More annual reports from Integrated Research Limited:
2023 ReportIntegrated Research
Annual Report 2019
Integrated Research
Annual Report 2019
ABN 76 003 588 449
ABN 76 003 588 449
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Asia Pacifi c/Middle East/Africa
Asia Pacifi c/Middle East/Africa
Integrated Research Limited
Integrated Research Limited
Level 9, 100 Pacifi c Highway
Level 9, 100 Pacifi c Highway
North Sydney NSW 2060
North Sydney NSW 2060
Australia
Australia
T. +61 (2) 9966 1066
T. +61 (2) 9966 1066
E. info.ap@ir.com
E. info.ap@ir.com
United Kingdom & Ireland
United Kingdom & Ireland
Integrated Research UK Ltd
Integrated Research UK Ltd
The Atrium, Harefi eld Road
The Atrium, Harefi eld Road
Uxbridge, Middlesex
Uxbridge, Middlesex
UB8 1PH
UB8 1PH
United Kingdom
United Kingdom
T. +44 (0) 189 581 7800
T. +44 (0) 189 581 7800
E. info.europe@ir.com
E. info.europe@ir.com
Americas - West Coast
Americas - West Coast
Integrated Research, Inc.
Integrated Research, Inc.
6312 S. Fiddlers Green Circle, Suite 500N
6312 S. Fiddlers Green Circle, Suite 500N
Denver, CO 80111, USA
Denver, CO 80111, USA
T: +1 (303) 390 8700
T: +1 (303) 390 8700
F: +1 (303) 390 877
F: +1 (303) 390 877
E. info.usa@ir.com
E. info.usa@ir.com
Singapore
Singapore
Germany
Germany
Americas - East Coast
Americas - East Coast
Integrated Research (Singapore) Pte. Ltd.
Integrated Research (Singapore) Pte. Ltd.
Integrated Research Germany GmbH
Integrated Research Germany GmbH
Integrated Research, Inc.
Integrated Research, Inc.
Unit 14-03, Palais Renaissance
Unit 14-03, Palais Renaissance
Hamborner Str. 53
Hamborner Str. 53
390 Orchard Road
390 Orchard Road
Singapore 238871
Singapore 238871
T. +65 6813 0851
T. +65 6813 0851
E. info.ap@ir.com
E. info.ap@ir.com
40472 Düsseldorf, Germany
40472 Düsseldorf, Germany
T. +49 (89) 97 007 132
T. +49 (89) 97 007 132
E. info.germany@ir.com
E. info.germany@ir.com
12950 Worldgate Dr, Suite 720
12950 Worldgate Dr, Suite 720
Herndon, VA 20170, USA
Herndon, VA 20170, USA
T: +1 (303) 390 8700
T: +1 (303) 390 8700
F: +1 (303) 390 8777
F: +1 (303) 390 8777
E. info.usa@ir.com
E. info.usa@ir.com
Americas - Mid West
Americas - Mid West
Integrated Research, Inc.
Integrated Research, Inc.
6601 Lyndale Ave. S., Suite 330
6601 Lyndale Ave. S., Suite 330
Richfi eld, Minnesota, MN 55423, USA
Richfi eld, Minnesota, MN 55423, USA
T. +1 (612) 243 6700
T. +1 (612) 243 6700
F. +1 (303) 390 8777
F. +1 (303) 390 8777
E. info.usa@ir.com
E. info.usa@ir.com
ir.com
ir.com
Corporate
directory
Directors
Paul Brandling
Independent Non-Executive
Director & Chairman
Nick Abrahams
Non-Executive Director
Garry Dinnie
Independent Non-Executive Director
Independent Non-Executive Director
Peter Lloyd
Anne Myers
Independent Non-Executive Director
Company Secretary
David Purdue
Registered Offi ce
Level 9, 100 Pacifi c Highway
North Sydney NSW 2060
T. +61 (2) 9966 1066
Share Registry
Computershare
Solicitors
Ashurst
Level 11, 5 Martin Place
Sydney NSW 2000
Bankers
National Australia Bank
Westpac Banking Corporation
HSBC Bank Australia
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:
Wednesday 20 November 2019
Museum of Sydney
Cnr. Phillip & Bridge Streets, Sydney
at 10:00am
This Annual Report is printed on Impress DM Matt. Impress DM is a FSC Certifi ed paper which is made from elemental
chlorine free pulp derived from well-managed forests. It is manufactured by an EMAS and ISO 14001 certifi ed mill.
4975 Designed and Produced by RDA Creative www.rda.com.au
Contents
About IR
Chairman’s report
Financial highlights
2
4
7
8
11
25 Remuneration report (audited)
Directors’ report
2019 in IR
35 Corporate governance statement
43 Financials
79 Directors’ declaration
80 Independent auditor’s report
87 ASX additional information
89 Corporate directory
1
Integrated Research and its controlled entities Annual Report 2019 Financial highlights
$101M
Revenue
$22M
Profit
Strong
growth in
Europe and
APAC
Total revenue
(AUD millions)
Net profit after tax
(AUD millions)
Revenue from licence sales
(AUD millions)
70.3
84.5
91.2
91.2 100.8
14.3
16.0
18.5
19.2
21.9
41.0
45.7
53.4
52.6
62.8
2015
2016
2017
2018 2019
2015
2016
2017
2018
2019
2015
2016
2017
2018
2019
2
2
Integrated Research and its controlled entities Annual Report 2019
Integrated Research and its controlled entities Annual Report 2019 e
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92%
28%
270
17%
IN MILLIONS OF AUD (EXCEPT EARNINGS PER SHARE)
Year ended 30 June
2019
2018
% Change
Revenue from licence fees
62.8
52.6
19%
Total revenue
100.8
91.2
11%
Net profit after tax
21.9
19.2
14%
Net assets
69.8
57.8
21%
Cash at balance date
9.3
11.2
-17%
Americas revenue
69.4
64.2
8%
Europe revenue
16.9
13.7
23%
Asia Pacific revenue
15.0
13.2
14%
Earnings per share (cents per share)
12.7
11.2
14%
Our customers
9/10
Top US Banks
7/10
Biggest Telcos
6/10
Top Fin Services
Companies Globally
6/10
Top Automotive Companies
Year ended 30 June
2019
2018
% Change
Americas revenue (USD)
49.7
49.5
0%
Asia Pacific revenue (AUD)
15.0
13.2
14%
Europe revenue (UK Sterling)
9.4
7.8
19%
125+
of Fortune 500
Integrated Research and its controlled entities Annual Report 2019
3
3
Integrated Research and its controlled entities Annual Report 2019
Chairman’s report
Dear IR Shareholders,
Thank you for your continued and valued support of Integrated Research Ltd.
I am pleased to present the annual report for the financial year ended
30 June 2019. A year in which your Company achieved record results with
notable milestone achievements amidst an industry which is constantly
changing and evolving.
FY 19 PERFORMANCE
The Company surpassed milestones of $100 million
revenue and $20 million profit for the first time in its
corporate history.
Profit after tax increased 14% over the previous financial
year to $21.9 million. Total revenue was up 11% to
$100.8 million. Underpinning this growth was a strong
performance in new licence sales which grew 19% to
$62.8 million.
A key attribute of IR’s performance and business model
resilience is the diversified geographic and product
portfolio. Over 95% of the Company’s revenue was
derived outside of Australia and split across three
primary product lines.
Europe was reorganised during the year with new
leadership and delivered a 19% increase in revenue to
£9.4 million. APAC’s growth trajectory continued with a
14% increase in revenue to $15.1 million. The Americas
delivered a solid result of US$49.7 million amidst changes
in leadership, which represents nominal growth.
Of the three primary product lines, Payments was
the standout performer with 92% revenue growth to
$16.0 million. Nine new payments customers were secured
during the year and growth with existing customers was
achieved through renewals plus expansion by attaching
additional product modules and capacity increases.
Infrastructure revenues grew by 28% to $26.3 million
with renewals plus additional capacity sales. This mature
product line continues to be a rich source of long-term
revenue and margin for the Company.
Unified Communications (UC) revenue declined 7% over
the previous year to $51.0 million with growth from Cisco
customers offset by lower licence sales in Avaya and
Microsoft Skype for Business. The Company continued
to achieve new revenue growth with service providers.
A strong focus by management on improved execution
in this space gives the Board confidence in a stronger
outlook for UC in FY20.
year came from major brands such as Airbus, Barclaycard,
CenturyLink, DXC Technology, IAG, Target, Walgreens,
Mastercard, Visa and Westpac.
The Company’s margins remain strong. EBITDA margin
(measured as EBITDA/revenue) has been at 40% for the
last three years. NPAT margin (measured as NPAT/revenue)
was 22% compared to 21% for the previous year.
IR’s balance sheet remains strong with total cash at
30 June 2019 of $9.3 million and no debt.
INVESTING FOR THE FUTURE
Overall expenses were up 9%, with a strong focus on
containing or reducing business as usual operating
costs helping to enable strong ongoing investment in
research and development. General and administrative
expenses were reduced by 5% whereas research and
development net expenses (gross expenditure plus
capitalisation and amortisation) were up 17% with gross
research and development spending representing 19% of
overall revenue.
IR has a proud history of technical excellence with
software solutions that are typically very ‘sticky’ resulting
in long term relationships with enterprise scale global
customers and retention rates of 95% (measured by
maintenance retention). The Company continues to invest
in these core solutions delivering regular updates and new
functionality thus providing expansion opportunities with
existing customers in addition to new logo wins.
Additionally, the Company is investing in a new
cloud-based platform which will enable complementary
expansion of IR’s solutions to enterprise customers as
they typically embrace an environment of on-premise,
hybrid and cloud solutions. The first of these cloud-based
solutions are expected to be delivered in 2H FY20.
A YEAR OF TRANSFORMATION
We recognise that top quality people are fundamental in
making a good company a great company.
IR continues to serve top tier organisations across the
world and some of the more significant sales during the
The Board is delighted to welcome John Ruthven as our
new CEO. John is an internationally experienced software
4
Integrated Research and its controlled entities Annual Report 2019 “The Company surpassed milestones
of $100 million revenue and
$20 million profit for the first time
in it’s corporate history.”
executive with a proven track record over more than
20 years of delivering strong profitable growth.
In addition, the Company’s overall leadership bench
strength has been significantly enhanced with new senior
executive hires to drive product strategy and delivery.
A new Chief Commercial Officer (CCO) role has been
created to optimise overall sales and field operational
performance including through a globally consistent
focus on and engagement with customers, and consistent
operational processes. A new senior executive was
successfully recruited into this role. Field sales and
operational capability has been bolstered with new
leaders appointed in Europe and the Americas.
The Board was also refreshed during the year with
Anne Myers elected at the AGM last November as a new
Independent Non-Executive Director.
IR’s founder, Steve Killelea, stepped down as Chairman
and we are fortunate to retain access to his experience
and deep knowledge as a Strategy Consultant under a
contract to support the Strategy Committee.
And of course, I was pleased to step up as the new
Chairman, having already served for three years as an
Independent Non-Executive Director and Deputy Chair.
DIVIDEND
The Board declared a final dividend of 3.75 cents per
share franked to 100%. This takes the total dividend
for the year to 7.25 cents compared to the prior year of
6.5 cents per share.
ACKNOWLEDGEMENTS
I am confident that we are building a stronger
Integrated Research which will continue to deliver
compelling solutions for our customers and returns for
our shareholders, as well as being a great place to work
for our employees.
I thank our customers for their continued support of IR.
We are committed to providing software solutions that
enhance the performance of our customers and the
experiences of their customers.
The Board would like to acknowledge the contribution
made by our dedicated team at IR and in particular
Peter Adams who was interim CEO for 2H FY19.
Peter’s support has been invaluable and we are
delighted to retain him as CFO.
Thanks also to my fellow Directors Nick Abrahams,
Garry Dinnie, Peter Lloyd and Anne Myers for their
commitment, expertise and valuable counsel plus
collegiate support as we strive to build an even better
Integrated Research.
The Board remains confident in the future for IR and
once again, I would like to thank our shareholders for
your ongoing support.
Paul Brandling
Chairman
5
Integrated Research and its controlled entities Annual Report 2019 Creating clarity and insight
in a world of connected devices
6
6
Integrated Research and its controlled entities Annual Report 2019
Integrated Research and its controlled entities Annual Report 2019 About IR
IR is the corporate brand name of Integrated Research
Limited, the leading global provider of proactive
experience management solutions for critical unified
communications, payments, contact centres and IT
infrastructure ecosystems.
The modern world relies on a complex array of technologies to keep turning. IR’s aim is to
simplify that complexity.
More than 1,000 organisations in over 60 countries - including some of the world’s largest
banks, airlines and telecommunications companies - rely on IR’s experience management
solutions to optimise their business-critical systems.
We provide insights, monitoring and support to keep payment hubs, unified
communications ecosystems and contact centres running as they should.
Our purpose is to create clarity and insight in a world of connected devices.
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.
Prognosis for Unified
Communications
Prognosis for Unified Communications
is the leading proactive experience
management solution for unified
communications (UC) on-premises,
hybrid or in the cloud. It enables our
customers to deliver the best user
experience possible for collaboration,
meetings and voice or video calls across
Avaya, Cisco and Microsoft UC solutions.
Prognosis for
Payments
Prognosis for Payments helps customers
de-risk deployments of new technology
and reap the benefits from their
investment sooner. Prognosis performance
management is specifically designed
to give complete real-time visibility
into payments handled by processors
such as ACI and FIS, and customers’
internal systems.
Prognosis for
Contact Center
Prognosis for
Infrastructure
Prognosis for Contact Centre ensures the
quality of customer interactions across
multiple channels, including voice, video and
the web. It helps make sure that contact
centre systems deliver the performance that
organisations expect so they can provide
high-quality experiences for customers,
make agents more efficient, and gain
revenue and cost benefits. We expanded our
contact centre solutions with new offers that
ensure the quality of call recording activities
and stress-test the performance of systems.
Prognosis for Infrastructure manages
the performance of IT systems and spots
patterns in data so that customers can
stop problems in their tracks. This means
they can make systems work better,
respond faster, prevent outages and get
back to doing what they do best.
7
Integrated Research and its controlled entities Annual Report 2019 2019 in IR
Our values are at the core of everything we do, guiding our actions, initiatives
and strategy as we embark on the next phase of our journey toward the future.
Customer First
We are solutions focused.
Over 30 years of success has been achieved by placing
the customer at the heart of everything we do. Growing
our customer-facing teams and introducing new Customer
Success Manager roles has ensured we continue to make
this our top priority.
The IR Summit grew again this year, with a record
number of customers and partners joining us in Denver.
Attendees participated in three days of hands-on
sessions, knowledge sharing, networking and best-practice
presentations. The event has proved invaluable in forging
connections with our customers, allowing us to better
understand their needs and priorities.
Enhancements to the IR Community to improve user
experience and improve support processes. This saw
an increase of 52% in membership and has created a
valuable space for collaboration between our employees,
customers and partners.
Teamwork
Leadership
Collaboration, cooperation and communication.
We lead by example.
As we expand into new products, platforms and markets,
the alignment of the team at all levels is critical. This year
our annual Kick Off events focused on the importance
of teamwork as we move forward with our ambitious
growth plans.
The global IR team is full of outstanding individuals,
who play a huge role in our success. One of our primary
goals is to retain, reward and attract this talent. To this
end, we introduced new programs allowing for more
flexible working and parental leave arrangements,
as well as opportunities for staff to move between teams
and offices, to challenge themselves and grow their skills.
Our leadership team was further strengthened this year
with the addition of Matt Glasner as our Chief Commercial
Officer and Frank Hoekstra as Head of Europe.
We strive to lead by example, not just in business, but in
every aspect of our operations. We cannot exist without
the communities in which we operate. Implementing a
new Corporate Social Responsibility initiative enables our
employees all over the world to lead by example and give
back to their communities through charity work.
8
Integrated Research and its controlled entities Annual Report 2019 High Performance
We excel in what we do.
Innovation
Learning and creating.
IR strive for excellence in everything we do. Achieving
record-breaking results in revenue and profit for the 2019
financial year is a testament to the high calibre of the
organisation, products and staff.
We introduced a Celebrating Our People program to
provide a framework for the company to reward hard work
and recognise employees who go above and beyond to
embody the IR values.
Innovation is the vital ingredient that drives growth,
attracts new business and draws talent to our business.
This year we announced new capabilities for
UC Service Providers, including improved multi-tenancy
management, role-based security, enhanced testing
capabilities and expanded reporting and analytics,
so they can continue to meet the evolving and growing
UC needs of their customers. We also released a new
Merchant Portal allowing Merchant Acquirers to provide
real-time transaction performance views to their
individual customers.
We joined BT’s Innovation Martlesham located at Adastral
Park in the UK, a ‘collaborative ecosystem’ created by
a cluster of 100 high-tech IT organizations, where BT
customers are now able to see Prognosis in action in the
onsite showcase.
9
Integrated Research and its controlled entities Annual Report 2019 10
10
Integrated Research and its controlled entities Annual Report 2019
Integrated Research and its controlled entities Annual Report 2019 Directors’
report
Contents
12 Review of operations
15 Outlook and strategy for 2020
18 Board of Directors
20 Senior management
22 Directors’ interests
23 Share options and performance rights
25 Remuneration report (audited)
Integrated Research and its controlled entities Annual Report 2019
11
11
Integrated Research and its controlled entities Annual Report 2019 Directors’
report
Annual revenue 11%
Licence Fees 19%
Annual after tax profit 14%
$100.8M
$62.8M
$21.9M
Review of
operations and
activities
Principal activities
Integrated Research Limited’s (the
“Company”) 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
The Company has a long 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 Prognosis
products to a cross section of
large organisations requiring high
levels of computing performance
and reliability.
Prognosis is an integrated suite
of monitoring and management
software, designed to give an
organisation’s management and
technical personnel operational
insight into and optimise the
operation of their HP NonStop,
distributed system servers, Unified
Communications (“UC”), and
Payment environments and the
business applications that run on
these platforms.
The Company 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.
The Company services customers
in more than 60 countries through
direct sales offices in the USA, UK,
Germany, Singapore and Australia,
and via a global, channel-driven
distribution network. The Company’s
customer base consists of many of
the world’s largest organisations
and includes major stock exchanges,
banks, credit card companies,
telecommunications carriers,
technology companies, service
providers and manufacturers.
The Company generates its
revenue from licence fees, recurring
maintenance, testing solutions
and professional services (formerly
referred to as consulting). Revenue
from the sale of licences where there
are 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. Revenue from
professional services and testing
solution services is recognised over
the period the services are delivered.
The Company has recently expanded
its product offering to Software as a
Service (SaaS) with the introduction
of cloud based solutions. SaaS
revenues are recognised rateably
over the delivery period.
Review and
results of
operations
Overview
The Company achieved $21.9 million
in profit after tax, representing a
14% increase over the prior year
and within the guidance provided
to the Australian Stock Exchange
on July 15, 2019. The result was driven
through strong licence sale growth
in both Payments and Infrastructure
product lines. The licence growth was
more than cyclical, with nine new
payment customers added during the
year and an increase in capacity and
deal length with existing customers.
Revenue in Unified Communications
was down over the prior year with
growth on the Cisco platform being
more than offset by declines in
Avaya and Microsoft. The Company
achieved an improvement in profit
margin with operating costs growing
at a slower pace to revenue growth.
12
Integrated Research and its controlled entities Annual Report 2019Directors’ report Revenue
Revenue for the year was $100.8 million, an increase of 11% over 2018 with the strongest growth coming from the
Company’s European operations. Licence fees increased by 19% to $62.8 million with strong growth from Payments
and Infrastructure.
The following table presents Company revenues for each of the relevant product groups:
In thousands of AUD
Unified Communications
Infrastructure
Payments
Professional services
Total revenue
2019
51,043
26,343
16,047
7,387
100,820
2018
% Change
54,865
20,568
8,375
7,367
91,175
(7%)
28%
92%
0%
11%
Unified Communications (UC) revenue declined 7% over the previous year with growth from Cisco customers offset by
lower licence sales in Avaya and Microsoft Skype for Business. The Company continued to achieve new revenue growth
with service providers.
Infrastructure revenues increased by 28% to $26.3 million as a result of the cyclical upswing compounded by additional
capacity sales. Licence transactions sold during the year were closed on a multi-year term basis with maturities ranging
from three to five years.
Payments revenue increased by 92% over the prior year to $16.0 million driven by a combination of new and renewal
business. The split was approximately one-third new business and two-thirds renewal. There were nine new customers
added over the year facilitating a near doubling of new licence sale growth on the preceding financial year. Existing
customers who renewed their Prognosis solution typically were happy to add capacity, additional modules and commit to
licence sales for a three to five year period.
The following table presents Company revenues for each of the relevant geographic segments in underlying
natural currencies:
Americas (USD’000)
Asia Pacific (A$’000)
Europe (£’000)
2019
49,696
15,052
9,360
2018
49,519
13,189
7,849
% Change
0%
14%
19%
The Americas revenue of US$49.7 million was comparable to the prior year. Strong Prognosis sales to Payments and
Infrastructure customers was offset by lower sales in Unified Communications. Asia Pacific achieved growth of 14% to
A$15.1 million with strong second half licence growth in Payments and Infrastructure. Europe achieved growth of 19% to
£9.4 million with a strong performance across the year and licence growth in all key product lines.
Expenses
The following table presents the Company’s cost base compared to the preceding year:
In thousands of AUD
Research and development expenses
Sales, professional services and marketing expenses
General and administration expenses
Total expenses
2019
17,888
49,787
5,557
73,232
2018
15,335
45,703
5,849
66,887
% Change
17%
9%
(5%)
9%
13
Integrated Research and its controlled entities Annual Report 2019 Total expenses were up 9% to $73.2 million with total staff numbers increasing by 4% over the course of the year to close
at 270. Gross spending on research and development expenditure represents 19% of total revenue (FY18:19%):
In thousands of AUD
Gross research and development spending
Capitalisation of development expenses
Amortisation of capitalised expenses
Net research and development expenses
Gross spend as a % of revenue
2019
18,966
(11,275)
10,197
17,888
19%
Shareholder returns
Returns to shareholders remain strong through the payment of franked dividends:
Net profit ($’000)
Basic EPS
Dividends per share
Dividend franking percentage
Return on equity
2019
$21,851
12.72¢
7.25¢
100%
31%
Financial position
The following table presents key items from the consolidated statement of financial position:
In thousands of AUD
Assets
Cash and cash equivalents (current)
Trade and other receivables (current and non-current)
Intangible assets (non-current)
Liabilities
Deferred Revenue
Equity
2018
17,341
(11,524)
9,518
15,335
19%
2018
$19,180
11.19¢
6.5¢
100%
33%
% Change
9%
(2%)
7%
17%
2017
$18,520
10.86¢
6.5¢
85%
38%
2019
2018
9,316
72,767
23,101
11,238
71,078
21,938
22,330
32,014
69,827
57,838
The Company’s end of year cash position was $9.3 million with no debt. The adoption of AASB15 ‘Revenue from Contracts
with Customers’ resulted in a derecognition of non-current trade receivables and deferred revenue of $13.3 million for
performance obligations that extend beyond 12 months. Further information on this change can be found in Note 1 to the
Financial Report.
The consolidated statement of financial position presented at page 45 together with the accompanying notes provides
further details.
14
Integrated Research and its controlled entities Annual Report 2019Directors’ report Outlook and
strategy for 2020
Integrated Research
continues to provide
the world’s leading
enterprises and
organisations clarity
and insight into the
operations of their
mission critical systems.
Unified Communications (UC) is the
largest portfolio segment. Having all
but replaced fixed-line telephony
across the world, billions of voice
and video calls and collaboration
sessions are conducted every day,
with business communication reliant
on the quality of these experiences.
IR Prognosis monitors and analyses
these interactions to optimise the
experience; no jitter, no latency,
no interruptions.
On the Payments side of the
business, hundreds of millions of
people conduct billions of payments
transactions using their credit cards
or through ATMs. IR Prognosis is used
by the world’s largest card issuers,
banks, processors and merchants
to ensure these transactions
are processed flawlessly without
network and infrastructure failure,
thereby maximising the revenue of
these organisations and ensuring
consumers in economies across the
world have a flawless experience.
The Company’s competitive
advantage derives from the
company’s know-how and
unique intellectual property (IP).
The architectural design enables
real time insight, monitoring, fault
root-cause analysis, business and
operational analytics, performance
management and optimisation.
Being 100% software-based, 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. Both the increasing
nature of business complexity, and
the unique IP, make Prognosis more
relevant and needed in today’s
business world than it was at its origin
thirty years ago.
We experience competition in
various forms in each of our
markets. Firstly, some of the
large telephony and payment
vendors have developed their
own performance management
software. These bespoke solutions
are generally inferior to Prognosis
both in terms of the depth of the
metrics captured and analysed
(which directly translates into the
power of insight and speed of issue
resolution) and the inability to
monitor heterogeneous multi-vendor
environments, as is most often
the case. Secondly, some of the
large solution software vendors
have developed performance
management products, which
again lack the depth and insight
of Prognosis, this discipline not
being their core specialisation.
Occasionally in specific niches,
IR competes with smaller, lower-cost
start-ups. Across all three competitive
segments, customers choose IR when
they value the quality of experience,
insight and operational optimisation
that Prognosis delivers.
We remain focused on sustaining
our competitive advantage in
a world of connected devices,
through continuing innovation
that comes from our research and
development efforts.
Through deep visibility, forensic
analysis into the root cause of
problems, extensive analytics at
multiple levels and new automation
capabilities, Prognosis enables
proactive and rapid resolution of
issues, capacity management as
well as operational, cost and user
experience optimisation.
15
Integrated Research and its controlled entities Annual Report 2019 Outlook and strategy for 2020 (continued)
Our solutions provide 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 to generate and deliver
insights into a customer’s business
that goes beyond improving and
optimising operational efficiency.
These capabilities today are
delivered on-premise, and
increasingly in the cloud.
The Company’s growth comes from
expanding the capabilities delivered
into existing markets and customers,
expanding our sales and service
capabilities into new geographic
markets as they mature and adopt
these core technologies, and by
creating new products that open
new markets.
Our Infrastructure customers
include users of high-end
computing systems such as the
HP Enterprise NonStop platform
for financial, telecommunication,
trading, manufacturing and other
high-volume, high-value mission
critical transaction environments.
NonStop remains at the operational
core of many of the world’s largest
companies, and is an important
part of the HPE server strategy.
We continue to invest in Prognosis for
Nonstop to be aligned with HPE and
its customers.
New customers continue to adopt
UC applications such as audio
and video conferencing, instant
messaging, collaboration, mobility
and tele-presence, and the number
of transactions and multi-party
collaboration events is growing
rapidly across enterprises worldwide.
We anticipate further growth in this
segment as customer migrate away
from legacy platforms to modern,
flexible and collaboration-enabled
solutions that provide greater
communication efficacy than
voice alone. UC networks are
becoming more pervasive, more
mission critical and more complex
and as such they require effective
performance and user experience
management. This complexity and
high performance demand generates
a need for solutions such as
Prognosis, and we therefore expect
to benefit from this need in terms
of further growth. 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. This includes vendors
providing ‘Unified Communications
as a Service’, for example Microsoft
Teams and Cisco Webex Teams.
Prognosis has been used worldwide
to monitor voice and video quality
and performance for Cisco UC
solutions since 2000. Whilst we
initially competed directly with
Cisco’s own monitoring solution, our
success in selling to and managing
many large and complex Cisco
implementations paved the way to
IR joining Cisco’s elite SolutionsPlus
program in the second half of FY18.
This is Cisco’s partner ecosystem and
online marketplace that enables their
global channel partners to select
and buy the best technologies that
support Cisco products, in order to
build and deploy the best and most
scalable solutions for their customers.
Microsoft’s Skype for Business is
now one of the leading global UC
solutions for both enterprises and
service providers. IR has capitalised
on this growth by introducing
three Microsoft-specific products,
which are now widely used by a
proportional share of our customer
base, alongside our Cisco and
Avaya solutions. Prognosis UC
Assessor is our Microsoft-certified
cloud-delivered product that provides
a comprehensive, end-to-end
assessment and troubleshooting
solution for customers migrating
to Skype for Business, be that in
the cloud, hybrid or on-premises.
Microsoft partners and customers
rely on this software-as-a-service
platform to assess and plan their
Skype for Business or Teams
infrastructure implementation,
which both increases our revenue
opportunities earlier in the lifecycle
and provides a natural move to using
Prognosis as the core monitoring
solution for their UC environment.
Microsoft continues to support
Skype for Business on-premise, and
have also incorporated this core
technology into their Office 365
Teams cloud-based collaboration
platform. Through our close
partnership with Microsoft and our
reputation as a leading vendor in
the Microsoft ecosystem, IR is well
positioned to support customers
regardless of which deployment
platform they choose; cloud, hybrid
or on-premises.
Due to both general economic
growth and the explosion in the
use of pin-less card transactions
such as Paywave and Paypass,
payment transaction volumes have
grown massively across all of our
markets, placing enormous demand
on our customers’ infrastructure
and therefore increased reliance
on Prognosis. We have expanded
our suite of Payments solutions by
adding new data and analytics
capabilities; this expands the
company’s addressable market in
the Payments segment and increases
revenue potential. We will maintain
this strategy in the Payments market
and work with its leading customers
and partners to support the adoption
of new payments types. The strategic
alliance with ACI, a global leader in
the payments market, continues to
support our Payments business.
IR Professional Services provide
Prognosis customers with
implementation, customisation and
training services to ensure that they
get the most out of their investment
in Prognosis. Professional Services
also help IR configure unique and
repeatable solutions that extend
the use and value of Prognosis.
The Company will continue to
invest in people and processes to
grow professional services revenue
and margin.
16
Integrated Research and its controlled entities Annual Report 2019Directors’ report The foundations of our business
model are extremely strong.
With close to 90% of our revenue
now recurring as multi-year deals,
strong retention rates coupled
with the expansion of our share
of customer wallet, contributes
significantly to strong future
earnings. We have a proven our
capability to acquire new customers,
adding 26 new logos during the 2019
financial year. Our continued focus
on new customer acquisition and
our long-term cloud roadmap are
significant factors that management
expects to support growth
through the financial year ending
30 June 2020 and beyond.
Due to scalability, reliability and
ultimately the business insight it
provides, Prognosis has proven to be
a ‘sticky’ solution, with maintenance
retention rates continuing to be
maintained at 95%. To ensure
that our customers obtain highest
economic benefit from Prognosis,
we have built a service and support
culture that maximizes adoption
within our customer base and
focusses on delivering their critical
success criteria and subsequently
the high levels of satisfaction and
advocacy. This approach naturally
results in a high level of renewal
and expansion of share of wallet.
Analysis of the Company’s customer
base of enterprise customers shows
significant potential to cross-sell.
Prognosis is a modular solution and
customers will typically purchase
only a small subset of those
modules on their initial purchase.
Subsequent purchases may
include additional solutions such
as Reporting and Analytics, Video
Management, Testing solutions,
Contact Centre and Call Recording
Assurance to name some of the most
commonly applicable.
17
Integrated Research and its controlled entities Annual Report 2019
Board of Directors
The directors of the Company at any time during or since the end of the financial year are listed below:
Paul Brandling
BSc Hons, MAICD
Independent Non‑Executive
Director and
Deputy Chairman
Nick Abrahams
B Comm, LLB (Hons), MFA
Non‑Executive Director
Paul was appointed a Director in August 2015 and elected
Chairman in November 2018. He has worked in the
information technology industry for over 30 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 previously a Director of
Amcom Telecommunications Limited until its acquisition by
Vocus and was a Director of Vocus Communications Limited
until February 2016. He was a Director of Tesserent Limited
(ASX: TNT) until October 2017 and a Director of Avoka
Technologies Pty Ltd until December 2018. He currently
serves as a Non-Executive Director of Infomedia Ltd
(ASX: IFM). Paul’s current term will expire no later than the
close of the 2021 Annual General Meeting.
Nick was appointed as a Director in September 2014.
Mr. Abrahams 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 is global
leader for the technology and innovation practice of
a global law firm. Mr. Abrahams is on the Board of the
Vodafone Foundation, on the Board of Sydney Film Festival
and is a Director of the Garvan Research Foundation.
Nick’s current term will expire no later than the close of
the 2020 Annual General Meeting.
Listed company directorships held in the past three years
other than listed above: None.
Listed company directorships held in the past three years
other than listed above: None.
Garry Dinnie
BCom, FCA, FAICD, FAIM,
MIIA (Aust)
Independent
Non‑Executive Director
Peter Lloyd
MAICD
Independent
Non‑Executive Director
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 2019
Annual General Meeting.
Garry is currently Chair of Integrated Research’s
Audit & Risk Committee and Nomination and
Remuneration Committee.
Listed company directorships held in the past three years
other than listed above: None.
Peter was appointed Director in July 2010. He has
over 45 years’ experience on computing technology,
having worked for both computer hardware and
software providers. For the past 35 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 is a Non-Executive Director of privately held Taggle
Pty Ltd., a Non-Executive Director of Flamingo AI Limited
(ASX: FGO) and a Non Executive Director of identitii Ltd
(ASX:ID8). Peter’s current term will expire no later than the
close of the 2019 Annual General Meeting.
Peter is currently Chair of Integrated Research’s
Strategy Committee.
Listed company directorships held in the past three years
other than listed above: None.
18
Integrated Research and its controlled entities Annual Report 2019Directors’ report Company Secretary
David Purdue
BEc, MBA, Grad Dip CSP,
FCA, FGIA, FCIS, GAICD
David was appointed Company Secretary in July 2012.
David was also the Company’s Global Commercial
Manager until his retirement in July 2016. 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 30 years’ experience in
both professional practice and industry.
Anne Myers
MBA, GAICD
Independent
Non‑Executive Director
Anne was appointed as a Director in July 2018. Ms. Myers
has worked in the finance and technology industry for over
30 years with experience in business strategy, technology,
digital innovation and operational functions. Anne is the
former Chief Operating Officer and CIO of ING Direct
Australia and has acted in executive technology and
business roles for QBE, Macquarie Bank and St George
Bank. She currently acts as an advisory board member to
early phase technology innovators, including TokenOne Pty
Limited, is a director of Defence Bank Limited and United
Way Australia Limited and is a Council Member of the
University of New England. Ms. Myers has also worked in
the not for profit sector for United Way Australia, and was a
member of the Industry Advisory Network for the University
of Technology. Anne’s current term will expire no later than
the close of the 2021 Annual General Meeting.
Listed company directorships held in the past three years
other than listed above: None.
Resigning Directors during the year
Steve Killelea
AM
Non‑Executive Director
and Chairman
John Merakovsky
B.Sc (Hons) PhD
Managing Director and
Chief Executive Officer
Steve retired as Chairman and Director of Integrated
Research in November 2018.
John was Managing Director and Chief Executive Officer
between September 2017 and February 2019.
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, Smarter Capital and The Charitable Foundation and
for activities involved with these he has received a number
of international awards including the Order of Australia and
Luxemburg Peace Prize.
John is a veteran of the digital industry with 25 years of
experience working in technology and digital companies.
This includes extensive experience in commercialising
technologies as an entrepreneur, consultant, Managing
Director, CEO and General Manager of various companies.
Prior to joining IR, John was the General Manager of
Seek Learning (the education arm of Seek Ltd) and was
previously the Managing Director of Experian ANZ, having
served as its Managing Director of Marketing Services
Asia-Pacific for 5 years.
Listed company directorships held in the past three years:
None.
Listed company directorships held in the past three years:
None.
19
Integrated Research and its controlled entities Annual Report 2019 Senior management
John Ruthven
B.Ed
Chief Executive
Officer
Peter Adams
B.Com, CA
Chief Financial
Officer
John Ruthven joined IR in July 2019 as the Company’s Chief Executive
Officer. John is an internationally experienced software industry
executive respected for his strategic approach and operational
expertise across global enterprises. John has over 20 years’ experience
working in the technology industry with a proven track record of
leadership and delivering strong profitable growth. Most recently,
John was the Operating Officer - Global Sales at TechnologyOne.
Prior to that John was President & Managing Director ANZ of SAP,
SVP International Sales at Zuora Inc, and held various senior positions
at CA Technologies and Computer Associates Inc. John has extensive
international experience in the USA, Europe and Asia Pacific regions.
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.
Jason Barker
BA (hons)
Senior Vice President,
Asia Pacific, Middle
East & Africa
Jason joined IR 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.
Greg Clancy
B.App.Sc (CompSc)
(Hons), MCS, D.E.S.S.
(AI)
Chief Product Officer
Matt Glasner
B.Eng (Hons), GAICD
Chief Commercial
Officer
Greg joined IR in July 2018 and is responsible for the strategy,
delivery, and commercialisation of the IR’s product and platform
portfolio. With more than 20 years of senior product leadership
at global enterprise software companies Greg is a champion of
technology innovation and setting product vision and strategy for
industry defining impact. Most recently he was based in Silicon
Valley, California responsible for transforming Ivanti to the cloud
while injecting innovation around analytics, machine learning, bots,
and automation.
Matt is a seasoned business leader and Non-Executive Director
with 20 years of successful sales, management and leadership
experience. Matt’s previous roles include Managing Director
South APAC for First Advantage and Managing Director Experian
Marketing Services ANZ. Matt brings solid strategic and tactical
expertise across sales and marketing, operations, offshoring,
organisational structure, change management and leadership.
Matt graduated from the University of Birmingham, England
with a Bachelor of Engineering (honors) and is a Graduate of the
Australian Institute of Company Directors.
Kevin Ryder
M.Mgt, MBA, GAICD
Chief Marketing and
Customer Officer
Kevin joined IR in October 2013 and is responsible for global brand,
marketing and customer experience. He has extensive experience in
the ICT industry, including leadership roles in Europe, North America,
Asia and Australia. Prior to joining IR, Kevin was the Enterprise
Marketing Director at Microsoft and has previously held senior
executive roles at KAZ Group, Attachmate and Eicon Technology.
Kevin was ranked #18 by CMO Magazine in the 2015 CMO50 list,
recognising Australia’s most innovative chief marketing officers.
20
Integrated Research and its controlled entities Annual Report 2019Directors’ report Michael
Tomkins
Chief Technology
Officer
Vanessa
Walker
B.Bus
Chief People and
Culture Officer
Michael joined IR in September 2018 and is responsible for leading
the development teams. Michael has deep expertise and a proven
track record in building cloud platforms at scale, and is also a
cyber security expert. Michael was formerly CEO of Deluxe Media
Cloud and was CTO of FoxSports for 5 years where he transformed
the business from an ‘iron and airwaves’ broadcaster of premium
sports content, to a fully digital cloud-based service, delivering a
flawless experience to millions of viewers.
Vanessa joined IR in September 2017 as the Director, Organisation
Development and was appointed General Manager, People &
Culture in November, 2017. Vanessa has extensive experience in both
strategic & operational commercially driven HR roles, particularly in
the technology sector with companies such as Experian, Hyperion,
Sage & Hitachi Data Systems. This includes a strong focus on Talent
Management, Culture & Employee Engagement across Asia Pacific
through leadership of regional HR teams & and globally via active
participation in the organisations’ global HR Councils. Most recently
Vanessa was working with Cloud Talent Group and previously was HR
Director, Asia Pacific with Accolade Wines.
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 2018 and the Auditor’s
Report thereon.
Results
The net profit of the consolidated entity for the 12 months ended 30 June 2019 after income tax expense was $21.9 million.
Dividends
Dividends paid or declared by the Company since the end of the previous financial year were:
Final 2018 - Ordinary shares
Interim 2019 - Ordinary shares
Final 2019 - Ordinary shares
100% franked
100% franked
100% franked
3.5
3.5
3.75
6,012
6,015
16 Oct 2018
16 Apr 2019
6,445
15 Oct 2019
Cents
Per share
Total Amount
$’000
Date of
Payment
Events subsequent to reporting date
For dividends declared after 30 June 2019 see Note 22 in the financial statements. The financial effect of dividends
declared and paid after 30 June 2019 has not been brought to account in the financial statements for the year ended
30 June 2019 and will be recognised in subsequent financial statements.
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 be in the Directors’ opinion, result in
unreasonable prejudice to the Company and has therefore not been included in this Report.
21
Integrated Research and its controlled entities Annual Report 2019 Directors and Company Secretary
Details of current directors’ qualifications, experience and special responsibilities are set out on pages 18 to 19. Details of
the company secretary and his qualifications are set out on page 19.
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 2019, 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
22
23
23
23
4
21
13
B
23
23
23
23
5
22
13
A
4
1
4
-
-
3
-
B
4
1
4
-
-
3
-
A
-
2
3
-
1
-
-
B
-
2
3
-
1
-
-
A
-
3
-
3
-
3
-
B
-
3
-
3
-
3
-
Nick Abrahams
Paul Brandling
Garry Dinnie
Peter Lloyd
Steve Killelea
Anne Myers
John Merakovsky
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
10,202
-
-
-
-
Beneficially
held
25,104
13,446
9,000
27,000
-
Total
Number of options
Number of rights
35,306
13,446
9,000
27,000
-
-
-
-
-
-
-
-
-
-
-
Paul Brandling
Nick Abrahams
Garry Dinnie
Peter Lloyd
Anne Myers
22
Integrated Research and its controlled entities Annual Report 2019Directors’ report 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:
Executive Officers
Peter Adams
Matt Glasner
Kevin Ryder
Number of
performance
rights granted
Performance
hurdle
Exercise price
Expiry date
22,000
67,988
40,000
40,000
22,000
15,000
No
No
No
No
No
No
Nil
Nil
Nil
Nil
Nil
Nil
Aug 2021
Feb 2022
Feb 2021
Aug 2022
Feb 2022
Aug 2021
The performance rights were granted under the Integrated Research Performance Rights and Option Plan
(established November 2011).
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
Aug 2020
Sep 2020
Aug 2021
Oct 2021
Feb 2021
Feb 2022
Aug 2022
Total performance rights
Performance rights
Exercise price
Number of shares
Nil
Nil
Nil
Nil
Nil
Nil
Nil
70,000
309,000
98,000
184,250
40,000
89,988
40,000
831,238
Performance rights do not entitle the holder to participate in any share issue of the Company or any other body corporate.
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.
To the extent permitted by law, the Company has agreed to indemnify its auditors, Ernst &Young Australia, as part of
the terms of its audit engagement agreement against claims by third parties arising from the audit (for an unspecified
amount). No payment of this type has been made to Ernst & Young during or since the financial year.
23
Integrated Research and its controlled entities Annual Report 2019 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.
Remuneration
report
The Company’s Remuneration Report,
which forms part of this Directors’
Report, is on pages 25 to 33.
Corporate
governance
A statement describing the Company’s
main corporate governance practices
in place throughout the financial year
is on pages 35 to 41.
Non‑audit
services
During the year Ernst and
Young, the Company’s auditor,
has performed certain other services
in addition to their statutory duties.
The board has considered the
non-audit services provided during
the year by the auditor and in
accordance with written advice
provided by resolution of the Audit
& Risk Committee, is satisfied that
the provision of those non-audit
services during the year by the
auditor is compatible with, and
did not compromise, the auditor
independence requirements of
the Corporations Act 2001 for the
following reasons:
• All non-audit services were subject
to the corporate governance
procedures adopted by the
Company and have been reviewed
by the Audit & Risk Committee
to ensure they do not impact the
integrity and objectivity of the
auditor, and
• The non-audit services provided
do not undermine the general
principles relating to auditor
independence as set out in
Professional Statement F1
Professional independence, as
they did not involve reviewing
or auditing the auditor’s own
work, acting in a management or
decision making capacity for the
Company, acting as an advocate
for the Company or jointly sharing
risks and rewards.
A copy of the auditors’ independence
declaration as required under
Section 307C of the Corporations Act
is on page 86 and forms part of the
Directors’ Report.
Auditor
The Board granted approval under
section 324DAA of the Corporations
Act for Mr John Robinson to
continue as lead auditor, to play
a significant role in the audit of
the Company for two additional
successive financial years being the
year ended 30 June 2018 and year
ending 30 June 2019. The approval
was granted in accordance with
a recommendation from the
Audit & Risk Committee who were
satisfied the approval is consistent
with maintaining the quality of the
audit provided to the Company and
would not give rise to a conflict of
interest situation (as defined under
324CD of the Corporations Act).
The decision is supported by the
Audit & Risk Committee’s satisfaction
with the quality of Ernst & Young and
Mr Robinson’s work as auditor and
that the Company maintains, and will
continue to maintain, robust auditor
independence policies and controls
to ensure the independence of the
auditor is maintained.
The Board granted approval for the
reappointment of Ernst & Young as
the Company auditor for a further
five years beyond 30 June 2019.
The approval was granted after the
recommendation to the Board by the
Audit & Risk Committee, following
the completion of a thorough
tender process.
Rounding
of amounts
to nearest
thousand dollars
The Company is of a kind referred
to in ASIC Corporations Instrument
2016/191 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.
Paul Brandling
Chairman
Garry Dinnie
Director
Dated at North Sydney this 22nd day of August 2019
24
Integrated Research and its controlled entities Annual Report 2019Directors’ 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 fringe benefits
tax (FBT) 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.
Performance hurdles are tested at
each vesting date.
25
Integrated Research and its controlled entities Annual Report 2019 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:
Licences ($’000)
Net profit ($’000)
Dividends paid ($’000)
Closing share price
Change in share price
2019
62,774
21,851
12,027
$3.30
$0.19
2018
52,591
19,180
11,137
$3.11
($0.11)
2017
53,441
18,520
11,088
$3.22
$0.97
2016
45,725
16,029
11,906
$2.25
$0.56
2015
41,031
14,251
10,162
$1.69
$0.695
Net profit and licence sales are considered in setting the STI and LTI, 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
Paul Brandling
Deputy Chairman (to 31 October 2018); Chairman (from 1 November 2018)
Nick Abrahams
Peter Lloyd
Garry Dinnie
Part year
Steve Killelea
Chairman (retired 1 November 2018)
John Merakovsky
Chief Executive Officer (resigned 18 February 2019)
Anne Myers
(appointed 12 July 2018)
Other key management personnel
Full year
Peter Adams
- Chief Financial Officer (to 17 February 2019); Interim Chief Executive Officer
(from 18 February 2019)
Kevin Ryder
Chief Marketing and Customer Officer
Part year
Matt Glasner
Chief Commercial Officer (from 1 January 2019)
Jason Barker
Senior Vice President Asia Pacific (to 31 December 2018)
Andre Cuenin
President Americas & VP European Field Operations (to 4 January 2019)
26
Integrated Research and its controlled entities Annual Report 2019Remuneration report (audited) 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 Peter Adams,
Chief Financial Officer
Mr Jason Barker,
Senior Vice President APAC
Mr Andre Cuenin,
President Americas
Has a contract of employment with
Integrated Research Singapore
Pte Limited dated 21 August 2014
and amended 11 April 2018 which
provides for specific notice and
severance undertakings of up
to three months compensation
depending on the particular
circumstances. Mr Barker can
terminate his employment by giving
three months prior notice in writing.
Had 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 could terminate his
employment by giving one month’s
prior notice in writing.
Has a contract of employment
with Integrated Research Limited
dated 23 January 2008 with
subsequent amendments dated
20 December 2018, which provides
for specific notice and severance
undertakings of up to six months
compensation depending on the
particular circumstances. Further,
other than on a temporary basis,
if Mr Adams status or responsibilities
are materially diminished, including
not holding the most senior
finance role within the company or
requiring permanent relocation to
another office, the notice period is
12 months. Mr Adams can terminate
his employment by giving between
three to six months prior notice
in writing depending upon the
particular circumstances.
Mr John Merakovsky,
Chief Executive Officer
Mr Kevin Ryder,
Chief Marketing & Customer Officer
Had a contract of employment
with Integrated Research Limited
dated 9 June 2017, which provides
for specific notice and severance
undertakings of up to three months
compensation depending on the
particular circumstances.
Mr Merakovsky could terminate his
employment by giving three months
prior notice in writing.
Has a contract of employment with
Integrated Research Limited dated
14 October 2013 and amended
26 September 2018, which provides
for specific notice and severance
undertakings of three months
compensation depending on the
particular circumstances. Mr Ryder
can terminate his employment by
giving three months prior notice
in writing.
Non‑executive directors
Total remuneration for all non-executive directors last voted upon at the Annual General Meeting in November 2013 is not
to exceed $750,000 per annum.
Director’s base fees during the financial year were $90,000 per annum inclusive of compulsory superannuation.
The chairman receives the base fee by a multiple of two and the deputy chairman receives the base fee by a multiple of
one and a half. Director’s fees cover all main board activities and committee membership. Directors receive $10,000 per
committee of which they are chair. Directors can elect to salary sacrifice their directors fees into superannuation.
Non-executive directors do not receive performance related compensation or retirement benefits.
27
Integrated Research and its controlled entities Annual Report 2019 Directors’ and executive officers’ remuneration
Details of the nature and amount of each major element of the remuneration of each of the key management personnel,
director of the Company and each of the executives and relevant group key management executives are reported below.
The estimated value of options and performance rights disclosed is calculated at the date of grant using the
Black-Scholes methodology, adjusted to take into account the inability to exercise options during the vesting period.
Further details of options and performance rights granted during the year are set out below.
“Executive officers” are officers who are involved in, or who take part in, the management of the affairs of Integrated
Research Limited and/or related bodies corporate. Remuneration for overseas-based employees has been translated to
Australian dollars at the average exchange rates for the year.
No director or executive appointed during the year received a payment as part of his or her consideration for agreeing to
hold the position.
Share‑
based
pay‑
ments
Other
com‑
pensa‑
tion
Long
term
Long
service
leave
$
Value of
options
and
rights1
$
Termi‑
nation
benefit
$
Pro‑
por‑
tion of
remu‑
nera‑
tion
Perfor‑
mance
related
Total
$
Short
term
Value
of
options
and
rights
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
165,000
64,064
90,000
110,000
96,667
86,932
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
Post‑
em‑
ploy‑
ment
Super‑
annua‑
tion
contri‑
bution
$
14,315
5,558
7,808
9,543
8,387
7,542
11,977
6,726 (341,299)
24,267
93,118
89%
0%
Short term
Salary &
fees
$
Bonus
$
Non‑
cash
benefits
$
2019
In AUD
Directors
Non‑executive
Paul Brandling
150,685
Steve Killelea2
Nick Abrahams
Garry Dinnie
Peter Lloyd
Anne Myers2
58,506
82,192
100,457
88,280
79,390
‑
‑
‑
‑
‑
‑
Executive
John
Merakovsky2
308,113
83,334
Executive officers (excluding directors)
‑
‑
‑
‑
‑
‑
‑
Peter Adams
390,973
129,111
4,532
20,531
9,089
73,248
Jason Barker2
190,639
70,157
‑
11,638
Andre Cuenin2
192,715
277,993
15,106
1,922
‑
‑
24,899
(1,136)
42,281
528,881
‑
‑
627,484
297,333
Matt Glasner2
229,734
120,178
Kevin Ryder
280,369
100,948
‑
‑
10,266
6,005
7,385
20,531
6,700
24,539
‑
‑
373,568
433,087
Total
compensation:
key management
(consolidated,
including directors)
2,152,053
781,721
19,638 130,018 28,520 (212,364)
66,548
2,966,134
1 Negative figure reflects lapsing and/or forfeiture of performance rights during the financial year
2 Reflects remuneration for the period the individual was determined to be Key Management Personnel only
28
21%
24%
53%
32%
23%
12%
8%
0%
2%
6%
Integrated Research and its controlled entities Annual Report 2019Remuneration report (audited)
Share‑
based
pay‑
ments
Other
com‑
pensa‑
tion
Long
term
Long
service
leave
$
Value of
options
and
rights
$
Termi‑
nation
benefit
$
Pro‑
por‑
tion of
remu‑
nera‑
tion
Perfor‑
mance
related
Total
$
Short
term
Value
of
options
and
rights
Short term
Salary &
fees
$
Bonus
$
Non‑
cash
benefits
$
2018
In AUD
Directors
Non‑executive
Nick Abrahams
68,493
Paul Brandling
(Deputy
Chairman)
Garry Dinnie
Peter Lloyd
Steve Killelea
(Chairman)
Executive
75,832
68,493
68,493
136,986
-
-
-
-
-
John Merakovsky
462,106
82,460
Executive officers (excluding directors)
-
-
-
-
-
-
Post‑
em‑
ploy‑
ment
Super‑
annua‑
tion
contri‑
bution
$
6,507
7,204
6,507
6,507
13,014
-
-
-
-
-
-
-
-
-
-
19,213
9,400
341,299
Peter Adams
310,419
68,524
4,532
20,049
6,728
17,062
Alex Baburin
(to October 2017)
322,096
-
-
12,346
5,576
-
Jason Barker
346,000
226,795
2,779
22,437
Andre Cuenin
349,672
377,658
12,615
10,415
Andrew Dutton1
(to July 2017)
66,000
-
-
-
-
-
-
39,686
49,565
-
Kevin Ryder
270,906
77,910
1,900
26,393
6,288
12,797
-
-
-
-
-
-
-
-
-
-
-
75,000
83,036
75,000
75,000
150,000
-
-
-
-
-
-
-
-
-
-
914,478
9%
37%
427,314
16%
4%
340,018
-
637,697
799,925
36%
47%
66,000
-
-
6%
6%
-
396,194
20%
3%
Total
compensation:
key management
(consolidated,
including directors)
2,545,496 833,347
21,826 150,592
27,992
460,409
- 4,039,662
1 Mr Andrew Dutton was appointed as the Company’s interim CEO. The amounts disclosed above reflect the cost to the Company for services rendered that
were billed through an independent third party agent. The amounts disclosed therefore do not necessarily reflect the amounts received by Mr Dutton.
29
Integrated Research and its controlled entities Annual Report 2019
Analysis of bonuses included in remuneration
Details of the vesting profile of the short-term incentive cash bonuses awarded as remuneration to each director of the
Company and each of the named Company executives and relevant group executives are detailed below:
Directors
John Merakovsky
Executives
Peter Adams
Jason Barker
Andre Cuenin
Matthew Glasner
Kevin Ryder
Short term incentive bonuses
Included in
remuneration
$ (A)
% vested in
year
% forfeited
in year
(B)
83,334
40%
60%
129,111
70,157
277,993
120,178
100,948
87%
56%
55%
96%
110%
13%
44%
45%
4%
0%
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 2019 financial year.
B) The amounts forfeited are due to the performance or service criteria not being met in relation to the current
financial year.
30
Integrated Research and its controlled entities Annual Report 2019Remuneration report (audited) 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 or
value vested ($)
Number
Date
Fair value
per share
($)
Percent
vested in
year
Directors
John Merakovsky
210,000
Nov-17
3.595
Executives
Peter Adams
Jason Barker
Andre Cuenin
20,000
22,000
67,988
40,000
60,000
30,000
20,000
20,000
50,000
25,000
22,000
Sep-17
Sep-18
Jan-19
Feb-19
Nov-14
Dec-15
Sep-17
Sep-18
Dec-15
Sep-17
Sep-18
3.178
2.265
2.286
2.284
0.775
1.846
3.178
2.265
1.846
3.178
2.265
Matt Glasner
22,000
Jan-19
2.286
Kevin Ryder
15,000
15,000
Sep-17
Sep-18
3.178
2.265
-
-
-
-
-
-
-
-
-
100%
-
-
-
-
-
Percent
forfeited
in year
(A)
Financial
year in
which
grant
expires
100%
2021
-
-
-
-
100%
100%
-
-
-
100%
100%
-
-
-
2021
2021
2022
2021
2019
2019
2021
2021
2020
2021
2021
2022
2021
2021
Min
(B)
-
nil
nil
nil
nil
-
-
nil
nil
Max
(C)
-
63,558
49,823
155,418
91,352
-
-
63,558
45,294
nil
92,294
-
-
nil
nil
nil
-
-
50,291
47,669
33,970
(A) The percentage forfeited in the year represents the reduction from the maximum number of performance rights
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 Black-Scholes methodology as
applied in estimating the value of performance rights for employee benefit expense purposes.
31
Integrated Research and its controlled entities Annual Report 2019 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 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).
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
2018
Granted as
compensa‑
tion
Exercised
Other
changes1
Held at
30 June
2019
Vested
during the
year
Vested and
exercised
at 30 June
2019
Current Year
Directors
John Merakovsky2
210,000
‑
Executives
Peter Adams
Jason Barker2
Andre Cuenin2
Matt Glasner
Kevin Ryder
20,000
110,000
75,000
‑
15,000
‑
‑
‑
(210,000)
‑
‑
149,988
(60,000)
70,000
‑
‑
‑
‑
‑
‑
129,988
20,000
22,000
(50,000)
(47,000)
‑
50,000
50,000
22,000
15,000
‑
‑
‑
‑
22,000
30,000
‑
‑
‑
‑
1 Other changes represent performance rights that expired or were forfeited during the year.
2 ‘Held 30 June 2019’ value represents holding on last day as Key Management Personnel.
Held at
1 July
2017
Granted as
compensa‑
tion
Exercised
Other
changes1
Held at
30 June
2018
Vested
during the
year
Vested and
exercised
at 30 June
2018
Prior Year
Directors
John Merakovsky
-
210,000
-
Executives
Peter Adams
Alex Baburin
Jason Barker
Andre Cuenin
David Purdue
Kevin Ryder
100,000
100,000
130,000
150,000
50,000
75,000
-
-
210,000
-
-
20,000
100,000
100,000
20,000
(100,000)
15,000
(100,000)
(15,000)
-
100,000
100,000
20,000
(40,000)
25,000
(100,000)
-
(50,000)
15,000
(75,000)
-
-
-
-
110,000
40,000
40,000
75,000
100,000
100,000
-
50,000
50,000
15,000
75,000
75,000
1 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.
Subsequent to year end, the Company has granted an additional 40,000 performance rights on 9 August 2019
vesting on 31 August 2022. The performance rights were provided at no cost to the recipients.
32
Integrated Research and its controlled entities Annual Report 2019Remuneration report (audited) Movements in shares
The movement during the reporting period in the number of ordinary shares in Integrated Research Limited held, directly,
indirectly or beneficially, by each key management person, including their related parties, is as follows:
Current Year
Directors
Non‑executive
Paul Brandling
Nick Abrahams
Garry Dinnie
Steve Killelea1
Peter Lloyd
Executive officers
(excluding directors)
Peter Adams
Andre Cuenin
Kevin Ryder
Held at
1 July
2018
Purchases
Received
on exercise
of perfor‑
mance
rights
Other
changes*
Sales
Held at
30 June
2019
10,202
5,042
2,000
68,193,231
25,104
8,404
7,000
‑
2,000
25,000
10,000
‑
35,000
‑
‑
‑
‑
‑
‑
‑
‑
‑
50,000
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
35,306
13,446
9,000
69,193,231
27,000
10,000
50,000
35,000
1 ‘Held 30 June 2019’ value represents holding on last day as Key Management Personnel
Prior Year
Directors
Non‑executive
Nick Abrahams
Paul Brandling
Garry Dinnie
Steve Killelea
Peter Lloyd
Executive officers
(excluding directors)
Peter Adams
Alex Baburin
Andre Cuenin
David Purdue
Kevin Ryder
Held at
1 July
2017
Purchases
Received
on exercise
of perfor‑
mance
rights
Other
changes1
Sales
Held at
30 June
2018
5,042
10,202
2,000
89,834,951
2,000
15,000
27,800
50,000
53,250
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
100,000
100,000
100,000
50,000
75,000
-
-
-
-
-
-
-
-
-
5,042
10,202
2,000
(21,641,720)
68,193,231
-
2,000
(105,000)
10,000
(25,600)
(102,200)
-
-
-
(150,000)
(25,000)
(40,000)
-
-
78,250
35,000
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.
33
Integrated Research and its controlled entities Annual Report 2019 34
34
Integrated Research and its controlled entities Annual Report 2019
Integrated Research and its controlled entities Annual Report 2019Corporate governance statement Corporate
governance
statement
Contents
36 Board of Directors and its committees
39 Risk management
40 Ethical standards
41 Communication with shareholders
Integrated Research and its controlled entities Annual Report 2019
35
35
Integrated Research and its controlled entities Annual Report 2019 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 agenda for its meetings is
prepared in conjunction with the
chairman, chief executive officer
and company secretary. Standing
items include strategic matters
for discussion, the CEO’s report,
financial reports, key performance
indicator reports and presentations
by key executives and external
industry experts. Board papers are
circulated in advance. Directors have
other opportunities, including visits to
operations, for contact with a wider
group of employees.
Director education
The consolidated entity follows
an induction process to educate
new directors about the nature
of the business, current issues,
the corporate strategy and
expectations of the consolidated
entity concerning performance of
directors. In addition executives make
regular presentations to the board to
ensure its familiarity with operational
matters. Directors are expected to
access external continuing education
opportunities to update and enhance
their skills and knowledge.
Independent advice
and access to company
information
Each director has the right of access
to all relevant company information
and to the company’s executives
and, subject to prior consultation
with the chairman, may seek
independent professional advice
from a suitably qualified adviser at
the consolidated entity’s expense.
A copy of the advice received by the
director is made available to all other
members of the board.
Board of
Directors and its
committees
Role of the board
The board’s primary role is the
protection and enhancement of
long-term shareholder value.
To fulfil this role, the board is
responsible for the overall corporate
governance of the consolidated
entity including evaluating and
approving its strategic direction,
approving and monitoring capital
expenditure, setting remuneration,
appointing, removing and creating
succession policies for directors
and senior executives, establishing
and monitoring the achievement of
management goals and assessing
the integrity of internal control and
management information systems.
It is also responsible for approving
and monitoring financial and
other reporting.
Board process
To assist in the execution of its
responsibilities, the Board has
established a number of board
committees including a Nomination
and Remuneration Committee,
an Audit and Risk Committee
and a Strategy Committee. These
committees have written mandates
and operating procedures, which
are reviewed on a regular basis.
The board has also established a
framework for the management of
the consolidated entity including
board-endorsed policies, a system
of internal control, a business
risk management process and
the establishment of appropriate
ethical standards.
The full board currently holds twelve
scheduled meetings each year and
any extraordinary meetings at such
other times as may be necessary to
address any specific matters that
may arise.
36
Integrated Research and its controlled entities Annual Report 2019Corporate governance statement 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.
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 18 to 19
of this report.
The company’s constitution
provides for the board to consist of
between three and twelve members.
At 30 June 2019 the board members
were comprised as follows:
• Mr Paul Brandling - Independent
Non-Executive Director (Chairman)
• Mr Nick Abrahams - Non-Executive
Director
• Mr Garry Dinnie - Independent
Non-Executive Director
• Mr Peter Lloyd - Independent
Non-Executive Director
• Ms Anne Myers - Independent
Non-Executive Director
For the period 1 July 2018 to
1 November 2018 of the financial
year, Mr Steve Killelea, who holds
39.7% of the company’s issued
shares, was the non-executive
chairman. During this period, the
Company did not comply with the
ASX Corporate Governance Council
recommendation that the chairman
be an independent director. However,
the board was satisfied that the
company benefited 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. Mr Abrahams
was previously deemed not to be
independent due to a pre-existing
business relationship between
Mr Abrahams and Mr Killelea.
This business relationship has now
ceased and as a result, the Board has
determined that Mr Abrahams will be
independent effective 1 July 2019.
At each Annual General Meeting
one-third of directors, any director
who has held office for three years
and any director appointed by
directors in the preceding year
must retire, then being eligible for
re-election. The CEO is not required
to retire by rotation.
The composition of the board is
reviewed on a regular basis to ensure
that the board has the appropriate
mix of expertise and experience.
When a vacancy exists, through
whatever cause, or where it is
considered that the board would
benefit from the services of a new
director with particular skills, the
Nomination and Remuneration
Committee, in conjunction with the
board, determines the selection
criteria for the position based on
the skills deemed necessary for
the board to best carry out its
responsibilities. The committee then
selects a panel of candidates and
the board appoints the most suitable
candidate who must stand for
election at the next general meeting
of shareholders.
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.
37
Integrated Research and its controlled entities Annual Report 2019 Responsibilities
regarding nomination
The Committee develops and makes
recommendations to the board on:
• The CEO and senior executive
succession planning.
• The range of skills, experience
and expertise needed on the
board and the identification of
the particular skills, experience
and expertise that will best
complement board effectiveness.
• A plan for identifying, reviewing,
assessing and enhancing director
competencies.
• Board succession plans to
maintain a balance of skills,
experience and expertise on
the board.
• Evaluation of the board’s
performance.
• Appointment and removal
of directors.
• Appropriate composition
of committees.
The terms and conditions of the
appointment of non-executive
directors are set out in a letter of
appointment, including expectations
for attendance and preparation for
all board meetings, expected time
commitments, procedures when
dealing with conflicts of interest,
and the availability of independent
professional advice.
The 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:
• Mr Paul Brandling - Independent
Non-Executive Director (From
1 November 2018)
• Mr Paul Brandling - Independent
Non-Executive Director (member
to 1 November 2018)
• Mr Steve Killelea - Non-Executive
• Ms Anne Myers - Independent
(to 1 November 2018)
The company does not comply with
the ASX Corporate Governance
Council recommendation that
the committee consist of three
members, a majority of whom should
be independent directors. During
this period of non-compliance, the
Company utilised the skills and
experience of the other independent
and non-executive Directors of the
Board. Moving towards compliance,
the Board have appointed Ms
Anne Myers to the Nomination
and Remuneration Committee on
21 August 2019.
A matrix of skills and diversity
of the board as required by
the ASX corporate governance
recommendations is available on the
Company’s website at www.ir.com.
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 Garry Dinnie - Independent
Non-Executive (Chairman)
Non-Executive Director (member
from 1 November 2018)
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 22.
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 2019 comply with
accounting standards and present
a true and fair view, in all material
respects, of the company’s financial
condition and operational results.
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.
• Mr Garry Dinnie - Independent
• Mr Nick Abrahams - Non-Executive
Non-Executive Director (Chairman)
Director
38
Integrated Research and its controlled entities Annual Report 2019Corporate governance statement • Review the external auditor’s
management letter and responses
by management.
controls, and to monitor
the implementation of any
recommendations made.
• Provide an avenue of
communication between the
auditors, management and
the board.
• Monitor compliance with all
financial statutory requirements
and regulations.
• Review financial reports and other
financial information distributed to
shareholders so that they provide
an accurate reflection of the
financial health of the company.
• 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
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.
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 Peter Lloyd - Independent
Non-Executive (Chairman from
1 November 2018)
• Mr Steve Killelea - Non-Executive
(Chairman to
1 November 2018 - refer below)
• Mr Paul Brandling - Independent
Non-Executive
• Ms Anne Myers - Independent
Non-Executive Director (member
from 1 November 2018)
• Mr John Merakovsky - Chief
Executive Officer (member to
18 February 2019)
With Mr Killelea retiring from the
Board effective 1 November and part
of a transition plan, the Company
entered into a two-year consulting
contract with Mr Killelea to provide
assistance of an advisory capacity to
the Strategy Committee.
The Strategy Committee is
responsible for:
• Reviewing and assisting in defining
current strategy.
• Assessing new strategic
opportunities, including
M&A proposals and intellectual
property developments or
acquisitions.
• Staying close to the business
challenges and monitor
operational implementation of
strategic plans.
• Endorsing strategy and business
cases for consideration by the
full board.
The Committee met three times
during the year under review.
Risk
management
Under the Audit and Risk Charter,
the Audit and Risk Committee
reviews the status of business
risks to the consolidated
entity through integrated risk
management programs ensuring
risks are identified, assessed
and appropriately managed and
communicated to the board. Major
business risks arise from such
matters as actions by competitors,
government policy changes and the
impact of exchange rate movements.
• Comprehensive policies and
procedures are established
such that:
• Capital expenditure above
a certain size requires
board approval.
•
Financial exposures are controlled,
including the use of forward
exchange contracts.
• Risks are identified and managed,
including internal audit, privacy,
insurances, business continuity
and compliance.
• Business transactions are properly
authorised and executed.
39
Integrated Research and its controlled entities Annual Report 2019 The Chief Executive Officer and
the Chief Financial Officer has
declared, in writing to the board
that the Company’s financial reports
are founded on a sound system
of risk management and internal
compliance and control which
implements the policies adopted by
the board.
Internal control
framework
The board is responsible for the
overall internal control framework,
but recognises that no cost effective
internal control system will preclude
all errors and irregularities. The board
has instigated the following internal
control framework:
•
Financial reporting - Monthly
actual results are reported against
budgets approved by the directors
and revised forecasts for the year
are prepared monthly.
• Continuous disclosure - Identify
matters that may have a
material effect on the price of the
Company’s securities, notify them
to the ASX and post them to the
Company’s website.
• Quality and integrity of
personnel - Formal appraisals are
conducted at least annually for
all employees.
•
Investment appraisals - Guidelines
for capital expenditure include
annual budgets, detailed appraisal
and review procedures and levels
of authority.
Internal Audit
The Company does not have an
internal audit function but utilises
its financial resources as needed
to assist the board in ensuring
compliance with internal controls.
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.
Ethical standards
All directors, managers and
employees are expected to act with
the utmost integrity and objectivity,
striving at all times to enhance the
reputation and performance of the
consolidated entity. Every employee
has a nominated supervisor to whom
they may refer any issues arising
from their employment.
Conflict of interest
Each Director must keep the board
advised, on an ongoing basis, of any
interest that could potentially conflict
with those of the Company. Where
the board considers that a significant
conflict exists the director concerned
does not receive the relevant board
papers and is not present at the
meeting whilst the item is considered.
The board has developed procedures
to assist directors to disclose potential
conflicts of interest. Details of director
related entity transactions with the
consolidated entity are set out in
Remuneration report page 25 to 33.
Code of conduct
The consolidated entity has advised
each director, manager and employee
that they must comply with the code
of conduct. The code aligns behaviour
of the board and management
with the code of conduct by
maintaining appropriate core values
and objectives. It may be reviewed on
the company’s website and includes:
• Responsibility to the community
and fellow employees to act
with honesty and integrity,
and without prejudice.
• Compliance with laws and
regulations in all areas where
the company operates, including
employment opportunity,
occupational health and safety,
trade practices, fair dealing,
privacy, drugs and alcohol, and
the environment.
• Dealing honestly with customers,
suppliers and consultants.
• Ensuring reports and other
information are accurate
and timely.
• Proper use of company resources,
avoidance of conflicts of interest
and use of confidential or
proprietary information.
Equal Employment
Opportunity
The Company has a policy on Equal
Employment Opportunity with the
provision that commits to a workplace
that is free of discrimination of all
types. It is Company policy to hire,
develop and promote individuals
solely on the basis of merit and their
ability to perform without prejudice
to race, colour, creed, national origin,
religion, gender, age, disability,
sexual orientation, marital status,
membership or non-membership of
a trade union, status of employment
(whether full or part-time) or any other
factors prohibited by law. The board is
satisfied that the Equal Employment
Opportunity policy is sufficient
without the need to further establish
a separate policy on gender diversity
as required by the ASX Corporate
Governance Council recommendation.
40
Integrated Research and its controlled entities Annual Report 2019Corporate governance statement 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.
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.
41
Integrated Research and its controlled entities Annual Report 2019 42
42
Integrated Research and its controlled entities Annual Report 2019
Integrated Research and its controlled entities Annual Report 2019Financial statements Financials
Contents
44 Consolidated statement of comprehensive income
45 Consolidated statement of financial position
46 Consolidated statement of changes in equity
47 Consolidated statement of cash flows
48 Notes to the financial statements
48 Note 1: Significant accounting policies
58 Note 2: Segment reporting
59 Note 3: Revenue from contracts with customers
59 Note 4: Expenditure
60 Note 5: Other gains and (losses)
60 Note 6: Finance income
61 Note 7: Auditors’ remuneration
61 Note 8: Income tax expense
62 Note 9: Earnings per share
62 Note 10: Cash and cash equivalents
63 Note 11: Trade and other receivables
64 Note 12: Other assets
64 Note 13: Other financial assets
64 Note 14: Property, plant and equipment
65 Note 15: Deferred tax assets and liabilities
67 Note 16: Intangible assets
68 Note 17: Goodwill
68 Note 18: Trade and other payables
68 Note 19: Employee benefits
70 Note 20: Provisions
70 Note 21: Other financial liabilities
71 Note 22: Capital and reserves
73 Note 23: Financial instruments
76 Note 24: Operating leases
76 Note 25: Consolidated entities
77 Note 26: Reconciliation of cash flows from operating activities
77 Note 27: Key management personnel disclosures
77 Note 28: Related parties
78 Note 29: Parent entity disclosures
78 Note 30: Subsequent events
79
Directors’ declaration
80 Independent auditor’s report
87
ASX additional information
Integrated Research and its controlled entities Annual Report 2019
43
43
Integrated Research and its controlled entities Annual Report 2019
Consolidated statement of comprehensive income
For the year ended 30 June 2019
In thousands of AUD
Revenue from contracts with customers
Licence fees
Maintenance fees
SaaS fees
Testing solution services
Professional services
Total revenue
Expenditure
Research and development expenses
Sales, professional services and marketing expenses
General and administration expenses
Total expenditure
Other gains and (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
Consolidated
Notes
2019
2018
62,774
24,995
669
4,995
7,387
3
100,820
52,591
25,893
117
5,207
7,367
91,175
4
5
6
8
(17,888)
(15,335)
(49,787)
(45,703)
(5,557)
(5,849)
(73,232)
(66,887)
1,312
1,560
28,900
25,848
747
29,647
(7,796)
21,851
423
26,271
(7,091)
19,180
95
749
844
(176)
498
322
Total comprehensive income for the year
22,695
19,502
Profit attributable to:
Members of Integrated Research
Total comprehensive income attributable to:
Members of Integrated Research
21,851
19,180
22,695
19,502
Earnings per share attributable to members of Integrated Research:
Basic earnings per share (AUD cents)
Diluted earnings per share (AUD cents)
9
9
12.72
12.70
11.19
11.15
The consolidated statement of comprehensive income is to be read in conjunction with the notes to the financial statements set out on pages 48 to 78.
44
Integrated Research and its controlled entities Annual Report 2019Financial statements Consolidated statement of financial position
As at 30 June 2019
In thousands of AUD
Current assets
Cash and cash equivalents
Trade and other receivables
Current tax assets
Other current assets
Total current assets
Non‑current assets
Trade and other receivables
Other financial assets
Property, plant and equipment
Deferred tax assets
Intangible assets
Other non-current assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Provisions
Income tax liabilities
Deferred revenue
Other financial liabilities
Total current liabilities
Non‑current liabilities
Deferred tax liabilities
Provisions
Deferred revenue
Other non-current financial liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained earnings
Total equity
Consolidated
Notes
2019
2018
10
11
12
11
13
14
15
16
12
18
20
21
15
20
21
22
22
9,316
51,378
222
3,133
11,238
44,186
1,037
1,792
64,049
58,253
21,389
26,892
236
2,631
1,286
23,101
829
49,472
255
2,547
687
21,938
-
52,319
113,521
110,572
9,797
3,197
1,638
21,410
139
36,181
5,837
723
920
33
7,513
10,140
3,085
1,986
22,643
329
38,183
4,281
829
9,371
70
14,551
43,694
52,734
69,827
57,838
1,667
3,978
64,182
69,827
1,667
3,043
53,128
57,838
The consolidated statement of financial position is to be read in conjunction with the notes to the financial statements set out on pages 48 to 78.
45
Integrated Research and its controlled entities Annual Report 2019 Financial Statements
Consolidated statement of changes in equity
For the year ended 30 June 2019
Consolidated
In thousands of AUD
Balance at 1 July 2018
(as reported)
Effect of adoption of new
accounting standards (Note 1B)
Share
capital
Hedging
reserve
Translation
reserve
Employee
benefit
reserve
Retained
earnings
Total
1,667
(146)
(256)
3,445
53,128
57,838
-
-
-
-
1,230
1,230
Balance at 1 July 2018 (restated)
1,667
(146)
(256)
3,445
Profit for the year
Other comprehensive income for
the year (net of tax)
Total comprehensive income
for the year
Share based payments expense
Dividends to shareholders
-
-
-
-
-
-
95
95
-
-
-
749
749
-
-
-
-
-
91
-
54,358
21,851
59,068
21,851
-
844
21,851
22,695
-
91
(12,027)
(12,027)
Balance at 30 June 2019
1,667
(51)
493
3,536
64,182
69,827
Consolidated
In thousands of AUD
Balance at 1 July 2017
Profit for the year
Other comprehensive income
for the year (net of tax)
Total comprehensive income
for the year
Share based payments expense
Dividends to shareholders
Share
capital
1,667
-
-
-
-
-
30
-
(176)
(176)
-
-
Hedging
reserve
Translation
reserve
Employee
benefit
reserve
Retained
earnings
Total
(754)
2,492
45,085
48,520
-
498
498
-
-
-
-
-
953
-
19,180
19,180
-
322
19,180
19,502
-
(11,137)
53,128
953
(11,137)
57,838
Balance at 30 June 2018
1,667
(146)
(256)
3,445
The consolidated statement of changes in equity is to be read in conjunction with the notes to the financial statements set out on pages 48 to 78.
46
Integrated Research and its controlled entities Annual Report 2019 Consolidated statement of cash flows
For the year ended 30 June 2019
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
26
Cash flows from investing activities
Payments for capitalised development
Payments for property, plant and equipment
Payments for intangible asset
Interest received
Interest paid
Net cash used in investing activities
Cash flows from financing activities
Proceeds from borrowings
Repayment of borrowings
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
23
23
22
10
Consolidated
Notes
2019
2018
89,472
82,734
(61,498)
(53,362)
27,974
(6,737)
21,237
29,372
(7,930)
21,442
(11,275)
(11,524)
(1,273)
(1,158)
(28)
799
(52)
(27)
518
(95)
(11,829)
(12,286)
3,000
4,500
(3,000)
(4,500)
(12,027)
(12,027)
(2,619)
11,238
697
9,316
(11,137)
(11,137)
(1,981)
14,113
(894)
11,238
The consolidated statement of cash flows is to be read in conjunction with the notes to the financial statements set out on pages 48 to 78.
47
Integrated Research and its controlled entities Annual Report 2019 Notes to the
financial
statements
For the year ended
30 June 2019
48
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 2019 comprises
the Company and its subsidiaries
(together referred to as the
“consolidated entity”).
The financial report was authorised
for issue by the directors on
22 August 2019.
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 a going concern
basis using historical cost, with the
exception of derivatives, which are
at fair value.
The company is of a kind referred to in
ASIC Legislative Instrument 2016/191
and in accordance with that Class
Order, amounts in the financial report
and Directors’ Report have been
rounded off to the nearest thousand
dollars, unless otherwise stated.
The preparation of financial
statements in conformity with
Australian Accounting Standards
requires management to make
judgements, estimates and
assumptions that affect the
application of policies and reported
amounts of assets and liabilities,
income and expenses. The estimates
and associated assumptions are
based on historical experience
and various other factors that are
believed to be reasonable under
the circumstances, the results of
which form the basis of making the
judgements about carrying values
of assets and liabilities that are not
readily apparent from other sources.
Actual results may differ from
these estimates. These accounting
policies have been consistently
applied by each entity in the
consolidated entity.
The estimates and underlying
assumptions are reviewed on
an ongoing basis. Revisions to
accounting estimates are recognised
in the period in which the estimate
is revised if the revision affects only
that period or in the period of the
revision and future periods if the
revision affects both current and
future periods.
New accounting
standards and
interpretations
The accounting policies and methods
of computation adopted in the
preparation of the financial report
are consistent with those adopted
and disclosed in Integrated Research
Limited’s 2018 annual financial
report, except for the adoption
of new standards for the 2019
financial year. These accounting
policies are consistent with
Australian Accounting Standards
and with International Financial
Reporting Standards.
AASB 15 ‘Revenue from Contracts
with Customers’
The standard is applicable to the
year ended 30 June 2019 and has
superseded all current revenue
recognition requirements under
Australian Accounting Standards.
The Company adopted AASB 15
using the modified retrospective
method of adoption and has elected
to apply the process to contracts
that were not completed at the date
of initial application (1 July 2018)
only. The cumulative effect of initially
applying AASB 15 is recognised at
the date of initial application as an
adjustment to the opening balance
of retained earnings. Therefore,
the comparative information was
not restated and continues to
be reported under AASB 118 and
related Interpretations.
Integrated Research and its controlled entities Annual Report 2019Financial statements Note 1: Significant accounting policies (cont.)
The new standard establishes a five-step model to account for revenue arising from contracts with customers.
Under AASB 15, revenue is recognised at an amount that reflects the consideration to which an entity expects to be
entitled in exchange for transferring goods or services to a customer. It requires entities to exercise judgement, taking
into consideration all of the relevant facts and circumstances when applying each step of the model to contracts with
their customers. The standard also specifies the accounting for the incremental costs of obtaining a contract and the
costs directly related to fulfilling a contract.
The application of the new standard did not impact the Company’s revenue recognition for contracts not completed at
the date of initial application. The revenue recognition accounting policy as disclosed within the 2018 annual financial
report is consistent with the requirements of AASB 15. The adoption of the standard does impact items other than
revenue which are detailed below.
The adoption of AASB 15 did not have a material impact on Other Comprehensive Income or the Company’s cash flows in
the period.
The effect of adopting AASB 15 as at 1 July 2018 was, as follows:
In thousands of AUD
Current assets
Other current assets - contract assets
Total current assets
Non‑current assets
Trade and other receivables
Other non-current assets - contract assets
Total non‑current assets
Total assets
Current liabilities
Deferred tax liabilities
Deferred revenue
Total current liabilities
Total liabilities
Net assets
Equity
Retained Earnings
Total Equity attributable to members of Integrated Research
(i)
(ii)
(i)
(i)
(ii)
Increase/
(decrease)
951
951
(7,915)
590
(7,325)
(6,374)
311
(7,915)
(7,604)
(7,604)
1,230
1,230
1,230
49
Integrated Research and its controlled entities Annual Report 2019
Note 1: Significant accounting policies (cont.)
The information below sets out the amounts by which each financial statement line item is affected as at and for the year
ended 30 June 2019 as a result of the adoption of AASB 15. The first column shows amounts prepared under AASB 15
and the second column shows what the amounts would have been under the previous accounting standards (AASB 118):
Condensed Consolidated Statement of Comprehensive Income
For the year ended 30 June 2019
In thousands of AUD
Continuing Operations
Expenditure:
AASB 15
AASB 118
Increase/
(decrease)
Sales, professional services and marketing expenses
(i)
(49,787)
(50,104)
Total expenditure
Profit before interest and tax
Profit before tax
Income Tax Expense
Profit for the period
Profit attributable to:
Members of Integrated Research
Total comprehensive income attributable to:
Members of Integrated Research
Earnings per share attributable to members of
Integrated Research:
Basic earnings per share (AUD cents)
Diluted earnings per share (AUD cents)
Condensed Consolidated Statement of Financial Position
As at 30 June 2019
(73,232)
(73,549)
28,900
29,647
(7,796)
21,851
28,583
29,330
(7,713)
21,617
21,851
21,617
22,695
22,433
12.72
12.70
12.58
12.56
(317)
(317)
317
317
(83)
234
234
262
0.14
0.14
In thousands of AUD
Current assets
Other current assets
Total current assets
Non‑current assets
Trade and other receivables
Other non-current assets - contract assets
Total non‑current assets
Total assets
Non‑current liabilities
Deferred tax liabilities
Deferred revenue
Total non‑current liabilities
Total liabilities
Net assets
Equity
Retained earnings
Total equity attributable to members of Integrate Research
50
(i)
(ii)
(i)
(i)
(ii)
AASB 15
AASB 118
Increase/
(decrease)
3,133
64,049
2,104
63,020
1,029
1,029
21,389
829
49,472
113,521
5,837
920
7,513
43,694
69,827
35,045
(13,656)
-
62,299
125,319
5,443
14,576
20,775
56,956
68,363
829
(12,827)
(11,798)
394
(13,656)
(13,262)
(13,262)
1,464
64,182
69,827
62,718
68,363
1,464
1,464
Integrated Research and its controlled entities Annual Report 2019Financial statements
Note 1: Significant
accounting policies (cont.)
The nature of the adjustments as at
1 July 2018 and the reasons for the
changes in the statement of financial
position as at 30 June 2019 and the
statement of comprehensive income
for the year ended 30 June 2019 are
described below:
i) Accounting for costs to fulfil
a contract
The Company remunerates
employees who actively participate
in the sales process with commissions
calculated based on revenues
where they have been involved in
the successful contract execution.
This typically includes revenues that
will be recognised in subsequent
financial reporting periods. Under the
accounting policy applied prior to
1 July 2018, commissions related to
sales are recognised as an expense
on contract execution, which is
the point at which a constructive
obligation arises for the Company.
Under AASB 15, these costs have
been recognised as an asset
on contract execution with the
amortisation period being consistent
with the period over which the
associated revenue will be recognised
on a straight-line basis.
As at 1 July 2018 there were
$1,541,000 in commissions costs
relating to on-going contracts with
customers for which revenue was yet
to be recognised. These amounts
were capitalised as costs to fulfil a
contract on adoption of AASB 15 with
a corresponding increase to retained
earnings. In addition, deferred tax
liabilities were recognised, at the
local regional tax rates, of $311,000.
For the year ended 30 June 2019
the net impact of the capitalisation
and amortisation of costs to fulfil a
contract for the current and previous
periods (to the extent the contracts
were not completed on adoption of
AASB 15) was an increase of profit for
the period of $215,000.
ii) Accounting for contract assets
and contract liabilities
On adoption of AASB 15, a contract
asset (including trade and other
receivables) is only recognised where
the Company has an unconditional
right of payment in accordance
with AASB 15, which is determined
by the Company as having both
a contractual right to invoice and
receive payment as well as having
satisfied or expecting to satisfy
the performance obligation within
twelve months. Where the company
has recognised a trade receivable
and services are being provided
currently or will be provided within
twelve months, a contract liability is
recognised. Where the Company has
satisfied a performance obligation
but does not have an unconditional
right of payment, a contract asset
is recognised.
The contractually committed
consideration for performance
obligations which are not expected to
be satisfied within twelve months are
not recognised as a trade receivable
or contract asset by the Company.
Correspondingly, a contract liability
is not recognised for performance
obligations which will not be satisfied
within twelve months. This specifically
applies to maintenance fees and
testing solutions services where the
Company, as part of a contract, has a
multiyear non-cancellable contractual
commitment, but does not yet meet
the requirements to recognise an
asset or liability under AASB 15.
As at 30 June 2019, the above
resulted in the decrease in both trade
and other receivables and deferred
revenue of $13,656,000.
iii) Accounting for SaaS
(“Software as a Service”) fees
The Company has expanded its
products into hosted services with
the migration of IT environments
into the cloud. As a small quantum
of revenue was recognised in the
prior comparative period, amounts
were classified under revenues
from maintenance fees. With the
expansion of customer adoption
and products, SaaS fees have been
restated to facilitate disclosure
requirements under AASB 15 relating
to disaggregated revenues.
The Company considers that the
term contracts relating to products
hosted on the Company’s cloud
environment represents a right of
access to its licenced intellectual
property for the duration of the
term of the contract. As a result,
under AASB 15, revenue from SaaS
fees (where licences are hosted on
the Company’s cloud environment)
will be recognised rateably
throughout the subscription term.
AASB 9 ‘Financial Instruments’
The standard is applicable to the
year ended 30 June 2019. AASB
9 replaces the requirements of
AASB 139 Financial Instruments:
Recognition and Measurement and
bring together the classification,
measurement, impairment and
hedge accounting requirements for
financial instruments.
AASB 9 was adopted retrospectively,
with the exception of hedge
accounting, which was adopted
prospectively. There is no impact on
adoption of AASB 9 on the opening
balance sheet at 1 July 2018.
The adoption of the standard
resulted in the changes in the
accounting policies described below.
iv) Hedge accounting
At the date of the initial application,
all of the Company’s existing
hedging relationships were eligible
to be treated as continuing hedging
relationships. Consistent with prior
periods, the Company has continued
to designate the change in fair
value of the entire forward contract
in the Company’s cash flow hedge
relationships and, as such, the
adoption of the hedge accounting
requirements of AASB 9 had no
significant impact on the Company’s
financial statements.
v) Trade receivables and
contract assets
The Company has applied the
simplified approach to measuring the
expected credit losses, which uses
a lifetime expected loss allowance
for all trade receivables and
contract assets.
To measure the expected credit
losses the Company has stratified
trade receivables and contract
assets based on the days past due
and established a provision matrix
based on the group historical credit
loss experience adjusted for forward
looking factors.
Trade receivables and contract
assets are written off when there
is no reasonable expectation
of recovery.
51
Integrated Research and its controlled entities Annual Report 2019 Note 1: Significant accounting policies (cont.)
Standards and Interpretations issued not yet effective
At the date of authorisation of the financial report, a number of standards and Interpretations were in issue but not
yet effective.
Initial application of the following Standards is not expected to materially affect any of the amounts recognised in the
financial statements, but may change the disclosures made in relation to the consolidated entity’s financial statements:
Standard/Interpretation
AASB 2018-1 Amendments to Australian Accounting Standards -
Annual Improvements 2015-2017 Cycle
AASB Interpretation 23 Uncertainty over Income Tax Treatments, and
relevant amending standards
Effective for
annual reporting
periods beginning
on or after
Expected to be
initially applied in
the financial year
ending
1 Jan 2019
30 June 2020
1 Jan 2019
30 June 2020
Conceptual Framework for Financial Reporting
1 Jan 2020
30 June 2021
AASB 2018-6 Amendments to Australian Accounting Standards -
Definition of a business
AASB 2018-7 Amendments to Australian Accounting Standards -
Definition of Material
1 Jan 2020
30 June 2021
1 Jan 2020
30 June 2021
Initial application of the following Standards is likely to impact the amounts recognised in the future financial statements
AASB16 ‘Leases’
The standard is applicable to the financial year ending 30 June 2020 and has superseded all lease requirements under
Australian Accounting Standards. The Company will apply the modified retrospective method in adopting the new
standard, and therefore not apply the standard to contracts that were not previously identified as containing a lease
applying AASB 117 and AASB Interpretation 4.
The Company will elect to use the exemptions proposed by the standard on lease contracts for which the lease terms
ends within 12 months as of the date of initial application, and lease contracts for which the underlying asset is of low
value (under US $5,000). AASB 16 sets out the principles for the recognition, measurement, presentation and disclosure
of leases and requires lessees to account for all leases under a single on-balance sheet model similar to the accounting
for finance leases under AASB 117. The Company will be also required to remeasure the lease liability upon the occurrence
of certain events (e.g., a change in the lease term, a change in future lease payments resulting from a change in an index
or rate used to determine those payments). Due to the adoption of AASB 16, the Company’s operating profit will improve,
while its interest expense will increase. This is due to the change in the accounting for expenses of leases that were
classified as operating leases under AASB 117.
The Company has assessed the impact of adopting AASB 16 and the indicative transition adjustments for the
30 June 2020 financial year to be a gross increase to assets and liabilities by between $2.1 million and S2.4 million,
inclusive of an increase to deferred tax liabilities.
Under the current lease accounting standard AASB 117, leases expense is recognised on a straight-line basis, resulting in
the recognition of lease liabilities, which are on transition to AASB 16 credited to the right-of-use assets.
52
Integrated Research and its controlled entities Annual Report 2019Financial statements Note 1: Significant
accounting policies (cont.)
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.
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. Fair value
measurement
Fair value is the price that would
be received to sell an asset or paid
to transfer a liability in an orderly
transaction between market
participants at the measurement
date. The fair value measurement
is based on the presumption
that the transaction to sell the
asset or transfer the liability takes
place either:
i)
ii)
in the principal market for the
assets or liability; or
in the absence of a principal
market, in the most
advantageous market for the
asset or liability.
The principal or the most
advantageous market must be
accessible by the Company.
The fair value of an asset or a liability
is measured using the assumptions
that market participants would use
when pricing the asset or liability,
assuming that market participants
act in their economic best interest.
A fair value measurement of a
non-financial asset takes into
account a market participant’s
ability to generate economic benefits
by using the asset in its highest and
best use or by selling it to another
market participant that would use
the asset in its highest and best use.
The Company uses valuation
techniques that are appropriate in
the circumstances and for which
sufficient data are available to
measure fair value, maximising
the use of relevant observable
inputs and minimising the use of
unobservable inputs.
53
Integrated Research and its controlled entities Annual Report 2019 Note 1: Significant
accounting policies (cont.)
All assets and liabilities for which fair
value is measured or disclosed in the
financial statements are categorised
within the fair value hierarchy,
described as follows, based on the
lowest level input that is significant to
the fair value measurement as whole:
• Level 1 - Quoted (unadjusted)
market prices in active markets for
identical assets or liabilities.
• Level 2 - Valuation techniques
for which the lowest level input
that is significant to the fair
value measurement is directly or
indirectly observable.
• Level 3 - Valuation techniques
for which the lowest level input
that is significant to the fair value
measurement is unobservable.
For assets and liabilities that
are recognised in the financial
statements at fair value on a
recurring basis, the Company
determines whether transfers
have occurred between levels
in the hierarchy by re-assessing
categorisation (based on the lowest
level input that is significant to the
fair value measurement as a whole)
at the end of each reporting period.
F. 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.
G. 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.
H. 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 (l)). 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 to 10 years
• Plant and equipment
4 to 8 years
I. Intangible assets
Research and development
Expenditure on research activities,
undertaken with the prospect of
gaining new scientific or technical
knowledge and understanding,
is recognised in profit or loss
as incurred.
Expenditure on development
activities, whereby research
findings are applied to a plan or
design for the production of new
or substantially improved products
and processes, is capitalised if the
product or process is technically
and commercially feasible and the
consolidated entity has sufficient
resources to complete development.
The useful lives of the capitalised
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 (L)).
Amortisation is charged to profit or
loss on a straight-line basis over the
estimated useful life, but no more
than three years.
54
Integrated Research and its controlled entities Annual Report 2019Financial statements Note 1: Significant
accounting policies (cont.)
Intellectual property
Intellectual property acquired from
third parties is amortised over its
estimated useful life, but no more
than three years.
Computer software
L. 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.
Refer to Note 1 (U) for Goodwill
impairment considerations.
Computer software is stated at cost
and amortised on a straight-line
basis over a two and a half to three
year period.
For intangible assets that are not yet
available for use, the recoverable
amount is estimated at each year
end date.
Customer Relationships
Customer relationships are initially
measured at fair value and amortised
over the estimated useful life, but no
more than five years.
J. Trade and other
receivables
Trade and other receivables are
stated at their amortised cost less
expected credit losses. To measure
the expected credit losses the
utilises the simplified approach in
calculating the expected credit loss
and recognises a loss allowance
based on a lifetime expected credit
losses at each reporting date.
The Company has established a
provision matrix calculated based
on the group historical credit loss
experience adjusted for forward
looking factors.
Trade receivables are written
off when there is no reasonable
expectation of recovery.
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.
K. Cash and cash
equivalents
Cash and cash equivalents comprises
cash balances and call deposits with
an original maturity of three months
or less.
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
their risk 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.
M. Employee benefits
Superannuation
Obligations for contributions to
defined contribution pension plans
are recognised as an expense in
profit or loss as incurred. There are no
defined benefit plans in operation.
Long‑term service benefits
The consolidated entity’s net
obligation in respect of long-term
service benefits, other than pension
plans, is the amount of future benefit
that employees have earned in
return for their service in the current
and prior periods. The obligation is
calculated using expected future
increases in wage and salary rates
including related on-costs and
expected settlement dates, and is
discounted using the rates attached
to the high quality corporate bond
rate at the year end date which
have maturity dates approximating
to the terms of the consolidated
entity’s obligations.
Share‑based payment transactions
The performance rights programmes
allow the consolidated entity’s
employees to acquire shares of
the Company. The fair value of
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 performance rights. The fair
value of the instrument granted is
measured using a Black-Scholes
methodology, taking into account the
terms and conditions upon which the
options were granted. The amount
recognised as an expense is adjusted
to reflect the actual number of share
options or performance rights that
are expected to vest.
Wages, salaries, annual leave,
and non‑monetary benefits
Liabilities for employee benefits
for wages, salaries and annual
leave represent present obligations
resulting from employees’ services
provided to the year end date,
calculated at undiscounted amounts
based on remuneration wage and
salary rates that the consolidated
entity expects to pay as at the year
end date.
N. 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.
55
Integrated Research and its controlled entities Annual Report 2019 Note 1: Significant
accounting policies (cont.)
Employee benefits
Provisions for employee benefits
include liabilities for annual leave and
long service leave and are measured
at the amounts expected to be paid
when the liabilities are settled.
Make good
The make good provision is
for leases undertaken by the
Company. For each provision raised
a corresponding asset has been
recognised and is amortised over the
shorter of the term of the lease or the
useful life of the asset.
O. Trade and other
payables
Trade and other payables are stated
at their amortised cost.
P. Revenue
Revenue from contracts with
customers is recognised either at a
point in time (licence fees) or over
time (maintenance, SaaS, testing
solutions and professional services
fees), regardless of when payment
is received. Amounts disclosed
as revenue are net of agency
commissions and discounts. Where
the Company bundles the products
or services, the transaction price
is allocated to each performance
obligation based on the proportionate
stand-alone selling prices.
Licence fees are recognised on
delivery of the licence key, where
the Company’s contracts with
customers provide the right to
use the Company’s intellectual
property. As such, the Company’s
performance obligation is satisfied at
the point in time which the customer
receives the licence key.
Maintenance fees are recognised
on a monthly basis over the term of
the service agreement, which may
range between one to five years.
Services provided to customers under
maintenance contracts include
technical support and supply of
software upgrades.
SaaS fees are recognised on a
monthly basis over the term of
the service agreement which may
range between one to five years.
The Company’s contracts with
customers provide a right of access
to the Company’s intellectual
property (hosted on the Company’s
cloud environment) for the duration
of the term of the contract.
Testing solutions services
revenues are recognised either
rateably over a service period
or as services are rendered.
Testing services relate to the
provision of services to performing
testing of customer environments.
Professional services (formerly
referred to as consulting) are
revenues recognised as the services
are rendered, typically in accordance
with the achievement of contract
milestones or hours expended.
Professional services include
implementation and configuration
services for licenced software.
Unsatisfied performance obligations
are disclosed as deferred revenue on
the consolidated statement of financial
position. Where the Company has a
multiyear non-cancellable contractual
commitment but does not expect to
satisfy the performance obligation
within twelve months, no deferred
revenue or trade receivable
is recognised.
The Company typically provides
multi-year payment terms to
customers ranging between one to
five years. For such contracts with
customers, the transaction price is
discounted using a rate that would
be reflected in a separate financing
transaction between the Company
and the customer. This amount
is recognised rateably as finance
income over the payment period.
Directly related contract costs in
obtaining the customer contracts are
expensed unless they are incremental
to obtaining the contract and the
Company expects to recover those
costs. These costs are recognised as
contract assets and amortised over
the life of the contract they relate to.
The incremental costs in obtaining
customer contracts for the Company
relate to specified commissions paid
to employees which meet the criteria
of directly related contract costs.
No revenue is recognised if there are
significant uncertainties regarding
the recovery of the transaction price,
the costs incurred or to be incurred
cannot be measured reliably or there
is a risk of return.
Q. Expenses
Operating lease payments
Payments made under operating
leases are recognised in profit or
loss on a straight-line basis over the
term of the lease. Lease incentives
received are recognised in profit or
loss as an integral part of the total
lease expense and spread over the
lease term.
R. Financing income
Financing income comprises interest
receivable on funds invested,
the financing component of the
sale of licences and interest payable
on borrowings.
S. Income tax
Income tax on the profit or loss for
the periods presented comprises
current and deferred tax. Income tax
is recognised in profit or loss except
to the extent that it relates to items
recognised directly in equity, in which
case it is recognised in equity.
Current tax is the expected tax
payable on the taxable income for
the year, using tax rates enacted or
substantively enacted at the year
end date, and any adjustment to tax
payable in respect of previous years.
Deferred tax is recognised on
temporary differences between the
carrying amounts of assets and
liabilities for financial reporting
purposes and the amounts used for
taxation purposes. The amount of
deferred tax provided is based on the
expected manner of realisation or
settlement of the carrying amount of
assets and liabilities, using tax rates
enacted or substantively enacted at
the year end date.
A deferred tax asset is recognised
only to the extent that it is probable
that future taxable profits will be
available against which the asset can
be utilised. Deferred tax assets are
reduced to the extent that it is no
longer probable that the related tax
benefit will be realised.
Additional dividend franking deficit
tax that arises from the distribution
of dividends are recognised at the
same time as the liability to pay the
related dividend.
56
Integrated Research and its controlled entities Annual Report 2019Financial statements V. Significant accounting
judgements, estimates
and assumptions
The carrying amounts of certain
assets and liabilities are often
determined based on estimates
and assumptions of future events.
The key estimates and assumptions
that have a significant risk of
causing a material adjustment to the
carrying amounts of certain assets
and liabilities within the next annual
reporting period are:
Intangible assets ‑ Development
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.
Intangible assets ‑ Goodwill
Goodwill acquired from business
acquisitions is initially measured at
cost. Goodwill is tested annually for
impairment or earlier if changes in
circumstances indicate a potential
impairment, the impairment
policy is explained in note 1(L).
The impairment testing requires
judgements over future cashflow
streams and assumptions used in
the calculations.
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 Black-Scholes methodology and
applying management determined
probability factors relating to
non-market vesting conditions.
Provision for expected credit losses
of trade and other receivables
The company uses a provision
matrix to calculate the expected
credit loss for trade and other
receivables. The provision rates are
based on the days overdue and
differ by geography. The provision
matrix is based on the historical
default experience for the Company
and adjusted for forward-looking
information and includes the use of
macroeconomic information where
appropriate. The determination of
the provision rates is considered a
significant estimate as it is sensitive
to change in circumstances and of
forecast of economic conditions.
The expected credit loss also may not
be representative of the customers’
actual default in the future.
Note 1: Significant
accounting policies (cont.)
T. 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.
U. Business combination
and goodwill
Business combinations are
accounted for using the acquisition
method. The cost of an acquisition
is measured as the aggregate of
the consideration transferred at
acquisition date measured at fair
value. Any contingent consideration
to be transferred by the acquirer
will be recognised at fair value at
the acquisition date. Changes in
the fair value of the contingent
consideration are recognised in the
Statement of Comprehensive Income.
Goodwill is initially measured at cost,
being the excess of the aggregate
of the consideration transferred over
the net identifiable assets acquired
and liabilities assumed. Goodwill
is tested annually for impairment.
Acquisition-related costs are
expensed as incurred and included in
administrative expenses.
57
Integrated Research and its controlled entities Annual Report 2019 Note 2. Segment reporting
The Chief Operating Decision Maker (CODM), being the Chief Executive Officer, reviews a variety of information on the
performance of Prognosis across the group for the purpose of resource allocation. The CODM monitors profit at a group
level for the Prognosis group.
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 and Germany 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 - with responsibility 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.
Information regarding these geographic segments is presented below. The accounting policies of the reportable
segments are the same as the Group’s accounting policies.
Americas
Europe
Asia Pacific
Corporate
Australia1
Eliminations
Consolidated
2019
2018
2019
2018
2019 2018
2019
2018
2019
2018
2019
2018
69,362 64,176 16,885 13,740 15,052 13,189
(479)
70
-
-
100,820
91,175
-
-
-
-
-
- 52,629 46,615 (52,629)
(46,615)
-
-
69,362 64,176 16,885 13,740 15,052 13,189 52,150 46,685 (52,629)
(46,516)
100,820
91,175
2,075
1,925
420
342
441
379 25,964 23,202
In thousands of
AUD
Sales to customers
outside the
consolidated entity
Inter-segment
revenue
Total segment
revenue
Total revenue
Segment results
(before finance
income and tax)
Results from
operating activities
Financing income
Income tax expense
Profit for the year
100,820
91,175
-
28,900 25,848
28,900 25,848
747
423
(7,796)
(7,091)
21,851
19,180
1,143
1,563
11,335 10,582
-
-
-
-
-
Capital additions2
234
273
88
105
121
81
700
1,104
Depreciation
and amortisation
expenditure
426
443
94
90
70
44 10,745 10,005
Americas
(USD)
Europe
(GBP)
In local currency3
2019
2018
2019
2018
Sales to customers
outside the
consolidated entity
49,696 49,519 9,360 7,849
Inter-segment sales
-
-
-
-
Total segment
revenue
49,696 49,519 9,360 7,849
Segment results
1,491
1,485
234
196
1 Corporate Australia includes both the research and development, hedging and corporate head office functions of Integrated Research Limited.
2 Excludes internal development costs capitalised but includes third party assets acquired. Additions also include assets acquired through the
purchase of businesses.
3 Segment results represented in local currencies.
58
Integrated Research and its controlled entities Annual Report 2019Financial statements Note 3. Revenue from contracts with customers
Information regarding the disaggregation of the Company’s revenues from contracts with customers is presented below.
In thousands of AUD
Timing of Revenue Recognition:
At a point in time
Over time
Total Revenue from contracts with customers
Type of product Group
Unified communications
Infrastructure
Payments
Professional services
Total Revenue
Consolidated
2019
2018
62,774
38,046
100,820
51,043
26,343
16,047
7,387
100,820
52,591
38,584
91,175
54,865
20,568
8,375
7,367
91,175
The transaction price allocated to the remaining performance obligations (unsatisfied or partially unsatisfied) as at
30 June 2019 is $13,656,000 and is expected to be recognised as revenue in two to five years. This amount relates
to contracts with customers where the Company has a multi-year non-cancellable contractual commitment but does
not expect to satisfy the performance obligation within twelve months, and no deferred revenue or trade receivable
is recognised.
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
Consolidated
2019
2018
2,644
111
50,268
53,023
11,335
264
1,954
2,414
950
46,556
49,920
10,582
350
2,102
59
Integrated Research and its controlled entities Annual Report 2019 Note 5. Other gains and (losses)
In thousands of AUD
Writeback of deferred consideration for acquisition
Loss on sale of financial assets
Currency exchange gains/(losses)
Note
23
Consolidated
2019
‑
(324)
1,636
1,312
2018
1,496
(738)
802
1,560
The prior year write-back reflects the fair value of the deferred consideration based on the prior year actual results.
The deferred consideration was based upon IQ Services achieving EBITDA milestones over the three years between
1 July 2015 and 30 June 2018. There were catch-up mechanisms over the three year period with the potential final
payment ranging between $nil and $3.5 million which were not met.
Note 6. Finance income
In thousands of AUD
Interest income
Interest on borrowings
Consolidated
2019
799
(52)
747
2018
518
(95)
423
60
Integrated Research and its controlled entities Annual Report 2019Financial statements Note 7. Auditors’ remuneration
In AUD
Remuneration for audit and review of the financial reports of the Company
or any entity in the consolidated entity:
Audit and review of financial reports
Auditors of the Company
Other auditors
Remuneration for other services by the auditors of the Company or any entity
in the consolidated entity:
Taxation services:
Auditors of the Company
Note 8. Income tax expense
Recognised in profit for the year
In thousands of AUD
Current tax expense:
Current year
Prior year adjustments
Deferred tax expense:
Origination and reversal of temporary differences
15
Total income tax expense in profit and loss
Numerical reconciliation between income tax expense and profit before tax
In thousands of AUD
Profit before tax
Income tax using the domestic corporate tax rate of 30%
Increase in income tax expense due to:
Non-deductible expenses
Effect of tax rates in foreign jurisdictions
Other
Decrease in income tax expense due to:
R&D tax incentive
Write-back of deferred consideration for acquisition
Prior year adjustments
Income tax expense
Consolidated
Note
2019
2018
Consolidated
2019
2018
259,995
275,080
‑
‑
-
-
163,602
114,451
9,043
(290)
8,753
(957)
7,796
Consolidated
2019
29,647
8,894
60
83
154
(1,105)
‑
(290)
7,796
8,636
(244)
8,392
(1,301)
7,091
2018
26,271
7,881
303
321
214
(901)
(483)
(244)
7,091
61
Integrated Research and its controlled entities Annual Report 2019
Note 9. Earnings per share
The calculation of basic and diluted earnings per share at 30 June 2019 was based on the profit attributable to ordinary
shareholders of $21,851,000 (2018: 19,180,000); a weighted number of ordinary shares outstanding during the year
ended 30 June 2019 of 171,794,468 (2018: 171,436,022); and a weighted number of ordinary shares (diluted) outstanding
during the year ended 30 June 2019 of 172,108,542 (2018: 172,067,466), 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 10. Cash and cash equivalents
In thousands of AUD
Cash at bank and on hand
Consolidated
2019
21,851
2018
19,180
Consolidated
2019
2018
171,794,468
171,436,022
314,074
631,444
172,108,542
172,067,466
12.72
12.70
11.19
11.15
Consolidated
2019
9,316
2018
11,238
62
Integrated Research and its controlled entities Annual Report 2019Financial statements Note 11. Trade and other receivables
Current
In thousands of AUD
Trade debtors
Less: Allowance for expected credit losses
GST receivable
Non‑current
In thousands of AUD
Trade debtors
Consolidated
2019
52,534
(1,417)
51,117
261
51,378
2018
45,374
(1,346)
44,028
158
44,186
Consolidated
2019
21,389
2018
26,892
The Company provides customers of good credit worthiness extended payment plans over the committed term of the
licence contract ranging between one to five years. For customers not on extended payment plans the credit period on
sales range from 30 to 90 days.
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
Note
23
2019
3,195
2,329
3,595
9,119
The movement in the allowance for expected credit losses in respect of trade receivables is detailed below:
In thousands of AUD
Balance at beginning of year
Amounts written off during the year
(Decrease)/increase in provision
Balance end of year
Consolidated
2019
1,346
(193)
264
1,417
2018
2,292
1,594
903
4,789
2018
1,454
(458)
350
1,346
The Company has used the following criteria to assess the allowance loss for expected credit losses shown above:
• historical default experience;
• macroeconomic factors specific to the geography of the customer;
• an individual account by account specific risk assessment based on past credit history; and
• any prior knowledge of debtor insolvency or other credit risk.
Included in the Company’s trade receivable balance are debtors which are 90 days past due at the reporting date which
the Company has not provided for as there has been no significant change in credit quality and the consolidated entity
believes that the amounts are still recoverable. The Company does not hold any collateral over these balances.
63
Integrated Research and its controlled entities Annual Report 2019 Note 12. Other assets
Current
In thousands of AUD
Other prepayments
Contract assets
Fair value of hedge asset - forward foreign exchange contracts
Non‑current
In thousands of AUD
Contract assets
Note 13. Other financial assets
In thousands of AUD
Deposits
Consolidated
2019
2,104
1,029
‑
3,133
Consolidated
2019
829
829
2018
1,783
-
9
1,792
2018
-
-
Consolidated
2019
236
2018
255
The carrying amount of other financial assets is a reasonable approximation of their fair value.
Note 14. Property, plant and equipment
Plant and Equipment
In thousands of AUD
At cost
Accumulated depreciation
Leasehold Improvements
In thousands of AUD
At cost
Accumulated depreciation
Consolidated
2019
6,277
(4,397)
1,880
Consolidated
2019
3,442
(2,691)
751
Total property, plant and equipment
Consolidated
In thousands of AUD
At cost
Accumulated depreciation
Total written down amount
2019
9,719
(7,088)
2,631
2018
5,325
(3,672)
1,653
2018
3,292
(2,398)
894
2018
8,617
(6,070)
2,547
64
Integrated Research and its controlled entities Annual Report 2019Financial statements Note 14. Property, plant and equipment (cont.)
Plant and Equipment
In thousands of AUD
Carrying amount at start of year
Additions
Effects of foreign currency exchange
Depreciation expense
Carrying amount at end of year
Leasehold Improvements
In thousands of AUD
Carrying amount at start of year
Additions
Effects of foreign currency exchange
Depreciation expense
Carrying amount at end of year
Consolidated
2019
1,653
872
30
(675)
1,880
Consolidated
2019
894
206
(71)
(278)
751
2018
1,304
896
22
(569)
1,653
2018
569
629
10
(314)
894
Note 15. 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
Deferred tax assets/(liabilities)
Set off of deferred tax asset
Net deferred tax assets/(liabilities)
Assets
Liabilities
Net
2019
‑
268
1,095
420
628
‑
2,411
(1,125)
1,286
2018
-
619
1,140
170
206
-
2,135
(1,448)
687
2019
5,799
‑
365
‑
‑
798
6,962
(1,125)
5,837
2018
5,454
2019
2018
(5,799)
(5,454)
-
-
-
-
275
5,729
(1,448)
4,281
268
730
420
628
(798)
619
1,140
170
206
(275)
(4,551)
(3,594)
‑
-
(4,551)
(3,594)
65
Integrated Research and its controlled entities Annual Report 2019 Note 15: Deferred tax assets and liabilities (cont.)
Movement in temporary differences during the year:
For year ended 30 June 2019
Consolidated
In thousands of AUD
Intangible assets
Trade and other payables
Employee benefits
Provisions
Other current liabilities
Unrealised foreign exchange gain
For year ended 30 June 2018
In thousands of AUD
Intangible assets
Trade and other payables
Employee benefits
Provisions
Other current liabilities
Unrealised foreign exchange gain
Unrealised foreign exchange loss
Balance
1 July 18
(5,454)
619
1,140
170
206
(275)
(3,594)
Balance
1 July 17
(4,746)
321
1,260
553
77
-
242
Recognised
in income
Recognised
in equity
Balance
30 June 19
(345)
(351)
(721)
250
422
(523)
(1,268)
‑
‑
311
‑
‑
‑
311
(5,799)
268
730
420
628
(798)
(4,551)
Consolidated
Recognised
in income
Recognised
in equity
Balance
30 June 18
(708)
298
(120)
(383)
129
(275)
(242)
-
-
-
-
-
-
-
-
(5,454)
619
1,140
170
206
(275)
-
(3,594)
(2,293)
(1,301)
66
Integrated Research and its controlled entities Annual Report 2019Financial statements Note 16. Intangible assets
The balance of capitalised intangible assets comprises:
Cost
In thousands of AUD
Balance at 1 July 2017
Fully amortised & offset
Internally developed
Purchased
Effects of foreign currency exchange
Software
development
Third party
software
28,808
-
11,524
-
-
1,378
-
-
38
8
Balance at 30 June 2018
40,332
1,424
Balance at 1 July 2018
Fully amortised & offset
Internally developed
Purchased
Effects of foreign currency exchange
40,332
(11,429)
11,275
‑
‑
1,424
(26)
‑
65
10
Balance at 30 June 2019
40,178
1,473
Consolidated
Goodwill
3,203
-
-
-
131
3,334
3,334
‑
‑
‑
190
3,524
Customer
Relationship
780
-
-
-
32
812
812
‑
‑
‑
47
859
Software
development
Third party
software
Goodwill
Customer
Relationship
Consolidated
Amortisation
In thousands of AUD
Balance at 1 July 2017
Fully amortised & offset
Amortisation for year
Effects of foreign currency exchange
Balance at 30 June 2018
Balance at 1 July 2018
Fully amortised & offset
Amortisation for year
Effects of foreign currency exchange
12,705
-
9,448
-
22,153
22,153
(11,429)
10,215
‑
1,218
-
98
8
1,324
1,324
(26)
‑
10
-
-
-
-
-
‑
‑
‑
‑
‑
312
-
155
20
487
487
‑
167
32
686
Balance at 30 June 2019
20,939
1,308
Carrying amounts
Consolidated
In thousands of AUD
Balance at 30 June 2018
Balance at 30 June 2019
Software
development
Third party
software
18,179
19,239
100
165
Goodwill
3,334
3,524
Customer
Relationship
325
173
Total
34,169
-
11,524
38
171
45,902
45,902
(11,455)
11,275
65
247
46,034
Total
14,235
-
9,701
28
23,964
23,964
(11,455)
10,382
42
22,933
Total
21,938
23,101
67
Integrated Research and its controlled entities Annual Report 2019 Note 17. Goodwill
Goodwill arose on the acquisition of IQ Services business in the year ending 30 June 2016. Management has identified
the Group as the cash generating unit (the Prognosis CGU) to which goodwill is allocated for impairment testing.
Management performs its annual impairment testing at least annually. The carrying value of goodwill at 30 June 2019 is
$3,524,000 (2018: $3,334,000). A reconciliation of the movement in goodwill is included in Note 16.
The recoverable amount of the Prognosis CGU has been determined using a value in use approach. The value in use has
been based on the following key assumptions:
1. Cash flow forecasts
The cash flow forecasts are based upon a Board approved 2019 budget and management projections for the subsequent
four years of the Prognosis CGU.
2. Discount rate
Discount rate of 11% (2018: 11%) applied for value in use calculation is based on the post-tax weighted average cost of
capital applicable to the Prognosis CGU.
3. Terminal value
The terminal growth rate after the five year projection period has been calculated using a growth rate of 3% (2018: 3%)
which is determined by Management based on their assessment of expected long term annual growth for the
software industry.
The value in use does not indicate any impairment is required at 30 June 2019.
Management believe that a reasonable change in any of the above key assumptions would not cause the carrying values
to exceed their recoverable amounts.
Note 18. Trade and other payables
In thousands of AUD
Trade and other creditors
The average credit period on trade and other payables is 30 days.
Note 19. Employee benefits
In thousands of AUD
Current
Liability for annual leave
Liability for long service leave
Non‑current
Liability for long service leave
Pension plans
Consolidated
2019
9,797
2018
10,140
Consolidated
2019
2018
2,178
1,019
3,197
2,143
942
3,085
201
242
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.
68
Integrated Research and its controlled entities Annual Report 2019Financial statements Note 19. Employee benefits (cont.)
Share based payments
Performance Rights
On 21 November 2011, the consolidated entity established the Integrated Research Performance Rights and Options Plan
(IRPROP). The plan enables the Company to offer performance rights to eligible employees to obtain shares in Integrated
Research at no cost contingent upon performance conditions being met. The performance conditions include either
a service period with performance components or a service period with a net after tax profit hurdle. The performance
rights are automatically exercised into shares upon the performance conditions being met. The following performance
rights were granted during the period:
Grant Date
Number of Rights
Earliest Vesting Date
Expiry date
Sep-18
Dec-18
Jan-19
Feb-19
120,000
194,750
89,988
40,000
Aug 2021
Oct 2021
Feb 2022
Feb 2021
Sep 2021
Nov 2021
Mar 2022
Mar 2021
The fair value of the performance rights including assumptions used are as follows:
Grant date
Fair value at measurement date
Share price
Exercise price
Expected volatility
Contractual life (expressed in days)
Expected dividends
Risk-free interest rate (based on 3 year treasury bonds)
Sep 2018
Dec 2018
Jan 2019
Feb 2019
$2.265
$2.45
nil
50%
1,082
2.65%
1.5%
$1.532
$1.71
nil
50%
1,022
3.81%
1.5%
$2.286
$2.49
nil
50%
1,110
2.81%
1.5%
$2.284
$2.42
nil
50%
731
2.89%
1.5%
Model Used
Black Scholes
Black Scholes
Black Scholes
Black Scholes
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.
During the year ended 30 June 2019, the consolidated entity recognised an expense through profit of $111,000 related
to the fair value of performance rights (2018: $950,000).
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)
2019
1,000
(474)
(180)
445
791
‑
2018
1,801
(511)
(1,100)
810
1,000
-
69
Integrated Research and its controlled entities Annual Report 2019 Note 20. Provisions
In thousands of AUD
Current
Employee benefits
Non‑current
Employee benefits
Lease make good
Note 21. Other financial liabilities
In thousands of AUD
Current
Consolidated
Note
2019
2018
19
19
3,197
3,085
201
522
723
242
587
829
Consolidated
2019
2018
Fair value of hedge liabilities - forward foreign exchange contracts
139
329
Non‑current
Other creditors
33
70
70
Integrated Research and its controlled entities Annual Report 2019Financial statements Note 22. Capital and reserves
Share capital
In thousands of shares
On issue 1 July
Issued against employee performance right exercised
On issue 30 June
Ordinary shares
2019
171,681
180
171,861
2018
170,581
1,100
171,681
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 19 for further details.
71
Integrated Research and its controlled entities Annual Report 2019 Note 22. 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
2019
Final 2018
Interim 2019
Total amount
2018
Final 2017
Interim 2018
Total amount
3.5
3.5
3.5
3.0
6,012
100% franked
16 Oct 2018
6,015
100% franked
16 Apr 2019
12,027
5,987
100% franked
5,150
100% franked
26 Sep 17
10 Apr 18
11,137
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 2019 and will be
recognised in subsequent financial statements:
In thousands of AUD
Final 2019
Cents
per share
3.75
Total amount
Franked/
unfranked
Date of
payment
6,445
100% franked
15 Oct 2019
The final dividend declared of 3.75 cents together with the interim dividend paid in April 2019 of 3.5 cents takes total
dividends for the 2019 financial year to 7.25 cents.
Franking account disclosure:
In thousands of AUD
Adjusted franking account balance
Impact on franking account balance of dividends not recognised
Company
2019
8,254
(2,762)
2018
7,260
(2,575)
72
Integrated Research and its controlled entities Annual Report 2019Financial statements Note 23. Financial instruments
Capital risk management
The consolidated entity manages its capital to ensure that controlled entities will be able to continue as a going concern
while maximising the return to stakeholders through the optimisation of treasury management.
The capital structure of the consolidated entity consists of cash and cash equivalents and equity attributable to
equity holders of the company, comprising issued capital, reserves, and retained earnings as disclosed in Notes 10 and
22 respectively.
Borrowing facility
The Company has available a $10 million multicurrency revolving cash advance facility that is undrawn at 30 June 2019.
The primary purpose of the facility is to fund working capital requirements.
The facility is secured by a General Security Agreement with a deed of cross guarantee including the parent entity,
Integrated Research UK Limited, and Integrated Research Inc. The facility is also subject to certain debt covenants
including a leverage ratio, interest cover ratio and capitalisation ratio. The Company met all the covenant requirements
during the year. Interest is variable, linked to Bank Bill Swap Bid Rate (BBSY), plus a margin.
Bank guarantee facility
The Company has a $900,000 bank guarantee facility. The primary purpose of the facility is to provide bank guarantees
to the Company’s landlord pursuant to contractual lease arrangements. At 30 June 2018 and 2019, the total value of
bank guarantees provided was $819,000. The facility terminates on 31 December 2019.
Significant accounting policies
Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of
measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset,
financial liability and equity instrument are disclosed in Note 1 to the financial statements.
Financial risk management objectives
The Board of Directors has overall responsibility for the establishment and oversight of the consolidated entity’s financial
management framework. The Board has an established Audit and Risk Committee, which is responsible for developing
and monitoring the consolidated entity’s financial management policies. The Committee provides regular reports to the
Board of Directors on its activities.
The Audit and Risk Committee oversees how Management monitors compliance with risk management policies and
procedures and reviews the adequacy of the risk management framework in relation to the risks.
The main risks arising from the consolidated entity’s financial instruments are currency risk, credit risk, liquidity risk and
cash flow interest rate risk.
The consolidated entity seeks to minimise the effects of these risks, where deemed appropriate, by using derivative
financial instruments to hedge these risk exposures. The use of financial derivatives is governed by the consolidated
entity’s policies on foreign exchange risk, credit risk, the use of financial derivatives and non-derivative financial
instruments, and the investment of excess liquidity. The consolidated entity does not enter into or trade financial
instruments, including derivative financial instruments, for speculative purposes.
Market risk
The consolidated entity’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates
and cash flow interest rate risks. The consolidated entity enters into foreign exchange forward contracts to hedge the
exchange rate risk arising from transactions not recorded in an entity’s functional currency.
73
Integrated Research and its controlled entities Annual Report 2019 Note 23. Financial instruments (cont.)
Foreign currency risk management
The consolidated entity undertakes certain transactions denominated in foreign currencies, hence exposures to
exchange rate fluctuations arise. Exchange rate exposures are managed within approved policy parameters utilising
forward foreign exchange contracts.
The carrying amount of the consolidated entity’s foreign currency denominated monetary assets and monetary liabilities
at the reporting date that are denominated in a currency that is different to the functional currency of the respective
entities undertaking the transactions is as follows:
In thousands of AUD
US Dollar
Euro
Consolidated
Liabilities
Assets
2019
1,467
‑
2018
1,258
-
2019
7,879
3,339
2018
6,047
1,396
Foreign currency sensitivity
At 30 June 2019, if the US Dollar and Euro 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:
In thousands of AUD
US Dollar Impact
Euro Impact
Change in currency (i) - 10% decrease
US Dollar Impact
Euro Impact
Change in currency (i) - 10% increase
Consolidated
Net profit
Retained earnings
2019
712
371
(583)
(304)
2018
532
155
(435)
(127)
2019
712
371
(583)
(304)
2018
532
155
(435)
(127)
(i) This has been based on the change in the exchange rate against the Australian dollar in the financial years ended 30 June 2019 and 30 June 2018.
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, Germany 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 United
States Dollar, UK Sterling, Euro and Singapore Dollar each.
74
Integrated Research and its controlled entities Annual Report 2019Financial statements Note 23. 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 the 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
2019
2018
2019
FC’000
2018
FC’000
2019
A$’000
2018
A$’000
2019
A$’000
2018
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
0.71
0.72
0.71
0.71
0.62
0.61
0.61
‑
0.56
0.55
0.55
‑
0.77
0.77
0.77
0.74
0.64
0.62
0.62
-
0.58
0.57
0.56
-
3,250
2,800
1,750
2,000
2,250
1,000
1,250
1,250
4,546
2,444
3,184
1,415
3,623
2,619
1,629
1,687
(82)
(42)
(7)
(1)
(166)
(86)
(60)
-
250
50
50
‑
100
50
100
‑
150
50
100
-
70
50
100
-
405
82
82
‑
179
90
181
‑
235
81
161
-
120
87
180
-
(2)
(1)
‑
‑
(3)
‑
(1)
‑
(3)
1
1
-
(5)
(3)
1
-
(139)
(320)
These hedge assets and liabilities are classified as a level 2 fair value measurement, being derived from inputs provided
from financial institutions, 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 over the counter 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.
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 balance with any one customer at 30 June 2019 was $5.3 million (2018: $4.5 million).
Ongoing credit evaluation is performed on the financial condition of accounts. Subsequent to 30 June 2019,
the Company has collected $2.7 million in overdue trade receivables.
75
Integrated Research and its controlled entities Annual Report 2019 Note 23. Financial instruments (cont.)
The Company continued its program to sell selected account receivable balances to a third party without recourse.
The purpose of the program is to manage credit risk and improve working capital. During the year ended 30 June 2019
a total of $5.6 million (2018: $14.4 million) debtors were sold at a cost of $324,000 (2018: $738,000). The Company
continues to bear maintenance support obligations to the end customers which are carried as a liability in the deferred
revenue account of the Company’s balance sheet of $2.7 million (2018: $3.0 million).
The credit risk on liquid funds and derivative financial instruments is limited because the counterparties are banks with
high credit ratings assigned by international credit-rating agencies.
Liquidity risk management
Ultimate responsibility for liquidity risk management rests with the board of directors, who have built an appropriate
liquidity risk management framework for the management of the consolidated entity’s short, medium and long-term
funding and liquidity management requirements.
The consolidated entity manages liquidity risk by maintaining adequate reserves, by continuously monitoring forecast
and actual cash flows and matching the maturity profiles of financial assets and liabilities.
All creditor and other payables shown in Note 18 and Note 21 for both 2019 and 2018 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. A discounted cashflow model was used to derive the fair value. The range of discount rates
was between 3.5% to 5.5%. The carrying value of non-current trade debtors for 2018 and 2019 of the consolidated entity
was a reasonable approximation of their fair value.
Note 24. Operating leases
Non-cancellable operating lease rental commitments is for office space with contracted payments as follows:
In thousands of AUD
Less than one year
Between one and five years
Greater than five years
Note 25. Consolidated entities
Parent entity:
Integrated Research Limited
Subsidiaries of Integrated Research Limited:
Integrated Research Inc
Integrated Research Singapore Pte Limited
Integrated Research UK Limited
Subsidiaries of Integrated Research UK Limited:
Consolidated
2019
1,721
638
‑
2,359
2018
2,001
1,674
-
3,675
Country of
incorporation
Ownership interest
2019
2018
Australia
USA
Singapore
UK
100%
100%
100%
100%
100%
100%
Integrated Research Germany GmbH
Germany
100%
100%
76
Integrated Research and its controlled entities Annual Report 2019Financial statements Note 26. Reconciliation of cash flows from operating activities
In thousands of AUD
Profit for the year
Depreciation and amortisation
Provision for expected credit loss
Interest received
Interest paid
Share-based payments expense
Net exchange differences
Change in operating assets and liabilities:
(Increase)/decrease in trade debtors
(Increase)/decrease in future income tax benefit
(Increase)/decrease in other operating assets
Increase/(decrease) in trade and other payables
Increase/(decrease) in other operating liabilities
Increase/(decrease) in provision for income taxes payable
Increase/(decrease) in provision for deferred income taxes
Increase/(decrease) in other provisions
Impact of new accounting standards - AASB 15
Net cash from operating activities
Note 27. Key management personnel disclosures
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
Termination benefits
Consolidated
2019
21,851
11,335
71
(799)
52
111
(21)
(1,618)
216
(2,151)
(343)
(9,911)
(348)
1,556
6
1,230
21,237
2018
19,180
10,582
(108)
(518)
95
950
883
(11,889)
579
(16)
520
2,234
(2,316)
841
425
-
21,442
Consolidated
2019
2018
2,953,412
3,400,669
130,018
28,520
(212,364)
66,548
27,992
150,592
460,409
-
2,966,134
4,039,662
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 28. Related parties
At 30 June 2019 Mr Steve Killelea, the Chairman (retired 1 November 2018) of the Company, owned either directly or
indirectly 39.7% of the Company (2018: 39.7%).
The related entity of Mr Killelea provided consulting services totaling $55,000 in the year ended 30 June 2019.
77
Integrated Research and its controlled entities Annual Report 2019 Note 29. Parent entity disclosures
In thousands of AUD
Financial Position
Assets
Current assets
Non-current assets
Total Assets
Liabilities
Current Liabilities
Non-current liabilities
Total Liabilities
Net Assets
Equity
Issued Capital
Employee benefits Reserve
Hedging reserve
Retained Earnings
Total Equity
Financial Performance
Profit for the year
Other comprehensive income
Total comprehensive income
Parent Entity
2019
2018
49,710
19,731
69,441
9,028
6,034
15,062
54,379
1,667
3,536
(51)
49,227
54,379
20,168
95
20,263
40,730
20,553
61,283
9,505
5,845
15,350
45,933
1,667
3,445
(146)
40,964
45,933
17,660
(176)
17,484
Investments in subsidiaries are included at cost.
Note 30. Subsequent events
Dividends
For dividends declared after 30 June 2019 see Note 22 in the financial statements. The financial effect of dividends
declared and paid after 30 June 2019 have not been brought to account in the financial statements for the year ended
30 June 2019 and will be recognised in subsequent financial reports.
Performance rights
The Company has issued an additional 40,000 performance rights on 9 August 2019 vesting on 31 August 2022 in
relation to Key Management Personnel. The financial effect of performance rights issued after 30 June 2019 have
not been brought to account in the financial statements for the year ended 30 June 2019 and will be recognised in
subsequent financial reports.
78
Integrated Research and its controlled entities Annual Report 2019Financial statements 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 2019
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 2019 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 2019.
This declaration is made in accordance with a resolution of the Directors.
Dated at North Sydney this 22nd day of August 2019.
Paul Brandling
Chairman
Garry Dinnie
Director
79
Integrated Research and its controlled entities Annual Report 2019 80
Integrated Research and its controlled entities Annual Report 2019 81
Integrated Research and its controlled entities Annual Report 2019 82
Integrated Research and its controlled entities Annual Report 2019 83
Integrated Research and its controlled entities Annual Report 2019 84
Integrated Research and its controlled entities Annual Report 2019 25 to 33
85
Integrated Research and its controlled entities Annual Report 2019 86
Integrated Research and its controlled entities Annual Report 2019 ASX additional information
Shareholder information
Analysis of numbers of equity security holders by size of holding as at September 2019
1 -1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 and over
Class of equity security
Ordinary shares
Shares
Options
Performance
Rights
1,556
2,974
1,271
1,451
79
7,331
-
-
-
-
-
-
-
21
28
20
1
70
Fully paid ordinary shares (total)
Twenty largest security holders of quoted equity securities as of 9 September 2019.
Rank Name
Units % of Units
1.
2.
3.
4.
MR STEPHEN JOHN KILLELEA
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
CITICORP NOMINEES PTY LIMITED
5. MR ANDREW RHYS RUTHERFORD
6. MR NICHOLAS BARRY DEBENHAM
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