and special responsibilities
are set out on pages 24 to 25. Details
of the company secretary and his
qualifications are set out on page 25.
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.
Events subsequent
to reporting date
For dividends declared after 30 June
2015 see Note 19 in the financial
statements. The financial effect of
dividends declared and paid after
30 June 2015 has not been brought
to account in the financial statements
for the year ended 30 June 2015 and
will be recognised in subsequent
financial statements.
On 1 July 2015, the Company completed
the acquisition of the US based IQ
Services business. The acquisition
provides the Company with a number
of strategically significant growth
opportunities in its existing markets and
into new allied markets. The business
combination is anticipated to provide
the world’s most complete view of cloud,
hybrid and traditional on premises
operations for unified communications
and contact centre solutions.
The initial purchase price for the
business was US$1.5 million subject to
working capital adjustments. There will
also be additional performance based
earn-out payments over the next three
financial years contingent upon meeting
certain earnings before interest tax
and depreciation (EBITDA) milestones.
The maximum consideration for the
acquisition is US$5.0 million based on
attaining the successful milestones.
27
Integrated Research and its controlled entities Annual Report 2015 Directors' Report
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 2015, and the numbers of meetings attended by each director were:
Board Meetings
Audit and Risk
Committee Meetings
Nomination
and Remuneration
Committee Meetings
Strategy Committee
Meetings
A
10
9
3
12
4
12
11
12
B
12
9
3
12
4
12
12
12
A
–
3
–
4
1
4
–
–
B
–
3
–
4
1
4
–
–
A
3
–
1
2
–
–
3
–
B
3
–
1
2
–
–
3
–
A
5
–
–
–
–
5
5
5
B
4
–
–
–
–
5
5
5
Alan Baxter
Nick Abrahams
Kate Costello
Garry Dinnie
Clyde McConaghy
Peter Lloyd
Steve Killelea
Darc Rasmussen
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.
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
Total Number of options
Number of rights
–
–
–
197,000
38,700
–
197,000
38,700
–
94,497,339
337,612
94,834,951
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
600,000
–
–
–
–
–
Alan Baxter
Darc Rasmussen
Garry Dinnie
Steve Killelea
Nick Abrahams
Paul Brandling
Peter Lloyd
28
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
Peter Adams
Alex Baburin
Jason Barker
Andre Cuenin
David Purdue
Kevin Ryder
Number of
performance
rights granted
Performance
hurdle
Exercise price
Expiry date
250,000*
100,000
100,000
40,000
60,000
100,000
50,000
75,000
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Oct 2016
Sep 2017
Sep 2017
Sep 2017
Dec 2018
Sep 2017
Sep 2017
Sep 2017
*This is the second tranche of the original plan granted on 14 November 2013 of 850,000 rights. Tranche 1 of 350,000 rights is noted within the table below.
The performance rights were granted under the Integrated Research Performance Rights and Option Plan (established
November 2011). The Company will either issue shares or make an on-market purchase for Mr Rasmussen upon his vesting
conditions being satisfied.
Unissued shares under performance rights
Unissued ordinary shares of Integrated Research Limited under performance rights at the date of this report are as follows:
Expiry date
Sept 2015
Oct 2016
Oct 2016
Sep 2017
Sep 2017
Oct 2017
Dec 2018
Total performance rights
Performance rights
Exercise price
Number of shares
Nil
Nil
Nil
Nil
Nil
Nil
Nil
160,000
165,000
600,000
495,000
85,000
840,000
60,000
2,405,000
Performance rights do not entitle the holder to participate in any share issue of the Company or any other body corporate.
29
Integrated Research and its controlled entities Annual Report 2015 Directors' Report
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.
• 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 84 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.
Remuneration
report
The Company’s Remuneration Report,
which forms part of this Directors’ Report,
is on pages 31 to 39.
Corporate
governance
A statement describing the Company’s
main corporate governance practices in
place throughout the financial year is on
pages 41 to 47.
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
Steve Killelea
Chairman
North Sydney, 25 August 2015
Darc Rasmussen
Chief Executive Officer
North Sydney, 25 August 2015
30
Remuneration report
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.
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.
31
Integrated Research and its controlled entities Annual Report 2015 Remuneration report
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
2015
41,031
14,251
10,162
$1.690
$0.695
2014
2013
28,048
26,632
8,489
9,278
$0.995
($0.04)
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)
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
Steve Killelea
Chairman
Alan Baxter
Peter Lloyd
Garry Dinnie
Darc Rasmussen
Chief Executive Officer
Part Year
Kate Costello
(retired September 2014)
Clyde McConaghy
(retired November 2014)
Nick Abrahams
(appointed September 2014)
Other key management personnel:
Full Year
Peter Adams
Chief Financial Officer
Alex Baburin
Chief Operating Officer
Andre Cuenin
President Americas & VP European Field Operations
Kevin Ryder
Chief Marketing Officer
David Purdue
Company Secretary & Global Commercial Manager
Part Year
Jonathan Stern
Vice President, Asia Pacific (resigned July 2014)
Jason Barker
Senior Vice President, Asia Pacific
(appointed October 2014)
32
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 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’s 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 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 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’s prior notice in writing.
Mr Kevin Ryder, Chief Marketing Officer,
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.
Mr Jason Barker, Senior Vice President,
APAC, has a contract of employment with
Integrated Research Limited dated 21
August 2014 which provides for specific
notice and severance undertakings of
one month compensation depending on
the particular circumstances. Mr Barker
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.
Directors' base fees in FY2015 were
$70,000 per annum inclusive of
compulsory superannuation. The
chairman receives the base fee by a
multiple of two. Directors' 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 on the next page.
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 on
the next page.
“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.
33
Integrated Research and its controlled entities Annual Report 2015
Remuneration report
2015 In AUD
Non‑Executive Directors
Nick Abrahams
(appointed Sep 2014)
Alan Baxter
Kate Costello
(retired Sep 2014)
Garry Dinnie
Peter Lloyd
Steve Killelea
(Chairman)
Clyde McConaghy
(retired Nov 2014)
Executive Director
Short term
Post‑
employ‑
ment
Long
term
Salary &
fees
$
Bonus
$
Non‑
cash
benefits
$
Super
contribu‑
tion
$
Long
service
leave
$
Share‑
based
pay‑
ments
Other
com‑
pensa‑
tion
Value of
options
and
rights
$
Termi‑
nation
benefit
$
Proportion of
remuneration
Total
$
Perfor‑
mance
related
Value of
options
and
rights
50,158
63,927
13,277
63,927
63,927
127,854
23,276
–
–
–
–
–
–
–
–
–
–
–
–
–
–
4,765
6,073
1,261
6,073
6,073
12,146
2,211
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
54,923
70,000
14,538
70,000
70,000
140,000
25,487
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Darc Rasmussen
500,000 162,000
4,532
18,783
15,201 280,619
–
981,135
17%
29%
Executive officers (excluding directors)
Peter Adams
Alex Baburin
Jason Barker
(appointed Oct 2014)
Andre Cuenin
David Purdue
Kevin Ryder
Jonathan Stern
(resigned Jul 2014)
Total compensation:
key management
(consolidated, incl.
directors)
281,519
62,863
4,532
18,783
272,965
42,728
233,182
129,973
–
–
292,143 370,449
13,886
201,685
–
4,532
27,408
15,818
8,764
18,783
8,156
7,610
–
–
27,109
27,109
17,826
54,828
4,991
15,081
225,473
34,478
5,408
–
–
–
24,343
6,306
13,463
–
–
–
–
–
–
–
–
–
–
402,962
377,820
16%
11%
396,799
33%
740,070
50%
245,072
304,063
5,408
–
11%
–
7%
7%
4%
7%
6%
4%
–
2,418,721 802,491
27,482
171,284 42,264 436,035
– 3,898,277
34
Short term
Post‑
employ‑
ment
Long
term*
2014 In AUD
Salary &
fees
$
Bonus
$
Non‑
cash
benefits
$
Super
contribu‑
tion
$
Long
service
leave
$
Share‑
based
pay‑
ments
Other
com‑
pensa‑
tion
Value of
options
and
rights
$
Termi‑
nation
benefit
$
Non‑Executive Directors
Alan Baxter
Kate Costello
Garry Dinnie
Peter Lloyd
Steve Killelea
(Chairman)
64,073
64,073
64,073
64,073
128,146
Clyde McConaghy
64,073
Executive Directors
Mark Brayan
(resigned Aug 2013)
Darc Rasmussen
(appointed Oct 2013)
225,702
–
–
–
–
–
–
–
–
–
–
–
–
–
5,927
5,927
5,927
5,927
11,854
5,927
–
–
–
–
–
–
–
–
–
–
–
–
755
8,887
–
(24,718)
355,770
92,370
4,532
13,331
10,336 330,545
Executive officers (excluding directors)
Peter Adams
Alex Baburin
271,510
36,938
4,532
17,775
266,416
34,683
–
24,644
Andre Cuenin
259,615 244,293
1,615
7,788
Andrew Levido
(resigned Jul 2013)
106,557
David Purdue
202,693
–
–
378
5,599
4,532
17,775
4,991
6,105
154,277
22,016
–
14,271
4,227
232,233
110,993
4,532
17,775
–
–
–
7,336
7,225
–
–
467
3,894
14,310
(4,257)
Kevin Ryder
(appointed Oct 2013)
Jonathan Stern
(resigned Jul 2014)
Total compensation:
key management
(consolidated, incl.
directors)
Proportion of
remuneration
Total
$
Perfor‑
mance
related
Value of
options
and
rights
70,000
70,000
70,000
70,000
140,000
70,000
–
–
–
–
–
–
–
–
–
–
–
–
210,626
0%
(12)%
806,884
11%
41%
338,558
336,862
527,621
108,277
236,096
194,791
11%
10%
46%
0%
0%
11%
365,533
30%
0%
1%
3%
(4)%
3%
0%
0%
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2,523,284
541,293
20,876
169,334
34,115 326,346
– 3,615,248
* The 2014 Remuneration Report has been amended to include long service leave.
35
Integrated Research and its controlled entities Annual Report 2015 Remuneration report
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 in this table:
Short term incentive bonuses
Included in
remuneration
$ (A)
%
vested in
year
%
forfeited
in year
(B)
Directors
Directors
Darc Rasmussen
162,000
81%
19%
Executives
Peter Adams
Alex Baburin
Jason Barker
Andre Cuenin
Kevin Ryder
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
2015 financial year.
62,863
42,728
129,973
370,449
34,478
101%
91%
92%
99%
98%
–
9%
8%
1%
2%
B) The amounts forfeited are due to the
performance or service criteria not
being met in relation to the current
financial year.
36
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. Performance rights granted
as compensation are listed in the table below.
Analysis of rights over equity instruments granted as compensation
Performance
rights granted
Value yet to vest ($)
Number
Date
%
vested in
year
%
forfeited
in year
(A)
Financial
year in
which grant
expires
350,000
250,000
30,000
100,000
30,000
100,000
40,000
60,000
50,000
85,000
100,000
14,500
20,000
50,000
75,000
Nov-13
Oct-14
Oct-12
Nov-14
Oct-12
Nov-14
Nov-14
Nov-14
Oct-12
Apr-14
Nov-14
Dec-11
Oct-12
Nov-14
Nov-14
–
–
–
–
–
–
–
–
–
–
–
100%
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2017
2017
2016
2018
2016
2018
2018
2019
2016
2018
2018
2015
2016
2018
2018
Min
(B)
Max
(C )
Nil 303,625
Nil
216,875
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
26,520
84,470
26,520
84,470
33,788
46,494
44,200
79,639
84,470
5,562
17,680
42,235
63,353
Directors
Darc Rasmussen
Executives
Peter Adams
Alex Baburin
Jason Barker
Andre Cuenin
David Purdue
Kevin Ryder
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 performance
rights 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 performance rights for
employee benefit expense purposes.
Other transactions with key management personnel
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).
37
Integrated Research and its controlled entities Annual Report 2015 Remuneration report
Key management
personnel
compensation
The key management personnel
compensation are as follows:
In AUD
Short-term benefits
Post-employment benefits
Long term benefit
Equity compensation benefits
Consolidated
2015
2014
3,248,694
3,085,453
171,284
42,264
169,334
34,115
436,035
326,346
3,898,277
3,615,248
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 2014
Granted as
compensation Exercised
Other
changes*
Held at
30 June
2015
Vested
during
the year
Vested and
exercisable
at 30 June
2015
Directors
Darc Rasmussen
Executives
Peter Adams
Alex Baburin
Jason Barker
Andre Cuenin
David Purdue
Kevin Ryder
Directors
Mark Brayan
Darc Rasmussen
Executives
Peter Adams
Alex Baburin
Andre Cuenin
Andrew Levido
David Purdue
Pim Van Poel
350,000
250,000
30,000
30,000
–
135,000
34,500
100,000
100,000
100,000
100,000
50,000 (14,500)
–
75,000
–
–
–
–
–
–
–
–
–
–
–
–
–
600,000
130,000
130,000
100,000
235,000
70,000
75,000
–
–
–
–
–
–
–
–
–
–
14,500
14,500
–
–
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
340,000
–
– (340,000)
–
–
350,000
130,000
105,000
125,000
56,250
34,500
25,000
–
–
85,000
–
–
–
–
–
–
–
–
–
–
–
350,000
(100,000)
(75,000)
30,000
30,000
(75,000)
135,000
(56,250)
–
–
34,500
(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
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:
Held at
1 July 2014
Purchases
Received on
exercise of
performance rights
Other
changes*
Sales
Held at
30 June 2015
197,000
199,622
94,834,951
–
–
–
8,700
30,000
5,000
10,000
18,750
–
–
–
–
–
–
–
–
–
14,500
–
(199,622)
–
–
–
–
–
–
–
–
–
–
–
–
197,000
–
94,834,951
38,700
5,000
10,000
33,250
Held at
1 July 2013
Purchases
Received on
exercise of
performance rights
Other
changes*
Held at
30 June 2014
Sales
100,000
200,000
94,834,951
25,000
97,000
199,622
–
–
–
8,700
5,000
–
18,750
–
–
–
–
–
–
–
–
–
10,000
–
–
–
– (200,000)
–
(25,000)
–
–
–
–
–
–
–
–
–
–
197,000
199,622
94,834,951
–
8,700
5,000
10,000
18,750
Non‑Executive Directors
Alan Baxter
Kate Costello
Steve Killelea
Executive Directors
Darc Rasmussen
Executives officers
(excluding directors)
Peter Adams
Alex Baburin
David Purdue
Non‑Executive Directors
Alan Baxter
Kate Costello
Steve Killelea
Executive Directors
Mark Brayan
Darc Rasmussen
Executives officers
(excluding directors)
Peter Adams
Alex Baburin
David Purdue
*Other changes represent net movement from ceasing to hold office.
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
Integrated Research and its controlled entities Annual Report 2015 40
Corporate
Governance
Contents
42 Board of Directors and its Committees
46 Risk management
46 Ethical standards
47 Communication with shareholders
Integrated Research and its controlled entities Annual Report 2015
41
Corporate Governance
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.
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.
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.
42
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 24 to 25 of
this report.
The company’s constitution provides
for the board to consist of between three
and twelve members. At 30 June 2015
the board members were comprised
as follows:
• Mr Steve Killelea –
Non-Executive Director (Chairman)
• Mr Nick Abrahams –
Non-Executive Director
• Mr Alan Baxter –
Independent Non-Executive Director
• Mr Garry Dinnie – Independent
Non-Executive Director
• Mr Peter Lloyd –
Non-Executive Director
• Mr Darc Rasmussen – Executive
Director (Chief Executive Officer)
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.
The composition of the board during
the year ended 30 June 2015 did
not comply with the ASX Corporate
Governance Council recommendation
that the majority of the board should
be independent directors. However, the
Company is working toward compliance
through the recent appointment of
Mr. Paul Brandling who is an Independent
Non-Executive Director.
The company secretary is accountable
directly to the board, through the chair,
on all matters to do with the proper
functioning of the board.
Nomination and Remuneration
Committee
The Nomination and Remuneration
Committee has a documented charter,
approved by the board. 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.
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.
Mr Abrahams was appointed as a
Non-Executive Director in September
2014. While there are good arguments
that Mr Abrahams is in fact independent,
he has been classified as not
independent due to a pre-existing
business relationship between Mr
Abrahams and Mr Killelea. The board is
satisfied that the company benefits from
Mr Abrahams’ experience and knowledge
gained through his more than 20 year
career as a lawyer assisting technology
companies in Australia and overseas.
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.
43
Integrated Research and its controlled entities Annual Report 2015 Corporate Governance
Responsibilities regarding
remuneration
The Committee reviews and makes
recommendations to the board on:
• The appointment, remuneration,
performance objectives and evaluation
of the chief executive officer.
• The remuneration packages for
senior executives.
• The Company’s recruitment,
retention and termination policies and
procedures for senior executives.
• 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,
44
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 performance of the chief executive
officer and the board was undertaken
in the reporting period identifying both
strengths and development actions.
The performance of other senior
management was conducted by the
chief executive officer.
The members of the Nomination and
Remuneration Committee during the
year were:
• Ms Kate Costello (Chairperson to
September 2014) – Independent
Non-Executive
• Mr Alan Baxter (Chairman from
October 2014) – Independent
Non-Executive
• Mr Garry Dinnie – Independent
Non-Executive Director
• Mr Steve Killelea – Non-Executive
At the date of this Corporate Governance
Statement, a matrix of skills and diversity
of the board as required by the ASX
corporate governance recommendations
remains in progress. The Company is
working toward the completion of the
matrix to comply with this corporate
governance requirement.
The Nomination and Remuneration
Committee meets at least twice a year
and as required. The Committee met
three times during the year under review.
Audit and Risk Committee
The Audit and Risk Committee has
a documented charter, approved by
the board. The charter states that 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:
• Mr Nick Abrahams – Non-Executive
Director
• Mr Garry Dinnie – Independent
Non-Executive (Chairman)
• Mr Peter Lloyd – Non-Executive
While the Committee is chaired by an
independent director who is not chair
of the Board, the year the number of
independent directors did not form a
majority of the Audit and Risk Committee
as recommended by the ASX Corporate
Governance recommendations.
The Company is moving toward
compliance on this matter with the
recent appointment of another
independent director.
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 four times
during the year and committee members’
attendance record is disclosed in the
table of Directors’ Meetings on page 28.
The external auditor met with the audit
committee/board four 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 2015
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 as set out in the
charter 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.
• Review the external auditor’s
management letter and responses by
management.
• Provide an avenue of communication
between the auditors, management
and the board.
• Mr Clyde McConaghy – Non-Executive
• Monitor compliance with all financial
statutory requirements and regulations.
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 Alan Baxter – Independent
Non-Executive
• Mr Peter Lloyd – Non-Executive
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 five times during the
year under review.
• Review financial reports and other
financial information distributed to
shareholders so that they provide an
accurate reflection of the financial
health of the company.
• Monitor corporate risk management
and assessment processes, and the
identification and management of
strategic and operational risks.
• Enquire of the auditors of any
difficulties 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.
45
Integrated Research and its controlled entities Annual Report 2015 • 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 42 days after the
release of the company’s half-yearly
results announcement.
• From 24 hours to 56 days after release
of the company’s annual results
announcement.
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.
Participants in the Company’s
Performance Rights program are
specifically prohibited to hedge
the exposure to the Integrated Research
share price during the vesting period
in respect of the unvested
performance rights.
Corporate Governance
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:
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.
Material exposure to economic,
environmental and social
sustainability risks
By the nature of the industry that
the Company participates in,
exposures to economic, environmental
and social sustainability risks are not
considered material.
• Capital expenditure above a certain
size requires board approval.
Ethical standards
• 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.
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 31 to 39.
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.
46
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.
47
Integrated Research and its controlled entities Annual Report 2015 Financial Statements
48
Financials
Contents
50 Consolidated statement of comprehensive income
51 Consolidated statement of financial position
52 Consolidated statement of changes in equity
53 Consolidated statement of cash flows
54 Notes to the financial statements
54 Note 1: Significant accounting policies
60 Note 2: Segment reporting
61 Note 3: Finance income
61 Note 4: Expenditure
61 Note 5: Auditors' remuneration
62 Note 6: Income tax expense
63 Note 7: Earnings per share
63 Note 8: Cash and cash equivalents
64 Note 9: Trade and other receivables
65 Note 10: Other current assets
65 Note 11: Other financial assets
66 Note 12: Property, plant and equipment
67 Note 13: Deferred tax assets and liabilities
68 Note 14: Intangible assets
69 Note 15: Trade and other payables
69 Note 16: Employee benefits
71 Note 17: Provisions
72 Note 18: Other liabilities
72 Note 19: Capital and reserves
74 Note 20: Financial instruments
77 Note 21: Operating leases
78 Note 22: Consolidated entities
78 Note 23: Reconciliation of cash flows from operating activities
79 Note 24: Key management personnel disclosures
79 Note 25: Related parties
79 Note 26: Parent entity disclosures
80 Note 27: Subsequent events
81 Directors’ declaration
82
85 ASX additional information
Independent auditor’s report
Integrated Research and its controlled entities Annual Report 2015
49
Financial Statements
Consolidated statement
of comprehensive income
For the year ended 30 June 2015
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 IR:
Basic earnings per share (AUD cents)
Diluted earnings per share (AUD cents)
Consolidated
Notes
2015
2014
41,031
23,700
5,548
70,279
28, 048
20,562
4,633
53,243
(12,431)
(35,161)
(5,220)
(11,067)
(26,836)
(4,707)
4
(52,812)
(42,610)
1,502
(364)
18,969
297
19,266
(5,015)
14,251
10,269
384
10,653
(2,164)
8,489
(317)
915
598
897
14
911
14,849
9,400
14,251
8,489
14,849
9,400
8.41
8.34
5.03
5.00
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 54 to 80.
50
Consolidated statement
of financial position
As at 30 June 2015
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 equipments
Deferred tax assets
Intangible assets
Total non-current assets
Total assets
Current liabilities
Trade and other receivables
Provisions
Income tax liabilities
Deferred revenue
Other current liabilities
Total current liabilities
Non‑current liabilities
Deferred tax liabilities
Provisions
Deferred revenue
Other non-current liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained earnings
Total equity
The consolidated statement of financial position is to be read in conjunction with the notes to the financial statements set out on pages 54 to 80.
Consolidated
Notes
2015
2014
8
9
10
9
11
12
13
14
15
17
18
13
17
18
19
19
15,323
25,012
184
1,344
41,863
13,260
804
1,969
1,342
17,020
34,395
13,300
20,225
616
1,024
35,165
2,632
786
1,680
1,463
16,257
22,818
76,258
57,983
7,241
2,327
1,719
18,698
604
30,589
4,408
899
3,825
405
9,537
4,074
2,105
237
13,571
9
19,996
3,664
778
2,798
–
7,240
40,126
27,236
36,132
30,747
1,667
935
33,530
36,132
1,667
(361)
29,441
30,747
51
Integrated Research and its controlled entities Annual Report 2015 Financial Statements
Consolidated statement
of changes in equity
For the year ended 30 June 2015
Consolidated
In thousands of AUD
Balance at 1 July 2014
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
Balance at 30 June 2015
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
Balance at 30 June 2014
Share
capital
Hedging
reserve
Translation
reserve
Employee
benefit
reserve
Retained
earnings
1,667
–
–
–
–
–
–
120
–
(317)
(317)
–
–
–
(1,354)
873
–
915
915
–
–
–
–
–
–
698
–
–
1,667
(197)
(439)
1,571
Total
30,747
14,251
29,441
14,251
–
598
14,251
14,849
–
–
(10,162)
33,530
698
–
(10,162)
36,132
Share
capital
Hedging
reserve
Translation
reserve
Employee
benefit
reserve
Retained
earnings
Total
1,501
–
–
–
–
166
–
1,667
(777)
–
897
897
–
–
–
(1,368)
424
–
14
14
–
–
–
30,230
8,489
30,010
8,489
–
911
8,480
9,400
–
–
(9,278)
29,441
449
166
(9,278)
30,747
–
–
–
449
–
–
873
120
(1,354)
The consolidated statement of changes in equity is to be read in conjunction with the notes to the financial statements set out on pages 54 to 80.
52
Consolidated statement
of cash flows
For the year ended 30 June 2015
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
Net cash provided by operating activities
Cash flows from investing activities
Payments for capitalised development
Payments for property, plant and equipment
Payments for intangible asset
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
2015
2014
62,012
(38,855)
23,157
(1,738)
21,419
(9,037)
(1,004)
(126)
297
54,080
(35,627)
18,453
(2,434)
16,019
(7,967)
(609)
(173)
384
(9,870)
(8,365)
–
(10,162)
(10,162)
1,387
13,300
636
15,323
166
(9,278)
(9,112)
(1,458)
14,827
(69)
13,300
23
19
8
The consolidated statement of cash flows is to be read in conjunction with the notes to the financial statements set out on pages 54 to 80.
53
Integrated Research and its controlled entities Annual Report 2015 Financial Statements
Notes to the
financial
statements
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
2015 comprises the Company and its
subsidiaries (together referred to as the
“consolidated entity”).
The financial report was authorised for
issue by the Directors on 25 August 2015.
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.
i. New accounting standards and
Interpretations
The Company has applied the
following standards and amendments
for the first time for the annual
reporting period commencing 1 July
2014 and have not had any material
effect on its financial position or
performance:
• AASB2012-3
‘Amendments to Australian
Accounting Standards – Offsetting
Financial Assets and Financial
Liabilities’
• 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’
• AASB 2014-1 Part A
‘Annual Improvements
2010-2012 Cycle’
• AASB 2014-1 Part A
‘Annual Improvements
2011-2013 Cycle’
54
ii.
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
Effective for
annual reporting
periods beginning
on or after
Expected to be
initially applied
in the financial
year ending
AASB 9 ‘Financial Instruments’
1 January 2018
30 June 2018
AASB 15 ‘Revenue from Contracts
with Customers’
AASB 2014-4 ‘Clarification of
Acceptable Methods of Depreciation
and Amortisation (Amendments to
AASB 116 and AASB 138)’
AASB 2015-1 ‘Amendments to
Australian Accounting Standards –
Annual Improvements 2012-2014 Cycle’
AASB 2015-3 ‘Amendments to
Australian Accounting Standards arising
from the Withdrawal of AASB1031
Materiality’
1 January 2017*
30 June 2017
1 January 2016
30 June 2016
1 January 2016
30 June 2016
1 July 2015
30 June 2016
* The International Accounting Standards Board (IASB) in its July 2015 meeting decided to confirm its proposal to defer the
effective date of IFRS 15 (the international equivalent of AASB 15) from 1 January 2017 to 1 January 2018. The amendment to
give effect to the new effective date for IFRS 15 is expected to be issued in September 2015. At this time, it is expected that the
AASB will make a corresponding amendment to AASB 15, which will mean that the application date of this standard for the
Group will move from 1 July 2017 to 1 July 2018.
55
Integrated Research and its controlled entities Annual Report 2015 Financial Statements
Note 1:
Significant accounting policies (cont.)
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.
56
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.
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:
6 – 10 years
• Plant and equipment:
4 – 8 years
h. Intangible assets
i. 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
assets 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.
ii.
Intellectual property
Intellectual property acquired from
third parties is amortised over its
estimated useful life, but no more
than three years.
iii. 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.
For the trade receivables with
extended payment terms beyond
twelve months, the receivable is
initially recognised at fair value
calculated by applying a discount
to the contracted cash flows. The
discount rate applied is based upon
the corporate borrowing rate that
would apply to the type of customer,
taking into account the customers’
credit worthiness based on its size
and jurisdiction.
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.
57
Integrated Research and its controlled entities Annual Report 2015 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 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.
i. 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.
ii. 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.
p. Expenses
i. 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.
ii. 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
Financial Statements
Note 1:
Significant accounting policies (cont.)
l. Employee benefits
i. 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.
ii. 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 Corporate bond rate at the
year end date which have maturity
dates approximating to the terms of
the consolidated entity’s obligations.
iii. Share‑based payment transactions
The share option and performance
rights programmes allow 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.
iv. 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
58
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.
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.
i.
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.
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.
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:
ii. 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.
iii. 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.
59
Integrated Research and its controlled entities Annual Report 2015 Financial Statements
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
and Singapore 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.
In thousands
of AUD
Sales to customers
outside the
consolidated entity
Inter-segment revenue
Total segment revenue
Total revenue
Segment results
Results from operating
activities
Financing income
(interest received)
Dividend received from
subsidiary
Income tax expense
Profit for the year
Capital additions2
Depreciation
and amortisation
expenditure
Americas
Europe
Asia Pacific
Corporate
Australia1
Eliminations
Consolidated
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
52,688
38,133
10,182
7,896
8,866
8,100
(1,457)
(886)
–
–
70,279
53,243
–
–
–
–
–
–
38,109
28,714 (38,109)
(28,714)
–
–
52,688
38,133
10,182
7,896
8,866
8,100 36,652
27,828 (38,109)
(28,714)
70,279
53,243
70,279 53,243
1,598
1,147
248
197
222
202
16,901
8,723
–
–
18,969
10,269
18,969
10,269
297
384
–
1,045
–
(1,045)
–
–
(5,015)
(2,164)
14,251
8,489
704
91
112
215
156
106
71
32
17
4
2
2
297
474
8,883
7,415
–
–
–
–
1,130
782
9,114
7,555
1 Corporate Australia includes both the research and development, hedging and corporate head office functions of the Integrated Research Limited.
2 Excludes internal development costs capitalised but includes third party assets acquired.
Americas
(USD)
Europe
(GBP)
In local currency '0003
2015
2014
2015
2014
Sales to customers
outside the
consolidated entity
Inter-segment sales
43,621
34,759
5,338
4,415
–
–
–
–
Total segment revenue
43,621
34,759
5,338
4,415
Segment results
1,311
1,044
133
111
3 Segment results represented in local currencies as reviewed by the Chief Operating Decision Maker.
60
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
2015 and 2014 Ernst and Young
In AUD
Consolidated
2015
297
297
2014
384
384
Consolidated
2015
2014
1,872
728
36,504
39,104
9,114
764
1,600
1,617
453
29,798
31,868
7,555
288
1,514
Consolidated
2015
2014
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
142,509
135,000
Remuneration for other services by the auditors of the
Company or any entity in the consolidated entity
86,251
–
Taxation services:
Auditors of the Company
157,460
121,361
61
Integrated Research and its controlled entities Annual Report 2015 Financial Statements
Note 6:
Income tax expense
Recognised in profit for the year
In thousands of AUD
Note
2015
2014
Consolidated
Current tax expense:
Current year
Prior year adjustments
Deferred tax expense:
Origination and reversal of
temporary differences
Total income tax expense in profit and loss
13
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
5,978
(98)
5,880
(865)
5,015
2,203
(233)
1,970
194
2,164
Consolidated
2015
19,266
5,780
303
121
(1,335)
244
(98)
5,015
2014
10,653
3,196
203
202
(1,199)
(5)
(233)
2,164
62
Note 7:
Earnings per share
The calculation of basic and diluted earnings per share at 30 June 2015 was based on the profit attributable to ordinary
shareholders of $14,251,000 (2014: $8,489,000); a weighted number of ordinary shares outstanding during the year ended
30 June 2015 of 169,409,027 (2014: 168,719,799); and a weighted number of ordinary shares (diluted) outstanding during the
year ended 30 June 2015 of 170,190,803 (2014: 169,895,017), 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
2015
14,251
2014
8,489
Consolidated
2015
2014
169,409,027
168,719,799
1,509,776
1,175,218
170,918,803
169,895,017
8.41
8.34
5.03
5.00
Consolidated
2015
15,323
2014
13,300
63
Integrated Research and its controlled entities Annual Report 2015 Financial Statements
Note 9:
Trade and other receivables
64
Current
In thousands of AUD
Trade debtors
Less: Allowance for doubtful debts
GST receivable
Non‑current
In thousands of AUD
Trade debtors
Consolidated
2015
25,768
(852)
24,916
96
2014
20,934
(858)
20,076
149
25,012
20,225
Consolidated
2015
13,260
2014
2,632
The credit period on sales ranges from 30 to 90 days. Customers of good credit
worthiness can request for extended payment plans over the committed term of the
licence contract which typically is up to three years.
Ageing of past due but not impaired
Consolidated
In thousands of AUD
Past due 30 days
Past due 60 days
Past due 90 days
Total
2015
873
1,697
654
3,224
2014
1,682
1,449
1,010
4,141
The movement in the allowance for doubtful debts in respect of trade receivables is
detailed below:
Consolidated
2015
858
(1,010)
1,004
852
2014
1,139
(569)
288
858
Included in the consolidated entity’s
trade receivable balance are debtors
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.
In thousands of AUD
Balance at beginning of year
Amounts written off during the year
Increase in provision
Balance end of year
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.
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
Consolidated
2015
1,325
19
2014
847
177
1,344
1,024
Consolidated
2015
804
2014
786
The carrying amount of other financial assets is a reasonable approximation of their
fair value.
65
Integrated Research and its controlled entities Annual Report 2015 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
Disposals
Effects of foreign currency exchange
Depreciation expense
Carrying amount at end of year
Leasehold Improvements
Carrying amount at start of year
Additions
Disposals
Effects of foreign currency exchange
Depreciation expense
Carrying amount at end of year
Consolidated
2015
2014
3,389
(2,073)
1,316
2,279
(1,626)
653
5,668
(3,699)
1,969
933
831
(10)
43
(481)
1,316
747
173
(67)
31
(231)
653
3,148
(2,215)
933
2,174
(1,427)
747
5,322
(3,642)
1,680
927
427
–
–
(421)
933
779
182
–
(2)
(212)
747
Financial Statements
Note 12:
Property, plant and equipment
66
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
Deferred tax assets/(liabilities)
Set off of deferred tax asset
Net deferred tax assets/(liabilities)
Assets
Liabilities
Net
2015
–
273
1,117
428
670
–
–
2,488
(1,146)
1,342
2014
–
252
965
416
893
–
115
2,641
(1,178)
1,463
2015
5,067
2014
4,842
2015
2014
(5,067)
(4,842)
–
–
–
–
487
–
5,554
(1,146)
4,408
–
–
–
–
–
–
273
1,117
428
670
(487)
–
252
965
416
893
–
115
4,842
(1,178)
3,664
(3,066)
(2,201)
–
–
(3,066)
(2,201)
Movement in temporary differences during the year:
Consolidated
For year ended 30 June 2015
In thousands of AUD
Property, plant and equipment
Intangible assets
Trade and other payables
Employee benefits
Provisions
Other current liabilities
Unrealised foreign exchange gain
Unrealised foreign exchange loss
For year ended 30 June 2014
In thousands of AUD
Property, plant and equipment
Intangible assets
Trade and other payables
Employee benefits
Provisions
Other current liabilities
Unrealised foreign exchange gain
Unrealised foreign exchange loss
Balance
1 July 14
Recognised
in income
Recognised
in equity
Balance
30 June 15
–
(4,842)
252
965
416
893
–
115
(2,201)
–
(225)
21
152
12
(223)
(487)
(115)
(865)
–
–
–
–
–
–
–
–
–
–
(5,067)
273
1,117
428
670
(487)
–
(3,066)
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)
67
Integrated Research and its controlled entities Annual Report 2015 Financial Statements
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
Consolidated
2015
8,403
8,403
2014
6,922
6,922
The balance of capitalised intangible
assets comprises:
In thousands of AUD
Cost
Balance at 1 July 2013
Fully amortised & offset
Effects of foreign currency exchange
Internally developed
Acquired
Consolidated
Software
development
Third party
software
Total
24,551
(5,619)
–
7,967
–
1,785
(789)
(2)
–
173
26,336
(6,408)
(2)
7,967
173
Balance at 30 June 2014
26,899
1,167
28,066
Balance at 1 July 2014
Fully amortised & offset
Effects of foreign currency exchange
Internally developed
Acquired
26,899
(5,672)
–
9,037
–
1,167
(250)
14
–
126
Balance at 30 June 2015
30,264
1,057
Amortisation
Balance at 1 July 2013
Fully amortised & offset
Effects of foreign currency exchange
Internally developed
Balance at 30 June 2014
Balance at 1 July 2014
Fully amortised & offset
Effects of foreign currency exchange
Internally developed
Balance at 30 June 2015
Carrying amounts
Balance at 30 June 2014
Balance at 30 June 2015
9,734
(5,619)
–
6,740
10,855
10,855
(5,672)
–
8,253
13,436
16,044
16,828
68
28,066
(5,922)
14
9,037
126
31,321
11,296
(6,408)
(1)
6,922
11,809
11,809
(5,922)
11
8,403
14,301
1,562
(789)
(1)
182
954
954
(250)
11
150
865
213
192
16,257
17,020
Note 15:
Trade and other payables
The average credit period on trade and
other payables is 30 days.
In thousands of AUD
Trade and other creditors
Note 16:
Employee benefits
In thousands of AUD
Current
Liability for annual leave
Liability for long service leave
Total
Non‑current
Consolidated
2015
7,241
7,241
2014
4,074
4,074
Consolidated
2015
2014
1,684
643
2,327
1,498
607
2,105
Liability for long service leave
399
361
Pension plans
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.
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
Number of Rights
Earliest Vesting Date
Expiry date
Sep–14
Oct–14*
Nov–14
Nov–14
Nov–14
790,000
250,000
50,000
495,000
60,000
Sep 2017
Oct 2017
Oct 2015
Oct 2016
Sep 2017
Oct 2017
Aug 2017
Sep 2017
Nov 2018
Dec 2018
*This is the second tranche of the original plan granted on 14 November 2013 of 850,000 rights.
69
Integrated Research and its controlled entities Annual Report 2015
Financial Statements
Note 16:
Employee benefits (cont.)
The fair value of the performance rights
including assumptions used are as follows:
Grant date
Sep 2014
Nov 2014
Nov 2014
Nov 2014
Fair value at measurement date
$0.8581
$0.8411
$0.8447
$0.7749
Share price
Exercise price
Expected volatility
Contractual life (expressed in days)
Expected dividends
Risk-free interest rate
(based on 3 year treasury bonds)
$1.000
$0.975
$0.970
$0.960
Nil
50%
1,096
5.10%
3.00%
Nil
50%
1,037
5.20%
3.00%
Nil
50%
1,007
5.20%
3.00%
Nil
50%
1,448
5.40%
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 2015,
the consolidated entity recognised an
expense through profit of $728,000
related to the fair value of performance
rights (2014: $452,000).
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)
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.
2015
1,937
(465)
(712)
1,645
2,405
–
2014
1,853
(516)
–
600
1,937
–
The terms and conditions of the
grants made and number outstanding
at 30 June 2015 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
70
Note 16:
Employee benefits (cont.)
The number and weighted average
exercise prices of share options
is as follows:
2015
2014
Weighted
average
exercise
price
Number of
options
–
–
–
–
–
–
–
–
–
–
–
–
Weighted
average
exercise
price
$0.29
$0.28
$0.30
–
–
–
Number of
options
872
(479)
(393)
–
–
–
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 2015.
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
2015 financial year (2014:nil).
Note 17:
Provisions
In thousands of AUD
Note
2015
2014
Consolidated
Current
Employee benefits
Non‑current
Employee benefits
Lease make good
16
16
2,327
2,327
2,105
2,105
399
500
899
361
417
778
71
Integrated Research and its controlled entities Annual Report 2015 In thousands of AUD
Current
Fair value of hedge liabilities –
forward foreign exchange contracts
Non‑current
Other creditors
Share capital:
In thousands of shares
On issue 1 July
Issued against employee options exercised
Issued against employee performance right exercised
On issue 30 June
Consolidated
2015
2014
604
405
9
–
Ordinary shares
2015
2014
168,959
168,367
–
712
592
–
169,671
168,959
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.
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.
Financial Statements
Note 18:
Other liabilities
Note 19:
Capital and reserves
72
Note 19:
Capital and reserves (cont.)
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
2015
Final 2014
Interim 2015
Total amount
2014
Final 2013
Interim 2014
Total amount
2.5
3.5
3.0
2.5
4,224
35% franked 12 Sep 2014
5,938
35% franked 20 Mar 2015
10,162
5,055
40% franked 13 Sep 2013
4,223
30% franked 21 Mar 2014
9,278
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 2015 and will be recognised in
subsequent financial statements:
In thousands of AUD
Final 2015
Cents per
share
Total
amount
Franked/
unfranked
Date of
payment
4.0
6,787
35% franked 22 Sep 2015
The final dividend declared of 4.0 cents together with the interim dividend paid in
March 2015 of 3.5 cents takes total dividends for the 2015 financial year to 7.5 cents.
Franking account disclosure:
In thousands of AUD
Adjusted franking account balance
Impact on franking account balance of dividends
not recognised
Company
2015
1,020
(1,019)
2014
737
(634)
73
Integrated Research and its controlled entities Annual Report 2015 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.
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:
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.
Financial Statements
Note 20:
Financial instruments
74
Note 20:
Financial instruments (cont.)
In thousands of AUD
US Dollar
Euro
UK Sterling
Consolidated
Liabilities
Assets
2015
56
–
–
2014
188
–
–
2015
1,949
2,450
1
2014
2,153
1,889
1
Foreign currency sensitivity
At 30 June 2015, if the US Dollar, Euro and UK sterling weakened or strengthened
against the Australian dollar by the percentage shown, with all other variables held
constant, net profit for the year would increase (decrease) by:
Consolidated
Net profit
Retained earnings
2015
2014
2015
2014
272
210
–
(223)
(172)
–
218
210
–
(179)
(172)
–
272
210
–
(223)
(172)
–
218
210
–
(179)
(172)
–
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
(i) This has been based on the change in the exchange rate against the Australian dollar in the financial years ended
30 June 2015 and 30 June 2014.
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.
75
Integrated Research and its controlled entities Annual Report 2015 Financial Statements
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
2015
2014
2015
FC'000
2014
FC'000
2015
A$'000
2014
A$'000
2015
A$'000
2014
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
0.84
0.84
0.76
0.77
0.69
0.67
0.68
–
0.54
0.50
0.50
0.49
0.92
0.91
0.89
0.92
0.68
0.68
0.67
0.67
0.55
0.55
0.55
0.54
2,850
1,200
1,850
1,950
2,900
1,650
1,750
1,300
3,378
1,431
2,436
2,536
370
95
175
–
250
100
100
75
310
210
215
295
270
70
160
150
534
141
259
–
461
198
199
152
3,136
1,808
1,967
1,408
454
309
321
443
490
128
293
275
(334)
(141)
(1)
(39)
(3)
1
1
–
(50)
(7)
(8)
(3)
(584)
45
38
79
(1)
3
1
3
5
(2)
(1)
(2)
(2)
166
These hedge assets and liabilities 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
$15,971,000 were held by the consolidated entity at the reporting date, attracting an average interest rate of 2.36% (2014: 3.01%).
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 +/–$79,855 (2014: +/– $69,745).
76
Note 20:
Financial instruments (cont.)
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 2015 and 2014 carry no
interest obligation.
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.
For non-current trade debtors Integrated
Research has considered a discount
rate to recognise the net present value
of the debtors. Level 3 inputs have
been considered including corporate
borrowing rates, size of the customer and
jurisdiction of the customer.
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. The largest single counterparty
exposure with any one customer is with
Avaya with a receivable balance at
30 June 2015 of $5.57 million Ongoing
credit evaluation is performed on the
financial condition of accounts.
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.
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
2015
1,475
2,663
132
4,270
2014
1,078
1,768
–
2,846
77
Integrated Research and its controlled entities Annual Report 2015 Financial Statements
Note 22:
Consolidated entities
In thousands of AUD
Parent entity
Country of
incorporation
Consolidated
2015
2014
Integrated Research Limited
Australia
Subsidiaries
Integrated Research, Inc
Integrated Research UK Limited
Integrated Research Singapore
Pte Limited
USA
UK
Singapore
100%
100%
100%
100%
100%
100%
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
Consolidated
2015
14,251
9,114
(6)
(297)
728
(66)
Change in operating assets and liabilities:
(Increase)/decrease in trade debtors
(15,409)
2014
8,489
7,555
(281)
(384)
453
(805)
988
(276)
892
(116)
411
(1,112)
82
123
121
94
3,167
7,154
1,481
744
343
21,419
16,019
(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
78
Note 24:
Key management
personnel disclosures
The key management personnel
compensation are as follows:
In AUD
Short-term benefits
Post-employment benefits
Long term benefit
Equity compensation benefits
Consolidated
2015
2014
3,248,694
3,085,453
171,284
42,264
169,334
34,115
436,035
326,346
3,898,277
3,615,248
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
At 30 June 2015 Mr Steve Killelea, the Chairman of the Company, owned either directly
or indirectly 55.89% of the Company (2014: 56.13%).
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
Investments in subsidiaries are included at cost.
Parent Entity
2015
2014
24,050
18,928
42,978
7,295
5,167
12,462
18,044
18,244
36,288
4,814
4,603
9,417
30,516
26,871
1,667
1,571
(197)
27,475
30,516
13,412
(317)
13,095
1,667
873
120
24,211
26,871
8,732
897
9,629
79
Integrated Research and its controlled entities Annual Report 2015 Disclosures in relation to the fair value of
the net assets acquired have not been
included as valuations are outstanding
and management are in the process of
determining provisional fair values as at
the date of completing the accounts.
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.
Dividends
For dividends declared after 30 June
2015 see Note 19 in the financial
statements. The financial effect
of dividends declared and paid
after 30 June 2015 have not been
brought to account in the financial
statements for the year ended 30
June 2015 and will be recognised
in subsequent financial reports.
Acquisition
On 1 July 2015, the Company completed
the acquisition of the US based IQ
Services business. The acquisition
provides the Company with a number
of strategically significant growth
opportunities in its existing markets and
into new allied markets. The business
combination is anticipated to provide
the world’s most complete view of cloud,
hybrid and traditional on premises
operations for unified communications
and contact centre solutions.
The initial purchase price for the
business was US$1.5 million subject to
working capital adjustments. There will
also be additional performance based
earn-out payments over the next three
financial years contingent upon meeting
certain earnings before interest tax
and depreciation (EBITDA) milestones.
The maximum consideration for the
acquisition is US$5.0 million based on
attaining the successful milestones.
Financial Statements
Note 27:
Subsequent events
80
Directors' declaration
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 2015 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 2015 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 2015.
On behalf of the board.
Steve Killelea
Chairman
North Sydney, 25 August 2015
Darc Rasmussen
Chief Executive Officer
North Sydney, 25 August 2015
81
Integrated Research and its controlled entities Annual Report 2015
Independent Auditor's Report
Financial Statements
Ernst & Young
680 George Street
Sydney NSW 2000 Australia
GPO Box 2646 Sydney NSW 2001
Tel: +61 2 9248 5555
Fax: +61 2 9248 5959
ey.com/au
Independent auditor's report to the members of Integrated
Research Limited
Report on the financial report
We have audited the accompanying financial report of Integrated Research Limited, which comprises
the consolidated balance sheet as at 30 June 2015, the consolidated income statement, the
consolidated statement of comprehensive income, the consolidated statement of changes in equity and
the consolidated statement of cash flows for the year then ended, notes comprising a summary of
significant accounting policies and other explanatory information, and the directors' declaration of the
consolidated entity comprising the company and the entities it controlled at the year's end or from
time to time during the financial year.
Directors' responsibility for the financial report
The directors of the company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal controls as the directors determine are necessary to enable the preparation of
the financial report that is free from material misstatement, whether due to fraud or error. In Note 1,
the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial
Statements, that the financial statements comply with International Financial Reporting Standards.
Auditor's responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our
audit in accordance with Australian Auditing Standards. Those standards require that we comply with
relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain
reasonable assurance about whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the financial report. The procedures selected depend on the auditor's judgment, including the
assessment of the risks of material misstatement of the financial report, whether due to fraud or error.
In making those risk assessments, the auditor considers internal controls relevant to the entity's
preparation and fair presentation of the financial report in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness
of the entity's internal controls. An audit also includes evaluating the appropriateness of accounting
policies used and the reasonableness of accounting estimates made by the directors, as well as
evaluating the overall presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
Independence
In conducting our audit we have complied with the independence requirements of the Corporations Act
2001. We have given to the directors of the company a written Auditor’s Independence Declaration, a
copy of which is included by reference in the directors’ report.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
82
Opinion
In our opinion:
a.
the financial report of Integrated Research Limited is in accordance with the Corporations Act
2001, including:
i
ii
giving a true and fair view of the consolidated entity's financial position as at 30 June
2015 and of its performance for the year ended on that date; and
complying with Australian Accounting Standards and the Corporations Regulations
2001; and
b.
the financial report also complies with International Financial Reporting Standards as
disclosed in Note 1.
Report on the remuneration report
We have audited the Remuneration Report included in pages 31 to 39 of the directors' report for
the year ended 30 June 2015. The directors of the company are responsible for the preparation
and presentation of the Remuneration Report in accordance with section 300A of the Corporations
Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our
audit conducted in accordance with Australian Auditing Standards.
Opinion
In our opinion, the Remuneration Report of Integrated Research Limited for the year ended 30 June
2015, complies with section 300A of the Corporations Act 2001.
Ernst & Young
John Robinson
Partner
Sydney
25 August 2015
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
83
Integrated Research and its controlled entities Annual Report 2015 Independent Auditor's Report
Financial Statements
Ernst & Young
680 George Street
Sydney NSW 2000 Australia
GPO Box 2646 Sydney NSW 2001
Tel: +61 2 9248 5555
Fax: +61 2 9248 5959
ey.com/au
Auditor’s Independence Declaration to the Directors of
Integrated Research Limited
In relation to our audit of the financial report of Integrated Research Limited for the financial year
ended 30 June 2015, to the best of my knowledge and belief, there have been no contraventions of
the auditor independence requirements of the Corporations Act 2001 or any applicable code of
professional conduct.
Ernst & Young
John Robinson
Partner
25 August 2015
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
84
ASX additional information
Shareholder information
Integrated Research Limited: Top 20 Holders
As at 11 September 2015
Rank Name
Number
held
Percentage
of issued shares
1
2
3
4
5
6
7
8
9
Mr Stephen John Killelea
National Nominees Limited
Mr Andrew Rhys Rutherford
J P Morgan Nominees Australia Limited
Citicorp Nominees Pty Limited
HSBC Custody Nominees (Australia) Limited
Custodial Services Limited
ABN AMRO Clearing Sydney Nominees Pty Ltd
UBS Nominees Pty Ltd
10
Forsyth Barr Custodians Ltd
11
12
13
14
15
16
17
18
19
Bell Potter Nominees Ltd
Mr Kevin John Cairns + Mrs Catherine Valerie Cairns
Key Glory Investments Pty Ltd
Mr Gary Ronald Poole + Mrs Leigh Margaret Poole
Key Glory Investments Pty Ltd
Fergfam Nominees Pty Ltd
Bipeta Pty Ltd
Mr Colin Gregory Organ
Farvex Corporation Pty Limited
20
Beebee Holdings Pty Ltd
94,497,339
5,230,939
3,385,869
2,053,705
1,580,241
1,213,630
876,184
724,851
701,995
591,945
542,000
516,113
500,000
500,000
401,000
375,263
337,612
330,000
325,000
300,000
55.64
3.08
1.99
1.21
0.93
0.71
0.52
0.43
0.41
0.35
0.32
0.30
0.29
0.29
0.24
0.22
0.20
0.19
0.19
0.18
85
Integrated Research and its controlled entities Annual Report 2015 ASX additional information
Analysis of numbers of equity security holders by size of holding
As at September 2015
Shares
Options
Performance
Rights
Class of equity security
Ordinary Shares
1 -1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 and over
785
1,917
919
1,166
70
4,857
–
–
–
–
–
–
–
15
19
39
2
75
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
on issue
Number
of holders
–*
2,309,900**
–
75
* Number of unissued ordinary shares under the Options.
** 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:
Mr. Stephen John Killelea*
* Include direct and indirect holdings.
Voting rights
Number held
Percentage
94,834,951
55.84
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.
2. Options.
No voting rights.
3. Performance rights.
4. No voting rights.
Other information
Integrated Research Limited, incorporated and domiciled in Australia, is a publicly listed Company limited by shares.
86
Corporate
directory
Directors
Steve Killelea
Non-Executive Director & Chairman
Darc Dencker-Rasmussen
Managing Director & CEO
Share Registry
Computershare
Solicitors
Ashurst
Level 11, 5 Martin Place
Sydney NSW 2000
Nick Abrahams
Non-Executive Director
Alan Baxter
Non-Executive Director
Paul Brandling
Non-Executive Director
Garry Dinnie
Non-Executive Director
Peter Lloyd
Non-Executive Director
Company Secretary
David Purdue
Registered Office
Level 9, 100 Pacific Highway
North Sydney NSW 2060
T. +61 (2) 9966 1066
Bankers
Westpac Banking Corporation
Securities Exchange Listing
Australian Securities 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 Meeting of
Integrated Research Limited will be
held on:
Friday, 13 November 2015
Museum of Sydney
Cnr Phillip & Bridge Streets, Sydney
at 3:00pm
Asia Pacific/Middle East/Africa
Integrated Research Ltd
Level 9, 100 Pacific Highway
North Sydney NSW 2060
Australia
T. +61 (2) 9966 1066
F. +61 (2) 9966 1042
E. info.ap@ir.com
Singapore
Integrated Research
Unit 12-01, Palais Renaissance
390 Orchard Road
Singapore 238871
T. +65 6684 5856
E. info.ap@ir.com
ir.com
United Kingdom & Ireland
Integrated Research UK Ltd
The Atrium, Harefield Road
Uxbridge, Middlesex
UB8 1PH
United Kingdom
T. +44 (0) 189 581 7800
E. info.europe@ir.com
Germany
Integrated Research UK Ltd
Munchner Buro der Integrated Research
UK Ltd
Terminalstrasse Mitte 18
85356 Munchen, Germany
T. +49 (89) 97 007 132
E. info.germany@ir.com
Americas – West Coast
Integrated Research Inc
6312 S. Fiddlers Green Circle Suite 500N
Denver, CO 80111, USA
T: +1 (303) 390 8700
F: +1 (303) 390 877
E. info.usa@ir.com
Americas – East Coast
Integrated Research Inc
12950 Worldgate Dr, Suite 720
Herndon, VA 20170, USA
T: +1 (303) 390 8700
F: +1 (303) 390 8777
E. info.usa@ir.com