delivering
outcomes today,
developing
for tomorrow,
designing
for the future.
01101001
01110011
01100101
01100101
01100111
01110100
01100101
01101111
00101100
01110110
01110000
00100000
00100000
01101111
01110111
01100101
01101110
00100000
00100000
00100000
01110101
01110010
00101110
01101100
01110010
00100000
01100011
01110011
01100100
00100000
01100101
01101001
01100110
01110100
01110010
00101100
01110011
01101001
01100110
01110100
01100110
01110010
01100101
00100000
01101001
01101001
01101111
01101111
00100000
01100001
01100100
01101100
01101110
01101111
01101111
01110010
00100000
01101001
01101110
01101111
01101000
01110101
01100101
01110011
01100100
01110110
01101110
01110101
01101101
01110100
01111001
01100101
01101111
01100111
01110010
01101101
01101111
01100100
01100111
01100111
01110010
01100101
01110100
00101110
Annual
Report
2017
In this Report
About Us
2017 A Snapshot
Leading Our People
Our People Leading
Financial Highlights
Chairman & CEO’s Letter
Principal Activities
Operating & Financial Review
Board of Directors
Directors’ Report
Auditor’s Independence Declaration
Financial Statements
Directors’ Declaration
Independent Auditor’s Report
Shareholder Information
Corporate Directory
01
02
04
05
06
08
10
12
16
18
45
46
73
74
78
80
AGM details
Thursday 3rd May 2018
11:30am AEST
RACV Club
501 Bourke Street
Melbourne, Victoria, Australia
delivering
outcomes today,
developing
for tomorrow,
designing
for the future.
01101001
01110011
01100101
01100101
01100111
01110100
01100101
01101111
00101100
01110110
01110000
00100000
00100000
01101111
01110111
01100101
01101110
00100000
00100000
00100000
01110101
01110010
00101110
01101100
01110010
00100000
01100011
01110011
01100100
00100000
01100101
01101001
01100110
01110100
01110010
00101100
01110011
01101001
01100110
01110100
01100110
01110010
01100101
00100000
01101001
01101001
01101111
01101111
00100000
01100001
01100100
01101100
01101110
01101111
01101111
01110010
00100000
01101001
01101110
01101111
01101000
01110101
01100101
01110011
01100100
01110110
01101110
01110101
01101101
01110100
01111001
01100101
01101111
01100111
01110010
01101101
01101111
01100100
01100111
01100111
01110010
01100101
01110100
00101110
On our cover
Binary code is the simplest form of
computer code – the basis of every software
engineering language and what makes
technology work. As technology is the very
core of our business, it’s only fitting to explain
what we are all about – delivering outcomes
today, developing for tomorrow and
designing for the future – in binary code.
IRESS LIMITED ABN 47 060 313 359
About Us
01000001 01100010 01101111 01110101 01110100 00100000 01010101 01110011
We design, develop
and deliver technology
solutions for the financial
services industry in
Australia, New Zealand,
the United Kingdom, South
Africa, Canada, and Asia.
Whether our clients trade on global financial markets, manage investments, provide
mortgages or help people plan their financial future and protect their family, they rely on
our software and our team to help deliver the right outcomes for their business and their
clients. With a solid financial track record, we continue to grow and adapt to meet the
complex and changing needs of our clients.
As we enter our 25th year, we haven’t forgotten our roots: keeping the entrepreneurial
spirit and creative thinking that has driven us to success, and an unwavering focus
on what’s most important – delivering outcomes today, developing for tomorrow and
designing for the future.
1,881
People
17
Offices
6
Countries
1
Ambition
To be the most innovative, reliable and respected technology partner,
regarded by our clients as essential and desirable.
Adelaide 01000001 01100100 01100101 01101100 01100001 01101001 01100100 01100101
Auckland 01000001 01110101 01100011 01101011 01101100 01100001 01101110 01100100
Brisbane 01000010 01110010 01101001 01110011 01100010 01100001 01101110 01100101
Cape Town 01000011 01100001 01110000 01100101 00100000 01010100 01101111 01110111 01101110
Cheltenham 01000011 01101000 01100101 01101100 01110100 01100101 01101110 01101000 01100001 01101101
Durban 01000100 01110101 01110010 01100010 01100001 01101110
Johannesburg 01001010 01101111 01101000 01100001 01101110 01101110 01100101 01110011 01100010 01110101 01110010 01100111
Leatherhead 01001100 01100101 01100001 01110100 01101000 01100101 01110010 01101000 01100101 01100001 01100100
London 01001100 01101111 01101110 01100100 01101111 01101110
Melbourne 01001101 01100101 01101100 01100010 01101111 01110101 01110010 01101110 01100101
Perth 01010000 01100101 01110010 01110100 01101000
Singapore 01010011 01101001 01101110 01100111 01100001 01110000 01101111 01110010 01100101
Sydney 01010011 01111001 01100100 01101110 01100101 01111001
Toronto 01010100 01101111 01110010 01101111 01101110 01110100 01101111
Warwick 01010111 01100001 01110010 01110111 01101001 01100011 01101011
Wellington 01010111 01100101 01101100 01101100 01101001 01101110 01100111 01110100 01101111 01101110
Wollongong 01010111 01101111 01101100 01101100 01101111 01101110 01100111 01101111 01101110 01100111
01
2017
A Snapshot
A focus on clients
and users
World-leading
solutions
21
All-digital UK bank Atom processes a
mortgage, from application to offer, in
just 21 seconds using our Mortgage
Sales and Origination (MSO) software.
55%
Continued investment in our product
and technology capability where
now 55% of our people are directly
responsible for creating and deploying
our world-leading solutions.
3
1
Three key Australian wealth
management clients took delivery
of XPLAN Prime, changing the way
advice professionals deliver scaled,
objective-based advice.
10
XPLAN named the best financial
planning software for the tenth
consecutive year in Investment
Trends’ (Australian) Planning Software
Benchmark Report.
Major milestones reached in the
delivery of a single integrated private
wealth technology platform and new
digital client portal for prominent
UK wealth manager Close Brothers
Asset Management.
$108m
Over $108 million was invested in
product and technology, the heart of
IRESS’ success and market position,
supporting client retention and future
recurring revenue growth.
140K
Statewide Super replaces multiple
legacy systems with our Acurity
platform enabling them to focus
on the needs of its more than
140,000 members.
347
Our third Global Hackathon, held
across 6 countries over 24 hours,
saw more than 600 people in 161
teams develop, code and build 347
new ideas – many of which are now
in production.
02
IRESS LIMITED ANNUAL REPORT 2017
00110010 00110000 00110001 00110111 00001010 01000001 00100000 01010011 01101110 01100001 01110000 01110011 01101000 01101111 01110100 IRESS LIMITED ANNUAL REPORT 2017 Planned and
targeted growth
The best people
working together
153
Our market data coverage continues
to expand, with our clients able to
access information from 153 global
exchanges and macroeconomic
data from 196 countries.
2020
2020 ambition and strategy shared
with all IRESS people at events
during March and April – the key
theme being the relentless pursuit of
becoming essential and desirable to
our clients and users.
94
Continued penetration of the UK
wealth management and advice
sector, with 94 of the top 100 advisory
firms now using our technology.
40%
South African operating revenue
grew 40% in 2017, reflecting strong
demand across our product suite
and contribution from recently-
acquired market data firm INET BFA.
4b
Growth in the Canadian wealth
management market with delivery
of a complete solution to leading
independent firm Echelon Wealth
Partners, which has more than
CAD 4 billion assets under
management.
212
Our Sydney team of 212 people
moved to new offices in Barangaroo,
purpose built as a contemporary,
cross-functional team workspace that
fosters collaboration and creativity.
26
Industry leading parental leave
entitlements introduced as part
of our diversity and inclusion
commitment – 26 weeks’ paid
leave for primary carers and four
for secondary carers.
8
Eight of our people recognised
externally for their achievements.
Andrew Walsh
Finalist, EY Australian Entrepreneur
of the Year
Clare Wilkes
Finalist, HR Professional of the
Year award
Ellen Sumbler
Winner, Goodacre Client Consultancy
award
Jo Hopkins
Winner, IT Rising Star (SME) award
Kirsty Gross
Finalist, FinTech Leader of the
Year award
Marnie Shervey
Finalist, IT Innovator of the Year award
Melanie Meadwell
Winner, Goodacre Product
Specialist award.
Sally Padmore
Finalist, IT Hero of the Year (SME) award
0303
Leading
Our People
01001100 01100101 01100001 01100100 01101001 01101110 01100111 00100000 00001010 01001111 01110101 01110010 00100000
01010000 01100101 01101111 01110000 01101100 01100101
Our greatest asset at IRESS is our people – more than
1,800 – who make it happen for our business, our clients
and our users.
Supporting them to deliver outcomes today, develop for
tomorrow and design for the future are a leadership team
who are committed to IRESS’ goals, clients and people.
Back row (left to right)
John Harris Chief Financial Officer,
Glenn Wilson Executive General Manager Wealth & Trading,
Julia McNeill Group Executive – Human Resources,
Andrew Todd Chief Technology Officer,
Simon New Group Executive – Strategy,
Simon Badley Managing Director – United Kingdom,
Andrew Walsh Chief Executive Officer,
Peter Ferguson Group General Counsel,
Coran Lill Group Executive – Communications and Marketing.
Front row (left to right)
Tizzy Vigilante Managing Director – Australia & New Zealand (Wealth Management),
Aaron Knowles Group Executive – Product,
Kirsty Gross Managing Director – Australia & New Zealand (Financial Markets),
Jason Hoang Managing Director – Asia,
Ray Pretorius Managing Director – South Africa.
04
IRESS LIMITED ANNUAL REPORT 2017 Our People
Leading
01001111 01110101 01110010 00100000 01010000 01100101 01101111 01110000 01101100 01100101 00001010 01001100 01100101
01100001 01100100 01101001 01101110 01100111
IRESS Foundation
Our people are more than skilled software engineers,
client relationship professionals and business managers -
they are also passionate about making a difference in the
communities in which we operate.
We have a long history of people-led community engagement. In 2017 we
established the IRESS Foundation to provide more support, structure and
funding to these endeavours across our regions in two key areas - IRESS
Opportunity Initiatives and IRESS Matching Initiatives.
IRESS Opportunity Initiatives
In each region, we have established
IRESS Opportunity Initiatives in
the form of long-term partnerships
with community organisations
to make a recognisable and
significant contribution to the
partner organisation.
In the United Kingdom we continued
our relationships with the Myton
Hospice and the James Hopkins
Trust and started working with
Cobalt, a charity that invests in
medical equipment, research
and education.
In South Africa, we continued
our long-term relationship with
Seeds of Africa, focused on
early childhood development
in previously disadvantaged
communities, and the Klipheuwel
Creche in Cape Town, which now
has space for 40 children to learn,
play and grow while receiving
access to food, medicine and
specialist support.
In Canada, we continued our
support of the Holland Bloorview
Rehabilitation Hospital.
In Sydney we have partnered
with TABLE – connecting people
from all walks of life with those
from disadvantaged backgrounds
through the sharing of a meal.
In Melbourne, we partnered with
Whitelion – an organisation that
assists at-risk young people to
reach their full potential.
IRESS Matching Initiatives
We recognise that our people have
personal interests in other social or
health issues, so IRESS Matching
Initiatives focus on harnessing
enthusiasm for community
engagement by matching funds
raised by a team of IRESS people.
Some highlights included:
–
–
–
–
In Canada, raising $25,000 in
the Ride to Conquer Cancer.
In the United Kingdom, taking
on the Three Peaks Challenge,
climbing the three highest
mountains in Scotland, England
& Wales within 24 hours.
In Australia, completing the
JDRF charity cycle in Adelaide,
raising $23,000 for research into
Type 1 diabetes.
In South Africa, raising funds
to purchase 60 food hampers
for families at the Healing
Word crèche.
–
In Australia, raising $13,000 for
the Cure Brain Cancer charity.
In 2017, the IRESS Foundation
supported Opportunity Initiatives
and Matching Initiatives to a
total value of over $100,000.
05
Financial
Highlights
01000110 01101001 01101110 01100001 01101110 01100011 01101001 01100001 01101100 00001010 01001000 01101001
01100111 01101000 01101100 01101001 01100111 01101000 01110100 01110011
Solid revenue growth driven by the acquisitions of Financial
Synergy and INET and underpinned by organic delivery to
clients globally.
Operating Revenue
$430m
10%
on 2016
13%
on 2016 on
a constant
currency basis
APAC
Resilient financial markets revenue.
Strong underlying growth in wealth
management reflects ongoing
XPLAN demand.
Full year contribution from Financial Synergy
acquired in 2016.
Asia steady.
56%
United Kingdom
Revenue growth reflects successful
client deliveries and increasing uptake.
Key milestones achieved on
several key client projects to deliver
integrated solutions.
Lending momentum increasing.
30%
South Africa
Strong underlying growth reflects client
deliveries and ongoing demand across
product suite.
Full year contribution from INET acquired
in 2016.
10%
Canada
Revenue growth reflects successful client
deliveries and strong client retention.
Successful wealth deployments
increasing wealth footprint.
4%
06
IRESS LIMITED ANNUAL REPORT 2017 Strong financial track record
Operating Revenue
Operating Cash Flow
0
.
0
3
4
7
.
3
8
AUD (m)
08 09 10 11 12 13 14 15 16 17
08 09 10 11 12 13 14 15 16 17
AUD (m)
Operating Cashflow $m
Cashflow Per Share Cents
Segment Profit (1)
Earnings Per Share
4
.
5
2
1
4
.
5
3
AUD (m)
NPAT
08 09 10 11 12 13 14 15 16 17
08 09 10 11 12 13 14 15 16 17
AUD (cents)
Dividends Per Share
8
.
9
5
0
.
4
4
AUD (m)
AUD (cents)
08 09 10 11 12 13 14 15 16 17
08 09 10 11 12 13 14 15 16 17
Unless otherwise stated all comparisons are with the prior corresponding period on a reported currency basis.
Financial information in this report is extracted or calculated from the half year & annual financial statements which
have been subject to review or audit.
(1)
Segment Profit represents earnings before interest, tax, depreciation, amortisation, share based payments, non-operating items and unrealised
FX gains/losses – see page 14 for a full reconciliation.
07
Chairman &
Chairman &
CEO’s Letter
CEO’s Letter
01000011 01101000 01100001 01101001 01110010 01101101 01100001 01101110 00100000 00100110 00001010 01000011 01000101
01001111 00100111 01110011 00100000 01001100 01100101 01110100 01110100 01100101 01110010
We are
delivering on
our strategy
of providing
integrated,
market-leading
products,
with critical
milestones
achieved to
existing and
new clients.
2017 was a year of solid performance
by IRESS.
As Australia’s leading financial
technology company, with a
diversified international presence,
IRESS continued to deliver growth
and innovation - supported by
targeted investments for the
longer term.
In the United Kingdom, we delivered
our integrated trading and wealth
solution to leading financial services
businesses. In Australia, we launched
XPLAN Prime, our new scaled advice
solution. In the second half we
delivered Prime to three ASX-listed
financial services businesses who
are to use Prime to change the way
they deliver advice to their clients. The
theme of delivery was repeated in
Singapore, South Africa and Canada
where key client deployments were a
feature in 2017.
We continued to invest in our people,
our products and our technology
while focusing on costs and
operational efficiency and continued
to maintain a conservative balance
sheet and steady dividend.
Financial results
For the full year to 31 December
2017, group revenue was up 10% on
2016 to $430 million. On a constant
currency basis, group revenue was
up 13%. This included positive
contribution to earnings from the
Financial Synergy and INET BFA
acquisitions in Australia and South
Africa. Statutory net profit was
$59.8 million, up 1% on 2016, after
investment made during 2017 in client
delivery capability for the longer term.
Group Segment Profit was $125.4
million, up 2% on 2016 (up 3% on
a constant currency basis).
Our financial results for 2017 are
at the higher end of the range of
the revised guidance provided to
the market in November 2017. We
experienced increased business
and revenue momentum in the
second half, realising the benefit of
investments made in prior periods.
In particular, second half revenue
increased 3% over the first half,
with second half segment profit up
11% over the first half on a constant
currency basis.
We are delivering on our strategy of
providing integrated, market-leading
products, with critical milestones
achieved to existing and new clients.
Revenue growth in Australia,
New Zealand and Asia was strong
and included the impact of 2016
acquisitions. Our financial markets
business shows continued resilience
as clients continue to experience cost
pressures. Our wealth management
business also experienced solid
underlying growth, underpinned by
continuing demand for our solutions.
08
IRESS LIMITED ANNUAL REPORT 2017
IRESS LIMITED ANNUAL REPORT 2017 Tony D’Aloisio
Chairman
Andrew Walsh
Managing Director &
Chief Executive Officer
Business activity
During the year IRESS achieved
a number of business highlights,
including:
–
XPLAN Prime: During the second
half of 2017, our new scaled
advice solution, XPLAN Prime,
was delivered to three ASX-listed
financial services businesses.
Market demand for this new
solution is strong.
– Integrated solutions: Critical
project milestones were achieved
for Tilney Group and Close
Brothers Asset Management in
the United Kingdom, and Echelon
Wealth Partners in Canada.
–
Superannuation: Delivery of
a managed technology service
and adoption of Acurity by
industry super fund, Statewide
Super, significantly automating
superannuation administration.
– Portfolio management:
Increased demand for IRESS’
portfolio management solution
to new and existing retail and
institutional buy-side clients.
–
Lending: Major retail bank TSB
went live in the second half
with MSO V2 and we reached
agreement with our first Australian
client to deliver our mortgage
solution during the first half
of 2018. Lending recurring
revenue increased from 10% to
15% of total revenue, reflecting
client deliveries.
–
Client and user experience:
Investments in improving core
products and technology for
our clients and users to improve
experience and ensuring greater
leverage, simplicity, and scale.
People
In response to feedback from people
and market research, during 2017
we reviewed and extensively tested
a new non-executive remuneration
framework. In 2018 we are
implementing this model. This will
see a greater focus on collective
performance to drive increased
collaboration as well as simplicity and
transparency in how we reward and
recognise our people. Under the new
model, individual cash bonuses will
not continue and will be replaced with
a profit share arrangement for our
people, with those who consistently
excel being offered equity as a fixed
percentage of their base salary.
Our focus in 2018
2018 will see IRESS continue to
focus on growth in all of our markets.
Our unique product and solution set,
our strong track record and our real
on-the-ground presence in each
market we serve are strong
competitive advantages.
External drivers including a demand
for integration, market consolidation,
regulatory change and a desire for
business efficiency are strong drivers
of our growth strategy.
We will continue to focus on scale
and efficiency through operational
leverage. We are well advanced with
technology initiatives to improve
delivery to our clients as well as
support greater efficiency.
Thank you
We take this opportunity to thank
you – IRESS’ shareholders – as well
as our clients, users and people, for
your continued support.
In the United Kingdom, we continue
to experience strong demand from
existing and new clients for integrated
solutions across IRESS’ trading and
advice product suite. 2017 saw
moderate revenue growth and one-off
costs associated with the delivery of
a large and strategically important
client project impacting direct
contribution. In the UK, recurring
revenue represents approximately
93% of total revenue, while XPLAN
sales contributed around 20% of total
revenue highlighting its progress in
the market.
Lending revenue in the UK was
steady as this business continues to
make good progress transitioning to a
subscription revenue model. In 2017
recurring license fees contributed
approximately 15% of total revenue,
up from 10% in 2016, reflecting key
client deliveries.
South Africa achieved solid underlying
revenue and Segment Profit growth,
which was accelerated by the positive
impact of the first full year contribution
from INET. Our business in Canada
improved, reflecting successful
client project deliveries, strong client
retention and a strong focus on
cost control.
Dividend and capital
management
In respect of second half earnings,
the Directors determined to pay
a final dividend of 28.0 cents per
share franked to 60% at a 30%
corporate tax rate. This represents
a total dividend for the year ended
31 December 2017 of 44.0 cents
per share, which is in line with 2016.
IRESS’ net debt balance at 31
December 2017 increased marginally
to $165.8 million (2016: $155.9 million),
equal to 1.3 times annualised
Segment Profit, and continues
to reflect a conservative balance
sheet position.
09
Principal
Activities
01010000 01110010 01101001 01101110 01100011 01101001 01110000 01100001 01101100 00001010 01000001 01100011 01110100
01101001 01110110 01101001 01110100 01101001 01100101 01110011
IRESS is a leading provider of technology to the financial
services industry. It was founded in Australia in 1993 and
operates in Australia, New Zealand, the United Kingdom,
South Africa, Canada and Asia. IRESS’ revenue is primarily
recurring and subscription based.
Our unified technology capability
We partner with and support clients from small retail to large institutional firms across multiple segments of
the financial services industry. Our solutions sit at the centre of our clients’ businesses, supporting their core
operations, providing end-to-end functionality and connectivity through back, middle and front office operations
and to our clients' customers.
Financial
Markets
Solutions
Global market data and
trading software including
order and execution
management services,
smart order routing,
FIX services, portfolio
management, securities
lending, analytical tools
and connectivity
Clients
Private Wealth
Management
Wealth
Management
Lending
Integrated software
solution offering market
data, order management,
portfolio management,
CRM and wealth
management platform.
Integrated wealth
management
platform offering
client management,
business automation,
portfolio data, research,
financial planning
tools, digital client
solutions and scaled
advice. Superannuation
administration platform.
Multi-channel mortgage
sales and origination
platform including
automated workflow and
processing. Mortgage
intermediary advice and
mortgage comparison
solution.
Sell-side and buy-
side institutions, retail
advisory, online brokers
and platforms
Discretionary retail
fund managers, private
client advisers, wealth
managers.
Institutional and
independent advisory,
wealth managers,
mortgage intermediaries.
Lenders, mortgage
intermediaries.
10
IRESS LIMITED ANNUAL REPORT 2017 Material business risks
The material business risks that have the potential to impact the Group are outlined below, together with
mitigating actions undertaken to minimise these risks.
Risk
Nature of risk
Mitigation
Information
security breach
and failure of
critical systems
Due to the nature of IRESS’
business, the Group could be
impacted significantly by the failure of
critical systems, whether caused by
error or malicious attack.
Dedicated information security functions across jurisdictions.
Board oversight through the Audit & Risk Committee and
executive oversight via Information Security Governance
Committee and Chief Information Security Officer.
Economic
climate
Foreign
Exchange
Regulation
Economic conditions, domestically
and internationally, can impact client
revenue and accordingly, client
demand for IRESS’ systems.
IRESS is exposed to foreign
exchange movements which may
affect the value of profits repatriated
to Australia.
Regulation can impact IRESS
and its clients because regulation
increases the cost of doing business,
or because regulation results
in structural changes, including
consolidation or fragmentation,
both of which can negatively impact
IRESS client engagements.
Market or
technology risk
The risk that a pronounced shift in
technology or a pronounced change
in the way market-segments organise
themselves and make use of IRESS’
products or solutions.
IRESS’ controls, audit and governance provides a framework
for actively identifying gaps, new exposures and the
development of appropriate treatment plans.
Network and malware scanning and mandatory information
security awareness training across the business.
Comprehensive disaster recovery procedure in place.
Focus on redundancy for internal and critical systems.
This risk is mitigated by IRESS’ diverse geographic presence
and diverse product portfolio.
IRESS’ presence in several jurisdictions and the increase in
relative revenue contributions from those jurisdictions tends
to ameliorate some of this exposure. IRESS reports foreign
exchange movements transparently in its periodic financial
statements in order to enable investors to better understand
the performance of the underlying business.
IRESS’ risk management strategy includes the close
monitoring of regulatory developments globally. IRESS
is pro-actively engaged in the development of new and
existing relationships with relevant regulatory stakeholders,
policy makers, and media groups to monitor the regulatory
landscape. This strategy is focused on limiting potential
impacts of regulatory development so that IRESS may
continue to service its global markets and efficiently respond
to compliance requests.
IRESS endeavours to manage this risk by maintaining a
highly skilled and educated technology organisation and
by exploring the potential utilisation or impact of emerging
technologies. In the same way, IRESS endeavours to
manage market change by maintaining a high degree
of engagement with its customers. In that regard IRESS
is fortunate that its customer base, being distributed
geographically and being comprised of highly sophisticated
industry representatives, is likely to be at the forefront of
industry change and evolution.
11
Operating &
Financial Review
01001111 01110000 01100101 01110010 01100001 01110100 01101001 01101110 01100111 00100000 00100110 00100000 01000110
01101001 01101110 01100001 01101110 01100011 01101001 01100001 01101100 00100000 01010010 01100101 01110110 01101001
01100101 01110111
IRESS’ financial performance is underpinned by a focus on
client service and support, ongoing investment in products
and technology, increasing product and geographical
diversification and a recurring subscription revenue model.
REPORTED (AUDm)
Operating Revenue - reported
- constant currency basis
Segment Profit - reported
- constant currency basis
Segment Profit after Share Based Payments
EBITDA
Reported NPAT
Basic EPS (cents per share)
Dividend (cents per share)
Operating Revenue
On a reported basis, revenue from
ordinary activities grew 10% to
$430.0m in 2017 (2016: $389.7m)
which primarily reflects a full year
contribution from businesses
acquired in 2016 and underlying
growth in all geographies, most
notably Australia, South Africa and
the UK. On a constant currency
basis, total revenue growth in 2017
was 13% and 4% excluding 2016
acquisitions.
In Australia, revenue growth was
driven by:
– Continuing strong underlying
demand for IRESS’ wealth
management platform, XPLAN.
The financial services sector
globally continues to look to
technology to increase efficiency,
manage risk in an increasingly
complex regulatory environment
and deliver improved client
experience;
– Deployment of XPLAN Prime
to three ASX listed clients, two
of whom have gone live and
are actively using this product
to change the way they deliver
scaled wealth advice to their
customers;
– Increased demand for IRESS’
portfolio management solution
to new and existing buy-side
financial markets clients, reflecting
increased focus on transparency
and efficiency; and
– Full year revenue contribution
from Financial Synergy, which
was acquired in October 2016.
In the United Kingdom, full year
revenue growth of 3% (in local
currency) reflected increased
revenue in the second half following
successful client deliveries and
increased uptake from existing
customers. The UK is underpinned
by similar global wealth management
themes, with the evolving regulatory
environment and industry landscape
continuing to heighten demand
for broader IRESS solutions that
support integrated wealth and trading
capabilities and unify diverse internal
technology needs.
In South Africa, revenue growth
was driven by a full year revenue
contribution from INET BFA, which
was acquired in November 2016, and
continuing strong underlying demand
for IRESS’ suite of trading, market
data and advice solutions.
2016
389.7
389.7
123.5
123.5
112.7
103.5
59.5
37.0
44.0
2017
430.0
439.8
125.4
126.6
116.1
107.3
59.8
35.4
44.0
Movement
from 2016
10%
13%
2%
3%
3%
4%
1%
(4%)
-
Segment Profit
IRESS uses Segment Profit as a
measure of underlying earnings to
aid inter-period comparability of
results. In 2017, reported Segment
Profit increased 2%, reflecting
revenue growth, particularly from
business acquired in 2016 and from
Australia and the UK in the second
half, and targeted investment in the
delivery of strategically important
client deployments, global product
development, migration of clients to
latest product releases with enhanced
functionality and increased delivery
capability to support future growth.
On a constant currency basis,
Segment Profit increased 3% in 2017
reflecting 11% growth in the second
half from increased revenue with only
marginal cost growth. Excluding the
impact of 2016 acquisitions constant
currency Segment Profit was down
3% in 2017 reflecting the targeted
cost investment that exceeded
underlying revenue growth.
APAC Financial Markets
Financial Markets revenue grew 1%
in 2017 ($1.6m) which reflects growth
in demand for portfolio management
solutions amidst continuing
challenging market pressures,
particularly on the institutional
sell side.
12
IRESS LIMITED ANNUAL REPORT 2017 REPORTED (AUDm)
APAC Financial Markets
ANZ Wealth Management
UK
Lending
South Africa
Canada
Total Group
Product and Technology
Operations
Corporate
Segment Profit
OPERATING REVENUE
2016
113.5
93.8
110.8
26.0
28.7
16.9
2017
115.1
125.1
105.5
23.8
42.8
17.7
389.7
430.0
Movement
from 2016
1%
33%
(5%)
(9%)
49%
5%
10%
DIRECT CONTRIBUTION
2016
84.1
75.7
73.2
21.1
22.4
7.8
284.4
(98.4)
(34.2)
(28.2)
123.5
2017
83.8
93.9
67.3
18.6
32.8
9.0
305.4
(108.3)
(38.7)
(33.0)
125.4
Movement
from 2016
(0%)
24%
(8%)
(12%)
47%
15%
7%
10%
13%
17%
2%
Revenue from Asia remained in line
with the prior year but is expected to
grow in 2018 as Maybank Kim Eng
continues to roll out IRESS’ online
trading solution to its retail clients.
The small decline in Direct
Contribution reflects wage inflation.
Increases in other costs, including
external market data, are largely
passed onto clients.
ANZ Wealth Management
Momentum in Wealth Management
remained strong in 2017 with revenue
growth of 33% from 2016 reflecting
the full year contribution from
Financial Synergy, and 7% underlying
growth from the increase in the
uptake of services by IRESS’ existing
clients in response to business
challenges and opportunities and
regulatory complexity.
During 2017, three key Australian
Wealth Management clients took
delivery of IRESS’ scaled advice
solution, XPLAN Prime, changing
the way advice professionals deliver
scaled advice. Interest in XPLAN
Prime remains strong and provides
strong efficiency opportunities
for each of large wealth advice
businesses, superannuation
funds, and independent financial
advice businesses.
During the year, the Superannuation
business successfully rolled out its
Acurity managed superannuation
platform to Statewide Super,
replacing multiple legacy systems
and enabling the fund to focus
(1) Previously called UK Lending
on the needs of their more than
140,000 members.
IRESS also completed development
of a digital superannuation solution
that provides increased functionality
and engagement for members. This
solution is attracting strong interest
from industry superannuation funds
in Australia.
In 2017, XPLAN was voted the
number one financial planning
software in Australia for the tenth
consecutive year.
UK
In local currency, revenue increased
3% from 2016 to 2017 which reflects
delivery of a number of client projects
and client retention. Revenue was
slightly down in the first half of 2017,
when compared to the second
half of 2016 reflecting the focus on
key project delivery. Revenue grew
3% in the second half reflecting
client deliveries and increased
uptake from existing clients across
services, including revenue growth
for services provided by IRESS’
The Exchange. Recurring revenue
represents approximately 93% of total
revenue, while XPLAN contributed
approximately 20% of total revenue
reflecting progress in the market.
In local currency, direct contribution
was flat on the prior year which
reflects investment in delivery
capacity and one-off costs associated
with the delivery of a large and
strategically important client project in
an accelerated time-frame.
During 2017, IRESS successfully
delivered a major milestone with
prominent wealth manager Close
Brothers Asset Management (CBAM)
to deliver an integrated private wealth
technology platform and new digital
client portal that replaces a number of
existing systems and processes with
a unified technology solution.
IRESS continues to experience strong
demand from existing and new clients
for integrated solutions across IRESS’
trading and advice product suite,
reflecting broader industry challenges
to support integrated wealth and
trading capabilities and unify diverse
internal technology stacks.
Lending(1)
In local currency, revenue and direct
contribution remained largely in line
with the prior year. The Lending
business continues to make
good progress transitioning to a
subscription revenue model with
recurring licence fees contributing
approximately 15% of total revenue
in 2017, up from 10% in 2016.
In the second half of the year,
prominent high street bank, TSB,
went live with version 2.0 of IRESS’
Mortgage Sourcing and Origination
product and IRESS reached
agreement to deliver our mortgage
solution to an Australian client, the
first client for this product outside
the UK.
13
Operating &
Financial Review continued
01001111 01110000 01100101 01110010 01100001 01110100 01101001 01101110 01100111 00100000 01000110 01101001 01101110
01100001 01101110 01100011 01101001 01100001 01101100 00100000 01010010 01100101 01110110 01101001 01100101 01110111
South Africa
Growth momentum remained
strong in South Africa in 2017. In
local currency, Operating Revenue
and Direct Contribution grew 40%
and 38% respectively, reflecting the
full year contribution from recently-
acquired INET BFA and continuing
double digit underlying revenue and
direct contribution growth due to
demand across IRESS’ product suite.
Revenue growth was underpinned
by increasing demand from existing
clients for trading solutions, trading
algorithms and automation, market
data and SmartHub trading
connectivity. Variable revenues,
which represent approximately 5%
of total revenue in South Africa, were
slightly down due to reduced trading
volumes on the JSE, which were 5%
below the prior year.
Canada
In local currency, Operating
Revenue increased 6% while Direct
Contribution increased 16%. This
result reflects successful client project
deliveries coupled with sell-side
client retention and some increased
uptake from existing clients. IRESS’
footprint in the Canadian wealth
management market continues to
progress well and grow following
delivery of a number of wealth
solution deployments including
a complete solution to leading
Canadian independent firm Echelon
Wealth Partners which has more
than CAD 4 billion assets under
management.
Product and Technology
The scale of investment in product
and technology is at the heart of
IRESS’ success and market position,
supporting client retention and future
recurring revenue growth.
Corporate
Corporate costs include IRESS’
central business functions including
human resources, finance,
communications & marketing, legal
and other general corporate costs.
Product and Technology cost
is primarily made up of people
costs and reflects IRESS’ ongoing
investment in existing and new
technology. Costs increased from
$98.4m in 2016 to $108.3m in 2017
which reflects the cost contribution by
the acquisitions of Financial Synergy
and INET BFA, and headcount and
wage increases, much of which
resulted from recruitment in the prior
year. Cost growth in the second
half was approximately 1% (when
compared to the first half).
Operations
Operational costs include core
business infrastructure and people,
such as internal and external
communications technology,
information security, operating
hardware and software, and
help desk.
Costs increased from $34.2m in
2016 to $38.7m in 2017 reflecting
the cost contribution by acquisitions
of Financial Synergy and INET BFA,
headcount and wage increases.
Costs increased from $28.2m in
2016 to $33.0m in 2017 reflecting the
cost contribution by the acquisitions
of Financial Synergy and INET BFA,
headcount and wage increases and
costs associated with a series of
IRESS people conferences held as
part of a continued focus in investing
and developing our people and
alignment to our strategic direction
and priorities. Corporate costs
declined marginally in the second
half of 2017.
Net Profit after Tax (NPAT)
IRESS’ reported NPAT increased
1% on the prior year. The increase
in Segment Profit and reduction in
share based payments, non-recurring
items and interest was offset by
higher depreciation and amortisation
charges that are discussed in more
detail below.
The cost of issuing share-based
remuneration to employees is
amortised to the P&L over the vesting
period (generally three years). Share-
based payments expense declined
from the previous year as a result of
a higher forfeiture rate in 2017.
REPORTED (AUDm)
Segment Profit
Share based payments
Segment Profit after Share based payments
Other non-operating items
Profit before interest and income tax expense
Depreciation and amortisation
EBIT
Net interest and financing costs
Tax
Reported NPAT
2016
123.5
(10.8)
112.7
(9.2)
103.5
(21.1)
82.5
(5.5)
(17.5)
59.5
2017
125.4
(9.3)
116.1
(8.8)
107.3
(25.1)
82.2
(4.4)
(18.0)
59.8
Movement
from 2016
2%
(14%)
3%
(4%)
4%
19%
(0%)
(19%)
3%
1%
14
IRESS LIMITED ANNUAL REPORT 2017 Non-operating items are primarily
related to:
– Integration of businesses acquired
in 2016 and 2015;
– Business restructuring, including
re-organisation of the senior
leadership team;
– Relocating and refurbishment
of the Sydney and Melbourne
offices; and
– Implementation of new corporate
core systems.
Depreciation and amortisation
represents depreciation of operating
fixed assets and amortisation of
intangible assets acquired within
business acquisitions. The increase
from 2016 reflects higher depreciation
costs on the new Sydney office and
amortisation charges in respect of
the software acquired as part of the
acquisition of Financial Synergy and
INET BFA in 2016.
Net interest and financing costs
reduced by 19% from the prior year
which reflects lower average debt
levels and a higher proportion of
debt in GBP which attracted a lower
interest rate.
The Group’s effective tax rate of
23.2% is the aggregate of tax rates in
the jurisdictions in which the business
operates, deductions associated
with employee share plans and
previously unrecognised tax losses
and other true-up adjustments to
historical items.
Dividends
The IRESS dividend policy is to
maintain a payout ratio of not less
than 80% of underlying earnings
on an annualised basis, subject to
accounting limitations. The dividend
policy may be modified by the
Board in the future, where it is felt
appropriate. Dividends continue
to be franked to the greatest
extent possible, while reflecting the
geographical context of the business.
Balance Sheet
The Sydney office was successfully
moved to a new, upgraded premises
during the year and substantial
progress was made on the upgrade
of the Melbourne office. The new
office environment will facilitate new,
more agile ways of working and
represents an investment in IRESS’
culture and people.
IRESS’ debt facilities were refinanced
during the year extending tenor.
DIVIDENDS
Interim dividend franked to 60% (2016: 60%)
Final dividend declared after balance sheet date franked
to 60% (2016: 60%)
Total
$m
2016
25.8
47.6
73.4
The increase in net debt by
$9.9 million was due to an increase
in borrowings used to fund the fit out
of IRESS’ new Sydney premises and
investment in computer equipment
and systems during the year. As a
result, gearing increased marginally,
but remains conservative at 1.3x
Segment Profit at the end of the year.
IRESS continues to actively manage
cash holdings to reduce interest costs.
The disposal of part of the funds
administration business that
services customer owned banks
and the amortisation of intangibles
recognised from past acquisitions
has resulted in a decrease in the
carrying amount of intangible assets.
Plant and equipment has increased,
mainly from the fitout of our new
Sydney premises and investment in
computer equipment and systems
during the year.
Following a successful reassessment
of our prior period tax returns, the
Group received a refund during the
year resulting in the reduction of
current tax payables.
Included in provisions are deferred
considerations for prior acquisitions.
Payments were made during
the year for the Pulse acquisition
following successful achievement of
required milestones. The remaining
deferred consideration is expected
to be paid in 2018.
$m
2017
27.4
48.0
75.4
Cents per
share
2016
Cents per
share
2017
16.0
28.0
44.0
16.0
28.0
44.0
15
Board of
Directors
01000010 01101111 01100001 01110010 01100100 00100000 01101111 01100110 00001010 01000100 01101001 01110010 01100101
01100011 01110100 01101111 01110010 01110011
TONY D’ALOISIO
GEOFF TOMLINSON
Independent Non-Executive Director since June
2012, Chairman since August 2014
Tony has 45 years’ experience as a senior executive in
government, corporate and legal roles. Tony became
Chairman of Perpetual in May 2017, following his
appointment as independent non-executive director in
December 2016. He was appointed as a Commissioner
for the Australian Securities and Investment Commission
(ASIC) in late 2006 and then as Chairman in 2007 for a
four-year term. He was Chairman of the (International)
Joint Forum of the Basel Committee on Banking
Supervision from 2009 to 2011. Prior to ASIC, he was
managing director and chief executive officer at the
Australian Securities Exchange (ASX) from 2004 to 2006.
Tony was chief executive partner at Mallesons Stephen
Jaques between 1992 and 2004, having first joined the
firm in 1977. Tony has a depth of experience in executive
and non-executive roles, which are directly relevant as we
grow our international footprint in financial markets and
wealth management.
Independent Non-Executive Director since
February 2015
Geoff has more than 40 years’ experience in financial
services. His executive career encompassed 29 years with
the National Mutual Group, including six years as group
managing director and chief executive officer. He was a
non-executive director of National Australia Bank from
March 2000 to December 2014, including Chairman of
its wealth management division MLC. Other companies
he has been a director of include Amcor, Suncorp, Dyno
Nobel, Programmed Management Services and Neverfail
Springwater. Geoff is Chairman of Growthpoint Properties
Australia, Calibre and Wingate Asset Management, and a
director of Wingate Group Holdings.
ANDREW WALSH
Executive Director and Chief Executive Officer
since October 2009
After a career as an actuarial consultant, Andrew
co-founded and spearheaded the development of market
leading financial planning software XPLAN and joined
IRESS when it acquired XPLAN Technology in 2003.
Andrew became IRESS’ CEO in 2009 and has since
led the growth of the group. Under Andrew’s leadership
IRESS’ market capitalisation has doubled to approximately
$2 billion.
Since Andrew became CEO, IRESS has expanded
organically and made several local and international
acquisitions and now has more than 1,800 people
designing, developing and delivering software
solutions for the financial services industry in Australia,
New Zealand, the United Kingdom, South Africa, Canada
and Asia.
JENNY SEABROOK
Independent Non-Executive Director since 2008,
Chair of the People & Performance Committee
since May 2011
Jenny has more than 30 years’ experience as a
chartered accountant, investment banker and capital
markets adviser. She is highly experienced in mergers
and acquisitions and has extensive public company
board experience. She is a senior advisor to Gresham
Advisory Partners and a non-executive director of
listed entities, Iluka Resources and MMG and of federal
government corporation Australian Rail Track Corporation
and Western Australian Treasury Corporation. Former
directorships include Alinta Gas, Amcor, Australia Post,
Edith Cowan University, Export Finance and Insurance
Corporation, Bankwest, MG Kailis, Princess Margaret
and King Edward Hospital, West Australian Newspapers
and Western Power. Jenny has been a member of
ASIC’s external advisory group and was a member of the
Takeovers Panel from 2000 to 2012.
16
IRESS LIMITED ANNUAL REPORT 2017 JOHN CAMERON
JULIE FAHEY
Independent Non-Executive Director since
March 2010
John is one of the pioneers of electronic trading. He was
a key member of the team that first automated the trading
floor of the Australian Securities Exchange, one of the first
in the world. He has designed and developed information
systems for major financial institutions in the United
Kingdom, France, the United States and Australia. In 1997
John created what was to become the world’s leading FIX
solution, CameronFIX. It was acquired by Orc Software in
2006 where John served as CTO. John left Orc in 2009
and created the Cameron Foundation. John now works
for the global refugee initiative Talent Beyond Boundaries.
Independent Non-Executive Director since
October 2017
Julie has over 30 years of experience in technology,
including in major organisations such as Western Mining,
Exxon, Roy Morgan, General Motors and SAP, covering
consulting, software vendor and chief information
officer roles. In addition to her industry experience,
Julie spent 10 years at KPMG as a partner with the
firm, during which time she held roles as national lead
partner telecommunications, media and technology, and
national managing partner - markets. Julie was also a
member of the KPMG National Executive Committee.
Julie is a non-executive director of SEEK, Datacom
Group, CenITex, Vocus Group and non-profit disability
services organisation Yooralla, and a member of the
Emergency Services Telecommunications Authority’s ICT
Advisory Board.
JOHN HAYES
NIKI BEATTIE
Independent Non-Executive Director since June
2011, Chair of the Audit & Risk Committee since
June 2011
John has been a non-executive director since June 2011
and Chair of the Audit & Risk Committee. A Fellow of
CPA Australia with over 40 years’ experience in financial
services. Senior roles included CFO of both ASX and
Advance Bank Australia and Vice President Financial
Services with BT Australia. John’s previous directorships
include ASX Perpetual Registry (now Link Market Services)
and Orient Capital as well as executive director roles
with the Australian Clearing House, ASTC (CHESS) and
ASX Operations. He was also previously a member of
the Advisory Council of Comcover, a federal government
entity, for six years.
Independent Non-Executive Director since
February 2015
Niki has more than 25 years’ experience in financial
technology and capital markets. She currently runs
Market Structure Partners, a strategic consulting firm.
Niki spent more than a decade in senior positions at
Merrill Lynch International. She is currently non-executive
chairman of pan-European share trading platform, Aquis
Exchange and of XTX Markets, a quantitative-driven,
electronic global market-maker. She is also non-executive
director of European financial services company Kepler
Cheuvreux International and Borsa Istanbul, the Turkish
stock exchange. She was previously on the board of
MOEX, the Moscow Exchange. She serves on the
Regulatory Decisions Committee of the UK Financial
Conduct Authority and the Secondary Markets Advisory
Committee to the European Securities Markets Authority.
COMPANY SECRETARY
Peter Ferguson
Peter joined IRESS in 2011 and has many years’ experience in international legal and commercial appointments in the
financial technology sector, with prior international and domestic appointments including seven years with Nasdaq OMX,
located in Stockholm and later Sydney, GBST and SIRCA.
17
Directors’ Report
For the year ended 31 December 2017
The Directors of IRESS Limited and its subsidiaries (“the Group”) submit the annual financial report for the year ended 31 December 2017.
DIRECTORS MEETINGS
The following table sets out the number of meetings of the Company’s Board of Directors and of each Board Committee held during the year
ended 31 December 2017, and the number of meetings attended by each Director.
Director
Tony D’Aloisio
Niki Beattie
John Cameron
Julie Fahey (1)
John Hayes
Jenny Seabrook
Geoff Tomlinson
Andrew Walsh
BOARD MEETINGS
AUDIT & RISK
PEOPLE & PERFORMANCE
Eligible
Attended
Eligible
Attended
Eligible
Attended
6
6
6
2
6
6
6
6
6
6
6
2
5
6
6
6
5
*
*
1
5
5
5
*
5
*
*
1
5
5
5
*
6
6
6
1
*
6
*
*
6
6
6
1
*
6
*
*
(1) Julie Fahey was appointed as a Director on 6 October 2017.
* Not a member of this committee.
SUBSEQUENT EVENTS
On 22 February 2018, the directors declared a final dividend of 28.0 cents per share franked to 60% totalling $48.0 million.
Other than the dividend declared, there has been no other matter or circumstances which has arisen since the end of the financial year which
has significantly affected, or may significantly affect, the operations of the Group, the results of those operations, or the state of affairs of the
Group in subsequent years.
CHANGES IN OPERATIONS DURING THE YEAR
During the year, the operations of the Group were not modified in any material way.
CHANGES IN STATE OF AFFAIRS
Significant changes in the state of affairs of the Group during the financial year are outlined below:
(i) Extension of borrowings
On 21 November 2017, the Group successfully refinanced its $300 million debt facility of which $181.25 million was expiring in September 2018
and $118.75 million was expiring in September 2020, to a four-year maturity expiring in November 2021.
(ii) Divestments
On 13 July 2017, IRESS entered into an agreement with Mainstream BPO to divest part of its superannuation administration business that
provides services to customer-owned banks for $3.3 million. The transaction was completed on 9 November 2017, with the sale proceeds
received in full during the 2017 year. No gain or loss (before transaction costs) was recognised on the transaction.
18
IRESS LIMITED ANNUAL REPORT 2017 Directors’ Report
For the year ended 31 December 2017
INDEMNIFICATION OF OFFICERS AND AUDITORS
During the year, the Company paid a premium in respect of a contract insuring each of the Directors of the Company (as named above), the
Company Secretary and each of the Executive Officers of the Company and any related body corporate against a liability or expense incurred
in their capacity as a Director, Secretary or Executive Officer to the extent permitted by the Corporations Act 2001. Further details have not
been disclosed due to confidentiality provisions in the insurance contract.
In addition, the Company has entered into a Deed of Indemnity which ensures that a Director or an officer of the Company will generally incur
no monetary loss as a result of defending actions taken against them as a Director or an officer. Certain actions are specifically excluded, for
example, penalties and fines which may be imposed in respect of breaches of the law.
The Company has not otherwise, during or since the end of the financial year, except to the extent permitted by the law, indemnified or agreed to
indemnify an officer or auditor of the Company or of any related body corporate against a liability incurred in their capacity as an officer or auditor.
NON-AUDIT SERVICES
Details of the amounts paid or payable to the auditor for audit services provided during the year by the auditor are outlined in Note 1.5 to the
financial statements. During the year, the Company’s auditor has performed certain other services in addition to its audit responsibilities.
The Board is satisfied that the provision of 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 to ensure that they do not impact the
integrity and objectivity of the auditor; and
• the non-audit services provided did not undermine the general principles relating to auditor independence as set out in APES 110 Code of
Ethics for Professional Accountants as they did not involve reviewing or auditing the auditor’s own work, acting in a management or decision
making capacity of the Company, acting as an advocate of the Company or jointly sharing risks or rewards.
AUDITOR’S INDEPENDENCE DECLARATION
A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001, is set out on page 45.
ROUNDING OF AMOUNTS
The amounts shown in this report and in the financial statements have been rounded off, except where otherwise stated, to the nearest
thousand dollars, the Company being in a class specified in the ASIC Corporations (Rounding in Financial / Directors’ Reports) Instrument
2016/191, issued by the Australian Securities and Investments Commission.
CORPORATE GOVERNANCE
The Corporate Governance Statement is located on the IRESS website https://www.iress.com/global/company/corporate-governance/
corporate-governance-statement/.
19
Directors’ Report
For the year ended 31 December 2017
AUDITED REMUNERATION REPORT
This remuneration report provides detail of IRESS’ remuneration policy and practice for Key Management Personnel (KMP) for the 2017
financial year. The information presented in this report has been audited as required under section 308(3C) of the Corporations Act 2001 and
forms part of the Directors’ Report.
CONTENTS
Section 1
Section 2
Section 3
Section 4
Section 5
Section 6
Section 7
Section 8
Section 9
Overview
Key Management Personnel
Remuneration approach
Remuneration components in detail
Actual remuneration realised
Remuneration awarded and the link between performance and reward
Executive KMP service agreements
Remuneration governance
Non-executive Director fees
Section 10
Additional required disclosures
21
23
24
26
30
31
36
37
38
39
20
IRESS LIMITED ANNUAL REPORT 2017 Directors’ Report
For the year ended 31 December 2017
Section 1 Overview
1.1. REMUNERATION APPROACH
IRESS’ remuneration objectives are to attract, retain and reward the people needed to deliver its strategy and to align the interests
of shareholders and employees. There are three key aspects to IRESS’ remuneration approach:
•
•
IRESS offers total remuneration (comprised of fixed remuneration and ‘at risk’ incentive opportunity) at market rates to attract and retain
individuals who collectively possess the capability IRESS requires to succeed (see Section 3.1);
IRESS establishes financial and non-financial objectives for the Group and individual executives at the start of the year, which are used
at the end of the year to assess Group and individual performance, and to determine incentive outcomes based on performance (see
Section 3.2); and
•
IRESS delivers a significant proportion of remuneration in equity (IRESS shares and rights to IRESS shares subject to satisfaction of
conditions) to further align the interests of executives and staff with shareholders’ long-term interests (see Section 3.3).
1.2 PERFORMANCE AND REMUNERATION OUTCOMES
Section 6.2 of this report details the Board’s assessment of the Group’s performance in 2017 against the financial and non-financial objectives
it established at the beginning of the year. In summary, performances against financial objectives and some non-financial objectives were below
the targets set by the Board at the start of the year.
The Board’s assessment of the performance of Executive KMP (as listed in Section 2) and their future contribution to the Group has translated
into the following remuneration outcomes:
Fixed remuneration
Base salary, superannuation,
and non-monetary benefits
Total fixed remuneration paid to Executive KMP in 2017 was $4,832,885 (2016: $5,005,625). The decrease
of 3% primarily reflects changes to the operating structure during 2017, which reduced the number of
Executive KMP from nine (as at 1 January 2017) to seven (as at 31 December 2017). The resulting decrease
in fixed remuneration was partially offset by the full year impact of 2016 pay rises and a 2017 increase in base
salary that reflected a change in role.
Short-term incentive (STI)
An incentive delivered in cash
and equity based on the
performance against financial
and non-financial objectives
Long-term incentive (LTI)
An incentive delivered in
performance rights that
vest subject to a relative
Total Shareholder Return
(TSR) performance
The STI to be awarded to Executive KMP for 2017 performance (see Section 6.4) totals $1,819,952 (2016:
$2,476,282), including:
• Cash STI to be paid following the release of annual results in February 2018 of $332,510
(2016: $843,765); and
• Equity STI of $1,487,442 (2016: $1,632,517) to be delivered in Deferred Share Rights in May 2018 that
vest in May 2021 subject to ongoing service and satisfactory performance (Equity STI award is subject
to shareholder approval for the MD/CEO).
• The decrease is reflective of a reduced number of Executive KMP, and the below target Segment Profit
performance of the Group.
(a) The LTI to be awarded to Executive KMP for performance in 2017 is performance rights with a face
value of $2,095,000 (2016: $2,335,968), inclusive of $1,000,000 (2016: $1,340,000) for the MD/CEO
(subject to shareholder approval). The performance rights may or may not vest in future years, subject
to the conditions described in Section 4.3.
(b) In 2017, Executive KMP LTI awards from prior years vested due to superior TSR performance, as outlined
in Section 6.3.
21
Directors’ Report continued
For the year ended 31 December 2017
Section 1 Overview continued
1.3 KEY CHANGES TO REMUNERATION STRUCTURE
2017
In 2017, the Board refined the guidelines it uses when determining executive STI outcomes. This initiative was intended to:
• Further enhance the process for assessing Group and Executive performance and the impact on remuneration.
•
Increase transparency for shareholders and executives regarding remuneration outcomes.
The following elements were further defined:
• Target remuneration outcomes were formalised for each executive with reference to the nature of the role, local market practice and total
remuneration opportunity.
• The Cash STI pool for the executive group is adjusted based on the Group’s financial performance against budget.
• Final Cash STI outcomes for each executive are then determined with a 50% weighting to the performance of the Group against
non-financial objectives and a 50% weighting to the executive’s performance against their individual financial and non-financial objectives.
The final determination of STI outcomes continues to be subject to overall Board discretion.
Additionally, there were several changes made to simplify administration of equity schemes effective for grants made in 2017:
• Equity grants will generally be made one week after the AGM.
• Deferred share rights and performance rights are now automatically exercised (converted to shares) on the vesting date in all locations.
• Participants are no longer required to pay a nominal amount of $1 at the point of exercise of a parcel of rights.
2018
In 2018, a new model for non-executive employee remuneration will be introduced. The goal of this new model is to ensure that IRESS can
continue to attract, retain, motivate and reward the exceptional talent that is needed to execute its strategy. This new model is supported by a
performance management framework that is focused on collective rather than individual success. The revised model has been based on internal
and external research and reflects the changing nature of IRESS’ workforce, and specifically, the competitive landscape in technology globally.
The revised model consists of base salary, a profit share component in which all employees receive the same cash award if the company
meets or exceeds the budget set by the Board at the start of the year and an equity award, vesting over three years, for individuals who
continually exceed expectations. Variable cash bonus payments based on individual performance will not form part of the revised remuneration
model. The profit share, combined with equity for key employees, will tangibly align employee and shareholder interests.
In light of the work underpinning changes to non-executive employee remuneration, the Board will also review IRESS’ executive remuneration
model. However, no significant changes are expected to executive remuneration in 2018.
22
IRESS LIMITED ANNUAL REPORT 2017 Directors’ Report continued
For the year ended 31 December 2017
Section 2 Key Management Personnel (KMP)
IRESS’ KMP are those persons having authority and responsibility for planning, directing and controlling the activities of the Group, directly
or indirectly. KMP comprises the Executive KMP (the MD/CEO and Group Executives) as well as Non-Executive Directors (NEDs).
For the year ended 31 December 2017, the KMP were:
KMP
Position
Term as KMP
Non-executive Directors
A D’Aloisio
N Beattie
J Cameron
J Fahey
J Hayes
J Seabrook
G Tomlinson
Executive Director
A Walsh
Executives
S Barnes
P Ferguson
J Harris
A Knowles
J McNeill
S New
M Rady
A Todd
Non-executive Chairman
Non-executive Director
Non-executive Director
Non-executive Director (1)
Non-executive Director
Non-executive Director
Non-executive Director
Managing Director and CEO (MD/CEO)
Chief Operating Officer (2)
Group General Counsel and Company Secretary
Chief Financial Officer
Group Executive, Product
Group Executive, Human Resources
Group Executive, Strategy
Group Executive, Financial Markets (2)
Chief Technology Officer (3)
Full year
Full year
Full year
Part year
Full year
Full year
Full year
Full year
Part year
Full year
Full year
Full year
Full year
Full year
Part year
Part year
(1) J Fahey was appointed to the Board 5 October 2017.
(2) S Barnes and M Rady ceased employment on 30 September 2017.
(3)
A Todd was appointed to the role of Chief Technology Officer effective 27 January 2017. David Walker, the prior incumbent, changed roles and ceased to be KMP
on 31 December 2016.
23
Directors’ Report continued
For the year ended 31 December 2017
Section 3 Remuneration approach
3.1 APPROACH TO SETTING REMUNERATION
IRESS considers the size and complexity of the role, the skills and experience of the individual and market pay levels of comparable roles
in determining fixed remuneration and ‘at risk’ remuneration opportunity. IRESS believes that the fixed and total remuneration it offers is
competitively positioned against comparable companies (based on sector and market capitalisation).
In determining ‘at risk’ remuneration outcomes IRESS considers the individual’s contribution to the business (based on individual performance
and future potential), policy remuneration mix, total remuneration and the value of unvested equity held by the individual.
3.2 SUMMARY OF IRESS’ EXECUTIVE REMUNERATION PROCESS
1.
The Board sets the financial budget for the Group. The financial budget is the primary driver
of Cash STI outcomes.
Section 4.2(d)
I
I
G
N
N
N
G
E
B
E
H
T
T
A
R
A
E
Y
E
H
T
F
O
2. The Board approves non-financial objectives for the Group.
Section 4.2(d)
3.
The Board sets individual objectives for the CEO and other executives which include
financial targets specific for each executive’s role.
Section 4.2(d)
4. The Board approves target remuneration (Cash STI, Equity STI, LTI) for each executive.
Section 4.2(d)
5.
The Board assesses the financial performance of the Group and adjusts the Cash STI pool
for executives up or down.
6.
The Board assesses the performance of the Group against non-financial objectives. This
outcome is given a 50% weighting in the determination of the Cash STI for each executive.
7.
The Board assesses the performance of each executive against individual non-financial
objectives. This outcome is given a 50% weighting in the determination of the Cash STI
for each executive.
Process: Section 4.2(e)
Outcome: Section 6.2
Process: Section 4.2(e)
Outcome: Section 6.2
Process: Section 4.2(e)
8.
The Board determines a Cash STI outcome for each executive based on points 4-7 above.
The Board applies discretion to establish the final Cash STI outcome.
Outcome: Section 6.4
9.
The Board determines the deferred equity (STI & LTI) for each executive with reference to:
the performance measures in points 5-7 above, their potential future contribution to the
organisation and the value of their unvested equity.
Outcome: Section 6.4
10. Executive KMP receive any Cash STI in March after the Group’s full-year results have been
finalised. Cash STI amounts are subject to revision up to this point in the event of material
change to company performance.
11. The MD/CEO’s Equity STI and LTI grants are subject to shareholder approval at the AGM in
May each year. Equity STI and LTI are issued after the AGM.
12. Equity STI and LTI grants for other Executive KMP are issued after the AGM, subject to
Board approval. Equity grants are subject to revision up to this point in the event of material
change to company performance.
Section 4.2 (h)
Section 4.2 (h)
Section 4.2 (h)
13. LTI grants from prior years are tested against the vesting conditions in May (with the portion
not vesting eligible for re-testing in November).
Process: Section 4.3
Outcome: Section 6.3
R
A
E
Y
E
H
T
G
N
I
R
U
D
I
R
A
E
Y
G
N
W
O
L
L
O
F
E
H
T
24
IRESS LIMITED ANNUAL REPORT 2017
Directors’ Report continued
For the year ended 31 December 2017
3.3 REMUNERATION FRAMEWORK AND MIX
As shown in the diagram below: IRESS uses a mix of fixed and ‘at risk’ remuneration to reward employees and drive performance. IRESS’
Executive remuneration framework (applying to Executive KMP and other senior executives) consists of fixed remuneration, short-term and
long-term incentives (STI and LTI).
FIXED
(see 4.1)
100% of fixed pay
awarded in cash
during the year
STI
(see 4.2)
LTI
(see 4.3)
T
N
A
D
N
E
P
E
D
E
C
N
A
M
R
O
F
R
E
P
,
I
K
S
R
T
A
Approximately one
third awarded
in cash
Paid March
Approximately two thirds of total STI award deferred in the
form of share rights (subject to a three-year service period and
satisfactory performance requirement)
Vests May
50% of performance rights have a one-year deferred start
and a three-year relative TSR hurdle.
50% of performance rights have a four-year relative TSR hurdle.
Vests May
Performance rights subject to a three-year relative TSR hurdle.
Vests May
:
O
E
C
/
D
M
R
E
H
T
O
:
I
S
E
V
T
U
C
E
X
E
Year 0
2017
Year 1
2018
Year 2
2019
Year 3
2020
Year 4
2021
Year 5
2022
IRESS also encourages employee share ownership through the award of deferred shares or deferred share rights to high performing
employees, and by offering an employee share ownership plan to all employees in Australia and the UK (see Section 4.4). The objective of the
broad reach of IRESS’ equity programs is to retain employees, motivate their long-term commitment to the company and align their interests
with those of shareholders.
The diagram below shows the mix of total remuneration that would typically be awarded to Executive KMP for a target level of performance
(“policy remuneration mix”). A significant portion of total Executive KMP remuneration is variable and at-risk:
• MD/CEO: Two-thirds (67%) of total remuneration is at risk (i.e. will not be received if service and performance criteria are not met)
and 58% is delivered in deferred equity. More than two-thirds of deferred equity has further vesting hurdles based on IRESS’ relative
TSR performance; and
• Other Executive KMP: Half of total remuneration (50%) is at risk and 41% is delivered in deferred equity. More than half of deferred
equity has further vesting hurdles based on IRESS’ relative TSR performance.
The Board believes that this remuneration mix is effective in aligning the interests of Executive KMP with shareholders.
O
E
C
/
D
M
R
O
F
E
G
A
R
E
V
A
I
P
M
K
E
V
T
U
C
E
X
E
Fixed
33%
STI Cash
9% of Total
28% of Fixed
STI Deferred
18% of Total
55% of Fixed
Fixed
33%
Cash
42%
Fixed
50%
STI Cash
9% of Total
18% of Fixed
STI Deferred
18% of Total
36% of Fixed
Fixed
50%
Cash
59%
LTI
40% of Total
123% of Fixed
At Risk
67%
Equity
58%
LTI
23% of Total
55% of Fixed
At Risk
50%
Equity
41%
There are minor differences in the remuneration mix table above to that depicted in the 2016 Annual Report. The 2016 table showed a
lower portion of total remuneration as LTI and a higher portion as Fixed and STI. When LTI was converted from fair value to face value in
2016, the face value was incorrect (LTI as a percentage of Total Remuneration was previously shown as 38% for the MD/CEO and 20% for
other Executive KMP).
25
Directors’ Report continued
For the year ended 31 December 2017
Section 4 Remuneration Components in Detail
4.1 FIXED REMUNERATION
a. What is fixed
remuneration?
b. How is fixed
remuneration
determined?
Base salary, superannuation, and other benefits (e.g. health insurance)
As noted in Section 3.1, the following factors are considered when setting fixed remuneration:
• The size and complexity of the role
• Skills and experience of the individual
• Market pay levels for comparable roles
Any decision to increase fixed remuneration is considered in the context of the resulting change in total remuneration.
4.2 SHORT-TERM INCENTIVES (STI)
a. What is the STI plan?
The STI is an ‘at-risk’ incentive awarded annually, subject to performance against pre-set financial and
non-financial objectives (refer to Section 4.2(d) below).
b. Who participates
in the STI plan?
The MD/CEO, other Executive KMP and high performing employees were eligible to participate in the STI plan
in 2017.
c. How are STI awards
delivered?
The STI is delivered in a combination of cash and deferred equity, which for Executive KMP, as shown in
Section 3.3, is typically as follows:
• One-third of the STI award is made in cash.
• Two-thirds of the award is made in deferred share rights. A deferred share right (DSR) is a deferred right
issued by IRESS to acquire one fully paid ordinary share in IRESS (subject to adjustment for certain capital
actions) at no cost. DSRs vest subject to a three-year continuing service requirement and achievement of
a satisfactory level of individual performance during these three years.
At the start of the year the Board sets the budget for the Group (and each business segment) having regard to
business strategy and prior year performance.
The primary financial metric used to determine the STI pools is segment profit, which is a measure of underlying
operating performance. The measure (as shown in Note 1.1 to the Consolidated Financial Statements)
excludes items that may fluctuate year-on-year for reasons not related to core business performance in the
current year. Consideration is also given to other financial metrics such as Earnings Before Interest, Tax,
Amortisation and Depreciation (EBITDA) and Net Profit After Tax (NPAT). The Board also considers the impact
of foreign exchange rate movements on financial performance.
The Board also confirms non-financial goals and specific targets for the Group at the start of the year in key
focus areas:
Focus area
Performance goals
Clients
Growth
People
Maintain resilient leadership in existing markets.
Grow revenue organically and pursue inorganic opportunities where appropriate.
Position IRESS as an employer of choice globally.
Products/Technology Anticipate trends and innovate to maintain product leadership.
Group/Corporate
Enhance IRESS’ brand through strong stakeholder relationships and communication.
Enhance and scale internal systems to support client service, delivery and growth.
Individual targets in each of the focus areas are set for the MD/CEO and each Executive KMP. Individual targets
include financial and non-financial objectives specific to that executive’s role.
Finally, the Board establishes target remuneration (Cash STI, Equity STI and LTI) for the MD/CEO and each
Executive KMP.
Target remuneration outcomes for each executive have regard to:
• The Group’s financial budgets and and non-financial objectives for the year
• Policy remuneration mix (refer section 3.3) and an appropriate balance between cash and equity
• The nature of each executive’s role and the individual financial and non-financial objectives they have been
set for the year
• Market practice in the region where each executive is employed
• The total remuneration opportunity
The target STI outcomes for each executive KMP are shown in Section 6.4.
d. What are the
performance
measures and how
are they established?
26
IRESS LIMITED ANNUAL REPORT 2017 Directors’ Report continued
For the year ended 31 December 2017
e. How is performance
assessed and STI
awarded at the end
of the year?
The performance of the Group against budget (primarily segment profit, with consideration of other
measures; see 4.2(d)) is used to adjust (up or down) the Cash STI pool for executives. In this way, the
performance of the Group against financial budgets set at the beginning of the year is the primary driver of
Cash STI outcomes.
The Board also assesses the performance of the Group against non-financial objectives set at the beginning
of the year and performance of each executive against individual objectives. The subsequent adjustment to
each executive’s Cash STI outcomes is 50% weighted to Group performance (see Section 6.2 for how the
Group performed against these objectives in 2017) and 50% weighted to individual performance. The STI
outcomes that resulted from this assessment (as compared to target) in 2017 are provided for Executive KMP
in Section 6.4.
The award of Equity STI is determined with reference to the executive’s target outcome, the Group’s
performance against financial and non-financial objectives and each executive’s performance against
individual objectives. In determining equity awards, other considerations are the individual’s expected
future contribution to the organisation, the total value of an executive’s remuneration and the value of their
unvested equity.
The Board reviews the allocation of STI (cash and equity) between executives and employees, and the total
spend as a proportion of segment profit, to confirm that STI is being appropriately and fairly distributed.
The final determination of STI outcomes is subject to Board discretion.
f. What is the maximum
STI opportunity?
There is no policy maximum STI opportunity. However, STI outcomes are funded and constrained by the
Group’s profitability (Section 4.2(d) and (e)).
g. Why does the Group
consider the STI
an appropriate
incentive plan?
IRESS’ STI plan promotes a shared focus on the Group’s financial performance and non-financial goals as well
as allowing differentiation between individuals.
The Equity STI component recognises ongoing contribution, acts as a retention mechanism for key employees
and provides continuing alignment with shareholder interests.
h. When do executives
receive STI?
Executives receive Cash STI after the Group’s full year results have been finalised. Cash STI remain subject
to Board approval and revision up to this point in the event of material change to company performance.
Equity STI is granted to executives following the AGM in May each year and remains subject to Board approval
and revision up to this point in the event of material change to company performance. The MD/CEO’s equity
grants are subject to shareholder approval at the AGM.
Deferred share rights vest three years after the Equity STI is granted, provided the Board is satisfied that the
individual’s performance is satisfactory, and the service condition is met.
i. What is the vesting
period for deferred
share rights?
j. How will shares to
satisfy deferred share
rights be sourced?
The Board assesses annually whether to issue new shares or buy shares on market based on which would
deliver a better outcome for shareholders. The Board considers a range of factors such as share price, balance
sheet capacity and debt funding rates.
k. Is there a clawback
provision?
The Board may exercise discretion to determine that Equity STI will be forfeited where there has been
unsatisfactory individual performance.
l. Are participants
entitled to dividends
and voting rights?
m. How is Equity
STI treated upon
termination?
Deferred Share Rights do not carry any voting rights or entitle the holder to dividends. Shares allocated upon
the vesting of DSRs carry the same rights as any other IRESS share.
If less than six months of the vesting period has elapsed at the date of cessation of employment: any unvested
deferred share rights will lapse.
If six months or more of the vesting period has elapsed at the date of cessation of employment: any unvested
deferred share rights will lapse, unless the Board exercises its discretion not to lapse the unvested deferred
share rights, in which case participants may receive a pro-rata amount (unless the Board determines otherwise)
subject to applicable law and the satisfaction of any conditions imposed by the Board under the plan.
n. How is Equity STI
treated upon a
change of control?
In the event of a takeover bid, change of control, compromise or arrangement involving a scheme of
arrangement, voluntary winding up or compulsory winding up of IRESS, the Board has discretion to allow
unvested deferred share rights to vest.
27
Directors’ Report continued
For the year ended 31 December 2017
Section 4 Remuneration Components in Detail continued
4.3 LONG-TERM INCENTIVES
a. What is the purpose
The purpose of the Executive LTI plan at IRESS is to:
of the LTI plan?
b. Who participates
in the LTI plan?
• Closely link executives’ interests with those of shareholders; and
• Promote the delivery of sustainable returns to shareholders.
LTI grants are limited to the MD/CEO and Executives who are most able to influence shareholder value.
c. How are LTI awards
delivered?
LTI awards are granted in the form of performance rights (PRs). A performance right is a right issued by IRESS to
acquire one fully paid ordinary share in IRESS, provided specific company performance hurdles are achieved.
d. How does IRESS
determine the amount
of the LTI opportunity
awarded?
The award of LTI is at the Board’s discretion and is determined with reference to the executive’s target
remuneration outcome and performance against individual objectives, as well as the Group’s performance
against financial and non-financial objectives.
Other factors such as the individual’s future contribution to the organisation, retention considerations, the total
value of the executive’s remuneration and the value of unvested equity held by the individual are considered as
part of the determination of equity awards.
e. How does IRESS
determine how many
rights to grant?
The number of LTI Performance Rights granted to each executive is calculated using a face value approach –
total LTI amount divided by the five-trading-day volume weighted average share price in the week up to and
including the grant date.
f. What are the vesting
conditions?
Vesting of performance rights is determined based on relative TSR performance over the performance period.
Relative TSR provides an objective assessment of the returns from an investment in IRESS (share price growth
and dividends), relative to other companies in which shareholders could have invested.
IRESS’ TSR performance is measured against a comparator group consisting of companies listed in the S&P/
ASX 200 Index, excluding mining and resources companies, and listed property trusts. The comparator group
companies are determined as at 1 January of the year of grant and represent alternative investment options
available to shareholders.
Prior to 2016 grants, the comparator group was adjusted to exclude companies that exited the S&P/ASX200
Index during the performance period.
While there are few ASX companies directly comparable to IRESS, the Board continues to believe that, at this
time and given the composition of the IRESS share register, relative TSR is the most appropriate way to align
executive and shareholder interests.
The TSR calculation for IRESS and companies in the comparator group includes franking credits for grants
prior to 2015. For the 2016 and subsequent grants, franking credits will be excluded from calculations.
g. What is the vesting
Performance rights vest on the following basis:
schedule?
h. What is the
performance and
vesting period?
IRESS’ relative TSR ranking
Percentage of performance rights to vest
Below 50th percentile
50th percentile
Nil.
50% of performance rights vest.
51st percentile to 74th percentile
Pro-rata vesting between 50% and 100%.
75th percentile or higher
100% of performance rights vest.
MD/CEO
The LTI grant for the MD/CEO consists of two tranches:
1) 50% of performance rights are assessed over a four-year period, commencing at the start of the financial
year (e.g. 1 January 2017 to 31 December 2020 for the 2017 grant). The vesting period begins on the date
of grant, which is 5-trading days after the Annual General Meeting (AGM) (e.g. 11 May 2017 to 11 May 2021
for the 2017 grant).
2) 50% of performance rights have a one-year deferred start and are assessed over a three-year period (e.g.
1 January 2018 to 31 December 2020 for the 2017 grant); with vesting over the four-year period following
grant (e.g. 11 May 2017 to 11 May 2021 for the 2017 grant).
Other Executive KMP
Performance is assessed over a three-year performance period commencing at the start of the financial year
(e.g. 1 January 2017 to 31 December 2019 for the 2017 grant); the vesting period begins on the date of grant,
which commences 5-trading days after the Annual General Meeting (AGM) (e.g. 11 May 2017 to 11 May 2020
for the 2017 grant).
For all grants prior to 2016 the Group performance period was aligned with the vesting period.
i. How will shares to
satisfy the rights be
sourced?
If shares are to be provided on vesting, the Board assesses at the time of vesting whether to issue new
shares or buy shares on market based on which would deliver a better outcome for shareholders. The Board
considers a range of factors such as share price, balance sheet capacity and debt funding rates.
28
IRESS LIMITED ANNUAL REPORT 2017 Directors’ Report continued
For the year ended 31 December 2017
j. Are awards subject to
re-testing if they do not
vest on initial testing?
To the extent any portions of awards do not vest on the first test date, the awards are retested once, six
months after the initial test date. Rights granted before 2014, are subject to six, monthly retests.
k. What happens to
unvested LTI grants
if an executive leaves
the Group?
Reason other than resignation, termination for cause or gross misconduct: Unvested LTI grants will lapse in
full (if less than 6 months of the performance period has elapsed at the date of cessation of employment) or
pro rata if 6 months or more of the performance period has elapsed, unless the Board determines otherwise.
Performance rights that do not lapse will remain eligible to vest in accordance with the terms of the plan.
Resignation, termination for cause or gross misconduct: All unvested LTI awards at the time of cessation of
employment will lapse.
l. How are unvested LTI
awards treated upon
a change of control?
In the event of a takeover bid, change of control, compromise or arrangement involving a scheme of
arrangement, voluntary winding up or compulsory winding up of IRESS, the Board has the discretion to
allow unvested performance rights to vest.
m. Are participants
entitled to dividends
and voting rights?
n. Are there restrictions
on dealing with
securities allocated
under the LTI plan?
Performance rights do not carry any voting rights or receive dividends. Shares allocated upon the vesting of
rights carry the same rights as any other IRESS share.
Consistent with the Corporations Act 2001, participants are prohibited from hedging their unvested
performance rights.
4.4 EMPLOYEE SHARE PLAN
a. How does IRESS
encourage share
ownership for
employees
b. How many shares
were issued under
this plan in 2017?
IRESS has an employee share plan covering the two major employee populations of Australia and the UK.
Eligible participants are invited to acquire IRESS shares by salary sacrifice and IRESS supplements this with
approximately one share for every two shares the employee acquires up to a maximum value of $300 (share
matching).
The Australian plan has been operating since 2013. In 2017, 358 employees participated (52% of eligible
employees), subscribing to 30,072 shares including 9,022 matched shares. The UK plan was established in
2015. In 2017, 311 employees participated (45% of eligible employees), subscribing to 51,163 shares including
6,860 matched shares.
4.5 SPECIAL ACQUISITION-RELATED INCENTIVES (‘AVELO AWARDS’)
a. Does IRESS have any
other equity plans with
awards outstanding?
As disclosed in the 2013 Annual Report, a special set of deferred share rights awards were made in
September 2013 in relation to the acquisition of Avelo FS Holdings Limited and its subsidiaries in the
United Kingdom.
b. Who participated in the
Avelo awards and what
are the vesting criteria?
1. A core group of former Avelo Senior Management (including J McNeill: 54,981 DSRs) and staff to
secure their retention and to ensure ongoing support for the integration and development of the business
opportunity in the United Kingdom.
Vesting is subject to commercially sensitive performance criteria over two tranches:
- Tranche 1: 1 January 2014 - 31 December 2017. As at 31 December 2017, the performance conditions were
still being assessed. Accordingly, the DSRs had not yet vested.
- Tranche 2 (executives only): 1 January 2014 - 31 December 2018. The additional year of vesting was to
provide extended executive alignment with IRESS’ non-financial goals in the UK.
2. Select IRESS employees (including P Ferguson: 5,160 DSRs) whose roles and responsibilities increased
during and after the acquisition. These DSR vested 2 January 2017.
29
Directors’ Report continued
For the year ended 31 December 2017
Section 5 Actual remuneration realised
Actual remuneration is provided in addition to statutory remuneration (refer to Section 10) to increase transparency of the remuneration actually
received by executives during the year. Actual remuneration realised by Executive KMP increased by 3% in 2017, primarily due to termination
payments made to executives whose roles were made redundant. The components included in actual remuneration and the reasons for this
increase are summarised below:
Component
2017 Inclusions
Fixed
remuneration
Base salary, superannuation, and non-
monetary benefits paid in 2017.
Cash STI
Equity STI
LTI
2017 Cash STI (which has been earned and
is scheduled for payment in March 2018
following the release of financial results)
Equity STI that was granted May 2014 in
relation to 2013 performance and vested
May 2017.
LTI awards that vested in 2017 relating to
the May 2013 grants (MD/CEO) and May
2014 grants (Other Executive KMP).
Change
on 2016 Key driver of change
(3%)
• M Rady and S Barnes were part year in 2017.
(61%)
• Below target Segment Profit result in 2017 and consequent impact on
Cash STI pool.
• M Rady and S Barnes were not eligible for STI for 2017.
3%
• Executives had increases to target remuneration in 2013 and J McNeill
was included in the IRESS STI plan following the Avelo acquisition.
(9%)
• 2017 vesting outcome from the MD/CEO four-year performance rights
was lower than the 2016 vesting outcome largely due to the 2012 award
being for more rights than the 2013 award.
• D Walker had LTI vesting in 2016, whereas A Todd’s first LTI will be
granted May 2018 (subject to Board approval).
Termination
payments
Payments to S Barnes and M Rady on
cessation of employment.
n/a
• No termination payments in 2016.
STI $
Fixed
remuneration
$
Cash STI
earned
Financial Year
Equity STI
LTI vested (a)
payments (c)
Termination
vested (a)
$
Position
MD/CEO
A Walsh
Other Executive KMP
S Barnes
P Ferguson
J Harris (b)
A Knowles (d)
J McNeill (b, d)
S New (b, d)
M Rady (b)
A Todd (b, e)
D Walker (f)
Total Executive KMP
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
1,025,000
1,030,000
110,000
300,000
707,600
647,900
1,465,464
1,746,772
355,525
445,000
403,951
367,123
570,721
552,429
547,620
536,398
432,880
389,927
562,398
600,962
413,750
530,000
521,040
553,785
–
60,000
29,000
55,000
42,500
70,000
36,770
75,000
32,120
63,950
32,120
54,815
–
80,000
50,000
85,000
4,832,885
5,005,625
332,510
843,765
218,746
191,072
212,651
124,632
–
–
244,000
195,195
58,926
–
–
–
–
–
–
277,818
207,930
177,815
129,906
–
–
291,751
205,919
97,210
–
–
–
–
–
–
235,364
1,441,923
1,394,163
259,812
2,310,058
2,550,339
Total
remuneration
realised
$
3,308,064
3,724,672
1,449,288
904,002
823,417
676,661
613,221
622,429
1,120,141
1,012,512
621,136
453,877
594,518
655,777
993,728
610,000
571,040
1,133,961
10,094,552
9,793,891
$
–
–
597,198
–
–
–
–
–
–
–
–
–
–
–
579,978
–
–
–
1,177,176
–
(a)
The value of equity that vested is calculated as the share price at vesting date multiplied by the number of rights that vested. There was no clawback of awards in
2017, i.e. no awards eligible for vesting in 2017 were forfeited due to unsatisfactory individual performance during the vesting period.
(b) Executive KMP who joined the Group since 2013 did not hold DSRs or PRs that were eligible for vesting in 2017.
(c) The termination payments did not require shareholder approval under the Corporations Act.
(d)
Fixed remuneration and Cash STI of J McNeil, S New, and (as of Dec 2017) A Knowles is denominated in British Pounds and is subject to foreign exchange
movements. The Australian dollar amounts shown in the table have been converted at an average exchange rate of 0.5915 (2016: 0.5473).
(e) A Todd joined the group and became KMP effective 27 January 2017.
(f) D Walker, the prior Chief Technology Officer, changed roles and ceased to be KMP on 31 December 2016.
30
IRESS LIMITED ANNUAL REPORT 2017 Directors’ Report continued
For the year ended 31 December 2017
Section 6 Remuneration awarded and the link between performance and reward
6.1 OVERVIEW OF GROUP PERFORMANCE
The table below provides summary information on the Group’s earnings for the five years to 31 December 2017.
Measure
2017
2016
2015
2014
2013
Company Performance
Net Profit After Tax (NPAT) ($’000s)
Segment profit ($’000s) (a)
Statutory EPS – basic (cents)
Dividends per share – ordinary (cents) (b)
Share price at 31 December
Annual TSR (c)
Annual TSR ASX200 (c)
59,755
125,383
35.4
44.0
11.58
1.26%
7.05%
59,452
123,531
37.0
44.0
11.87
22.97%
6.99%
55,385
119,175
35.2
42.7
10.00
(2.79%)
(2.15%)
50,671
111,444
32.3
41.5
10.71
16.33%
1.09%
24,241
88,201
17.5
38.0
9.44
19.97%
14.09%
(a)
Segment profit (calculation as set out in Note 1.1 to the Consolidated Financial Statements) is a measure of core underlying business performance and the basis
on which the Cash STI Pool is determined.
(b) Dividend per share is calculated based on the total of the interim dividend and the announced (but not yet paid) final dividend relating to the financial year.
(c)
Total Shareholder Return (TSR) amounts have been included above as an indicator of IRESS’ performance relative to the ASX200 index. These TSR amounts are
sourced from IRESS’ market data product and are different from that used to determine LTI vesting, which is specific to the IRESS LTI plan. It excludes franking
credits (whereas for LTI grants made prior to 2016, franking credits are included). It is shown for IRESS and the ASX200 index (whereas for LTI grants, IRESS is
compared to the constituents of the ASX200, excluding mining and resources companies and listed property trusts (see Section 4.2(f)).
6.2 TRANSLATION OF GROUP PERFORMANCE INTO STI AWARDS
The Board’s assessment of the Group’s performance against 2017 financial and non-financial objectives is summarised in the table below. This
assessment, formed the basis for the determination of STI awards for the year, consistent with the process outlined in Section 3.2:
Key focus area
Performance goal
Performance outcome
In 2017, the consolidated financial performance of the company (segment
profit, EBITDA and NPAT) was below the budget set by the board at the
start of the year.
Result
Below target
Financial measures
Financial
Non-financial
measures
Clients
Achievement of the
Board approved
budget (see Section
4.2(d)).
Maintain resilient
leadership in
existing markets,
client service
excellence, new client
implementations and
retention of existing
clients
The APAC financial markets business demonstrated continued resilience
and delivered revenue growth despite the ongoing macro challenges
being faced by the segment.
Above target
In 2017 XPLAN was voted the number one financial planning software in
Australia for the tenth consecutive year. The APAC wealth management
business delivered the scaled advice solution (XPLAN Prime), to three ASX
listed financial services businesses and continues to see strong demand for
IRESS’ broad range of technology solutions. IRESS’ superannuation solution,
Acurity, went live at Statewide Super.
The UK business achieved a major milestone as part of the roll-out of
IRESS’ integrated wealth solution to Close Brothers Asset Management. In
the second half, prominent high street bank, TSB, went live with version 2.0
of IRESS’ Mortgage Sourcing and Origination solution.
The South African business continued to experience strong underlying
demand, confirming its leading market position. XPLAN was deployed to
production for major South African financial services firm Old Mutual.
Canada delivered a number of wealth solution deployments following success
with independent firm Echelon Wealth Partners.
Growth
Grow revenue
organically and
pursue inorganic
opportunities
where appropriate
Integration of the 2016 acquisitions of Financial Synergy and INET BFA
are progressing well. The completion of an integrated advice solution for
superannuation funds in Australia is generating strong interest.
Below target
Despite achieving a number of significant client milestones in the roll-out
of IRESS’ integrated wealth solution, revenue growth in the UK was below
target. This outcome was largely driven by the timing of implementation
projects and slower than expected pipeline conversion.
31
Directors’ Report continued
For the year ended 31 December 2017
Section 6 Remuneration awarded and the link between performance and reward continued
6.2 TRANSLATION OF GROUP PERFORMANCE INTO STI AWARDS CONTINUED
Key focus area
Performance goal
Performance outcome
People
Products/
Technology
Group/Corporate
Result
Above target
Position IRESS
as an employer of
choice globally
IRESS has actively invested in its position as an attractive employer of the
best people. During the year IRESS completed an independent survey to
measure engagement, following an extensive program to deliver its oneIRESS
message globally. The results showed a significant increase in positive
engagement since the last all people survey in 2014.
Anticipate trends
and innovate to
maintain product
leadership
Enhance IRESS
brand through
strong stakeholder
relationships and
communication.
Enhance and scale
internal systems
to support client
service, delivery
and growth.
IRESS continued to respond to regulatory and market changes, as well as
client demand, with product updates and releases during the year.
At target
Significant investments were also made in XPLAN Prime; digital advice for
the superannuation industry; IOS+ migration and the rollout of ViewPoint;
and MSO V2.
During the year the IRESS Foundation was established as a vehicle for IRESS
people around the globe to contribute their time, talent and money to support
local communities and not-for-profit causes.
At target
Significant investments have been made during the year into software
development and deployment processes, particularly automation, and client
and end-user support.
The Sydney office was moved to a new, upgraded premises during the year
and substantial progress was made on the upgrade of the Melbourne office.
IRESS’ debt facilities were refinanced during the year achieving an extension
of tenor.
External communication was enhanced during the year through social,
news media and direct channels as well as hosted and trade-based
events. In addition, additional emphasis on internal communications
increased alignment between teams to better support client outcomes
and company brand.
The implementation of new payroll and expense management systems was
completed during the year. The implementation of a new Enterprise Resource
Planning (ERP) system is also materially progressed with go-live expected in
early 2018.
6.3 TRANSLATION OF GROUP PERFORMANCE INTO LTI AWARDS
IRESS’ dividends and share price performance directly affect the vesting of LTI awards as all performance rights granted under the Executive
LTI plan are subject to a relative TSR performance measure.
The table below illustrates the independently verified vesting outcomes for those LTI grants eligible to vest in 2017 based on the Group’s relative
TSR performance.
LTI Award
Performance Period
Relative TSR Performance (a)
Vesting Outcome
MD/CEO – 2013 Four-year
performance rights
MD/CEO – 2013 Deferred
three-year performance rights
Other Executive KMP –
2014 performance rights
7 May 2013 to 8 May 2017
67.4th percentile
84.8% of performance rights vested
7 May 2014 to 8 May 2017
78.3rd percentile (b)
100% of performance rights vested
7 May 2014 to 8 May 2017
72.6th percentile (b)
95.2% of performance rights vested
(a) Based on maximum relative TSR performance as measured on 8 May 2017 and subsequent retest dates.
(b)
The Relative TSR differs for these two awards due to changes to TSR calculation methodology that became effective for grants made in 2014. Specifically, for the
2013 MD/CEO award, the TSR calculation is based on closing share price at the start and end of the performance period, with monthly re-tests for six months.
Conversely, for the 2014 other Executive KMP award, the TSR calculation is based on a 20-trading-day volume weighted average share price, with one re-test
after six months.
32
IRESS LIMITED ANNUAL REPORT 2017 Directors’ Report continued
For the year ended 31 December 2017
6.4 TRANSLATION OF GROUP AND INDIVIDUAL PERFORMANCE INTO REMUNERATION AWARDED
TO EXECUTIVE KMP FOR 2017
The following table shows the 2017 STI and LTI outcomes awarded for each of the Executive KMP in relation to their performance in 2017 (to
be paid/granted in 2018). Remuneration awarded to Executive KMP decreased by 11% in 2017, primarily due to the below target Segment
Profit result in 2017 and consequent impact on 2017 Cash STI pool. Cash STI amounts are subject to Board approval in February 2018.
Equity STI and LTI are subject to Board and shareholder approval in May 2018 (by shareholders for the MD/CEO and by the Board for other
Executive KMP). The Board retains the discretion to increase or decrease the Cash STI and equity amounts up to the approval date should the
performance of the Group or of individual KMP vary materially.
STI AWARDED $
Executive
MD/CEO
A Walsh
Other Executive KMP
S Barnes
P Ferguson
J Harris
A Knowles (c)
J McNeill (c)
S New (c)
M Rady
A Todd (d)
D Walker (e)
Total Executive KMP
Fixed
remuneration
paid
$
Cash STI
Equity STI (a)
$
Total
remuneration
awarded
$
LTI(b)
$
1,025,000
1,030,000
110,000
300,000
500,000
510,000
1,000,000
1,340,000
2,635,000
3,180,000
355,525
445,000
403,951
367,123
570,721
552,429
547,620
536,398
432,880
389,927
562,398
600,962
413,750
530,000
521,040
553,785
–
60,000
29,000
55,000
42,500
70,000
36,770
75,000
32,120
63,950
32,120
54,815
–
80,000
50,000
85,000
–
150,000
123,500
115,000
180,500
175,000
175,750
175,000
132,724
76,258
165,968
76,258
–
180,000
209,000
175,000
–
152,778
140,000
118,056
210,000
180,556
200,000
180,556
150,000
82,378
175,000
94,146
–
187,500
220,000
–
4,832,885
5,005,624
332,510
843,765
1,487,442
1,632,516
2,095,000
2,335,970
355,525
807,778
696,451
655,179
1,003,721
977,985
960,140
966,954
747,724
612,513
935,486
826,181
413,750
977,500
1,000,040
813,785
8,747,837
9,817,875
Year
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
(a)
(b)
(c)
Equity STI is shown at grant value. The number of deferred share rights granted to each executive is based on the fair value of a deferred share right. For grant
purposes this is the five-trading-day volume weighted average share price in the week up to and including the grant date adjusted for ineligibility to receive dividends.
LTI is shown at grant value. The number of performance rights granted to each executive is based on the five-trading-day volume weighted average share price in
the week up to and including the grant date.
Fixed remuneration and Cash STI of J McNeil, S New and (as of December 2017) A Knowles is denominated in British Pounds and is subject to foreign exchange
movements. The Australian dollar amounts shown in the table have been converted at an average exchange rate of 0.5915 (2016: 0.5473).
(d) A Todd joined the group and became KMP effective 27 January 2017.
(e)
D Walker, the prior Chief Technology Officer, changed roles and ceased to be KMP on 31 December 2016. In accordance with the change in role, he was not
eligible for an LTI award in 2016.
33
Directors’ Report continued
For the year ended 31 December 2017
Section 6 Remuneration awarded and the link between performance and reward continued
6.4 TRANSLATION OF GROUP AND INDIVIDUAL PERFORMANCE INTO REMUNERATION AWARDED TO EXECUTIVE
KMP FOR 2017 CONTINUED
The table below shows the actual remuneration awarded to Executive KMP for 2017 against each executive’s target remuneration.
The Cash STI outcome for each executive resulting from the Board’s assessment of financial performance of the Group against budget,
performance of the Group against non-financial objectives and performance against individual objectives is shown in the table below. As noted
in Section 6.2 above, the company’s financial performance was below the budget set by the Board at the start of the year. As a result, the cash
STI awarded to Executive KMP was substantially less than target.
STI equity and LTI equity awards are determined at the discretion of the Board with reference to Group financial performance, performance
of the Group against non-financial objectives and the executive’s performance against individual objectives. In addition, the award of equity
reflects retention considerations, the expected long-term contribution of the individual and their unvested equity exposure. On average, the
award of deferred equity represents 85% of target. The Board considers that this reflects an appropriate balance between long-term goals
and short-term financial performance.
BASE
CASH STI
EQUITY STI
TOTAL STI
LTI
TOTAL REMUNERATION
Actual (a)
Actual
Target
Actual
as a %
of target
Actual
Target
Actual
as a %
of target
Actual
Target
Actual
Target
Actual
Target
Actual
as a
% of
target
1,000,000
110,000
275,000
40%
500,000
550,000
91%
610,000
825,000
74%
1,000,000
1,227,273
81%
2,610,000
3,052,273
86%
365,000
540,000
507,153
371,912
507,153
603,900
29,000
42,500
36,770
32,120
32,120
50,000
3,895,118
332,510
66,364
98,182
92,210
67,620
92,210
109,800
801,386
44%
43%
40%
48%
35%
46%
41%
123,500
180,500
175,750
132,724
165,968
209,000
132,727
196,364
184,419
135,241
184,419
219,600
1,487,442
1,602,770
93%
92%
95%
98%
90%
95%
93%
152,500
223,000
212,520
164,844
198,088
259,000
199,091
294,545
276,629
202,861
276,629
329,400
140,000
210,000
200,000
150,000
175,000
220,000
171,630
253,918
238,473
174,880
238,473
283,966
82%
83%
84%
86%
73%
77%
81%
657,500
973,000
919,673
686,756
735,721
1,088,464
1,022,255
749,654
880,241
1,022,255
1,082,900
1,217,266
7,810,070
8,887,888
1,819,952
2,404,155
2,095,000
2,588,613
Actual
as a
% of
target
77%
76%
77%
81%
72%
79%
76%
Actual
as a
% of
target
89%
89%
90%
92%
86%
89%
88%
Executive
MD/CEO
A Walsh
Executive KMP (b)
P Ferguson
J Harris
A Knowles
J McNeill
S New
A Todd (c)
Total
(a)
Target remuneration is based on base salary at 31 December 2017. It excludes allowances, non-monetary benefits and superannuation. Amounts therefore vary
from the Fixed Remuneration disclosed elsewhere in this report.
(b) S Barnes and M Rady are not included in the table above as they ceased to be KMP during the year and were not eligible for an award of STI or LTI.
(c) A Todd had a salary increase effective 1 October to reflect the increased size of his role.
34
IRESS LIMITED ANNUAL REPORT 2017 Directors’ Report continued
For the year ended 31 December 2017
6.4 TRANSLATION OF GROUP AND INDIVIDUAL PERFORMANCE INTO REMUNERATION AWARDED TO EXECUTIVE
KMP FOR 2017 CONTINUED
The table below shows the actual remuneration awarded to Executive KMP for 2017 against each executive’s target remuneration.
The Cash STI outcome for each executive resulting from the Board’s assessment of financial performance of the Group against budget,
performance of the Group against non-financial objectives and performance against individual objectives is shown in the table below. As noted
in Section 6.2 above, the company’s financial performance was below the budget set by the Board at the start of the year. As a result, the cash
STI awarded to Executive KMP was substantially less than target.
STI equity and LTI equity awards are determined at the discretion of the Board with reference to Group financial performance, performance
of the Group against non-financial objectives and the executive’s performance against individual objectives. In addition, the award of equity
reflects retention considerations, the expected long-term contribution of the individual and their unvested equity exposure. On average, the
award of deferred equity represents 85% of target. The Board considers that this reflects an appropriate balance between long-term goals
and short-term financial performance.
Executive KMP (b)
Executive
MD/CEO
A Walsh
P Ferguson
J Harris
A Knowles
J McNeill
S New
A Todd (c)
Total
Actual
as a %
of target
44%
43%
40%
48%
35%
46%
41%
365,000
540,000
507,153
371,912
507,153
603,900
29,000
42,500
36,770
32,120
32,120
50,000
66,364
98,182
92,210
67,620
92,210
109,800
801,386
123,500
180,500
175,750
132,724
165,968
209,000
132,727
196,364
184,419
135,241
184,419
219,600
Actual
as a %
of target
93%
92%
95%
98%
90%
95%
93%
BASE
CASH STI
EQUITY STI
TOTAL STI
LTI
TOTAL REMUNERATION
Actual (a)
Actual
Target
Actual
Target
Actual
Target
Actual
as a
% of
target
Actual
Target
Actual
as a
% of
target
Actual
Target
Actual
as a
% of
target
1,000,000
110,000
275,000
40%
500,000
550,000
91%
610,000
825,000
74%
1,000,000
1,227,273
81%
2,610,000
3,052,273
86%
3,895,118
332,510
1,487,442
1,602,770
1,819,952
2,404,155
152,500
223,000
212,520
164,844
198,088
259,000
199,091
294,545
276,629
202,861
276,629
329,400
77%
76%
77%
81%
72%
79%
76%
140,000
210,000
200,000
150,000
175,000
220,000
171,630
253,918
238,473
174,880
238,473
283,966
2,095,000
2,588,613
82%
83%
84%
86%
73%
77%
81%
657,500
973,000
919,673
686,756
735,721
1,088,464
1,022,255
749,654
880,241
1,022,255
1,082,900
1,217,266
7,810,070
8,887,888
89%
89%
90%
92%
86%
89%
88%
35
Directors’ Report continued
For the year ended 31 December 2017
Section 7 Executive KMP service agreements
All IRESS Executive KMP have a formal contract, known as a service agreement. These agreements are of an ongoing nature and have no set
term of service.
The key terms of the service agreements for the MD/CEO and other Executive KMP are summarised below. Executive KMP termination
entitlements are limited to 12 months’ base salary.
MD/CEO
Criterion
Arrangements
Term of contract
Ongoing.
Notice period
Resignation
Retirement
Termination on notice
by IRESS
Redundancy
Termination for
serious misconduct
Non-Compete
Six months (from the employee and Group).
The MD/CEO may resign by giving six months’ written notice.
There are no additional financial entitlements due from IRESS on retirement.
IRESS may terminate the employment agreement by providing six months’ written notice, or payment in lieu of
the notice period.
If IRESS terminates employment for reasons of bona fide redundancy, a severance payment will be made.
The quantum of the payment will be determined subject to the Board’s discretion, considering matters such as
statutory requirements, the executive’s contribution, position and length of service.
IRESS may terminate the employment agreement at any time without notice.
A non-compete arrangement exists during the MD/CEO’s employment and for a period of six months following
his employment with the Group.
EXECUTIVE KMP
Details of the contractual terms for the other Executive KMP members are aligned with the terms set out above for the MD/CEO, with the
exception that J Harris, J McNeill, S New and A Todd have non-compete clauses for the 12-months following employment (in addition to
the non-compete arrangements during employment).
36
IRESS LIMITED ANNUAL REPORT 2017 Directors’ Report continued
For the year ended 31 December 2017
Section 8 Remuneration Governance
The Board and People & Performance Committee (PPC) work closely to apply the Group’s remuneration philosophy
and ensure the company’s remuneration strategy supports the creation of sustainable shareholder value.
HOW REMUNERATION DECISIONS ARE MADE – ROLES AND RESPONSIBILITIES
BOARD
• Oversees remuneration.
• Ultimately responsible for recommendations and decisions made by the PPC.
• Approves remuneration for NEDs and the CEO.
• Reviews PPC charter annually.
With advice from
PEOPLE AND PERFORMANCE COMMITTEE
• Reviews remuneration taking into account a wide variety of information
including internal budgets, general and specific global and regional market
factors, and peer review.
• Makes recommendations to the Board on remuneration arrangements for Directors.
• Approves remuneration arrangements for direct reports to the MD/CEO.
• Governed by PPC charter.
Based on input from
MANAGEMENT
• Management makes relevant
proposals to the PPC for
consideration by the Board,
taking into consideration market
practice and external advice.
EXTERNAL ADVISORS
• At IRESS’ request, external
advisors provide both information
on current market practice and
independent input into key
remuneration decisions.
• The terms of engagement for
external advisors include specific
measures designed to protect
independence.
• External advisors interact
with members of IRESS’
management team.
Individual executives, including the MD/CEO, do not participate in PPC meetings where their own remuneration is being discussed.
To ensure independence, IRESS’ management team is precluded from requesting services from an external advisor that would be considered
a ‘remuneration recommendation’ as defined by the Corporations Amendment (Improving Accountability on Director and Executive
Remuneration) Act 2011.
No remuneration recommendations (as defined by the Corporations Act 2001) were provided to the IRESS Board during the reporting period.
To ensure objective and independent oversight of the Group, Non-executive Directors (NEDs) do not participate in performance-based
incentives or receive post-employment benefits.
37
Directors’ Report continued
For the year ended 31 December 2017
Section 9 Non-executive Director fees
APPROACH TO SETTING NED FEES
The Group’s NEDs receive fees for their services plus the reimbursement of reasonable expenses. The NED fee structure considers the
responsibilities of NEDs and the time spent by NEDs on IRESS matters.
NED fees are reviewed at appropriate intervals and are determined by the Board in consideration of fees paid to NEDs by comparable
companies. The Board seeks external advice on this subject where considered necessary.
MAXIMUM AGGREGATE NED FEE POOL
The total amount of remuneration provided to all NEDs is determined by shareholders at the Annual General Meeting in accordance with the
Group’s Constitution. The maximum aggregate remuneration for NEDs is set around the median level for comparable companies, to provide
the ability for IRESS to attract and retain appropriately qualified and experienced directors.
The maximum aggregate remuneration of $1,200,000 per annum was approved at the Annual General Meeting held on 5 May 2016. The total
amount of remuneration paid to NEDs in 2017 was $903,342 (2016: $800,096). The increase on 2016 is due to an increase to policy fees as
well as an additional NED joining the Board (J Fahey, 5 October 2017).
NED FEE POLICY
The table below contains the fee policy for NEDs during 2017. Fees were increased for the first time since 2013 in July 2017. Fees include
statutory superannuation contributions or fees in lieu of statutory superannuation contributions paid by the Group.
Fee ($) – 1 January
to 30 June 2017
Fee ($) – From
1 July 2017
Role
IRESS Limited Board
Board Chair
Board member
Audit & Risk Committee
Chair
Member
People and Performance Committee
Chair
Member
The Chairman is entitled to the Board Chair fee only (no additional Committee fees).
Non-executive Director statutory remuneration
The total statutory remuneration paid to NEDs during 2017 and 2016 is as out in the table below:
200,000
110,000
22,000
Nil
22,000
Nil
Non-executive Directors
A D’Aloisio
N Beattie (a)
J Cameron
J Fahey (b)
J Hayes
J Seabrook
G Tomlinson
Total Non-executive Director fees
SHORT-TERM
BENEFITS
POST-
EMPLOYMENT
ENTITLEMENTS
Fees
$
200,913
182,648
120,000
110,000
109,589
100,457
28,463
–
130,594
120,548
130,594
120,548
109,589
100,457
829,742
734,658
Super-
annuation
$
19,087
17,352
6,175
6,096
10,411
9,543
2,704
–
12,406
11,452
12,406
11,452
10,411
9,543
73,600
65,438
Financial
year
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
240,000
130,000
24,000
Nil
24,000
Nil
Total
$
220,000
200,000
126,175
116,096
120,000
110,000
31,167
–
143,000
132,000
143,000
132,000
120,000
110,000
903,342
800,096
(a)
NED fees are paid inclusive of superannuation for all NEDs except for N Beattie. N Beattie is paid superannuation on-top of fees based on the percentage of total
fees relating to work performed in Australia.
(b) J Fahey was appointed 5 October 2017.
38
IRESS LIMITED ANNUAL REPORT 2017 Directors’ Report continued
For the year ended 31 December 2017
Section 10 Additional Required Disclosures
EXECUTIVE KMP STATUTORY REMUNERATION
The table below presents details of Executive KMP remuneration prepared in accordance with statutory requirements and
accounting standards. Under this standard deferred share rights and performance rights are expensed based on the grant date fair value
over the vesting period.
SHORT-TERM BENEFITS (c)
POST-EMPLOYMENT
BENEFITS (d)
LONG-TERM BENEFITS
Salary
and fees
Non
monetary
benefits
Executive
Year
$ (a)
$ (b)
Termin-
ation
payments
$
Share-
based
payments
Shares
$ (e)
Share-
based
payments
DSRs
$
Share-
based
payments
PRs
$
Super-
annuation
$
STI
$
Long-
service
leave
$
Total
Remun-
eration
$
MD/CEO
A Walsh
2017 1,000,000
2016 1,000,000
Executive KMP
S Barnes
2017
2016
P Ferguson
J Harris
2017
2016
2017
2016
A Knowles (b, f) 2017
2016
J McNeill (b,f)
S New (f)
M Rady
A Todd (g)
D Walker (g)
Total
2017
2016
2017
2016
2017
2016
2017
2016
315,000
410,000
365,000
330,000
540,000
520,000
506,231
500,000
385,605
319,021
507,153
548,145
382,500
500,000
476,513
520,000
2017 4,478,002
2016 4,647,166
–
–
–
–
2,289
2,123
1,370
529
11,388
2,123
13,803
14,038
4,530
5,311
–
–
–
2,123
33,380
26,247
110,000
300,000
25,000
30,000
–
–
–
–
529,590
494,892
668,554
629,786
20,741 2,353,885
16,759 2,471,437
–
60,000
29,000
55,000
42,500
70,000
36,770
75,000
32,120
63,950
32,120
54,815
–
80,000
50,000
85,000
40,525
35,000
36,662
35,000
29,350
31,900
30,000
34,275
33,472
27,380
50,715
47,506
31,250
30,000
44,526
31,663
364,170
–
–
–
–
–
–
–
–
–
–
–
302,893
–
–
–
300
–
300
300
–
–
–
–
262
241
262
241
–
–
–
–
96,849
137,869
100,343
106,370
71,185
21,918
168,054
158,139
58,008
183,313
36,496
13,151
119,284
82,301
–
33,162
106,233
75,462
72,542
102,422
66,339
111,343
109,983
30,994
22,631
25,043
8,767
25,601
72,961
–
(6,253)
6,253
17,708
7,043
–
–
8,847
25,528
–
–
–
–
–
–
–
843,753
755,355
626,764
608,378
786,827
710,686
872,633
905,048
554,264
630,574
656,319
677,936
861,528
765,262
571,039
175,378
138,611
9,884
962,658
332,510
843,765
321,500
302,724
667,063
–
1,124 1,179,809 1,072,581
782 1,373,331 1,227,853
41,043 8,127,012
65,467 8,487,335
Perform-
ance-
related
remun-
eration
as %
of total
remun-
eration
56%
58%
15%
40%
33%
38%
27%
22%
36%
38%
22%
43%
14%
11%
17%
31%
9%
41%
32%
41%
(a) Salary includes allowances and short-term compensated absences paid during the 2016 and 2017 years.
(b)
Non-monetary benefits include health and life insurance subsidies. The value of non-monetary benefits for J McNeill was overstated in 2016 and has been restated
above. Non-monetary benefits for A Knowles additionally includes $9,156 for temporary accommodation and furnishings following his relocation to the UK.
Excluded from non-monetary benefits for A Knowles is $35,587 in reimbursed relocation expenses that are not classified as remuneration, e.g. removalist fees
and airfares.
(c) There were no other short-term employee benefits, provided to Executive KMP during the 2016 or 2017 years.
(d)
Post-employment benefits for 2016 and 2017 included superannuation and termination payments. Termination payments for accounting purposes exclude equity
that vested on termination. The share-based payment expense above includes amounts relating to equity that vested on termination.
(e) Share-based payments in Shares relate to matching shares delivered under Employee Share Plans (see Section 4.4).
(f)
Remuneration of J McNeill, S New, and (from December 2017) A Knowles, is denominated in British Pounds and is subject to FX movements. The Australian dollar
amounts shown in the table were converted at an average foreign exchange rate of 0.5915 (2016: 0.5473).
(g) A Todd joined the group and became KMP effective 27 January 2017 and D Walker ceased to be KMP on 31 December 2016.
39
Directors’ Report continued
For the year ended 31 December 2017
Section 10 Additional Required Disclosures continued
RIGHTS HELD DURING THE FINANCIAL YEAR
The number of deferred shares (Employee Share Plans), deferred share rights (Equity STI) and performance rights (LTI) held in the Company by
each Executive KMP is set out below. No rights are granted to NEDs or related parties.
Deferred Shares and Deferred Share Rights
MD/CEO
A Walsh
Executive KMP
S Barnes (b)
P Ferguson (c)
J Harris (d)
A Knowles (d)
J McNeill
S New
M Rady (b)
A Todd
Total
Balance
as at
1 January
2017
Granted as
compen-
sation
Vested
during
the year (a)
Forfeited
during
the year
Balance
as at
31 December
2017
173,000
47,575
(58,000)
–
162,575
47,597
37,884
9,756
55,366
71,261
5,876
31,552
–
13,993
10,753
16,325
16,325
7,138
7,138
16,792
–
(38,389)
(17,570)
–
(20,000)
(4,830)
–
(24,327)
–
432,292
136,039
(163,116)
(23,201)
–
–
–
–
–
(24,017)
–
(47,218)
–
31,067
26,081
51,691
73,569
13,014
–
–
357,997
(a) All deferred share rights that vest during the year are exercisable. No deferred share rights were, as at 31 December 2017, vested and not yet exercised.
(b) On termination, a proportion of unvested deferred share rights vested, and the remainder were forfeited.
(c) The opening balance has been reinstated to include Deferred Shares granted under Employee Share Plans (share matching).
(d) The opening balance has been reinstated as J Harris and A Knowles Deferred Share Rights granted in 2016 were transposed.
Performance Rights
MD/CEO
A Walsh
Executive KMP
S Barnes (b)
P Ferguson
J Harris
A Knowles
J McNeill
S New
M Rady (b)
A Todd
Total
Balance
as at
1 January
2017
Granted as
compen-
sation
Vested
during
the year (a)
Forfeited
during
the year
Balance
as at
31 December
2017
496,000
109,478
(120,120)
(9,880)
475,478
57,616
39,461
36,760
59,993
14,252
4,706
40,410
–
12,482
9,646
14,752
14,752
6,731
7,692
15,319
–
(22,772)
(14,575)
–
(23,914)
(7,968)
–
–
–
749,198
190,852
(189,349)
(24,670)
(735)
–
(1,206)
(402)
–
(28,679)
–
(65,572)
22,656
33,797
51,512
49,625
12,613
12,398
27,050
–
685,129
(a) All performance rights that vested during the year are exercisable. No performance rights were, as at 31 December 2017, vested and not yet exercised.
(b)
On termination, a proportion of unvested Performance Rights lapsed, and the remainder were retained and remain subject to the original vesting period and
performance conditions.
40
IRESS LIMITED ANNUAL REPORT 2017 Directors’ Report continued
For the year ended 31 December 2017
DEFERRED SHARE RIGHTS AND PERFORMANCE RIGHTS AWARDED DURING THE YEAR
The table below discloses deferred share rights and performance rights granted to the Executive KMP during 2017, in relation to
performance in 2016.
No rights vest if the conditions are not satisfied, hence the minimum value yet to vest is nil. Rights granted in 2017 that subsequently vest will
be automatically exercised on or around the time IRESS notifies them that their rights have vested. The maximum value of the grants yet to vest
has been determined as the fair value of awards at grant date. Deferred share rights and performance rights are granted for no consideration,
and upon vesting, can be exercised at no cost.
Executive
A Walsh
S Barnes
P Ferguson
J Harris
A Knowles
J McNeill
S New
M Rady
A Todd
Vehicle
Deferred share rights
Performance rights
Deferred share rights
Performance rights
Deferred share rights
Performance rights
Deferred share rights
Performance rights
Deferred share rights
Performance rights
Deferred share rights
Performance rights
Deferred share rights
Performance rights
Deferred share rights
Performance rights
Deferred share rights
Performance rights
Grant date
11–May–17
11–May–17
11–May–17
11–May–17
11–May–17
11–May–17
11–May–17
11–May–17
11–May–17
11–May–17
11–May–17
11–May–17
11–May–17
11–May–17
11–May–17
11–May–17
11–May–17
Number
of rights
granted
Fair value at
grant date
($)
Vesting date
Expiry date
$10.86
11–May–20
11–May–20
$6.64
$7.05
$10.86
$7.13
$10.86
$7.13
$10.86
$7.13
$10.86
$7.13
$10.86
$7.13
$10.86
$7.13
$10.86
$7.13
11–May–21
11–May–21
11–May–20
11–May–20
11–May–20
11–May–20
11–May–20
11–May–20
11–May–20
11–May–20
11–May–20
11–May–20
11–May–20
11–May–20
11–May–20
11–May–20
11–May–21
11–May–21
11–May–20
11–May–20
11–May–20
11–May–20
11–May–20
11–May–20
11–May–20
11–May–20
11–May–20
11–May–20
11–May–20
11–May–20
11–May–20
11–May–20
47,575
54,739
54,739
13,993
12,482
10,728
9,646
16,325
14,752
16,325
14,752
7,114
6,731
7,114
7,692
16,792
15,319
–
–
41
Directors’ Report continued
For the year ended 31 December 2017
Section 10 Additional Required Disclosures continued
DEFERRED SHARE RIGHTS AND PERFORMANCE RIGHTS VESTED AND LAPSED DURING THE YEAR
The table below discloses deferred share rights and performance rights that had vesting determinations made during the year for the
Executive KMP. One ordinary share is provided for each vested right, subject to adjustment for certain capital actions. Shares provided on
vesting of rights are fully paid and accordingly there is no unpaid amount.
Executive
A Walsh
S Barnes (a)
P Ferguson
J Harris
A Knowles
J McNeill
S New
M Rady (a)
Vehicle
Deferred share rights
Performance rights
Performance rights
Deferred share rights
Performance rights
Deferred share rights
Deferred share rights
Performance rights
Deferred share rights
Performance rights
Deferred share rights
Performance rights
Deferred share rights
Performance rights
Deferred share rights
Performance rights
Deferred share rights
Performance rights
A Todd
Deferred share rights
Performance rights
Grant date
07–May–14
07–May–13
07–May–13
07–May–14
07–May–15
05–May–16
11–May–17
07–May–14
07–May–15
05–May–16
11–May–17
30–Sep–13
07–May–14
07–May–14
07–May–14
07–May–14
07–May–14
07–May–14
07–May–15
05–May–16
11–May–17
07–May–15
05–May–16
11–May–17
Number of rights
granted
Fair value
at grant date
Number of rights
vested (a)
Number of rights
lapsed/forfeited
Proportion
rights vested
Proportion
forfeited
58,000
65,000
65,000
17,930
15,521
14,146
13,993
23,920
20,755
12,941
12,482
5,160
12,410
15,310
–
–
20,000
25,120
4,830
8,370
–
–
14,967
16,585
16,792
24,528
15,882
15,319
–
–
$7.25
$5.03
$4.76
$7.25
$9.02
$10.25
$10.86
$4.18
$5.30
$8.50
$7.13
$7.75
$7.25
$4.18
$7.25
$4.18
$7.25
$4.18
$9.02
$10.25
$10.86
$5.30
$8.50
$7.13
Vesting date (a)
08–May–17
08–May–17
08–May–17
08–May–17
30–Sep–17
30–Sep–17
11–May–20
08–May–17
07–May–18
05–May–19
11–May–20
02–Jan–17
08–May–17
08–May–17
08–May–17
08–May–17
08–May–17
08–May–17
30–Sep–17
30–Sep–17
11–May–20
07–May–18
05–May–19
11–May–20
Expiry date
08–May–17
08–May–17
08–May–17
08–May–17
30–Sep–17
30–Sep–17
11–May–20
08–May–17
07–May–18
05–May–19
11–May–20
02–Jan–17
08–May–17
08–May–17
08–May–17
08–May–17
08–May–19
08–May–19
30–Sep–17
30–Sep–17
11–May–20
07–May–18
05–May–19
11–May–20
58,000
55,120
65,000
17,930
15,521
4,938
22,772
5,160
12,410
14,575
20,000
23,914
4,830
7,968
14,967
9,360
–
–
–
–
–
–
–
–
–
–
–
–
–
–
9,880
–
–
–
–
9,208
13,993
1,148
4,162
6,878
12,482
735
–
–
–
–
–
–
–
–
–
–
–
1,206
402
7,225
16,792
4,919
8,441
15,319
100.0%
84.8%
100.0%
100.0%
100.0%
34.9%
0.0%
95.2%
0.0%
0.0%
0.0%
100.0%
100.0%
95.2%
100.0%
95.2%
100.0%
95.2%
100.0%
56.4%
0.0%
0.0%
0.0%
0.0%
0.0%
15.2%
0.0%
0.0%
0.0%
65.1%
100.0%
4.8%
20.1%
53.1%
100.0%
0.0%
0.0%
4.8%
0.0%
4.8%
0.0%
4.8%
0.0%
43.6%
100.0%
20.1%
53.1%
100.0%
(a)
On their termination date of 30 September 2017, a proportion of the deferred share rights granted to S Barnes and M Rady in 2015 and 2016 vested, and the
remainder were forfeited. The original vesting dates were 7 May 2018 and 5 May 2019 respectively.
42
IRESS LIMITED ANNUAL REPORT 2017
Directors’ Report continued
For the year ended 31 December 2017
Executive
A Walsh
S Barnes (a)
P Ferguson
J Harris
A Knowles
J McNeill
S New
M Rady (a)
Vehicle
Deferred share rights
Performance rights
Performance rights
Deferred share rights
Performance rights
Deferred share rights
Deferred share rights
Performance rights
Deferred share rights
Performance rights
Deferred share rights
Performance rights
Deferred share rights
Performance rights
Deferred share rights
Performance rights
Deferred share rights
Performance rights
Grant date
07–May–14
07–May–13
07–May–13
07–May–14
07–May–15
05–May–16
11–May–17
07–May–14
07–May–15
05–May–16
11–May–17
30–Sep–13
07–May–14
07–May–14
07–May–14
07–May–14
07–May–14
07–May–14
07–May–15
05–May–16
11–May–17
07–May–15
05–May–16
11–May–17
Number of rights
granted
Fair value
at grant date
58,000
65,000
65,000
17,930
15,521
14,146
13,993
23,920
20,755
12,941
12,482
5,160
12,410
15,310
20,000
25,120
4,830
8,370
14,967
16,585
16,792
24,528
15,882
15,319
–
–
–
–
–
–
$7.25
$5.03
$4.76
$7.25
$9.02
$10.25
$10.86
$4.18
$5.30
$8.50
$7.13
$7.75
$7.25
$4.18
$7.25
$4.18
$7.25
$4.18
$9.02
$10.25
$10.86
$5.30
$8.50
$7.13
A Todd
Deferred share rights
Performance rights
(a)
On their termination date of 30 September 2017, a proportion of the deferred share rights granted to S Barnes and M Rady in 2015 and 2016 vested, and the
remainder were forfeited. The original vesting dates were 7 May 2018 and 5 May 2019 respectively.
Vesting date (a)
08–May–17
08–May–17
08–May–17
08–May–17
30–Sep–17
30–Sep–17
11–May–20
08–May–17
07–May–18
05–May–19
11–May–20
02–Jan–17
08–May–17
08–May–17
08–May–17
08–May–17
08–May–17
08–May–17
30–Sep–17
30–Sep–17
11–May–20
07–May–18
05–May–19
11–May–20
Expiry date
08–May–17
08–May–17
08–May–17
08–May–17
30–Sep–17
30–Sep–17
11–May–20
08–May–17
07–May–18
05–May–19
11–May–20
02–Jan–17
08–May–17
08–May–17
08–May–17
08–May–17
08–May–19
08–May–19
30–Sep–17
30–Sep–17
11–May–20
07–May–18
05–May–19
11–May–20
Number of rights
vested (a)
Number of rights
lapsed/forfeited
Proportion
rights vested
Proportion
forfeited
58,000
55,120
65,000
17,930
15,521
4,938
–
22,772
–
–
–
5,160
12,410
14,575
–
–
20,000
23,914
4,830
7,968
–
–
14,967
9,360
–
–
–
–
–
–
–
9,880
–
–
–
9,208
13,993
1,148
4,162
6,878
12,482
–
–
735
–
–
–
1,206
–
402
–
–
–
7,225
16,792
4,919
8,441
15,319
–
–
100.0%
84.8%
100.0%
100.0%
100.0%
34.9%
0.0%
95.2%
0.0%
0.0%
0.0%
100.0%
100.0%
95.2%
100.0%
95.2%
100.0%
95.2%
100.0%
56.4%
0.0%
0.0%
0.0%
0.0%
0.0%
15.2%
0.0%
0.0%
0.0%
65.1%
100.0%
4.8%
20.1%
53.1%
100.0%
0.0%
0.0%
4.8%
0.0%
4.8%
0.0%
4.8%
0.0%
43.6%
100.0%
20.1%
53.1%
100.0%
43
Directors’ Report continued
For the year ended 31 December 2017
Section 10 Additional Required Disclosures continued
SHAREHOLDINGS
The number of ordinary shares held in the Company during the financial year by each KMP is set out below. Included are shares held on their
behalf by the trustee of the IRESS Limited Equity Plans Trust and their personally related parties is set out below.
KMP
NEDs
A D’Aloisio
N Beattie
J Cameron
J Fahey
J Hayes
J Seabrook
G Tomlinson
Executive KMP
A Walsh (a)
S Barnes
P Ferguson (b)
J Harris
A Knowles
J McNeill (b)
S New (b)
M Rady
A Todd
Total
Balance
as at
1 Jan 2017
Shares
acquired
during
the year (c)
Other
changes
Balance
as at
31 Dec 2017
36,855
–
36,668
–
13,788
37,988
–
370,502
31,110
29,082
–
9,316
697
293
–
–
566,299
10,629
–
–
–
–
510
8,000
191,843
64,007
33,955
–
46,649
9,951
315
24,327
–
390,186
–
–
–
–
–
–
–
(150,000)
–
(35,868)
–
(23,701)
(7,207)
–
–
–
(216,776)
47,484
–
36,668
–
13,788
38,498
8,000
412,345
95,117
27,169
–
32,264
3,441
608
24,327
–
739,709
(a) Opening balance has been restated for A Walsh to include shares acquired on acquisition of Financial Synergy.
(b)
Opening balances have been restated for P Ferguson, J McNeill and S New to include shares purchased under Employee Share Plans in prior years. A portion
of performance rights vesting in 2016 have not been included as they have not yet been exercised.
Shares acquired by Executive KMP during the year were acquired on the exercise of deferred share rights, exercise of performance rights (including those that
vested in 2016 that were exercised in 2017) and acquisition of shares under Employee Share Plans.
(c)
The aggregate number of shares, deferred share rights and performance rights held by each executive is shown below.
Executive
A Walsh
S Barnes
P Ferguson
J Harris
A Knowles
J McNeill
S New
M Rady
A Todd
Total
Shareholdings
at 31 Dec 2017
Deferred
share rights at
31 Dec 2017
Performance
rights at
31 Dec 2017
Total shares/
rights at
31 Dec 2017
412,345
95,117
27,169
-
32,264
3,441
608
24,327
-
595,271
162,575
-
31,016
26,081
51,691
73,492
12,968
-
-
357,823
475,478
22,656
33,797
51,512
49,625
12,613
12,398
27,050
-
685,129
1,050,398
117,773
91,982
77,593
133,580
89,546
25,974
51,377
-
1,638,223
Note: Excludes equity instruments that will be issued in May 2018 related to 2017 performance year.
TRANSACTIONS WITH KMP
No transactions (excluding share-based payment compensation) occurred between KMP and the Company during 2017.
LOANS TO KMP OR RELATED PARTIES
No loans to KMP or related parties were provided during 2017.
Signed in accordance with a resolution of the Directors made pursuant to s.298(2) of the Corporations Act 2001 (Cth).
TONY D’ALOISIO
CHAIRMAN
22 February 2018
44
A WALSH
CHIEF EXECUTIVE OFFICER AND MANAGING DIRECTOR
IRESS LIMITED ANNUAL REPORT 2017 Auditor’s Independence Declaration
Deloitte Touche Tohmatsu
ABN 74 490 121 060
550 Bourke Street
Melbourne VIC 3000
GPO Box 78
Melbourne VIC 3001 Australia
Tel: +61 3 9671 7000
Fax: +61 3 9671 7001
www.deloitte.com.au
22 February 2018
The Board of Directors
IRESS Limited
Level 18, 385 Bourke Street
MELBOURNE VIC 3000
Dear Board Members
IRESS Limited
In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the
following declaration of independence to the directors of IRESS Limited.
As lead audit partner for the audit of the financial statements of IRESS Limited for the financial
year ended 31 December 2017, I declare that to the best of my knowledge and belief, there have
been no contraventions of:
(i) the auditor independence requirements of the Corporations Act 2001 in relation to the
audit; and
(ii) any applicable code of professional conduct in relation to the audit.
Yours sincerely
DELOITTE TOUCHE TOHMATSU
Tom Imbesi
Partner
Chartered Accountants
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Touche Tohmatsu Limited
45
Financial Statements
For the year ended 31 December 2017
This is the financial report for IRESS Limited (the ‘Company’) and its controlled entities (collectively
referred to as the ‘Group’ or ‘IRESS’) for the year ended 31 December 2017.
CONTENTS
Consolidated statement of profit and loss and other comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Section 1. Financial results
1.1
1.2
1.3
1.4
1.5
1.6
1.7
Segment information
Earnings per share and dividends per share
Employee benefit expenses
Share based payments
Other expenses
Deprecation and amortisation
Notes to the consolidated statement of cash flows
Section 2. Core assets and working capital
2.1
2.2
2.3
2.4
2.5
Intangibles
Receivables and other assets
Payables and other liabilities
Provisions
Commitments and contingencies
Section 3. Debt and equity
3.1
3.2
3.3
Debt facilities and derivatives
Issued capital
Managing financial risks
Section 4. Other disclosures
4.1
4.2
4.3
4.4
4.5
4.6
4.7
4.8
Taxation
Businesses and investments acquired and divested
IRESS Limited – parent entity financial information
Subsidiaries
Deed of cross guarantee
Basis of preparation
Transactions with related parties
Subsequent events
46
IRESS LIMITED ANNUAL REPORT 2017
47
48
49
50
51
51
51
53
54
55
57
57
58
59
59
60
61
62
62
63
63
64
65
66
66
68
68
69
70
71
72
72
Section Heading
Financial Statements
For the year ended 31 December 2017
Consolidated Statement of Profit or Loss
and Other Comprehensive Income
For the year ended 31 December 2017
Revenue
Customer data fees
Communication and other technology expenses
Employee benefit expenses
Other expenses
Profit before depreciation, amortisation, interest and income tax expense
Depreciation and amortisation expense
Profit before interest and income tax expense
Interest revenue
Financing costs
Net interest and financing costs
Share of loss of equity-accounted investments, net of tax
Profit before income tax expense
Income tax expense
Profit after income tax expense
Other comprehensive income
Items that may be reclassified to profit or loss:
Exchange differences on translation of foreign operations
Tax related to exchange differences recognised directly in foreign currency translation reserve (1)
Total other comprehensive income/(loss) for the period
Total comprehensive income for the period
Notes
1.3
1.5
1.6
3.1(d)
4.2
4.1
2017
$’000
429,952
(33,333)
(24,516)
(232,838)
(31,880)
107,385
(25,075)
82,310
382
(4,827)
(4,445)
(100)
77,765
(18,010)
59,755
10,089
88
10,177
69,932
Cents
per share
2016
$’000
389,737
(31,385)
(23,026)
(202,428)
(29,389)
103,509
(21,063)
82,446
937
(6,406)
(5,469)
–
76,977
(17,525)
59,452
(38,931)
(1,610)
(40,541)
18,911
Cents
per share
Earnings per share
Basic earnings per share
Diluted earnings per share
1.2
1.2
35.4
34.9
37.0
36.4
(1) These are exchange differences on monetary items that form part of a reporting entity’s net investment in a foreign operation.
The consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes.
47
Consolidated Statement of Financial Position
As at 31 December 2017
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Derivative assets
Total current assets
Non-current assets
Intangibles
Plant and equipment
Investment in associate
Deferred tax assets
Derivative assets
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Provisions
Total current liabilities
Non-current liabilities
Trade and other payables
Provisions
Borrowings
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Issued capital
Share based payments reserve
Foreign currency translation reserve
Retained earnings
Total equity
Notes
2017
$’000
2016
$’000
2.2
3.1(b)
2.1
1.6
4.2
4.1
3.1(b)
2.3
2.4
2.3
2.4
3.1
4.1
3.2
28,615
55,839
306
84,760
547,285
19,773
1,400
18,337
–
586,795
671,555
38,310
12,893
51,203
4,205
6,854
192,865
8,881
212,805
264,008
407,547
376,309
24,213
(6,426)
13,451
407,547
22,951
50,102
–
73,053
553,610
12,096
–
23,276
205
589,187
662,240
44,168
10,979
55,147
7,517
8,040
177,805
12,905
206,267
261,414
400,826
375,287
23,006
(16,603)
19,136
400,826
The consolidated statement of financial position should be read in conjunction with the accompanying notes.
48
IRESS LIMITED ANNUAL REPORT 2017 Consolidated Statement of Financial Position
As at 31 December 2017
Consolidated Statement of Changes in Equity
For the year ended 31 December 2017
Balance at 1 January 2016
Profit for the period
Other comprehensive loss
Total comprehensive (loss) / income
Transactions with owners in their capacity as owners:
Shares issued during the year (1)
Share raising costs
Dividends declared or paid
Share-based payment expense, net of tax (3)
Transfer of share-based payments reserve (4)
Balance at 31 December 2016
Balance at 1 January 2017
Profit for the period
Other comprehensive income
Total comprehensive income
Transactions with owners in their capacity as owners:
Shares issued during the year (1)
Dividends declared (2)
Share-based payment expense, net of tax (3)
Transfer of share-based payments reserve (4)
Balance at 31 December 2017
Issued
capital
$’000
275,983
–
–
–
101,214
(1,910)
–
–
–
99,304
375,287
Issued
capital
$’000
375,287
–
–
–
486
536
–
–
1,022
376,309
Share based
payments
reserve
$’000
21,155
–
–
–
–
–
–
11,739
(9,888)
1,851
23,006
Share based
payments
reserve
$’000
23,006
–
–
–
–
–
10,757
(9,550)
1,207
24,213
Foreign
currency
translation
reserve
$’000
23,938
–
(40,541)
(40,541)
–
–
–
–
–
–
(16,603)
Foreign
currency
translation
reserve
$’000
(16,603)
–
10,177
10,177
–
–
–
–
–
(6,426)
Retained
earnings
$’000
18,235
59,452
–
59,452
–
–
(68,439)
–
9,888
(58,551)
19,136
Retained
earnings
$’000
19,136
59,755
–
59,755
–
(74,990)
–
9,550
(65,440)
13,451
Total
equity
$’000
339,311
59,452
(40,541)
18,911
101,214
(1,910)
(68,439)
11,739
–
42,604
400,826
Total
equity
$’000
400,826
59,755
10,177
69,932
486
(74,454)
10,757
–
(63,211)
407,547
The consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
(1)
2017 shares issued to satisfy employee share plan obligations. 2016 shares issued in respect of institutional placements and share offer plan to fund acquisition of
Financial Synergy, and satisfy employee share plan obligations. Refer Note 3.2.
(2) Shares issued under the Dividend Reinvestment.
(3) Share-based payment expense includes the tax impact of $1.4 million (2016: $0.6 million) on vesting of employees share based payments.
(4)
The movement from share-based payment reserves to retained earnings represents the fair value of share-based payments that have vested or lapsed during the
year. The amount has been recognised as a share-based payment expense over the vesting period. Details of share-based payment arrangements are provided in
Note 1.4.
49
Consolidated Statement of Cash Flows
For the year ended 31 December 2017
Cash flows from operating activities
Receipts from customers
Payments to suppliers
Payments to employees
Interest received
Interest and borrowing costs paid
Income taxes paid
Net cash inflow from operating activities
Cash flows from investing activities
Payments for plant and equipment
Payments for intangibles
Proceeds from sale of intangible assets
Payment of deferred consideration
Net cash paid for acquisition for investments and subsidiaries
Acquisition and integration costs paid
Net cash outflow from investing activities
Cash flows from financing activities
Proceeds from borrowings
Repayments of borrowings
Proceeds from share issue
Share issue costs paid
Proceeds from employee share plan repayments
Dividends paid
Net cash (outflow) / inflow from financing activities
Net increase / (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Effects of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at the end of the year
Notes
2017
$’000
2016
$’000
1.7
2.1
2.4
4.2
464,319
(130,397)
(223,168)
382
(6,043)
(21,350)
83,743
(18,945)
(3,279)
3,250
(1,132)
(1,500)
–
(21,606)
167,156
(154,175)
–
–
487
(74,644)
(61,176)
961
22,951
4,703
28,615
428,672
(123,322)
(189,940)
937
(6,080)
(19,699)
90,568
(7,240)
(4,575)
–
–
(101,692)
(7,656)
(121,163)
48,084
(65,313)
100,623
(1,910)
591
(68,376)
13,699
(16,896)
39,233
614
22,951
The consolidated statement of cash flows should be read in conjunction with the accompanying notes.
50
IRESS LIMITED ANNUAL REPORT 2017 Consolidated Statement of Cash Flows
For the year ended 31 December 2017
Notes to the Consolidated Financial Statements
For the year ended 31 December 2017
Section 1. Financial Results
1.1 SEGMENT INFORMATION
IRESS has a global presence, with the Managing Director and Chief
Executive Officer, who is IRESS’ Chief Operating Decision Maker,
receiving internal reporting split by the segments listed below. Any
transactions directly between segments are charged on an arm’s
length basis.
CHANGE TO A GROSS MARGIN PRESENTATION
IRESS has previously reported the financial performance of
client-facing segments after the allocation of centrally incurred costs
(‘post cost allocation view’). More than 50% of IRESS cost base is
incurred centrally with the largest component of these costs being the
Product and Technology team.
Given the material size of centrally incurred costs, IRESS believes that
separate specific disclosure of expenditure in these areas will provide
greater transparency to users of the financial statements. In addition,
the benefit that each client segment derives from these central
costs, and in particular product and technology activity, varies over
time. As a result, it was becoming increasingly difficult to assess the
performance of each business using the post cost allocation view.
In response, IRESS has changed the presentation of segment results
to show the financial performance of client segments excluding
centrally incurred costs and to separately disclose key centrally
incurred costs. The revised segments comprise:
Client Segments
Client segments which include revenue less the direct costs of
customer-facing teams that oversee this revenue generation, are:
APAC Financial Markets
Provides information, trading, compliance, order management,
portfolio systems and related tools to financial markets participants
in Australia, New Zealand and Asia.
ANZ Wealth Management
Provides financial planning systems, fund administration software
and related tools to Superannuation and Wealth Management
professionals located in Australia and New Zealand.
UK
Incorporates the financial markets business which provides
information, trading, compliance, order management, portfolio
systems and related tools to cash equity participants; and the wealth
management business which provides financial planning systems
and related tools to Wealth Management professionals located in
the United Kingdom.
Lending
The Lending segment operates in the United Kingdom to provide
mortgage origination software and associated consulting services
to banks.
South Africa
Provides information, trading, compliance, order management,
portfolio systems and related tools to financial markets participants
and provides financial planning systems and related tools to Wealth
Management professionals located in South Africa.
Canada
Provides information, trading, compliance, order management, portfolio
systems and related tools to financial markets participants in Canada.
Cost Segments
Product and Technology
All costs associated with product and technology will be reported
under this segment giving a clear view of the quantum of investment
made by IRESS in maintaining and enhancing its products.
Operations
Includes costs to run client-facing and corporate operations activity,
including hosting and networks, information security, client help desks
and property infrastructure.
51
Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2017
Section 1. Financial Results continued
1.1 SEGMENT INFORMATION CONTINUED
Corporate
All other corporate functions including legal, finance and administration, human resources, marketing, board of directors and executives.
The revenue, segment profit and reconciliation to the Group results are shown below:
OPERATING REVENUE
DIRECT CONTRIBUTION
S
T
L
U
S
E
R
T
N
E
M
G
E
S
APAC Financial Markets
ANZ Wealth Management
Total APAC
UK
Lending
Total UK
South Africa
Canada
Total Group
T
S
O
C
S Product and Technology
T
N
E
M
G
E
S
Operations
Corporate
Total indirect costs
2017
$’000
115,059
125,131
240,190
105,526
23,759
129,285
42,754
17,723
429,952
2016
$’000
113,457
93,825
207,282
110,830
25,994
136,824
28,687
16,944
389,737
2017
$’000
83,763
93,935
177,698
67,323
18,590
85,913
32,784
8,987
2016
$’000
84,092
75,743
159,835
73,230
21,102
94,332
22,357
7,841
305,382
284,365
(108,323)
(38,707)
(32,969)
(179,999)
125,383
(9,327)
116,056
(8,671)
(98,428)
(34,216)
(28,190)
(160,834)
123,531
(10,836)
112,695
(9,186)
Group Segment Profit
Share-based payment expense
Segment Profit after share-based payment expense
Other non-operating expenses (1)
S
T
L
U
S
E
R
P
U
O
R
G
Profit before interest and tax, depreciation and amortisation
107,385
103,509
Depreciation and amortisation
Profit before interest and tax
Net interest and financing costs
Share of loss of equity-accounted investments, net of tax
Tax expense
Net profit after tax
(25,075)
82,310
(4,445)
(100)
(18,010)
59,755
(21,063)
82,446
(5,469)
–
(17,525)
59,452
(1)
Predominately relates to office move costs, business acquisition and integration expenses and unrealised foreign exchange gains and losses.
The below table outlines revenue and non-current assets by geographical area, being Australia and New Zealand, United Kingdom,
South Africa, Canada and Asia:
Australia and New Zealand
Asia
Total APAC
United Kingdom
South Africa
Canada
Grand total
EXTERNAL REVENUES
NON-CURRENT ASSETS (1)
2017
$’000
237,416
2,774
240,190
129,285
42,754
17,723
429,952
2016
$’000
204,671
2,611
207,282
136,823
28,687
16,945
389,737
2017
$’000
2016
$’000
372,857
165,784
30
372,887
173,454
12,099
10,018
568,458
56
165,840
377,207
12,072
10,588
565,707
(1) Excludes financial instruments and deferred taxes, and predominately relates to intangible assets (Note 2.1).
52
IRESS LIMITED ANNUAL REPORT 2017
Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2017
1.2 EARNINGS PER SHARE AND DIVIDENDS PER SHARE
(a) Basic and diluted earnings per share and dividends per share for the period are:
Earnings per share
Diluted earnings per share
Dividends per share:
Interim dividend franked to 60% (2016: 60%)
Final dividend declared after balance sheet date franked to 60% (2016: 60%)
(b) The weighted average number of shares used to calculate earnings per share is as follows:
Weighted average number of ordinary shares used in basic earnings per share
Effect of potentially dilutive shares
Weighted average number of ordinary shares used in diluted earnings per share
(c) Dividends recognised during the year and after the balance sheet date were as follows:
Dividends recognised and paid during the year
Final dividend for 2016 28.0 cents per share franked to 60% (2015: 26.7 cents per share franked to 60%)
Interim dividend for 2017 16.0 cents per share franked to 60% (2016: 16.0 cents per share franked to 60%)
Cents
per share
2017
Cents
per share
2016
35.4
34.9
16.0
28.0
Number
of shares
2017
’000
168,800
2,535
171,335
2017
$’000
47,588
27,402
74,990
37.0
36.4
16.0
28.0
Number
of shares
2016
’000
160,777
2,543
163,320
2016
$’000
42,664
25,775
68,439
Dividends declared after balance date
Since the end of the year, the directors declared a final dividend of 28.0 cents per share franked to 60% (2016:
28.0 cents per share franked to 60%)
Franking credit balance
Franking credits available for subsequent reporting periods based on a tax rate of 30% (2016: 30%)
48,022
47,588
3,141
4,771
53
Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2017
Section 1. Financial Results continued
1.3 EMPLOYEE BENEFIT EXPENSES
Short-term employee benefits, mainly comprising of base salary, bonus payments and annual leave costs are expensed as the employee
renders services.
Post-employment benefits which comprise IRESS contribution to defined contribution retirement plans are expensed as the service is received
from the employee.
Termination benefits are amounts paid to employees when their employment is terminated. These are expensed when IRESS can no longer
withdraw the offer of the termination benefit.
Short term and other employee benefits
Post employment benefits
Termination benefits
Share-based payment expense
Employee administration expense
Notes
1.4
Key management personnel
Key Management Personnel compensation included in total employee benefits for the year is set out below:
Short term employee benefits
Long term employee benefits
Post employment benefits
Share based payments
Termination payments
2017
$’000
197,177
14,183
2,433
9,327
9,718
232,838
2017
$’000
5,673
41
395
2,254
667
9,030
2016
$’000
169,237
11,988
1,427
10,836
8,940
202,428
2016
$’000
6,252
65
368
2,602
–
9,287
Detailed remuneration disclosures are provided in the Remuneration Report.
The following changes in the composition of key management personnel occurred during the year:
•
In January 2017, Andrew Todd commenced as Chief Technology Officer.
• Following an executive team restructure in September 2017, Steve Barnes – Chief Operating Officer, and Matt Rady – Group Executive,
Financial Markets ceased to be KMP in September and exited the business.
•
In October 2017, Julie Fahey was appointed to the Board of Directors.
54
IRESS LIMITED ANNUAL REPORT 2017 Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2017
1.4 SHARE BASED PAYMENTS
The grant date fair value of equity settled share based payment awards granted to employees is recognised as an expense, with a
corresponding increase in equity, over the vesting period of the awards. The amount recognised as an expense is adjusted to reflect the
number of awards for which the related service and non-market performance conditions are expected to be met, such that the amount
ultimately recognised is based on the number of awards that meet the related service and non-market performance conditions at
the vesting date.
(a) Details of share plans
To assist in the attraction, retention and motivation of employees, the Group operates the following share based payment plans:
Plan
Key terms
Performance condition
Performance /
Restriction period
Dividends received
before vesting
3 years and 4 years
No
Executive LTI Plan –
CEO
Executive LTI Plan
Employee Deferred
Share Plan
Employee Deferred
Share Rights Plan
General Employee
Share Plan/ UK Share
Incentive Plan
CEO receives
performance rights at
no cost.
Eligible participants
receive performance
rights at no cost.
Eligible participants
receive deferred shares
at no cost.
Eligible participants
receive deferred rights
at no cost.
Eligible participants
are invited to acquire
IRESS shares,
IRESS matches this
participation to a
set value.
Total shareholder
return (TSR) against
peer group
3 years
Individual performance
criteria
3 years
3 years
3 years
Nil
No
Yes
No
Yes
If participant leaves
before end of
performance period
Generally forfeited
(Board discretion
may apply)
Generally forfeited
(Board discretion
may apply)
Matched shares are
forfeited under the UK
Share Incentive Plan
and granted under
the General Employee
Share Plan.
As at 31 December 2017, the total unvested shares in the General Employee Share Plan/ UK Share Incentive Plan were 37,768 (2016: 29,750).
(b) Grant date fair value
The grant date fair value of the Executive LTI Plans and the Employee Deferred Share Rights Plan are independently determined using a
Monte Carlo simulation option pricing model using standard option pricing inputs such as the underlying share price, exercise price, expected
dividends, expected risk free rates and expected share price volatility. Key inputs are summarised below:
Grant date fair value
Key inputs in determining grant date fair value
Model used
Risk free rate
Share price volatility
Dividend yield
Executive
LTI Plan
Employee
Deferred Share
Rights Plan
Monte Carlo
1.68 – 3%
22.5 – 30%
4 – 5%
Monte Carlo
1.68 – 3%
22.5 – 30%
4 – 5%
As the vesting conditions of the Employee Deferred Share Plan grants are not linked to company performance and participants receive
dividends during the vesting period, the grant date fair value approximates the share price at the date of grant.
55
Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2017
Section 1. Financial Results continued
1.4 SHARED BASED PAYMENTS CONTINUED
(c) Details of shares or rights on issue during the year is shown below:
NUMBER OF SHARES
AT GRANT DATE
Type
Grant
date
Vesting
date
At 1 Jan
2017
Granted
Forfeited
Vested
At 31 Dec
2017
Executive LTI Plan – CEO
2013 Grant – 3 year
2013 Grant – 4 year
2014 Grant – 3 year
2014 Grant – 4 year
2015 Grant – 3 year
2015 Grant – 4 year
2016 Grant – 3 year
2016 Grant – 4 year
2017 Grant – 3 year
2017 Grant – 4 year
7/5/13
7/5/13
7/5/14
7/5/14
7/5/15
7/5/15
5/5/16
5/5/16
11/5/17
11/5/17
8/5/17
8/5/17
7/5/18
7/5/18
7/5/19
7/5/19
5/5/20
5/5/20
11/5/21
11/5/21
65,000
65,000
63,000
63,000
60,000
60,000
60,000
60,000
–
–
–
–
–
–
–
–
–
–
54,739
54,739
–
(9,880)
–
–
–
–
–
–
–
–
(65,000)
(55,120)
–
–
–
–
–
–
–
–
–
–
63,000
63,000
60,000
60,000
60,000
60,000
54,739
54,739
496,000
109,478
(9,880)
(120,120)
475,478
Executive LTI Plan
2014 Grant
2015 Grant
2016 Grant
2017 Grant
7/5/14
7/5/15
5/5/16
11/5/17
8/5/17
7/5/18
5/5/19
11/5/20
211,964
220,002
161,413
–
–
–
–
144,559
(10,174)
(9,081)
(18,326)
(27,801)
(201,790)
–
–
–
–
210,921
143,087
116,758
593,379
144,559
(65,382)
(201,790)
470,766
Employee Deferred Share Plan
2012 Grant – Special (1)
7/5/12
2014 Grant (2)
7/5/14
7/5/15
2015 Grant
5/5/16
2016 Grant
11/5/17
2017 Grant – Special
11/5/17
2017 Grant
7/12/16
8/5/17
7/5/18
5/5/19
11/5/19
11/5/20
161,032
541,560
556,370
574,116
–
–
–
–
–
–
47,907
653,238
(28,180)
(7,260)
(29,827)
(58,749)
(3,726)
(30,875)
(132,852)
(534,300)
(8,713)
(3,915)
–
–
–
–
517,830
511,452
44,181
622,363
1,833,078
701,145
(158,617)
(679,780) 1,695,826
Employee Deferred Share Rights Plan
2012 Grant – Special (3)
2013 Grant
2014 Grant – Special (4)
2014 Grant – Special
2014 Grant
2015 Grant
2016 Grant
2017 Grant
7/5/12
7/5/13
1/1/14
1/1/14
7/5/14
7/5/15
5/5/16
11/5/17
7/12/17
7/12/17
31/12/17
31/12/18
8/5/17
7/5/18
5/5/19
11/5/20
194,826
50,250
486,104
57,244
245,790
257,320
270,272
–
–
–
–
–
–
–
–
254,924
(25,328)
–
(26,952)
–
(660)
(1,150)
(22,377)
(30,785)
(72,085)
(50,250)
–
–
(245,130)
(30,488)
(15,707)
–
97,413
–
459,152
57,244
–
225,682
232,188
224,139
1,561,806
254,924
(107,252)
(413,660) 1,295,818
Total
The weighted average remaining contractual life of the above grants is 1.2 years (2016: 1.2 years)
Share
price
$
8.51
8.51
8.27
8.27
10.15
10.15
11.87
11.87
12.24
12.24
8.27
10.15
11.87
12.24
6.18
8.27
10.15
11.87
12.24
12.24
6.18
8.51
8.27
8.27
8.27
10.15
11.87
12.39
Fair
value
$
5.03
4.76
4.05
3.89
5.17
5.13
8.00
6.24
6.64
7.05
4.18
5.30
8.50
7.13
6.18
8.27
10.15
11.87
12.39
12.39
5.26
5.26
7.73
7.73
7.25
9.02
10.25
10.86
2017
$’000
29
27
64
61
77
77
120
94
58
62
669
103
346
371
178
998
(174)
417
1,623
1,907
175
1,646
5,594
(129)
–
(202)
1
212
796
869
519
2,066
9,327
(1) The award was fully expensed by 2016. Testing of the non-market based vesting conditions early in 2017 resulted in a partial forfeiture and a negative expense.
(2) Opening balance was restated by 230 units to correct an error in the 2016 opening and closing balance.
(3)
The award was fully expensed by 2016. Testing of non-market based vesting conditions was completed for half of the awards in 2017, resulting in a partial
forfeiture and a negative expense. The vesting conditions of the remaining half of awards will be completed early in 2018.
Testing of the non-market based vesting conditions will be completed early in 2018 in order to determine the number vested and forfeited. Any forfeiture will result
in a negative expense in 2018.
(4)
56
IRESS LIMITED ANNUAL REPORT 2017 Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2017
1.5 OTHER EXPENSES
(a) Included in other operating and other non-operating expenses are the following items:
Other operating expenses
General operating expenses
Reversal of provision for doubtful debts
Rental expense relating to operating leases
Fees to auditors
Other non-operating expenses
Unrealised (gains)/losses on foreign balances
Business acquisition and restructure expenses
Other project related expenses (1)
Notes
1.5(b)
2017
$’000
13,528
(502)
9,352
831
23,209
(426)
1,305
7,792
8,671
2016
$’000
14,061
(1,499)
6,899
742
20,203
666
7,423
1,097
9,186
Other expenses
31,880
29,389
(1) Comprises project related expenses from implementation of corporate core systems.
(b) Fees to auditors, Deloitte Touche Tohmatsu, for services rendered are as follows:
Auditors of the parent entity
Audit or review of the financial report
Other non-audit services (1)
Network firms of the parent entity auditor
Audit or review of the financial report
Total fees to auditors
(1) Other services comprise assurance and other compliance reviews.
2017
$
2016
$
374,418
83,625
458,043
372,773
372,773
830,816
346,037
22,769
368,806
373,316
373,316
742,122
1.6 DEPRECIATION AND AMORTISATION
Computer and other plant and equipment are measured at cost less accumulated depreciation and impairment. Depreciation is calculated on a
straight line basis over its expected useful life of between 3 to 10 years.
Depreciation and amortisation expense
Amortisation
Depreciation – computer equipment (1)
Depreciation – other plant and equipment (2)
Notes
2.1
2017
$’000
17,119
4,551
3,405
25,075
2016
$’000
14,628
3,852
2,583
21,063
(1)
(2)
Cost of computer equipment as at 31 December 2017 was $40.5 million (2016: $35.1 million) and accumulated depreciation was $30.3 million
(2016: $27.1 million).
Cost of other plant and equipment as at 31 December 2017 was $18.2 million (2016: $18.6 million) and accumulated depreciation was $8.7 million
(2016: $14.5 million).
57
Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2017
Section 1. Financial Results continued
1.7 NOTES TO THE CONSOLIDATED STATEMENT OF CASH FLOWS
Reconciliation of profit attributable to members of the parent entity to net cash flows from operating activities.
Profit for the financial year
Adjustments for non-cash items and non-operating cash flow items
Depreciation and amortisation
Share based payment expense
Foreign exchange (gain)/loss
Amortisation of prepaid loan establishment fees
Business combination and restructure expenses
Share of loss of equity-accounted investments, net of tax
Change in working capital and tax balances, net of effects from acquisition of controlled entities
Increase in receivables
Decrease in payables
Net change in derivatives
Net change in tax balances
(Decrease) / increase in provisions
Net cash inflow from operating activities
2017
$’000
2016
$’000
59,755
59,452
25,075
9,327
(426)
751
–
100
(5,736)
(922)
(723)
(3,340)
(118)
83,743
21,063
10,836
21,925
579
7,656
–
(4,804)
(3,321)
(21,124)
(2,170)
476
90,568
58
IRESS LIMITED ANNUAL REPORT 2017
Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2017
Section 2. Core Assets and Working Capital
2.1 INTANGIBLES
Intangibles for the Group comprise of goodwill arising from business combinations, customer relationships, computer software and other
intangibles (mainly acquired databases and brands). Intangible assets with finite lives are carried at cost less accumulated amortisation and
accumulated impairment losses.
Goodwill recognised arose from business combinations where the fair value of the consideration paid exceeded the fair value of the assets
acquired. Goodwill is considered to have an indefinite life and is not amortised as it represents the synergistic benefits of bringing the
businesses together.
Customer relationships, some computer software and other intangibles were acquired as part of business combinations. These intangible assets
are initially recognised at their fair value at the acquisition date. Some of the computer software was separately acquired, and initially recognised
at cost. Subsequent to initial recognition, intangible assets other than goodwill are amortised over the expected useful lives noted below.
Internally generated assets will be recognised if the cost of actual development can be reliably measured and clearly distinguished
from research and ongoing operating and maintenance activities. Given the development and research phases inherent in software
development occur contemporaneously, the separation of these phases is imprecise, other than on an arbitrary basis. Accordingly, the
expenditure related to development activity cannot be reliably measured accordingly. No internally generated computer software assets
have been recognised during the period.
(a) The carrying value of intangibles is shown below:
GOODWILL
CUSTOMER
RELATIONSHIPS
COMPUTER SOFTWARE
OTHER INTANGIBLES
TOTAL
2017
$’000
2016
$’000
2017
$’000
2016
$’000
2017
$’000
2016
$’000
2017
$’000
2016
$’000
2017
$’000
2016
$’000
442,802
435,300
52,873
52,484
200,181
201,670
7,834
6,236
703,690
695,690
Cost
Accumulated
amortisation
Carrying value
442,802
435,300
–
–
(18,867)
34,006
(12,437)
(133,399)
(125,676)
40,047
66,782
75,994
(4,139)
3,695
(3,967)
(156,405)
(142,080)
2,269
547,285
553,610
Opening
carrying value
Separately
acquired
Acquired
through
business
combinations (i)
Disposal (ii)
Amortisation
Foreign
currency
translation
Closing
carrying value
Expected
useful life
(years)
435,300
467,315
40,047
33,719
75,994
26,385
2,269
2,133
553,610
529,552
–
–
–
–
1,778
4,575
1,501
–
3,279
4,575
–
(3,250)
–
31,135
–
–
–
–
(6,181)
17,070
–
(5,981)
–
–
(10,859)
55,639
–
(8,586)
–
–
(79)
284
–
(61)
–
(3,250)
(17,119)
104,128
–
(14,628)
10,752
(63,150)
140
(4,761)
(131)
(2,019)
4
(87)
10,765
(70,017)
442,802
435,300
34,006
40,047
66,782
75,994
3,695
2,269
547,285
553,610
1 to 10
3 to 15
1 to 10
i) Completion of provisional accounting of prior year acquisitions
In 2016, the Group acquired Financial Synergy and INET BFA Pty Ltd. The amount of deferred tax liability and goodwill recognised on the 2016
acquisition of Financial Synergy had been provisionally calculated as the tax values had not been finalised at the last reporting date. These
values were finalised during the year and resulted in a reduction in the deferred tax liability recognised of $5.1 million, and a corresponding
decrease in goodwill from $33.7 million to $28.6 million. Under accounting standards, such adjustments are recognised in 2016 and not 2017.
Accordingly, the 2016 goodwill and deferred tax liability recognised on the acquisition of Financial Synergy have been adjusted. There were no
other material changes to the assets and liabilities recognised as previously disclosed on the 2016 annual report.
ii) Divestment during the period
On 13 July 2017, IRESS entered into an agreement with Mainstream BPO to divest part of its superannuation administration business that
provides services to customer-owned banks for $3.3 million. The transaction was completed on 9 November 2017, with the sale proceeds
received in full during the 2017 year. No gain or loss (before transaction costs) was recognised on the transaction.
59
Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2017
Section 2. Core Assets and Working Capital continued
2.1 INTANGIBLES CONTINUED
(b) Impairment testing for goodwill
Goodwill is tested for impairment annually or more frequently whenever indicators of impairment are identified. In testing for impairment,
the carrying amount of each Cash Generating Unit (CGU) is compared against the recoverable amount.
The recoverable amount has been calculated based on the value in use, using a discounted cash flow (DCF) approach. The DCF uses post-tax
cashflow projections that are based on the most recent five year financial plan approved by the Board, and is discounted at an appropriate
after tax discount rate taking into account the Group’s weighted average cost of capital adjusted for any risks specific to the CGU.
Terminal growth rates applied in the DCF take into account historic growth trends, future strategy and the long term outlook of the business.
The allocation of goodwill to each cash generating unit and assumptions applied in calculating the recoverable amounts of the goodwill
in testing for impairment are as follows:
Cash generating unit
ANZ Wealth Management
UK
UK Lending
South Africa
Canada
ALLOCATED GOODWILL
POST-TAX DISCOUNT RATES
LONG TERM GROWTH RATES
2017
$'000
45,486
299,258
76,325
13,041
8,692
442,802
2016
$'000
48,706
289,544
75,495
12,730
8,825
435,300
2017
%
8.6
8.5
8.5
15.5
8.1
2016
%
9.0
8.7
8.7
15.4
10.6
2017
%
2.7
2.7
2.7
4.7
0.5
2016
%
2.7
2.7
2.7
4.7
0.5
Significant estimates made
UK Lending
A new version of an existing product is being rolled out within the UK Lending CGU. The financial performance of the UK Lending CGU is
sensitive to the success of this product.
Canada
The continued profitability and growth of the Canada business is dependent on securing large-scale clients in the financial markets business
and introducing wealth products to Canadian clients. During the year, new client wins in Canada has reduced the risk of Canada not meeting
its strategic outlook, as reflected by the reduction in the discount rate used for the Canada business.
An unforeseen loss in material customers or inability to realise forecast growth targets in the UK Lending or Canada CGUs may result in a
decrease in the recoverable amount, and possibly an impairment of the goodwill.
2.2 RECEIVABLES AND OTHER ASSETS
Receivables arise from revenue that has been billed, but not yet settled by the customer. Unbilled income arises where revenue has been
earned but the invoice has not been issued.
Revenue arises from providing access to IRESS software, rendering of services or recharging for access to capital markets data. Revenue is
measured at the fair value of the consideration received or receivable. Where services rendered spans over more than one accounting period,
revenue is only recognised based on a percentage of completion basis with reference to specific milestones.
IRESS credit terms are generally 30 days from the date of invoice. As such, the carrying amount of receivables approximates their fair value.
(a) Receivables and other assets comprises:
Trade receivables
Allowance for doubtful debts
Unbilled income
Prepayments
Other assets
60
2017
$’000
34,058
(668)
33,390
11,465
8,374
2,610
55,839
2016
$’000
32,303
(1,086)
31,217
3,722
11,913
3,250
50,102
IRESS LIMITED ANNUAL REPORT 2017 Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2017
(b) Credit risk and allowance for doubtful debts
Credit risk refers to the risk a counterparty will default on its contractual obligations resulting in a financial loss to the Group. The maximum
exposure to credit risk is the carrying value of the receivables. The Company actively manages this exposure by dealing only with
counterparties with good credit standing and not having any significant credit risk with any single counterparty.
The credit risk exposure arising from customers is monitored on a monthly basis. Where an event of default is identified, a provision is
raised against the amount owed by the customer to the estimated amount not considered recoverable in the normal course of business.
The movement in the allowance for doubtful debts during the period is as follows:
Balance 1 January
Provision reversed during the period
Balance 31 December
2017
$’000
1,086
(418)
668
2016
$’000
2,275
(1,189)
1,086
(c) Quality of trade receivables
The quality of debtors is best monitored by the ageing of open invoices in accounts receivable. The ageing at the end of the year is as follows:
Neither past due nor impaired – less than 30 days
Past due but not impaired:
+31 to 90 days
+91 days
Impaired
2017
$’000
2016
$’000
20,479
23,010
6,847
6,064
668
34,058
7,039
1,168
1,086
32,303
Receivables that are neither past due nor impaired comprise customers with a long term record of timely payments and/or no recent history of
default arising from financial difficulty.
Receivables that are past due and not impaired comprise customers which do not have any objective evidence that the receivable may be
impaired. IRESS has actively engaged these customers and reasons for the invoices remaining outstanding are being actively resolved.
An allowance for doubtful debts is recognised where IRESS has identified objective evidence that an amount owing may not be recoverable,
mainly arising from observed financial difficulty of a customer.
2.3 PAYABLES AND OTHER LIABILITIES
Payables and other liabilities are initially measured at fair value. Subsequent to initial measurement, these are recognised at amortised cost.
Deferred revenue represents amounts received from customers for which revenue has not been earned nor recognised.
Finance arrangements relate to the acquisition of software licences.
Liabilities are classified as current where IRESS does not have an unconditional right to defer settlement beyond 12 months.
Due to the short term nature of current liabilities, the carrying amount approximates fair value.
Current
Trade payables
Accruals
Deferred revenue
Current tax payable
GST payable
Finance arrangements
Employee related liabilities
Accrued interest
Other
Non-current
Finance arrangements
2017
$’000
6,736
13,079
6,228
661
2,713
3,076
5,212
598
7
38,310
4,205
4,205
2016
$’000
4,063
14,692
6,256
4,915
4,005
3,076
6,047
734
380
44,168
7,517
7,517
61
Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2017
Section 2. Core Assets and Working Capital continued
2.3 PAYABLES AND OTHER LIABILITIES CONTINUED
The Group’s exposure to foreign currency risk arising from translating payables and other liabilities to a Group entity’s functional currency is not
considered material. The exposure is monitored on a net working capital basis as disclosed in Note 3.3.
Liquidity risk arises from current payables and other liabilities that are payable in less than one year, as well as the finance arrangements with certain
software providers that have an average annual contractual payment of $3.1 million per annum, over the life of the arrangements of 3 to 5 years.
The Group manages this liquidity risk by maintaining sufficient cash and current assets to meet the contractual obligations as they arise.
2.4 PROVISIONS
Provisions are measured at the present value of Management’s best estimate of the expenditure required to settle the present obligation at the
end of the reporting period.
Employee benefits comprise mainly annual leave and long service leave entitlements to employees.
Deferred consideration represents purchase consideration payable for acquisitions once certain conditions are met as stipulated in the contracts.
These are measured at the discounted value of the best estimate of the cash payable based on conditions existing at the balance date.
Current provisions
Employee benefits
Deferred consideration
Other provisions
Non-current provisions
Employee benefits
Deferred consideration
Other provisions
2017
$’000
8,766
3,265
862
12,893
6,267
–
587
6,854
2016
$’000
8,161
2,362
456
10,979
5,137
1,884
1,019
8,040
The decrease in deferred consideration is due to the payment of $1.1 million in February 2017 relating to the Pulse acquisition in 2016, as the
required conditions were fulfilled, as well as foreign currency movements.
2.5 COMMITMENTS AND CONTINGENCIES
(a) Operating lease commitments
IRESS leases office facilities with lease terms between 2 to 10 years of which some are supported by bank guarantees of $8.2 million
(2016: $3 million).
On renewal, the terms of the leases are negotiated. The below summarises IRESS’ commitments for minimum lease payments in relation to
non-cancellable operating leases.
Payable within one year
Payable later than one year, no later than five years
Payable later than five years
2017
$’000
11,175
32,762
19,960
63,897
2016
$’000
8,520
21,782
6,165
36,467
The increase in contractual lease commitments is due to the new Sydney and Melbourne office leases executed during the year.
The adoption of AASB 16 Leases will have an impact on the accounting for operating leases. Refer Note 4.6.
(b) Capital commitments
No capital expenditure has been contracted or provided for at balance date (2016: Nil).
(c) Contingencies
There are no material contingent liabilities or capital expenditure that have been contracted or provided for at the reporting date.
62
IRESS LIMITED ANNUAL REPORT 2017 Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2017
Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2017
Section 3. Debt and Equity
3.1 DEBT FACILITIES AND DERIVATIVES
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost.
Any gains or losses are recognised in the statement of profit or loss in the event the borrowings are derecognised.
(a) Details of borrowings held by the Group are as follows:
Non-current
4 year $300 million bank facility to November 2021
AUD
GBP
3 year $181.25 million bank facility to September 2018
AUD
GBP
5 year $118.75 million bank facility to September 2020
AUD
GBP
3 year $0.5 million facility to August 2018
Total amount drawn
Borrowing costs capitalised
Total borrowings
2017
$’000
2016
$’000
90,000
104,753
–
–
–
–
–
–
–
48,000
59,086
27,000
44,528
495
194,753
179,109
(1,888)
(1,304)
192,865
177,805
On 21 November 2017, the Group successfully refinanced its $300 million debt facility of which $181.25 million was expiring in
September 2018 and $118.75 million was expiring in September 2020, to a four-year maturity expiring in November 2021.
The facilities allow multi-currency drawdowns and are at variable interest rates based on LIBOR and BBSY benchmark rates plus a market
margin. As such, the amount drawn approximates fair value.
Not included in the table above is a $10 million multi-currency guarantee facility that is used for any bank guarantees required by the Group.
The borrowings are unsecured, and the Group has complied with the financial covenants of its borrowing facilities during the year.
(b) Derivatives
Derivatives are initially recognised at fair value at the date the derivative contract is entered into and are subsequently revalued to fair value at
the end of each reporting period.
The AUD and GBP borrowings were utilised to fund acquisitions in the UK. To minimise the risk of loss due to unfavourable foreign exchange
rate movements that arises from funding a foreign acquisition with AUD debt, the Group entered into cross currency swaps as follows:
Assets at fair value
5 year Receive AUD / Pay GBP to September 2018
2017
$’000
2016
$’000
306
205
The fair value of the derivatives is determined by first calculating the future cash flows that are estimated based on forward interest rates (from
observable yield curves at the end of the reporting period) and contract interest rates, and then discounting the future cash flows at a rate that
reflects the credit risk of various counterparties.
The fair value is classified as Level 2 as the calculation is based on observable inputs.
The change in the fair value during the year is due to the impact of the depreciation of the British pound against the Australian dollar.
No credit risk adjustments have been recognised on the fair value of the derivative assets as these are not material.
63
Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2017
Section 3. Debt and Equity continued
3.1 DEBT FACILITIES AND DERIVATIVES CONTINUED
(c) Contractual maturity analysis
Contractual cash outflow maturity analysis is shown based on undiscounted cashflows. An estimate – based on forward interest rates and
foreign currency rates – has been applied in determining interest and foreign cash outflows (inflows). The actual contractual outflow may vary to
the amounts disclosed.
31 December 2017
Outflows/(inflows)
4 year facilities – principal
Interest on borrowings
5 year cross currency swap – principal exchange (1)
5 year cross currency swap – interest (1)
31 December 2016
Outflows/(inflows)
3 year facilities – principal
3 year working capital facilities – principal
5 year facilities – principal
Interest on borrowings
3 year and 5 year cross currency swap – principal exchange (1)
3 year and 5 year cross currency swap – interest (1)
within
1 year
$’000
–
3,938
(249)
(288)
within
1 year
$’000
–
–
–
3,887
–
313
1–3 years
$’000
–
11,814
–
–
1–3 years
$’000
107,085
495
–
9,721
(14)
834
Greater than
3 years
$’000
194,753
3,610
–
–
Greater than
3 years
$’000
–
–
71,528
3,467
–
–
(1)
Represents expected net cash exchange in AUD that occurs at settlement. Under the terms of the swap, the settlements are on a gross basis where IRESS
receives AUD and pays GBP.
(d) Interest expense and financing costs
Interest expenses are recognised using the effective interest rate method. Interest expenses includes exchange differences arising from foreign
currency borrowings to the extent they are regarded as adjustments to interest costs.
Net interest expense and financing costs for the year comprised the following:
Interest revenue
Interest expense
Other financing costs comprising:
Amortisation of borrowing costs
Translation losses on intragroup financing arrangements
Fair value changes on cross currency swaps
Net interest expense and financing costs
3.2 ISSUED CAPITAL
The number of ordinary shares outstanding at the end of the year is as follows:
Balance at 1 January
Shares issued under the Employee Share Plan (1)
Shares issued (2)
Less Treasury Shares (3)
Number of shares on issue
2017
$’000
382
(4,799)
(751)
621
102
(4,445)
2017
Number
of shares
‘000
169,957
1,505
45
171,507
(1,964)
169,543
2016
$’000
937
(5,897)
(580)
(20,993)
21,064
(5,469)
2016
Number
of shares
‘000
160,074
1,059
8,824
169,957
(1,933)
168,024
(1) New shares issued to meet obligations in relation to Performance Rights, Deferred Shares and Deferred Share Rights for employees.
(2)
(3) The change is due to the net movement in shares issued and shares vested under the Employee Share Plan.
Shares issued during the current year for Dividend Reinvestment Plan. In 2016 shares issued as part of the Institutional Placement and Share offer plan to fund acquisitions.
64
IRESS LIMITED ANNUAL REPORT 2017
Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2017
3.3 MANAGING FINANCIAL RISKS
(a) Market risks
Interest rate risk
The Group’s exposure to interest rate risk mainly arises from its variable rate borrowings and cross currency swaps. A decrease in the
benchmark interest rates of 50 basis points (0.5%), with all other factors held constant, would result in a decrease in the annual interest cost
of the Group by $0.9 million (2016: $0.9 million decrease).
Foreign currency risk
GBP borrowings do not give rise to foreign currency risk to the Group as they are ultimately held in entities that have a GBP functional currency.
However, the Group is also exposed to foreign currency risk mainly from intercompany loans denominated in foreign currency, the majority
of which is mitigated by cross currency derivatives. Additional foreign currency risk arises from cash balances, receivables and payables
denominated in foreign currency.
The Group’s exposures to foreign currency arise from monetary balances in a currency other than the functional currency of each of the
Group’s subsidiary (assessed from the context of that subsidiary). The material exposure to foreign currency movements arises from working
capital balances as summarised below:
Working capital denominated in foreign currency
AUD impact on profit or loss of a 1% change in foreign currency rates
GBP
$’000
25,158
(431)
ZAR
$’000
58,248
(60)
The above excludes the exposure of the Group from translating its foreign operations to the Group presentation currency.
(b) Capital risk management
The Group manages its capital to ensure it will be able to continue as a going concern while maximising the return to shareholders.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to
shareholders, issue new shares or sell assets to reduce debt. The Group is not subject to any regulatory capital requirements.
Management reviews the capital structure of the Group on a regular basis. As part of this review, the cost of capital and the risks associated
with each class of capital is considered.
The Group’s year end gearing ratio is outlined below.
Net debt (1)
Net debt plus total equity
Gearing ratio
(1) Measured as borrowings excluding capitalised borrowing costs, and net derivatives assets less cash and cash equivalents.
2017
$’000
165,832
573,379
28.9%
2016
$’000
155,953
556,779
28.0%
65
Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2017
Section 4. Other Disclosures
4.1 TAXATION
Total income tax expense or revenue is comprised of current and deferred tax recognised in the income statement in the period. Current and
deferred tax is also recognised directly in equity, and not in the income statement, to the extent it is attributable to amounts and movements
which have also been recognised directly in equity.
Current tax
Current tax represents the businesses expected tax payable/receivable for the period in respect of income and expenses which have been
recognised in the income statement.
Current tax comprises expected tax payable/receivable on the businesses taxable income/loss which is recognised in the income statement
in the current period, as well as any adjustments to tax payable/receivable recognised in the current period which relate to taxable income/
loss recognised in the income statement in prior periods.
Current tax is measured using the applicable income tax rates which are enacted, or substantively enacted, at the reporting date in the
countries where the Company’s subsidiaries and associates operate.
Deferred tax
Deferred tax represents the movements in deferred tax assets and liabilities which have been recognised in the period and which are
attributable to amounts recognised in the income statement in the current period, as well as amounts recognised in the income statement in
prior periods. Deferred tax assets and liabilities are attributable to temporary timing differences between the carrying amount of assets and
liabilities recognised for financial reporting purposes and the tax base of assets and liabilities recognised for tax purposes.
Deferred tax assets are recognised for deductible temporary differences, unused tax losses and unused tax credits to the extent it is probable
that future taxable profits will be available against which they can be realised.
Deferred tax liabilities are recognised for all assessable temporary differences as required by accounting standards.
Deferred tax is determined using tax rates which are expected to apply when the deferred tax asset/liability is expected to be realised/settled
based on laws which have been enacted or substantively enacted at the reporting date. The measurement of deferred tax also reflects the tax
consequences flowing from the manner in which the Group expects, at the reporting date, to realise or settle the carrying amount of its assets
and liabilities.
Tax consolidation
The Company and its wholly-owned Australian resident entities are part of a tax consolidated group under Australian Taxation Law. IRESS
Limited is the head entity of the tax consolidated group. Tax expense, tax revenue, deferred tax assets and deferred tax liabilities arising
from temporary differences of the members of the tax consolidated group are recognised in the separate financial accounts of the members of
the tax consolidated group using the ‘stand-alone taxpayer’ approach. Current and deferred tax assets and liabilities arising from unused tax
losses and tax credits of the members of the tax consolidated group are recognised by the Company (as head entity of the tax consolidated
group).
Due to the existence of a tax funding arrangement between the entities in the tax consolidated group, amounts are recognised as payable to
or receivable by the Company and each member of the Group in relation to the tax contribution amounts paid or payable between the parent
entity and the other members of the tax consolidated group in accordance with the arrangement.
(a) Income tax for the year including current and deferred tax is as follows:
Income tax expense recognised in profit or loss
Current income tax
Current income tax charge
Adjustments in respect of current income tax of the previous year
Defered income tax
Origination and reversal of temporary differences
Adjustments in respect of deferred income tax of the previous year
Total income tax expense recognised in profit or loss
Income tax expense recognised in other comprehensive income
Arising from gains or losses on long term monetary intercompany balances
Income tax expense recognised directly in equity
Arising from the vesting of share based payments and share raising costs
Total income tax expense recognised in other comprehensive income and equity
66
2017
$’000
2016
$’000
18,547
(1,371)
17,176
2,538
(1,704)
834
22,190
(1,991)
20,199
(3,424)
750
(2,674)
18,010
17,525
(88)
1,610
(1,430)
(1,518)
(1,463)
147
IRESS LIMITED ANNUAL REPORT 2017 Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2017
(b) The reconciliation of income tax expense at the Australian tax rate to total income tax expense is as follows:
Profit from continuing operations before income tax expense
Tax at the Australian tax rate of 30% (2016: 30%)
Income tax adjustments:
Effect of different tax rates in foreign jurisdictions
Effect of non-assessable income and non-deductible expenses
Adjustments for current and deferred tax of prior periods
Employee share plan
Previously unrecognised tax losses
Income tax expense
2017
$’000
77,765
23,330
(91)
(403)
(3,075)
(221)
(1,530)
2016
$’000
76,977
23,093
(534)
(2,411)
(1,241)
(623)
(759)
18,010
17,525
(c) Deferred income tax assets and liabilities recognised in the statement of financial position are as follows:
Opening
balance
$’000
Charged
to income
$’000
Charged
to OCI/Equity
$’000
From business
combinations
$’000
Exchange
differences
$’000
Closing
balance
$’000
For the year ended 31 December 2017
Deferred tax assets
Trade and other receivables
Plant and equipment
Computer software
Trade and other payables
Provisions and accruals
Derivative liabilities
Carry forward tax losses
Capital transaction costs
Share based payments
Other
Total deferred tax assets
Deferred tax liabilities
Computer software
Intangibles
Other financial assets
Total deferred tax liabilities
For the year ended 31 December 2016
Deferred tax assets
Trade and other receivables
Plant and equipment
Computer software
Trade and other payables
Provisions and accruals
Derivative liabilities
Carry forward tax losses
Capital transaction costs
Share based payments
Other
Total deferred tax liabilities
Deferred tax liabilities
Computer software
Intangibles
Other financial assets
Total deferred tax liabilities
159
5,121
4,443
823
4,249
61
4,036
3,186
1,130
68
23,276
(3,652)
(9,174)
(79)
(12,905)
733
6,859
1,614
359
3,075
6,337
4,700
1,633
883
4
26,197
(2,206)
(7,038)
(6,337)
(15,581)
(67)
(1,064)
(2,656)
171
496
(31)
(26)
(1,354)
(662)
426
(4,767)
3,028
936
(31)
3,933
(582)
(1,318)
(132)
220
406
(6,276)
(1,863)
1,451
1,107
62
(6,925)
1,234
2,089
6,276
9,599
–
–
–
–
–
–
–
(121)
–
–
(121)
–
–
–
–
–
–
–
–
–
–
–
(603)
(860)
–
(1,463)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(111)
2,961
244
744
–
1,719
705
–
–
6,262
(2,961)
(5,159)
(18)
(8,138)
(2)
(123)
–
–
16
–
64
–
(6)
–
(51)
114
(24)
1
91
8
(309)
–
–
24
–
(520)
–
–
2
(795)
281
934
–
90
3,934
1,787
994
4,761
30
4,074
1,711
462
494
18,337
(510)
(8,262)
(109)
(8,881)
159
5,121
4,443
823
4,249
61
4,036
3,186
1,130
68
23,276
(3,652)
(9,174)
(79)
1,215
(12,905)
67
Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2017
Section 4. Other Disclosures continued
4.1 TAXATION CONTINUED
(d) Unused tax losses for which no deferred tax asset has been recognised are outlined below:
United Kingdom (Tax rate 19%, 2016: 19%)
Potential tax benefit
2017
$’000
–
–
2016
$’000
7,964
1,513
The Group had unused tax losses in the prior year relating to its businesses in the United Kingdom. No deferred tax asset had previously
been recognised on the losses on the basis it was not sufficiently probable whether the Group would derive assessable income of a sufficient
quantum or nature to enable the temporary difference to be realised. The unused losses were all realised against assessable income in the
current period. The Group does not have any unused losses for which no deferred tax asset has been recognised as at the reporting date.
4.2 BUSINESSES AND INVESTMENTS ACQUIRED AND DIVESTED
The Group accounts for business combinations using the acquisition method when control is transferred to the Group. The consideration
transferred in the acquisition is measured at fair value, as are the identifiable net assets acquired. Any goodwill that arises is tested annually for
impairment. Any gain on a bargain purchase is recognised in profit or loss immediately. Transaction costs are expensed as incurred, except if
related to the issue of debt or equity securities.
Any contingent consideration is measured at fair value at the date of acquisition. If any obligation to pay contingent consideration that meets
the definition of a financial instrument is classified as equity, then it is not remeasured and settlement is accounted for within equity. Otherwise,
subsequent changes in the fair value of the contingent consideration are recognised in profit or loss.
Investment in associate
On 19 September 2017 and 27 December 2017, the Group acquired 10% and 5% equity interest in Lucsan Capital Proprietary Limited
(‘Lucsan’) for $1 million and $0.5 million respectively. Under the acquisition agreement, the Group is contracted to acquire a further 5% for
$0.5 million to bring its total investment to 20% by 31 July 2018.
IRESS has significant influence on the operations of Lucsan due to the contractual rights under the shareholders agreement. Lucsan is an
established, Australian-owned RegTech and data analytics company providing leading technology solutions to a wide range of companies,
including Australia’s major banks.
As at 31 December 2017, Lucsan’s net liabilities are $0.1 million with IRESS share being $0.02 million. During the period, Lucsan’s net loss
after tax was $1 million, with IRESS share being $0.1 million. Goodwill of $1.4 million is included as part of the investment in the associate
and represents the synergy benefit and future growth envisaged in Lucsan in the regulatory technology space. There were no indicators of
impairment identified at year end.
4.3 IRESS LIMITED – PARENT ENTITY FINANCIAL INFORMATION
The ultimate controlling entity of the Group is IRESS Limited, which is a for profit entity listed on the Australian Securities Exchange.
(a) Summary financial information
The individual financial statements for the parent entity, IRESS Limited, show the following aggregate amounts:
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained earnings
Total equity
Profit for the year
Total comprehensive income
(b) Contingent liabilities
The parent entity did not have any contingent liabilities as at 31 December 2017.
68
2017
$’000
34,246
746,488
780,734
31,803
207,994
239,797
540,937
376,309
24,213
140,415
540,937
160,470
160,470
2016
$’000
26,723
635,537
662,260
25,360
193,222
218,582
443,678
375,287
23,006
45,385
443,678
33,281
33,281
IRESS LIMITED ANNUAL REPORT 2017 Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2017
(c) Related party transactions
During the period, the parent entity undertook an internal legal restructure of its subsidiary holdings to reduce complexity in the Group’s
corporate structure. As part of this restructure, the parent disposed of its investments in Apollo III UK Holdings Limited to IRESS International
Holdings Pty Ltd, realising a gain of $101 million and received dividends from subsidiaries of $39 million.
The above transactions are all between wholly-owned subsidiaries and have no impact on the reported IRESS Group results.
4.4 SUBSIDIARIES
Details of the Group’s wholly-owned subsidiaries at the end of the year are as follows:
Australia
IRESS International Pty Ltd (formerly: Apollo I Australia Pty Ltd) (1),(2)
Apollo II Australia Pty Ltd (1)
Financial Synergy Pty Ltd (1)
Financial Synergy Actuarial Pty Ltd (1)
Financial Synergy Holdings Pty Ltd (1)
Innergi Pty Ltd
IRESS (AUS) Limited Partnership
IRESS Data Pty Ltd (1)
IRESS Information Pty Ltd
IRESS Wealth Management Pty Ltd (1)
IRESS South Africa (Australia) Pty Ltd (1)
IRESS Spotlight Wealth Management Solutions (RSA) Pty Ltd (1)
Planning Resources Group Pty Ltd (1)
Top Quartile Management Pty Ltd (1)
Canada
IRESS (LP) Holdings Corp.
IRESS (Ontario) Limited
IRESS Canada Holdings Limited
South Africa
IRESS Market Technology Canada LP
KTG Technologies Corp.
Advicenet Advisory Services (Proprietary) Limited
IRESS Hosting (Pty) Ltd (formerly: EDM Solutions Pty Ltd) (3)
IRESS MD RSA (Pty) Ltd (formerly: INET BFA Pty Ltd) (3)
IRESS Financial Markets (Pty) Ltd
IRESS Wealth MNGT(Pty) Ltd
IRESS Wealth Management (RSA) (Proprietary) Ltd
United Kingdom
Apollo III (UK) Limited
Apollo III UK Holdings Limited
IRESS (UK) Limited
IRESS FS Group Limited
IRESS FS Limited
IRESS Mortgage Services Limited
IRESS Portal Limited
IRESS Solutions Limited
Other countries
IRESS Technology Limited
IRESS UK Holdings Limited
IRESS Web Limited
Proquote Limited
Pulse Software Systems Limited
Pulse Software Management Limited
TrigoldCrystal Limited
IRESS Asia Holdings Limited (Hong Kong)
Peresys Software Limited (Ireland)
IRESS Malaysia Holdings Sdn Bhd (Malaysia)
IRESS (NZ) Limited (New Zealand)
IRESS Market Technology (Singapore) Pte Ltd (Singapore)
IRESS Limited and its Australian subsidiaries entered into an ASIC Class Order and Deed of Cross Guarantee with IRESS Limited.
(1)
(2) Change of name for this entity occurred on 17 January 2018.
(3) Change of name for this entity occurred on 10 February 2017.
69
Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2017
Section 4. Other Disclosures continued
4.5 DEED OF CROSS GUARANTEE
IRESS Limited, and some Australian wholly-owned subsidiaries as specified in the Subsidiaries note, are party to a deed of cross guarantee
under which each company guarantees the debts of the others. By entering into the deed, the relevant wholly-owned subsidiaries have
been relieved from the requirement to prepare the financial report and Directors’ report under ASIC Corporations (Wholly owned companies)
Instrument 2016/785 issued by the Australian Securities and Investments Commission.
(a) Consolidated statement of profit or loss and retained earnings
Profit before tax (1)
Income tax expense
Net profit after tax
Retained earnings at beginning of the year
Transfers from reserves
Dividends declared / profit repatriation
Retained earnings at end of the year
2017
$’000
62,493
(20,842)
41,651
42,766
9,550
(74,990)
18,977
2016
$’000
76,899
(19,966)
56,933
44,384
9,888
(68,439)
42,766
(1)
Included in profit before tax is $39 million dividend received from a fellow subsidiary that is not part of the deed of cross guarantee group.
(b) Consolidated statement of financial position
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Derivative assets
Total current assets
Non-current assets
Intangibles
Plant and equipment
Investment in associate
Deferred tax assets
Derivative assets
Investment in subsidiaries
Other financial assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Provisions
Total current liabilities
Non-current liabilities
Trade and other payables
Provisions
Borrowings
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained earnings
Total equity
70
2017
$’000
2016
$’000
14,696
29,364
306
44,366
120,551
12,828
1,400
12,667
–
343,461
161,809
652,716
697,082
24,458
8,611
33,069
55,057
6,444
193,171
4,262
258,934
292,003
405,079
376,309
9,793
18,977
405,079
9,770
140,310
–
150,080
124,133
4,016
–
18,437
205
251,655
117,235
515,681
665,761
24,323
11,097
35,420
7,517
5,904
177,541
12,267
203,229
238,649
427,112
375,287
9,059
42,766
427,112
IRESS LIMITED ANNUAL REPORT 2017 Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2017
4.6 BASIS OF PREPARATION
This is a general purpose financial report for IRESS Limited (the ‘Company’) and its subsidiaries (collectively referred to as the ‘Group’ or
‘IRESS’ for the year ended 31 December 2017. It:
• has been prepared in accordance with the Corporations Act 2001 (Cth), Australian Accounting Standards and Interpretations, and
International Financial Reporting Standards (IFRS);
• was authorised for issue by the Directors on 22 February 2018;
• has been prepared on a historical cost basis, except for derivative financial instruments and investments in financial assets which have
been measured at fair value;
• has all amounts presented in Australian dollars, unless otherwise stated;
• has amounts rounded off to the nearest thousand dollars, unless otherwise stated, as allowed under ASIC Corporations (Rounding in
Financial / Directors Reports) Instrument 2016/191 dated 24 March 2016 (ASIC guidance).
(a) Adoption of new standards
The Group has adopted all the new and revised Standards and Interpretations issued by the Australian Accounting Standards Board (the
AASB) that are relevant to its operations and effective for annual reporting periods on or after 1 January 2017. None of these standards have
had a material impact on IRESS in the current or future reporting periods or on foreseeable future transactions. The Group does not intend to
early adopt any of the pronouncements.
(b) Standards on issue but not yet effective
At the date of authorisation of the financial report, certain new accounting standards and interpretations have been published that are not
mandatory for 31 December 2017 reporting periods and have not yet been applied by IRESS within this financial report.
With the exception of AASB 16 Leases and AASB 15 Revenue, IRESS does not believe these Accounting Standards and Interpretations in
issue but not effective will have a material impact in future periods on the financial statements of the Group.
Management have commenced a detailed assessment of the impact of the adoption of AASB 15 and AASB 16 on the financial statements of
the Group in future periods as noted below.
AASB 15 Revenue
AASB15 is effective for the years commencing 1 January 2018. IRESS has completed a review of their customer contracts and noted that the
timing of recognition of non-recurring revenue may change.
Where previously, non-recurring revenue which predominately comprises implementation revenue was recognised over the period in which
services were provided, some of this revenue may now only be recognised when certain milestones have been reached as prescribed by the
contractual terms. Generally, this will align more closely with when billing occurs.
Except for additional disclosure required under AASB 15, the financial impact upon adoption is not expected to be material. Further analysis is
ongoing to quantify the impact of this if any on prior periods.
AASB 16 Leases
AASB 16 is effective for years commencing 1 January 2019. AASB 16 eliminates the classification of leases as either operating leases or
finance leases as required by AASB 17 and, instead, introduces a single lessee accounting model. Applying that model, a lessee is required to
recognise:
• assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value; and
• amortisation of lease assets separately from interest on lease liabilities in the income statement.
IRESS’s operating leases with terms of more than 12 months relate to office facilities leases.
The adoption of AASB 16 will result in revised accounting for any operating leases that have a lease end date of 31 December 2019 or later
(as per the transition periods). The impact on the opening balance sheet as at 1 January 2018 is expected to be as follows:
Balance sheet impact
Increase in non-current asset (recognition of lease assets)
Increase in deferred tax asset
Increase in liabilities from recognition of lease liabilities
Decrease in retained earnings (higher expense recognised under AASB 16)
The estimated impact to the 2018 income statement is estimated as follows:
Income statement impact
Decrease in rent expense resulting in an increase in segment profit
Increase in interest expense
Increase in depreciation expense
Decrease in net profit before tax
$’000
37,351
979
40,613
(2,103)
$’000
11,175
3,710
8,589
(1,124)
71
Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2017
Section 4. Other Disclosures continued
4.6 BASIS OF PREPARATION CONTINUED
(c) Summary of general accounting policies
The following significant accounting policies have been adopted in the preparation and presentation of the financial report.
i) Consolidation
The consolidated financial statements include the financial statements of the Company, and the information and results of each subsidiary from
the date on which the Company obtains control and until such time as the Company ceases to control such entity.
An entity is controlled when IRESS is exposed to, or has rights to, variable returns from involvement with the entity and has the ability to affect
those returns through power over the entity.
When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with the Group’s
accounting policies.
In reporting the consolidated financial statements, all intercompany balances and transactions, and unrealised profits or losses within the
Group are eliminated in full.
ii) Foreign currency translation
Foreign currency transactions
All foreign currency transactions during the financial year are brought to account using the exchange rate in effect at the date of the transaction.
Foreign currency monetary items at reporting date are translated at the exchange rate existing at reporting date.
Exchange differences are recognised in profit or loss in the period in which they arise except that exchange differences on monetary items
receivable from or payable to a foreign operation for which settlement is neither planned or likely to occur, which form part of the net investment
in a foreign operation, are recognised in the foreign currency translation reserve in the consolidated financial statements and are recognised in
profit or loss on disposal of the net investment.
Foreign operations
Assets and liabilities of foreign operations are translated using exchange rates prevailing at the end of each reporting period. Income and
expense items are translated at the average exchange rates for the period, unless exchange rates fluctuate significantly during that period, in
which case the exchange rates at the dates of the transactions are used. Any exchange differences are recognised in equity. On the disposal
of a foreign operation, all of the exchange differences accumulated in equity in respect of that operation are reclassified to profit or loss.
4.7 TRANSACTIONS WITH RELATED PARTIES
ASX Limited (‘’ASX’’) owns 18.76% ordinary shares in IRESS. ASX is a major supplier of Australian equity market data to the Group. All
transactions with the ASX are conducted on an arm’s length basis. Fees charged by ASX $9,661,438 (2016: $9,082,629), balances
outstanding at the end of the year $2,262,630 (2016: $1,437,780).
4.8 SUBSEQUENT EVENTS
On 22 February 2018, the directors declared a final dividend of 28.0 cents per share franked to 60% totalling $48.0 million.
Other than the dividend declared, there has been no other matter or circumstances which has arisen since the end of the financial year which
has significantly affected, or may significantly affect, the operations of the Group, the results of those operations, or the state of affairs of the
Group in subsequent years.
72
IRESS LIMITED ANNUAL REPORT 2017 Directors’ Declaration
31 December 2017
In the directors’ opinion:
(a) the financial statements and notes set out on pages 47 to 72 are in accordance with the Corporations Act 2001, including:
(i) complying with the Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and
(ii) giving a true and fair view of the consolidated entity’s financial position as at 31 December 2017 and of its performance for the financial
year ended on that date; and
(b) there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable; and
(c) at the date of this declaration, there are reasonable grounds to believe that the members of the extended closed group identified in note 4.4
will be able to meet any obligations or liabilities to which they are, or may become subject by virtue of the deed of cross guarantees
described in note 4.5.
Note 4.6 confirms that the financial statements also comply with International Financial Reporting Standards as issued by the International
Accounting Standards Board.
The directors have been given the declarations by the Chief Executive Officer and Chief Financial Officer required by section 295A of the
Corporations Act 2001.
This declaration is made in accordance with a resolution of the directors.
TONY D’ALOISIO
CHAIRMAN
Melbourne
22 February 2018
ANDREW WALSH
CHIEF EXECUTIVE OFFICER AND MANAGING DIRECTOR
73
Independent Auditor’s Report
Deloitte Touche Tohmatsu
ABN 74 490 121 060
550 Bourke Street
Melbourne VIC 3000
GPO Box 78
Melbourne VIC 3001 Australia
DX: 111
Tel: +61 3 9671 7000
Fax: +61 3 9671 7001
www.deloitte.com.au
Independent Auditor’s Report to the Members of IRESS
Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of IRESS Limited (the Company) and its subsidiaries
(the Group), which comprises the consolidated statement of financial position as at 31
December 2017, the consolidated statement of profit or loss and other comprehensive
income, the consolidated statement of changes in equity and the consolidated statement of
cash flows for the year then ended, notes to the consolidated financial statements, and the
directors’ declaration.
In our opinion:
the accompanying financial report of the Group, is in accordance with the Corporations Act
2001, including:
(i)
(ii)
giving a true and fair view of the Group’s financial position as at 31 December 2017
and of its financial performance for the year ended on that date; and
complying with Australian Accounting Standards and the Corporations Regulations
2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities
under those standards are further described in the Auditor’s Responsibilities for the Audit of
the Financial Report section of our report. We are independent of the Group in accordance
with the auditor independence requirements of the Corporations Act 2001 and the ethical
requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of
Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial
report in Australia. We have fulfilled our other ethical responsibilities in accordance with the
Code.
We confirm that the independence declaration required by the Corporations Act 2001, which
has been given to the directors of the Company, would be in the same terms if given to the
directors as at the time of this auditor’s report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide
a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most
significance in our audit of the financial report for the current period. These matters were
addressed in the context of our audit of the financial report as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these matters.
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Touche Tohmatsu Limited
74
IRESS LIMITED ANNUAL REPORT 2017
Key Audit Matter
How the scope of our audit responded
to the Key Audit Matter
Carrying value of goodwill and non-
current assets
Our procedures included but were not
limited to:
Refer to Note 2.1 - Impairment assessment.
As at 31 December 2017, the Group’s
goodwill and intangible assets totalled
$547.2 million which is allocated to the
relevant Cash Generating Units (CGUs).
Goodwill is required to be assessed for
impairment on an annual basis or when any
indicators of impairment exist.
The Canadian and UK Lending CGU’s have
been identified as having a higher risk of
impairment due to their dependency on
securing key contracts and the achievement
of forecast growth rates. Included within
these CGU’s is goodwill of $8.7 million and
$76.3 million respectively.
The Group has prepared value in use models
to determine the recoverable amounts of
the Canada and UK Lending CGUs.
Due to the level of judgement involved in
determining the recoverable amounts of the
CGUs, this was considered to be a key audit
matter.
Obtaining an understanding of the key
controls associated with the
preparation of the value in use models
and critically evaluating management’s
methodologies.
With the assistance of Deloitte valuation
experts, we:
assessed key assumptions, including
forecast growth rates by comparing to
economic and industry growth rates
challenged the forecasted revenue for
each CGU with reference to:
-
-
review of the historical accuracy
of forecasting of the Group
evaluation of current pipeline and
historical pipeline conversion rate
evaluated discount rates used to
assess the cost of capital for each CGU
against comparable organisations
verified the consistency of the cash
flows used with the latest Board
approved five year financial plan for
each CGU
tested on a sample basis the
mathematical accuracy of the cash flow
models
assessed the net present value of each
CGU in local currency to their
respective carrying values in local
currency.
We performed a sensitivity analysis to
stress test the key assumptions used in
the value in use models, including revenue
growth, terminal growth rates and discount
rates used.
We have also assessed the
appropriateness of the disclosures included
in Note 2.1 of the financial report.
75
Independent Auditor’s Report continued
Other Information
The directors are responsible for the other information. The other information comprises the
information in the Company’s annual report for the year ended 31 December 2017, but does
not include the financial report and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and we do not
express any form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other
information and, in doing so, consider whether the other information is materially
inconsistent with the financial report or our knowledge obtained in the audit or otherwise
appears to be materially misstated. If, based on the work we have performed, we conclude
that there is a material misstatement of this other information, we are required to report that
fact. We have nothing to report in this regard.
Responsibilities of the Directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that
gives a true and fair view in accordance with Australian Accounting Standards and the
Corporations Act 2001 and for such internal control as the directors determine is necessary to
enable the preparation of the financial report that gives a true and fair view and is free from
material misstatement, whether due to fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the
Group to continue as a going concern, disclosing, as applicable, matters related to
going concern and using the going concern basis of accounting unless the directors either
intend to liquidate the Group or to cease operations, or has no realistic alternative but to do
so.
Auditor’s Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a
whole is free from material misstatement, whether due to fraud or error, and to issue an
auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with the Australian Auditing
Standards will always detect a material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on the basis of
this financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise
professional judgement and maintain professional scepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financial report, whether
due to fraud or error, design and perform audit procedures responsive to those risks,
and obtain audit evidence that is sufficient and appropriate to provide a basis for our
opinion. The risk of not detecting a material misstatement resulting from fraud is
higher than for one resulting from error, as fraud may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design
audit procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of
accounting estimates and related disclosures made by the directors.
Conclude on the appropriateness of the directors’ use of the going concern basis of
accounting and, based on the audit evidence obtained, whether a material
uncertainty exists related to events or conditions that may cast significant doubt on
the Group’s ability to continue as a going concern. If we conclude that a material
76
IRESS LIMITED ANNUAL REPORT 2017
uncertainty exists, we are required to draw attention in our auditor’s report to the
related disclosures in the financial report or, if such disclosures are inadequate, to
modify our opinion. Our conclusions are based on the audit evidence obtained up to
the date of our auditor’s report. However, future events or conditions may cause the
Group to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial report,
including the disclosures, and whether the financial report represents the underlying
transactions and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the
entities or business activities within the Group to express an opinion on the financial
report. We are responsible for the direction, supervision and performance of the
Group audit. We remain solely responsible for our audit opinion.
We communicate with the directors regarding, among other matters, the planned scope and
timing of the audit and significant audit findings, including any significant deficiencies in
internal control that we identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and
other matters that may reasonably be thought to bear on our independence, and where
applicable, related safeguards.
From the matters communicated with the directors, we determine those matters that were of
most significance in the audit of the financial report of the current period and are therefore
the key audit matters. We describe these matters in our auditor’s report unless law or
regulation precludes public disclosure about the matter or when, in extremely rare
circumstances, we determine that a matter should not be communicated in our report
because the adverse consequences of doing so would reasonably be expected to outweigh the
public interest benefits of such communication.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report which forms part of the directors’ report and is
included in the annual report the year ended 31 December 2017.
In our opinion, the Remuneration Report of IRESS Limited, for the year ended 31 December
2017, complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our
responsibility is to express an opinion on the Remuneration Report, based on our audit
conducted in accordance with Australian Auditing Standards.
DELOITTE TOUCHE TOHMATSU
Tom Imbesi
Partner
Chartered Accountants
Melbourne 22 February 2018
77
Shareholder Information
The shareholder information set out below was applicable as at 31 December 2017.
DISTRIBUTION OF MEMBERS AND THEIR HOLDINGS
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and over
Total
SUBSTANTIAL SHAREHOLDERS
ASX LIMITED
HYPERION ASSET MANAGEMENT LIMITED
GREENCAPE CAPITAL PTY LIMITED
Total substantial shareholders
Balance of register
Total
Number of
shareholders
Number of
shares
% of
issued capital
3,502
3,052
597
351
37
7,539
1,565,128
7,324,937
4,219,124
8,036,391
150,361,389
171,506,969
Number held
32,181,994
22,193,114
10,698,537
65,073,645
106,433,324
0.91
4.27
2.46
4.69
87.67
100.00
%
18.76
12.94
6.24
37.94
62.06
171,506,969
100.00
78
IRESS LIMITED ANNUAL REPORT 2017 20 LARGEST SHAREHOLDERS OF QUOTED EQUITY SECURITIES
Rank Name
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
ASX LIMITED
J P MORGAN NOMINEES AUSTRALIA LIMITED
CITICORP NOMINEES PTY LIMITED
NATIONAL NOMINEES LIMITED
BNP PARIBAS NOMS PTY LIMITED
AUSTRALIAN FOUNDATION INVESTMENT COMPANY LIMITED
BNP PARIBAS NOMINEES PTY LIMITED
PACIFIC CUSTODIANS PTY LIMITED
CITICORP NOMINEES PTY LIMITED
PACIFIC CUSTODIANS PTY LIMITED
RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED
MIRRABOOKA INVESTMENTS LIMITED
ARGO INVESTMENTS LIMITED
AVANTEOS INVESTMENTS LIMITED
DJERRIWARRH INVESTMENTS LIMITED
AMCIL LIMITED
NAVIGATOR AUSTRALIA LIMITED
AMP LIFE LIMITED
NULIS NOMINEES (AUSTRALIA) LIMITED
Total top twenty shareholders
Balance of register
Total
Number held
% of
issued shares
47,365,740
32,181,994
24,356,196
10,890,003
8,744,767
4,543,748
3,892,333
3,607,161
3,091,404
1,497,302
1,161,639
1,104,604
840,000
791,884
755,080
515,702
500,000
373,365
333,036
300,638
146,846,596
24,660,373
171,506,969
27.62
18.76
14.20
6.35
5.10
2.65
2.27
2.10
1.80
0.87
0.68
0.64
0.49
0.46
0.44
0.30
0.29
0.22
0.19
0.18
85.62
14.38
100.00
79
Corporate Directory
Directors
A D’Aloisio – Chairman
A Walsh – Chief Executive Officer and Managing Director
N Beattie
J Cameron
J Fahey
J Hayes
J Seabrook
G Tomlinson
Company Secretary
P Ferguson
Registered Office
Share Registry
Level 18, 385 Bourke Street
Melbourne VIC 3000
Phone: +61 3 9018 5800
Fax: +61 3 9018 5844
Link Market Services Limited
Level 4, 333 Collins Street
Melbourne VIC 3000
Stock Exchange Listings
IRESS Limited shares are quoted on the Australian Securities Exchange under the code: IRE
Auditor
Deloitte Touche Tohmatsu
80
IRESS LIMITED ANNUAL REPORT 2017 www.iress.com.au