Breaking
new ground
ANNUAL FINANCIAL REPORT 2011
1
CONTENTS
Directors’ Report
Auditors’ Independence Declaration
to the Directors of iSelect Limited
Statement of Comprehensive Income
Statement of Financial Position
Statement of Cash Flows
Statement of Changes in Equity
Notes to the Financial Statements
Directors’ Declaration
Independent Auditor’s Report to the
members of iSelect Limited
2
4
5
6
7
7
8
37
38
iSelect Annual Report 2011
2
Directors’ Report
The Directors of iSelect Limited and its controlled entities
(‘iSelect Group’) submit herewith its financial report in respect of
the year ended 30 June 2011. iSelect Limited was incorporated
on 7 March 2007 and is the holding Company for the iSelect Group,
comprising health, life and general insurance and mortgages
brokerage activities and media referral services. On 16 July 2010
iSelect Limited converted to an unlisted public Company, where the
Company name was changed from iSelect Pty Ltd to iSelect Limited.
In addition on 30 November 2011 iSelect Media Pty Ltd, and on
14 January 2011 iSelect Mortgages Pty Ltd were incorporated as
wholly owned subsidiaries.
DIRECTORS
The names of the Directors in office during or since the end
of the financial year are:
Martin Dalgleish Non-Executive Chairman
Damien Waller
Chief Executive Officer and
Managing Director
Shaun Bonett
Non-Executive Director
Leslie Webb
Non-Executive Director
Nicholas Gray
Non-Executive Director –
resigned 22 September 2010
Joanne Pollard
Non-Executive Director –
resigned 25 May 2011
Michael McLeod Non-Executive Director
Patrick O’Sullivan
Non-Executive Director –
appointed 22 September 2010
COMPANY SECRETARY
Matthew McCann Appointed – 22 September 2010
Paul Cullinan
Resigned – 22 September 2010
PRINCIPAL ACTIVITIES
The Group’s principal activity during the course of the financial year
were health, life and general insurance and mortgages brokerage
activities and media referral services.
DIVIDENDS
The Directors do not recommend the payment of a dividend for the
current year. No dividends have been paid during the financial year,
or to the date of this report.
REVIEW OF OPERATIONS
The Consolidated Entity achieved a net profit after tax for the year
ended 30 June 2011 of $10,657,000 (2010: $5,780,000).
This financial report reflects the financial performance of the
consolidated Group from 1 July 2010 to 30 June 2011 and the
financial position of the consolidated Group at 30 June 2011.
Except as so disclosed, information on likely developments in the
Consolidated Entity’s operations in future financial years and the
expected results of those operations have not been included in this
report because the Directors believe it would be likely to result
in unreasonable prejudice to the Consolidated Entity.
ENVIRONMENTAL REGULATIONS
Given the nature of its business the Consolidated Entity is not
subject to any particular or significant environmental regulation
under any law of the Commonwealth of Australia or any of its
States or Territories.
The Consolidated Entity has not incurred any liability (including any
liability for rectification costs) under any environmental legislation.
INSURANCE OF OFFICERS
During the financial year, the Group paid a premium of $20,600
to insure the Directors, secretary and executive officers of the
Consolidated Entity.
The liabilities insured are costs and expenses that may be incurred
in defending civil or criminal proceedings that may be brought
against the officers in their capacity as officers of the Group.
PROCEEDINGS ON BEHALF OF THE GROUP
No proceedings have been brought on behalf of the Group
nor has any application been made in respect of the Group under
section 237 of the Corporations Act 2001.
SIGNIFICANT CHANGES IN STATE OF AFFAIRS
In the opinion of the Directors, there were no significant changes
in the state of affairs of the Group during the financial year under
review not otherwise disclosed in this report or the Consolidated
Financial Statements.
SIGNIFICANT EVENTS AFTER BALANCE DATE
In relation to the current premises, which iSelect intend to move
out from in late October 2011, iSelect Health Pty Ltd (a wholly
owned subsidiary of iSelect Limited) has raised provisions of
$500k and $549k for make good costs and onerous contracts
for rent respectively. The Group is in the process of formalising the
surrender of the lease over its current premises before the end of
the lease (with no make good obligation). As part of the surrender
arrangements, the Group has agreed to pay a licence fee for the
continued display of its outdoor signage at the premises at a cost
of $165k. As a result, in the 2012 financial year, iSelect anticipates
to recoup the $500k in relation to the make good costs and will likely
be able to recoup approximately $314k in relation to the onerous
contract for rent, subject to finalisation of all arrangements.
On 19 August 2011, iSelect Limited announced an off-market
takeover bid for all of the shares of Infochoice Ltd for total
consideration of $33.538 million. iSelect’s offer to Infochoice
shareholders is now unconditional. As at the date of this report,
iSelect has received acceptances from 98.72% of the Infochoice
shares. iSelect will fund the acquisition from drawings under
a $35 million bridge loan note facility arranged by Goldman Sachs
& Partners Australia Capital Markets Limited with a maturity date
of 20 August 2012.
Other than the matters discussed above, in the interval between
the end of the financial year and the date of this report no item,
transaction or event of a material and unusual nature likely,
in the opinion of the directors of Group, to affect significantly
the operations of the Group, the results of those operations or the
state of affairs of the Group, in future financial years.
3
LIKELY DEVELOPMENTS AND FUTURE RESULTS
Except as so disclosed, information on likely developments
in the Consolidated Entity’s operations in future financial years and
the expected results of those operations have not been included
in this report because the Directors believe it would be likely to result
in unreasonable prejudice to the Consolidated Entity.
ROUNDING OFF
The Group is of a kind referred to in ASIC Class Order 98/100 dated
10 July 1998 and in accordance with the Class Order, amounts
in the consolidated financial statements have been rounded off
to the nearest thousand dollars, unless otherwise stated.
AUDITOR
Ernst & Young has been appointed by the Consolidated Entity
in accordance with section 327 of the Corporations Act 2001.
AUDITOR INDEPENDENCE DECLARATION
A copy of the auditors’ independence declaration as required
under section 307C of the Corporations Act 2001 is set out on
page 4 of this report.
NON AUDIT SERVICES
The following non-audit services were provided by the Group’s
auditor, Ernst & Young. The Directors are satisfied that the provision
of non-audit services is compatible with the general standard of
independence for auditors imposed by the Corporations Act 2001.
The nature and scope of each type of non-audit service provided
means that auditor independence was not compromised.
Ernst & Young received or are due to receive the following amounts
for the provision of non-audit services:
Other services:
– tax compliance
– assurance related
– due diligence
– equity raising
– regulatory compliance
Total
CONSOLIDATED
2011
$
2010
$
47,800
25,650
94,615
58,674
26,400
253,139
30,000
39,000
–
–
24,720
93,720
REGISTERED OFFICE
Level 4, 973 Nepean Highway, Moorabbin Victoria 3189
Signed in accordance with a resolution of the Board of Directors:
Damien Waller
Chief Executive Officer & Managing Director
Melbourne, 27 October 2011
iSelect Annual Report 2011
4
Auditor’s Independence Declaration
to the Directors of iSelect Limited and its controlling entities
Auditor’s Independence Declaration to the Directors of iSelect Ltd
Auditor’s Independence Declaration to the Directors of iSelect Ltd
In relation to our audit of the financial report of iSelect Ltd for the financial year ended 30 June 2011, to
the best of my knowledge and belief, there have been no contraventions of the auditor independence
In relation to our audit of the financial report of iSelect Ltd for the financial year ended 30 June 2011, to
requirements of the Corporations Act 2001 or any applicable code of professional conduct.
the best of my knowledge and belief, there have been no contraventions of the auditor independence
requirements of the Corporations Act 2001 or any applicable code of professional conduct.
Ernst & Young
Ernst & Young
Ashley Butler
Partner
Ashley Butler
27 October 2011
Partner
27 October 2011
Liability limited by a scheme approved
under Professional Standards Legislation
Liability limited by a scheme approved
under Professional Standards Legislation
Statement of Comprehensive Income
for the year ended 30 June 2011
Sales revenue
Cost of sales
Gross profit
Other income
Share based payments expense
Administrative expenses
Relocation expenses
Acquisition expenses
Profit before interest, tax, depreciation and amortisation
Amortisation
Depreciation
Profit before interest and tax
Interest revenue
Income tax expense
Profit for the period
Other comprehensive income for the period, net of tax
Total comprehensive income for the period
5
CONSOLIDATED
2011
$‘000
2010
$‘000
Notes
4
72,442
43,491
4
20
4
4
4
4
4
5
(36,026)
(22,369)
36,416
21,122
215
(658)
244
(274)
(16,795)
(11,835)
(1,592)
(217)
17,369
(617)
(2,568)
14,184
841
(4,368)
10,657
–
10,657
–
–
9,257
(456)
(972)
7,829
400
(2,449)
5,780
–
5,780
iSelect Annual Report 2011
6
Statement of Financial Position
as at 30 June 2011
Assets
Cash and cash equivalents
Trade and other receivables
Net present value of future trail commission
Other assets
Total current assets
Net present value of future trail commission
Deferred tax assets
Property, plant and equipment
Intangible assets
Total non-current assets
Total assets
Liabilities
Trade and other payables
Provisions
Total current liabilities
Provisions
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Nets assets
Equity
Issued capital
Share based payments reserve
Business combination reserve
Retained earnings
Total equity
CONSOLIDATED
2011
$‘000
2010
$‘000
Notes
6
7
8
9
8
5
10
11
12
13
13
5
17,499
5,111
20,239
1,053
43,902
41,241
8,062
1,969
3,678
54,950
98,852
9,520
3,423
12,943
183
19,383
19,566
32,509
66,343
7,438
3,963
8,923
346
20,670
29,327
5,011
2,932
1,893
39,163
59,833
7,221
1,838
9,059
267
11,965
12,232
21,291
38,542
14
36,582
20,096
1,827
5,571
22,363
66,343
1,169
5,571
11,706
38,542
Statement of Cash Flows
for the year ended 30 June 2011
Receipts from customers and related parties
Payments to suppliers and employees
Net cash flows from/(used in) operating activities
Interest received
Purchase of property, plant and equipment
Purchase of intangible assets
Net cash flows from/(used in) investing activities
Proceeds from issue of shares
Net cash flows from/(used in) financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents
– at the beginning of the period
– at the end of the period
Notes
6
6
Statement of Changes in Equity
for the year ended 30 June 2011
Share based
payment reserve
$‘000
CONSOLIDATED
Issued
capital
$‘000
Business
combination
reserve
$‘000
Balance at 1 July 2010
1,169
20,096
5,571
Total comprehensive income for the period
Transactions with owners in their capacity as owners:
Share based payment expense
Issues of share capital
Balance at 30 June 2011
Balance at 1 July 2009
Total comprehensive income for the period
Transactions with owners in their capacity as owners:
Share based payment expense
Issues of share capital
Balance at 30 June 2010
–
658
–
1,827
895
–
274
–
–
–
16,486
36,582
–
–
–
5,571
22,363
19,929
5,571
–
–
167
–
–
–
5,926
5,780
–
–
1,169
20,096
5,571
11,706
38,542
7
CONSOLIDATED
2011
$‘000
48,665
(51,924)
(3,259)
841
(1,562)
(2,445)
(3,166)
16,486
16,486
10,061
7,438
17,499
Retained
earnings
$‘000
11,706
10,657
–
–
2010
$‘000
30,679
(32,906)
(2,227)
375
(997)
(979)
(1,601)
167
167
(3,661)
11,099
7,438
Total
$‘000
38,542
10,657
658
16,486
66,343
32,321
5,780
274
167
iSelect Annual Report 2011
8
Notes to the Financial Statements
For the year ended 30 June 2011
1. CORPORATE INFORMATION
The financial report of iSelect Limited for the year ended
30 June 2011 was authorised for issue in accordance with
a resolution of the Directors on 27 October 2011.
iSelect Limited is a Company limited by shares incorporated in
Australia and is a holding entity whose principal activity during the
financial year was the holding of investments in its wholly owned
subsidiaries; iSelect Health Pty Ltd, iSelect Life Pty Ltd, iSelect
Mortgages Pty Ltd, iSelect Media Pty Ltd and , iSelect General Pty
Ltd. On 16 July 2010 iSelect Limited converted to an unlisted public
Company. The Company name has changed from iSelect Pty Ltd
to iSelect Limited.
The Group’s registered office is at Level 4, 973 Nepean Highway,
Moorabbin.
The nature of the operations and principal activities are described
in the Directors’ Report.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a) BASIS OF PREPARATION
The financial report is a general-purpose financial report, which
has been prepared in accordance with the requirements of the
Corporations Act 2001 and Australian Accounting Standards.
The financial report has been prepared on a historical cost basis,
except for certain assets, which as noted, have been measured
at fair value.
The financial report is presented in Australian dollars and all values
are rounded to the nearest thousand dollars unless otherwise stated.
b) STATEmENT OF COmPLIANCE
The financial report complies with Australian Accounting Standards
as issued by the Australian Accounting Standards Board.
9
c) NEW ACCOuNTING STANDARDS AND INTERPRETATIONS
Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet effective have not been
adopted by the Group for the annual reporting period ending 30 June 2011. These are outlined in the table below:
Reference
Title
Summary
Application date
of standard*
Impact on Group
financial report
Application date
for Group*
AASB 9
Financial Instruments
1 January 2013
1 July 2013
These amendments
are only expected
to affect the
presentation of the
Group’s financial
report and will not
have a direct impact
on the measurement
and recognition of
amounts disclosed in
the financial report.
AASB 9 includes requirements for the
classification and measurement of financial
assets resulting from the first part of Phase 1
of the IASB’s project to replace IAS 39 Financial
Instruments: Recognition and Measurement
(AASB 139 Financial Instruments: Recognition
and Measurement).
These requirements improve and simplify the
approach for classification and measurement of
financial assets compared with the requirements
of AASB 139. The main changes from AASB 139
are described below.
a)
b)
c)
Financial assets are classified based on
(1) the objective of the entity’s business
model for managing the financial assets;
(2) the characteristics of the contractual
cash flows. This replaces the numerous
categories of financial assets in AASB 139,
each of which had its own classification
criteria.
AASB 9 allows an irrevocable election
on initial recognition to present gains and
losses on investments in equity instruments
that are not held for trading in other
comprehensive income. Dividends in respect
of these investments that are a return on
investment can be recognised in profit or
loss and there is no impairment or recycling
on disposal of the instrument.
Financial assets can be designated and
measured at fair value through profit or loss
at initial recognition if doing so eliminates
or significantly reduces a measurement
or recognition inconsistency that would
arise from measuring assets or liabilities,
or recognising the gains and losses on them,
on different bases.
* Application date is for the annual reporting periods beginning on or after the date shown in the above table.
iSelect Annual Report 2011
10
Notes to the Financial Statements
For the year ended 30 June 2011
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
c) NEW ACCOuNTING STANDARDS AND INTERPRETATIONS (CONTINuED)
Reference
Title
Summary
Application date
of standard*
Impact on Group
financial report
Application date
for Group*
The revised Standard introduces a number of
changes to the accounting for financial assets,
the most significant of which includes:
1 January 2013
1 July 2013
The Group does not
expect any material
impact as a result of
these amendments,
if any.
AASB 2009–11 Amendments to
Australian Accounting
Standards arising from
AASB 9
[AASB 1, 3, 4, 5, 7, 101,
102, 108, 112, 118, 121,
127, 128, 131, 132, 136,
139, 1023 & 1038 and
Interpretations
10 & 12]
AASB 124
(Revised)
Related Party
Disclosures
(December 2009)
–
–
–
–
–
–
two categories for financial assets being
amortised cost or fair value
removal of the requirement to separate
embedded derivatives in financial assets
strict requirements to determine which
financial assets can be classified as
amortised cost or fair value, Financial assets
can only be classified as amortised cost if
(a) the contractual cash flows from the
instrument represent principal and interest
and (b) the entity’s purpose for holding
the instrument is to collect the contractual
cash flows
an option for investments in equity
instruments which are not held for trading
to recognise fair value changes through
other comprehensive income with no
impairment testing and no recycling
through profit or loss on derecognition
reclassifications between amortised cost
and fair value no longer permitted unless
the entity’s business model for holding the
asset changes
changes to the accounting and additional
disclosures for equity instruments classified
as fair value through other comprehensive
income
The revised AASB 124 simplifies the definition of
a related party, clarifying its intended meaning
and eliminating inconsistencies from the
definition, including:
a)
b)
c)
the definition now identifies a subsidiary
and an associate with the same investor
as related parties of each other;
entities significantly influenced by one
person and entities significantly influenced
by a close member of the family of that
person are no longer related parties of
each other; and
the definition now identifies that, whenever
a person or entity has both joint control
over a second entity and joint control or
significant influence over a third party,
the second and third entities are related
to each other.
A partial exemption is also provided from the
disclosure requirements for government-related
entities. Entities that are related by virtue of
being controlled by the same government can
provide reduced related party disclosures.
* Application date is for the annual reporting periods beginning on or after the date shown in the above table.
1 January 2011
1 July 2011
AASB 124 is a
disclosure standard so
will have no impact on
the amounts included
in the Group’s financial
statements. The Group
does not expect any
material impact on
the disclosure.
11
Reference
Title
Summary
Application date
of standard*
Impact on Group
financial report
Application date
for Group*
AASB 2009–12 Amendments to
Australian Accounting
Standards
[AASBs 5, 8, 108, 110,
112, 119, 133, 137,
139, 1023 & 1031 and
Interpretations 2, 4, 16,
1039 & 1052]
This amendment makes numerous editorial
changes to a range of Australian Accounting
Standards and Interpretations.
In particular, it amends AASB 8 Operating
Segments to require an entity to exercise
judgement in assessing whether a government
and entities known to be under the control
of that government are considered a single
customer for the purposes of certain operating
segment disclosures. It also makes numerous
editorial amendments to a range of Australian
Accounting Standards and Interpretations,
including amendments to reflect changes made
to the text of IFRSs by the IASB.
1 January 2011
1 July 2011
These amendments
are only expected
to affect the
presentation of the
Group’s financial
report and will not
have a direct impact
on the measurement
and recognition of
amounts disclosed in
the financial report.
* Application date is for the annual reporting periods beginning on or after the date shown in the above table.
iSelect Annual Report 2011
12
Notes to the Financial Statements
For the year ended 30 June 2011
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
d) BASIS OF CONSOLIDATION
The consolidated financial statements comprise the financial
statements of iSelect Limited and its controlled entities as at
30 June each year (‘the Group’).
The financial statements of subsidiaries are prepared for the
same reporting year as the consolidated group, using consistent
accounting policies.
Adjustments are made to bring into line any dissimilar accounting
policies that may exist.
All intercompany balances and transactions, including unrealised
profits arising from intra-group transactions, have been eliminated
in full. Unrealised losses are eliminated unless costs cannot be
recovered.
Subsidiaries are consolidated from the date on which control
is transferred to the Group and cease to be consolidated from
the date on which control is transferred out of the Group.
Where there is loss of control of a subsidiary, the consolidated
financial statements include the results for the part of the reporting
year during which iSelect Limited has control.
e) BuSINESS COmBINATION RESERvE
The internal group restructure performed in the 2007 financial
year, which interposed the holding Company, iSelect Limited,
into the consolidated Group was exempted by AASB 3 Business
Combinations as it precludes entities or businesses under
common control.
The carry-over basis method of accounting was used for the
restructuring of the iSelect Group. As such the assets and liabilities
were reflected at their carrying amounts. No adjustments were
made to reflect fair values, or recognise any new assets or liabilities.
No goodwill was recognised as a result of the combination and
any difference between the consideration paid and the ‘equity’
acquired was reflected within equity as an equity reserve entitled
“Business Combination Reserve”.
f)
SIGNIFICANT ACCOuNTING JuDGEmENTS,
ESTImATES AND ASSumPTIONS
Significant accounting estimates and assumptions
The carrying amounts of certain assets and liabilities are often
determined based on estimates and assumptions of future events.
The key estimates and assumptions that have a significant risk
of causing a material adjustment to the carrying amounts of certain
assets and liabilities within the next annual reporting year are:
Present value of trail commissions
The Group has elected to account for trail commission revenue
at the time of selling a health, life and general insurance policy or
mortgage settlements to which trail commission attaches, rather
than on the basis of actual payments received from the relevant
health, life and general funds or mortgage providers involved.
This method of revenue recognition requires the Directors and
management to make certain estimates and assumptions based
on industry data and the historical experience of the Group.
In undertaking this responsibility, the Group engages Deloitte
Actuaries & Consultants Limited, a firm of consulting actuaries,
to assist in reviewing the accuracy of assumptions for health and
life trail revenue. The iSelect General trail commission is a director
valuation and is based on the same principles as outlined above.
These estimates and assumptions include but are not limited to:
termination or lapse rates, mortality rates, inflation, risk free and
other discount rates, counter party credit risk, forecast health fund
premium increases and the estimated impact of known Australian
Federal and State Government policy.
The Directors made an estimate of the likely impact of the Federal
Government’s intention to introduce tiered means testing for the
private health insurance rebate within the present value of health
fund trail commission calculations. Currently there is uncertainty as
to possible changes to the Federal Government’s health insurance
rebate and as such the Directors have again estimated the impact
upon the present value of the health trail commission.
The full impact of any legislative changes are still yet to be
determined with any known certainty as at the date of this financial
report. The Directors consider this method of trail commission
recognition to be a more accurate representation of the Group’s
financial results. This method is further detailed in Note 2 (g).
Clawback provisions
Marketing fees received from certain insurance funds can be clawed
back in the event of early termination of membership. They vary
across the insurance industry and insurers alike:
Health
Health insurance clawbacks are usually triggered where a referred
member terminates their policy. The fund has an individual
agreement and the clawback period ranges between 2 to 12
months depending on fund. The Group provides for this liability
based upon historic average rates of attrition. For the year ended
30 June 2011, the Directors have assessed these provisions in light
of any estimated impact of the Federal Government’s proposed
health insurance rebate changes.
Life
Life insurance clawbacks are usually triggered where
termination occurs up to 12 months from the sale of the policy.
The Group provides for this liability based upon historic average
rates of attrition.
General
General insurance clawbacks are usually triggered where
termination occurs within 3 months of the sale of the policy.
The Group provides for this liability based upon historic average
rates of attrition.
Mortgages
Mortgage brokerage clawbacks are usually triggered where
termination occurs within 0–24 months settlement of the loan.
The Group provides for this liability based upon historic average
rates of attrition.
Taxation
The Group’s accounting policy for taxation requires management’s
judgement as to the types of arrangements considered to be
a tax on income in contrast to an operating cost. Judgement
is also required in assessing whether deferred tax assets and
certain deferred tax liabilities are recognised on the statement of
financial position. Deferred tax assets, including those arising from
unrecouped tax losses, capital losses and temporary differences, are
13
i) marketing fees
Marketing fees are upfront fees earned upon new members joining
a health fund, initiating a life insurance policy, obtaining general
insurance or obtaining media products via iSelect. Marketing fees
are recognised at the time customers make their first payment
with the relevant fund and the insurer accepts the underlying risk.
Marketing fees may trigger a ‘clawback’ of revenue in the event of
early termination by customers as specified in individual health fund
agreements. These clawbacks are provided for by the Group on a
monthly basis by utilising industry data and historical experience.
ii) Trail commission
Trail commissions are ongoing fees related to existing health, life
and general fund members referred to individual funds via iSelect.
Furthermore it includes any individuals who settle their mortgages
via iSelect. Trail commission revenue represents commission earned
from health, life and general funds calculated as a percentage of
the value of the underlying policy relationship of the expected life
and in the case of mortgages a proportion of the underlying value
of the loan. The Group is entitled to receive health, life, general
and mortgage trail commission without having to perform further
services. On initial recognition, trail revenue and receivables are
recognised at fair value, being the present value of expected
future trail revenue receivables discounted to their net present
value using discounted cash flow valuation techniques for all
of the above beside mortgages. These calculations require
the use of assumptions.
The key assumptions underlying the fair value calculations of trail
revenue receivable at balance date include: lapse and mortality
rates, commission term, premium increases and discount rate,
incorporating risk free rates and estimates of the likely credit risk
associated with the health and life funds.
It is the Directors’ responsibility to determine the assumptions used
and the fair value of trail revenue. In undertaking this responsibility,
the Group engages Deloitte Actuaries & Consultants Limited,
a firm of consulting actuaries, to assist in reviewing the accuracy
of assumptions and the fair value model utilised to determine
the fair value of health and life fund trail revenue and the
accompanying asset. The iSelect General trail commission is a
director valuation and is based on the same principles as outlined
above. Subsequent to initial recognition and measurement, the
trail revenue asset is measured at amortised cost. The carrying
amount of the trail revenue asset is adjusted to reflect actual
and revised estimated cash flows by recalculating the carrying
amount through computing the present value of estimated future
cash flows at the original effective interest rate. The resulting
adjustment is recognised as income or expense in the statement
of comprehensive income.
recognised only where it is considered more likely than not that they
will be recovered, which is dependent on the generation of sufficient
future taxable profits. Deferred tax liabilities arising from temporary
differences in investments, caused principally by retained earnings
held in foreign tax jurisdictions, are recognised unless repatriation
of retained earnings can be controlled and are not expected to
occur in the foreseeable future.
Assumptions about the generation of future taxable profits and
repatriation of retained earnings depend on management’s
estimates of future cash flows. These depend on estimates of future
sales volumes, operating costs, capital expenditure, dividends and
other capital management transactions. Judgements are also
required about the application of income tax legislation. These
judgements and assumptions are subject to risk and uncertainty,
hence there is a possibility that changes in circumstances will
alter expectations, which may impact the amount of deferred tax
assets and deferred tax liabilities recognised on the statement of
financial position and the amount of other tax losses and temporary
differences not yet recognised. In such circumstances, some or
all of the carrying amounts of recognised deferred tax assets and
liabilities may require adjustment, resulting in a corresponding credit
or charge to the statement of comprehensive income.
Provisions for employee entitlements
Provisions are measured at the present value of management’s
best estimate of the expenditure required to settle the present
obligation at the balance sheet date using the discounted cash flow
methodology. The risks specific to the provision are factored into
the cash flows and as such a risk-free government bond rate relative
to the expected life of the provision is used as a discount rate. If
the effect of the time value of money is material, provisions are
discounted using a current pre-tax rate that reflects the time value
of money and the risks specific to the liability. The increase in the
provision resulting from the passage of time is recognised as
finance costs.
Research and development costs
Internal project costs are classified as research or development
based on management’s assessment of the nature of each cost
and the underlying activities performed. Management performs this
assessment against the Group’s development costs policy which is
consistent with the requirements of AASB 138 Intangible Assets.
Share based payments
Accounting judgements, estimates and assumptions in relation
to share based payments have been discussed in note 2 (u).
g) REvENuE RECOGNITION
Revenue is recognised to the extent that it is probable that the
economic benefits will flow to the Group and the revenue can be
reliably measured. The following specific recognition criteria must
also be met before revenue is recognised:
Fee Revenue
iSelect earns two distinct types of revenue:
– Marketing fees
– Trail commission
iSelect Annual Report 2011
14
Notes to the Financial Statements
For the year ended 30 June 2011
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
to the carrying amount of the leased asset and recognised over the
lease term on the same basis as the lease income.
g) REvENuE RECOGNITION (CONTINuED)
In the 2009 federal budget, the government announced an
intention to introduce tiered means testing for the private health
insurance rebate. During mid 2009, draft legislation was passed
by the House of Representatives but was rejected in the Senate.
However, it remains an announced government policy. Under
the arrangement, the rebate would be reduced or removed for
higher income groups and in some cases a higher Medicare Levy
Surcharge would also apply. The expectation is that this will impact
the future amount of health fund trail commission to be received
as it is likely that some existing members below these income
levels may opt out of health insurance. The full impact of the type
and number of members that may withdraw this cover is not yet
known as at the date of this financial report. The impact of the
estimated effect of a tiered means testing has been considered by
the consulting actuaries in reviewing the commission valuation at
30 June 2011. This assessment of the impact was based on reports
prepared by independent parties at the time of performing the
valuation. The valuation has been based on the assumption that
the legislation will be passed, therefore higher thresholds and higher
estimated terminations have been included in the assumptions
of the valuation. The Directors are of the belief that the revenue
recognised in the financial year is appropriate and reasonable given
the uncertainty surrounding the actual impact of the proposed
health insurance rebate charges.
Interest
Revenue is recognised as interest accrues (using the effective
interest method, which is the rate that exactly discounts estimated
future cash receipts through the expected life of the financial
instrument) to the net carrying amount of the financial asset.
Dividends
Revenue is recognised when the Group’s right to receive the
payment is established.
h) LEASES
The determination of whether an arrangement is or contains a
lease is based on the substance of the arrangement and requires
an assessment of whether the fulfilment of the arrangement
is dependent on the use of a specific asset or assets and the
arrangement conveys a right to use the asset.
Finance leases, which transfer to the Group substantially all the
risks and benefits incidental to ownership of the leased item, are
capitalised at the inception of the lease at the fair value of the
leased property or, if lower, at the present value of the minimum
lease payments. Lease payments are apportioned between the
finance charges and reduction of the lease liability so as to achieve
a constant rate of interest on the remaining balance of the liability.
Finance charges are recognised as an expense in profit and loss.
Capitalised leased assets are depreciated over the shorter of the
estimated useful life of the asset or the lease term if there is no
reasonable certainty that the Group will obtain ownership by the
end of the lease term.
Leases where the lessor retains substantially all the risks and benefits
of ownership of the asset are classified as operating leases. Initial
direct costs incurred in negotiating an operating lease are added
Operating lease payments are recognised as an expense in the
statement of comprehensive income on a straight-line basis over the
lease term. Lease incentives are recognised when they are received
and amortised over the life of the lease.
i) CASh AND CASh EquIvALENTS
Cash and short-term deposits in the statement of financial position
comprise cash at bank and in hand and short-term deposits with an
original maturity of three months or less.
For the purposes of the statement of cash flows, cash and cash
equivalents consist of cash and cash equivalents as defined above,
net of outstanding bank overdrafts.
j) TRADE AND OThER RECEIvABLES
All trade receivables recognised as current assets are due for
settlement within no more than 30 days for marketing fees and
within one year for trail commission. Trade receivables are measured
on the basis of amortised cost and trail commission is measured at
fair value.
Recoverability of trade receivables is reviewed on an ongoing
basis. Debts which are known to be uncollectible are written off.
A provision for doubtful debts is raised where some doubt as to
collection exists.
k) INCOmE TAx
Current tax assets and liabilities for the current and prior periods are
measured at the amount expected to be recovered from or paid to
the taxation authorities. The tax rates and tax laws used to compute
the amount are those that are enacted or substantively enacted by
the balance date.
Deferred income tax is provided on all temporary differences at the
balance date between the tax bases of assets and liabilities and
their carrying amounts for financial reporting purposes.
Deferred income tax liabilities are recognised for all taxable
temporary differences:
–
–
except where the deferred income tax liability arises from the
initial recognition of an asset or liability in a transaction that is
not a business combination and, at the time of the transaction,
affects neither the accounting profit nor taxable profit or loss;
and
in respect of taxable temporary differences associated with
investments in subsidiaries, except where the timing of the
reversal of the temporary differences can be controlled and it is
probable that the temporary differences will not reverse in the
foreseeable future.
Deferred income tax assets are recognised for all deductible
temporary differences, carry-forward of unused tax assets and
unused tax losses, to the extent that it is probable that taxable
profit will be available against which the deductible temporary
differences, and the carry-forward of unused tax assets and unused
tax losses can be utilised:
15
–
–
except where the deferred income tax asset relating to
the deductible temporary difference arises from the initial
recognition of an asset or liability in a transaction that is not
a business combination and, at the time of the transaction,
affects neither the accounting profit nor taxable profit or loss;
and
in respect of deductible temporary differences associated
with investments in subsidiaries, deferred tax assets are only
recognised to the extent that it is probable that the temporary
differences will reverse in the foreseeable future and taxable
profit will be available against which the temporary differences
can be utilised.
The carrying amount of deferred income tax assets is reviewed at
each balance date and reduced to the extent that it is no longer
probable that sufficient taxable profit will be available to allow all
or part of the deferred income tax asset to be utilised.
Unrecognised deferred income tax assets are reassessed at each
balance date and are recognised to the extent that it has become
probable that future taxable profit will allow the deferred tax asset
to be recovered.
Deferred income tax assets and liabilities are measured at the tax
rates that are expected to apply to the period when the asset is
realised or the liability is settled, based on tax rates (and tax laws)
that have been enacted or substantively enacted at the balance
sheet date.
Income taxes relating to items recognised directly in equity are
recognised in equity and not in the statement of comprehensive
income.
Deferred tax assets and deferred tax liabilities are offset only if a
legally enforceable right exists to set off current tax assets against
current tax liabilities and the deferred tax assets and liabilities relate
to the same taxable entity and the same taxation authority.
Tax consolidation legislation
iSelect Limited and its wholly owned Australian controlled entities
have implemented the tax consolidation legislation. Members of the
tax consolidated group have entered into a tax funding agreement.
Each entity is responsible for remitting its share of the current tax
payable (receivable) assumed by the head entity.
In accordance with UIG 1052 and Group accounting policy, the
Group has applied the “separate taxpayer within Group approach”
in which the head entity, iSelect Limited, and the controlled entities
in the tax consolidated Group continue to account for their own
current and deferred tax amounts.
In addition to its own current and deferred tax amounts,
iSelect Limited also recognises the current tax liabilities (or assets)
and the deferred tax assets arising from unused tax losses and
unused tax credits assumed from controlled entities in the tax
consolidated Group.
The allocation of taxes to the head entity is recognised as an
increase/decrease in the controlled entities intercompany accounts
with the tax consolidated Group head entity.
l) OThER TAxES
Revenues, expenses and assets are recognised net of the amount of
GST except:
–
where the GST incurred on a purchase of goods and services is
not recoverable from the taxation authority, in which case the
GST is recognised as part of the cost of acquisition of the asset
or as part of the expense item as applicable; and
–
receivables and payables are stated with the amount of
GST included.
The net amount of GST recoverable from, or payable to, the
taxation authority is included as part of receivables or payables in
the statement of financial position.
Cash flows are included in the statement of cash flows on a gross
basis and the GST component of cash flows arising from investing
and financing activities, which is recoverable from, or payable to,
the taxation authority are classified as operating cash flows.
Commitments and contingencies are disclosed net of the amount
of GST recoverable from, or payable to, the taxation authority.
m) PROPERTy, PLANT AND EquIPmENT
Plant and equipment is stated at cost less accumulated depreciation
and any accumulated impairment losses. Such cost includes the cost
of replacing parts that are eligible for capitalisation when the cost of
replacing the parts is incurred. Similarly, when each major inspection
is performed, its cost is recognised in the carrying amount of the
plant and equipment as a replacement only if it is eligible for
capitalisation.
Depreciation is calculated over the estimated useful life of the asset
as follows:
useful life
method
Computer software/equipment 2 – 4 years
Straight-line method
Furniture, fixtures and fittings
8 years
Straight-line method
Leasehold Improvements
5 to 6.5 years
Straight-line method
An item of property, plant and equipment is derecognised upon
disposal or when no future economic benefits are expected to arise
from the continued use of the asset.
Any gain or loss arising on derecognition of the asset (calculated as
the difference between the net disposal proceeds and the carrying
amount of the item) is included in the statement of comprehensive
income in the period the item is derecognised.
Impairment
The carrying values of plant and equipment are reviewed for
impairment at each reporting date, with recoverable amount being
estimated when events or changes in circumstances indicate that
the carrying value may be impaired.
The recoverable amount of plant and equipment is the higher of
fair value less costs to sell and value in use. In assessing value in
use, the estimated future cash flows are discounted to their present
value using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific
to the asset.
iSelect Annual Report 2011
16
Notes to the Financial Statements
For the year ended 30 June 2011
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
m) PROPERTy, PLANT AND EquIPmENT (CONTINuED)
For an asset that does not generate largely independent cash
inflows, recoverable amount is determined for the cash-generating
unit to which the asset belongs, unless the asset’s value in use can
be estimated to be close to its fair value. Impairment exists when
the carrying value of an asset or cash-generating units exceeds its
estimated recoverable amount. The asset or cash-generating unit
is then written down to its recoverable amount.
n) INTANGIBLE ASSETS
Intangible assets are initially measured at cost. Following
initial recognition, intangible assets are carried at cost less any
accumulated amortisation and any accumulated impairment
losses. Internally generated intangible assets, excluding capitalised
development costs, are not capitalised and expenditure is
recognised in profit or loss in the year in which the expenditure
is incurred.
The useful lives of intangible assets are assessed to be either finite
or infinite. Intangible assets with finite lives are amortised over the
useful life and tested for impairment whenever there is an indication
that the intangible asset may be impaired. The amortisation period
and the amortisation method for an intangible asset with a finite
useful life are either reviewed at the end of each financial period or
amortised over the life of the asset. Changes in the expected useful
life or the expected pattern of consumption of future economic
benefits embodied in the asset are accounted for prospectively
by changing the amortisation period or method, as appropriate,
which is a change in accounting estimate. The amortisation
expense on intangible assets with finite lives is recognised in profit
or loss in the expense category consistent with the function of the
intangible asset.
Intangible assets with indefinite useful lives are tested for
impairment annually either individually or at the cash-generating
unit level. Such intangibles are not amortised. The useful life of an
intangible asset with an indefinite life is reviewed each reporting
period to determine whether indefinite life assessment continues to
be supportable. If not, the change in the useful life assessment from
indefinite to finite is accounted for as a change in an accounting
estimate and is thus accounted for on a prospective basis.
Research and development costs
Research costs are expensed as incurred. An intangible asset arising
from development expenditure on an internal project is recognised
only when the Group can demonstrate the technical feasibility of
completing the intangible asset so that it will be available for use or
sale, its intention to complete and its ability to use or sell the asset,
how the asset will generate future economic benefits, the availability
of resources to complete the development and the ability to
measure reliably the expenditure attributable to the intangible
asset during its development. Following the initial recognition of
the development expenditure, the cost model is applied requiring
the asset to be carried at cost less any accumulated amortisation
and accumulated impairment losses. Any expenditure so
capitalised is amortised over the period of expected benefit from
the related project.
Web site development costs capitalised as an intangible asset are
amortised on a straight-line basis with a useful life between 2 to 4
years.
o) INvESTmENTS
Investments in controlled entities are carried at the lower of cost
and recoverable amount.
p) ImPAIRmENT OF ASSETS
The Group assesses at each reporting date whether there is an
indication that an asset may be impaired. If any such indication
exists, or when annual impairment testing for an asset is required,
the Group makes an estimate of the asset’s recoverable amount.
An asset’s recoverable amount is the higher of its fair value less
costs to sell and its value in use and is determined for an individual
asset, unless the asset does not generate cash inflows that are
largely independent of those from other assets or groups of assets
and the asset’s value in use cannot be estimated to be close to its
fair value. In such cases the asset is tested for impairment as part
of the cash-generating unit to which it belongs. When the carrying
amount of an asset or cash-generating unit exceeds its recoverable
amount, the asset or cash-generating unit is considered impaired
and is written down to its recoverable amount.
In assessing value in use, the estimated future cash flows are
discounted to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of money
and the risks specific to the asset. Impairment losses relating to
continuing operations are recognised in those expense categories
consistent with the function of the impaired asset.
An assessment is also made at each reporting date as to whether
there is any indication that previously recognised impairment losses
may no longer exist or may have decreased. If such indication
exists, the recoverable amount is estimated. A previously recognised
impairment loss is reversed only if there has been a change in the
estimates used to determine the asset’s recoverable amount since
the last impairment loss was recognised. If that is the case the
carrying amount of the asset is increased to its recoverable amount.
That increased amount cannot exceed the carrying amount
that would have been determined, net of depreciation, had no
impairment loss been recognised for the asset in prior periods.
Such reversal is recognised in statement of comprehensive income.
After such a reversal the depreciation charge is adjusted in future
periods to allocate the asset’s revised carrying amount, less any
residual value, on a systematic basis over its remaining useful life.
q) TRADE AND OThER PAyABLES
Trade payables and other payables are carried at amortised cost
and represent liabilities for goods and services provided to the
Group prior to the end of the financial period that are unpaid and
arise when the Group becomes obliged to make future payments
in respect of the purchase of these goods and services.
r) PROvISIONS
Provisions are recognised when the Group has a present obligation
(legal or constructive) as a result of a past event, it is probable
that an outflow of resources embodying economic benefits will
be required to settle the obligation and a reliable estimate can be
made of the amount of the obligation.
17
Where the Group expects some or all of a provision to be
reimbursed, for example under an insurance contract, the
reimbursement is recognised as a separate asset but only when
the reimbursement is virtually certain. The expense relating to any
provision is presented in the statement of comprehensive income
net of any reimbursement.
If the effect of the time value of money is material, provisions
are determined by discounting the expected future cash flows
at a pre-tax rate that reflects current market assessments of the
time value of money and the risks specific to the liability.
Where discounting is used, the increase in the provision due to the
passage of time is recognised as a borrowing cost.
s) EmPLOyEE BENEFITS
Provision is made for employee benefits accumulated as
a result of employees rendering services up to the reporting date.
These benefits include wages and salaries, annual leave and long
service leave.
Liabilities arising in respect of wages and salaries, annual leave
and any other employee benefits expected to be settled within
twelve months of the reporting date are measured at their nominal
amounts based on remuneration rates which are expected to be
paid when the liability is settled. All other employee benefit liabilities
are measured at the present value of the estimated future cash
outflow to be made in respect of services provided by employees
up to the reporting date. In determining the present value of future
cash outflows, the market yield as at the reporting date on national
government bonds, which have terms to maturity approximating
the terms of the related liability, are used.
Employee benefit expenses and revenues arising in respect of the
following categories:
–
–
wages and salaries, non-monetary benefits, annual leave,
long service leave and other leave benefits; and
other types of employee benefits are recognised against profits
on a net basis in their respective categories.
t) CONTRIBuTED EquITy
Ordinary shares are classified as equity. Incremental costs directly
attributable to the issue of new shares or options are shown in
equity as a deduction, net of tax, from the proceeds.
u) ShARE BASED PAymENTS
The Group provides benefits to its employees (including key
management personnel) in the form of share based payments,
whereby employees render services in exchange for shares or rights
over shares (equity-settled transactions).
There are currently three plans in place to provide these benefits:
–
–
–
the Employee Share Option Plan, which provides benefits to all
employees, including Directors;
CEO Plan, which provides benefits to the Chief Executive Officer;
and
ninemsn Option agreement, which provides benefits to ninemsn,
a major shareholder.
The cost of these equity-settled transactions with employees is
measured by reference to the fair value of the equity instruments at
the date at which they were granted. The fair value was determined
by the Directors and management using a Binomial model.
In valuing equity-settled transactions, no account is taken of
any vesting conditions. The cost of equity-settled transactions is
recognised, together with a corresponding increase in equity, over
the period in which the performance and/or service conditions
are fulfilled (the vesting period), ending on the date on which
the relevant employees become fully entitled to the award
(the vesting date).
At each subsequent reporting date until vesting, the cumulative
charge to the statement of comprehensive income is the product
of (i) the grant date fair value of the award; (ii) the current best
estimate of the number of awards that will vest, taking into account
such factors as the likelihood of employee turnover during the
vesting period and the likelihood of non-market performance
conditions being met; and (iii) the expired portion of the
vesting period.
The charge to the statement of comprehensive income for
the period is the cumulative amount as calculated above less
the amounts already charged in previous periods. There is a
corresponding credit to equity.
Until an award has vested, any amounts recorded are contingent
and will be adjusted if more or fewer awards vest than were
originally anticipated to do so. Any award subject to a market
condition is considered to vest irrespective of whether or not
that market condition is fulfilled, provided that all other conditions
are satisfied.
If the terms of an equity-settled award are modified, as a minimum
an expense is recognised as if the terms had not been modified. An
additional expense is recognised for any modification that increases
the total fair value of the share based payment arrangement, or is
otherwise beneficial to the employee, as measured at the date of
modification.
If an equity-settled award is cancelled, it is treated as if it had vested
on the date of cancellation, and any expense not yet recognised for
the award is recognwhe date that it is granted, the cancelled and
new award are treated as if they were a modification of the original
award, as described in the previous paragraph.
v) COmPARATIvE BALANCES
Accounting policies adopted are consistent with those of the
previous year. Where expenses have been reallocated between
departments or within expense lines, the comparatives for the
previous year have been reallocated also to assist comparability
between the years.
w) ONEROuS CONTRACTS
A provision for onerous contracts is recognised when the expected
benefits to be derived by the Group from the contract are lower than
the unavoidable cost of meeting its obligations under the contract.
The provision is measured at the present value of the lower of the
expected cost of terminating the contract and the expected net cost
of continuing with the contract. Before a provision is established,
the Group recognises any impairment loss on assets associated
with the contract.
iSelect Annual Report 2011
18
Notes to the Financial Statements
For the year ended 30 June 2011
3. FINANCIAL RISK MANAGEMENT AND OBjECTIVES AND POLICIES
The Group has limited exposure to financial risks. The Group does not use derivative financial instruments such as foreign exchange
contracts and interest rate swaps to hedge certain risk exposures. It does not operate internationally and is not exposed to either securities
price risk, foreign exchange risk or commodity price risk.
The main risks arising from the Group’s financial instruments are interest rate risk, credit risk, liquidity risk and fair value risk. The Group
uses different methods to measure and manage different types of risks to which it is exposed. These include monitoring levels of exposure
to interest rate risk and assessments of market forecasts for interest rates. Ageing analyses and monitoring of specific credit allowances
are undertaken to manage credit risk, liquidity risk is monitored through the development of future rolling cash flow forecasts and
comprehensive capital management planning.
The Board of Directors is continuing to review the Group’s risk management framework and has established an Audit and Risk Committee
to aid and oversee this process.
The Group’s policies in relation to financial risks to which it has exposure are detailed below.
a) mARkET RISk
Cash flow and fair value interest rate risk
The Group’s main interest rate risk arises from cash and cash equivalents and net present value of future trail commission receivables.
The Group does not have borrowings and therefore is not exposed to interest rate risk on borrowings. The following sensitivity analysis
is based on the interest rate risk exposures in existence at the balance sheet date:
Financial Assets
Current
Cash and cash equivalents
Trade and other receivables
Net present value of future trail commission
Non-current
Net present value of future trail commission
Financial Liabilities
Current
Trade and other payables
Net Exposure
CONSOLIDATED
2011
$‘000
2010
$‘000
17,499
5,111
20,239
41,241
84,090
7,438
3,963
8,923
29,327
49,651
9,520
9,520
7,221
7,221
74,570
42,430
19
At 30 June 2011, if interest rates had moved, as illustrated in the table below, with all other variables held constant, post tax profit would
have been affected as follows:
TOTAL
Consolidated
+1% (100 basis points)
-1% (100 basis points)
TRAIL COmmISSION
Consolidated
+1% (100 basis points)
-1% (100 basis points)
CASh AT BANk
Consolidated
+1% (100 basis points)
-1% (100 basis points)
Post Tax Profit
higher/(Lower)
CONSOLIDATED
2011
$‘000
2010
$‘000
(1,189)
1,295
(1,311)
1,417
122
(122)
(840)
920
(892)
972
52
(52)
Judgements of reasonably possible movements
The movements in profit are due to higher/lower interest income from cash balances and higher/lower net present value of future trail
commission. The sensitivity is higher in 2011 than in 2010 because of higher net present value of future trail commission.
b) FOREIGN CuRRENCy RISk
The Group has minimal transactional currency exposure. Such exposure arises from purchases by an operating entity in currencies other
than the functional currency.
c) CREDIT RISk
Credit risk is managed on a group basis. Credit risk arises from cash and cash management equivalents through deposits with banks and
financial institutions.
Additionally, the Group has exposure to credit risk associated with the health, life and general funds and mortgage providers, with regard to
the fair value calculation of the trail commissions (as discussed in note 2 (g) and outstanding receivables. Estimates of the likely credit risk
associated with the health, life and general funds and mortgage providers are incorporated in the discount rates (one of the assumptions
used in the fair value calculation).
The Group trades only with recognised, creditworthy third parties (health and life funds, major financial institutions and large media
suppliers), and as such collateral is not requested.
It is the Group’s policy that all key partners who wish to trade on credit terms are subject to credit verification procedures including an
assessment of their capital and solvency position and industry reputation. Risk limits are set for each individual key partner in accordance
with parameters set by the board. These risk limits are regularly monitored.
In addition, receivable balances are monitored on an ongoing basis with the result that the Group’s exposure to bad debts is not significant.
d) LIquIDITy RISk
The Group’s liquidity risk exposure is minimal due to the Group not having any debt, loans or financial liabilities. The Group does not have
contractual financial liabilities and all trade and other payables are payable within no greater than six months.
e) FAIR vALuE RISk
The Group uses various methods in estimating the fair value of a financial instrument. The methods comprise:
Level 1 – the fair value is calculated using quoted prices in active markets.
Level 2 – the fair value is estimated using inputs other than quoted prices included in Level 1 that are observable for the asset or liability,
either directly (as prices) or indirectly (derived from prices).
Level 3 – the fair value is estimated using inputs for the asset or liability that are not based on observable market data.
iSelect Annual Report 2011
20
Notes to the Financial Statements
For the year ended 30 June 2011
3. FINANCIAL RISK MANAGEMENT AND OBjECTIVES AND POLICIES (CONTINUED)
The fair value of the financial instruments as well as the methods used to estimate the fair value are summarised in the table below.
Consolidated
Financial Assets
Net present value of future trail commission
Financial Liabilities
Consolidated
Financial Assets
Net present value of future trail commission
Financial Liabilities
year ended 30 June 2011
valuation
technique
– market
observable
inputs
(Level 2)
$‘000
valuation
technique –
non-market
observable
inputs
(Level 3)
$‘000
quoted
market
price
(Level 1)
$‘000
Total
$‘000
–
–
–
–
–
–
–
–
61,480
61,480
61,480
61,480
–
–
–
–
year ended 30 June 2010
valuation
technique
– market
observable
inputs
(Level 2)
$
valuation
technique –
non-market
observable
inputs
(Level 3)
$
quoted
market
price
(Level 1)
$
Total
$
–
–
–
–
–
–
–
–
38,250
38,250
38,250
38,250
–
–
–
–
For financial instruments not quoted in active markets, the Group used valuation techniques such as present value techniques, comparison
to similar instruments for which market observable prices exist and other relevant models used by market participants. These valuation
techniques use both observable and unobservable market inputs.
21
CONSOLIDATED
2011
$‘000
2010
$‘000
38,250
29,893
(2,551)
(14,439)
4,310
6,017
22,890
13,884
(1,031)
(6,586)
3,081
6,012
61,480
38,250
Reconciliation of Level 3 fair value movements
Opening Balance
New Receivable
Lapsed Receivable
Cash Receipts
Gains/(Losses) from movement in discount rate
Gains/(Losses) from movement in other fair value assumptions
Closing Balance
The Group uses the discounted cash flow method in determining the fair value of the unlisted asset. The potential effect of using reasonable
possible alternative assumptions based on a change in relevant inputs by 1% would have the effect of reducing the fair value by up to
$5,050,000 should the discount rate increase, premium price decrease or termination rates increase, or increase the fair value by $5,590,160
should the opposite apply.
If the assumption that there is a potential impact of future regulatory or federal government policy change be removed, the valuation
would increase by $586,334.
4. REVENUES AND ExPENSES
a)
Revenue
Sales Revenue
health Insurance
Marketing fees, net of clawback
Present value of trail commissions
Life Insurance
Marketing fees, net of clawback
Present value of trail commissions
General Insurance
Marketing fees, net of clawback
Present value of trail commissions
Total insurance revenue
Other business revenue
Total sales revenue
Interest revenue
Other Income
Total income
b) Employee entitlement expenses
Cost of sales and administrative expenses include the following personnel expenses:
Employee benefits
Share based payments expense
Total employee benefits expenses
CONSOLIDATED
2011
$‘000
2010
$‘000
24,161
33,355
14,096
19,701
4,932
3,271
5,591
1,013
4,676
2,519
2,499
–
72,323
43,491
119
–
72,442
43,491
841
215
400
244
73,498
44,135
23,628
658
24,286
15,113
274
15,387
iSelect Annual Report 2011
22
Notes to the Financial Statements
For the year ended 30 June 2011
4. REVENUES AND ExPENSES (CONTINUED)
c) Research and development costs
Amortisation of previously capitalised development costs
d) Depreciation expense
Property, plant and equipment
The depreciation amounts shown include accelerated depreciation for fixed assets being disposed
of prior to the premises relocation scheduled for the end of October 2011.
e) Lease expenditure
Operating lease expenditure
f) Relocation expenses
Relocation expenses
CONSOLIDATED
2011
$‘000
2010
$‘000
617
2,568
456
972
543
262
1,592
–
Relocation costs relate to the expenditure incurred as a result of the planned move to the new premises at Bay Road, Cheltenham.
The costs relate to legal, property management and property fees.
Make good and onerous contract for rental costs incurred in the current building are also included.
g) Acquisition expenses
Acquisition expenses
217
–
Acquisition costs relate to the legal and due diligence costs in association with the Info Choice acquisition.
Refer to note 17 for further information on the Info Choice acquisition.
5. INCOME TAx
Current income tax
Current income tax benefit/(charge)
Adjustment in respect of current income tax of previous years
Deferred income tax
Relating to origination and reversal of temporary differences
Adjustments in respect of deferred income tax of previous years
Income tax reported in income statement
A reconciliation of income tax benefit/(expense) applicable to account profit
before income tax at the statutory income tax rate is as follows:
Accounting profit before income tax
Statutory income tax rate of 30%
Adjustments in respect of current income tax of previous years
Adjustments in respect of deferred income tax of previous years
Share based payments
Entertainment
Research and development concessional deduction
Investment Allowance
Other
Total income tax expense
Deferred tax assets relate to the following:
Deferred tax assets from temporary differences on:
Trade and other payables
Provisions
Carried forward losses
Other
Total deferred tax assets
Deferred tax liabilities from temporary differences on:
Present value of trail commission
Accrued Interest
Development costs
Other
Total deferred tax liabilities
23
CONSOLIDATED
2011
$‘000
2010
$‘000
2,216
2,154
286
(52)
(6,778)
(4,569)
(92)
18
(4,368)
(2,449)
15,025
(4,508)
286
(92)
(197)
(27)
170
–
–
8,229
(2,469)
(52)
18
(82)
(17)
–
155
(2)
(4,368)
(2,449)
221
1,082
6,695
64
8,062
199
619
4,193
–
5,011
(18,444)
(11,475)
(12)
(927)
–
(1)
(489)
–
(19,383)
(11,965)
Tax consolidation
The iSelect Group formed an income tax consolidated group as at 30 April 2007. iSelect Limited continue to act as the head Company of
this Group. In addition on 30 November 2011, iSelect Media Pty Ltd and on 14 January 2011 iSelect Mortgages Pty Ltd were incorporated
as wholly owned subsidiaries and therefore joined the tax consolidated group.
Members of the Group entered into a tax sharing agreement at that time that provided for the allocation of income tax liabilities between
the entities should the head entity default on its tax payment obligations. No amounts are expected to be recognised in the financial
statements in respect of this agreement on the basis that the probability of default is remote.
The head entity and the controlled entities in the likely tax consolidated group continue to account for their own current and deferred
tax balances.
iSelect Annual Report 2011
24
Notes to the Financial Statements
For the year ended 30 June 2011
6. CASH AND CASH EqUIVALENTS
Cash at bank and in hand
Term deposits
Total cash and cash equivalents
CONSOLIDATED
2011
$‘000
6,999
10,500
17,499
2010
$‘000
2,807
4,631
7,438
Cash at bank and in hand earns interest at floating rates based on daily bank deposit rates.
Short-term deposits are made for varying periods of between one day and three months,
depending on the immediate cash requirements of the Group, and earn interest at the respective short-term deposit rates.
Reconciliation of statement of cash flows
Reconciliation of net profit after tax to net cash flows from operations
Net profit after tax
Adjustments for non-cash income and expense items:
Depreciation/amortisation
Share options expensed
Interest income classified as investing cash flow
Net (gain)/loss on disposal of intangible asset
Increase/decrease in assets and liabilities
Trade and other receivables
Net present value of future trail commission
Other assets
Deferred Tax Assets
Trade and other payables
Deferred Tax Liabilities
Income tax payable
Provisions
10,657
5,780
3,185
658
(841)
–
1,428
274
(375)
35
(1,148)
(677)
(23,230)
(15,361)
(707)
(3,051)
2,299
7,418
–
1,501
(174)
2,290)
4,141
–
4,739
253
Net cash from/(used in) operating activities
(3,259)
(2,227)
7. TRADE AND OTHER RECEIVABLES
Trade receivables, third parties
Total trade and other receivables
8. NET PRESENT VALUE OF FUTURE TRAIL COMMISSION
Net present value of future trail commission
Total net present value of future trail commission
Current
Net present value of future trail commission
Non-current
Net present value of future trail commission
9. OTHER ASSETS
Prepayments
Other Assets
Total other assets
5,111
5,111
61,480
61,480
20,239
20,239
41,241
41,241
716
337
1,053
3,963
3,963
38,250
38,250
8,923
8,923
29,327
29,327
330
16
346
25
Total
$‘000
2,932
1,562
43
CONSOLIDATED
Leasehold
improvements
$‘000
Office/
Computer
equipment
$‘000
Computer
Software
$‘000
Furniture
fixtures and
fittings
$‘000
1,075
87
–
(1,162)
716
589
–
(396)
617
722
43
524
164
–
(366)
(644)
(2,568)
10. PROPERTY, PLANT AND EqUIPMENT
year ended 30 June 2011
At 1 July 2010
Net of accumulated depreciation
Additions
Transfers
Depreciation for the period
At 30 June 2011
Net of accumulated depreciation
–
909
1,016
44
1,969
At 1 July 2010
Cost value
Accumulated depreciation
Net carrying amount
At 30 June 2011
Cost value
Accumulated depreciation
Net carrying amount
year ended 30 June 2010
At 1 July 2009
Net of accumulated depreciation
Additions
Disposals
Depreciation for the period
At 30 June 2010
1,682
(607)
1,075
1,769
(1,769)
–
1,713
(997)
716
2,302
(1,393)
909
1,227
(610)
617
1,992
(976)
1,016
752
(228)
524
916
(872)
44
CONSOLIDATED
Leasehold
improvements
$‘000
Office/
Computer
equipment
$‘000
Computer
Software
$‘000
Furniture
fixtures and
fittings
$‘000
1,386
1
_
(312)
668
378
_
(330)
348
515
_
(246)
505
103
_
(84)
5,374
(2,442)
2,932
6,979
(5,010)
1,969
Total
$‘000
2,907
997
_
(972)
Net of accumulated depreciation
1,075
716
617
524
2,932
At 1 July 2009
Cost value
Accumulated depreciation
Net carrying amount
At 30 June 2010
Cost value
Accumulated depreciation
Net carrying amount
1,681
(295)
1,386
1,682
(607)
1,075
1,335
(667)
668
1,713
(997)
716
712
(364)
348
1,227
(610)
617
649
(144)
505
752
(228)
524
4,377
(1,470)
2,907
5,374
(2,442)
2,932
iSelect Annual Report 2011
26
Notes to the Financial Statements
For the year ended 30 June 2011
11. NON–CURRENT ASSETS – INTANGIBLE ASSETS
year Ended 30 June 2011
At 1 July 2010
Net of accumulated amortisation and impairment
Additions
Transfers
Amortisation
At 30 June 2011
Net of accumulated amortisation and impairment
At 30 June 2011
Cost (gross carrying amount)
Accumulated amortisation and impairment
Net carrying amount
year Ended 30 June 2010
At 1 July 2009
Net of accumulated amortisation and impairment
Additions
Disposals
Amortisation
At 30 June 2010
Net of accumulated amortisation and impairment
At 30 June 2010
Cost (gross carrying amount)
Accumulated amortisation and impairment
Net carrying amount
CONSOLIDATED
Development
costs
$‘000
Trademarks
& Domain
Names
$‘000
Computer
Software
$‘000
Total
$‘000
1,893
2,445
(43)
(617)
3,678
6,143
(2,465)
3,678
1,405
979
(35)
(456)
43
–
(43)
–
–
–
–
–
119
–
–
(76)
43
1,893
229
(186)
43
3,741
1,848)
1,893
1,649
2,445
–
(617)
3,477
5,942
(2,465)
3,477
1,189
840
–
(380)
1,649
3,311
(1,662)
1,649
201
–
–
–
201
201
–
201
97
139
(35)
–
201
201
–
201
a) DESCRIPTION OF INTANGIBLE ASSETS
i) Development costs
Development costs are carried at cost less accumulated amortisation and accumulated impairment losses. This intangible asset has been
assessed as having a finite life and is amortised using the straight-line method over a period of two and four years. The amortisation has
been recognised in the statement of comprehensive income in amortisation. If an impairment indication arises, the recoverable amount is
estimated and an impairment loss is recognised to the extent that the recoverable amount is lower than the carrying amount.
ii) Trademark and domain names
Trademark and domain names are carried at cost and are not amortised. These intangible assets have been determined to have infinite
useful lives. These assets were tested for impairment as at 30 June 2011, on a ‘value-in-use’ basis.
iii) Software
Capitalised software is carried at cost less accumulated amortisation and accumulated impairment losses. The software has been assessed
as having a finite life and is amortised using the straight-line method over a period of 2 to 4 years. The amortisation has been recognised in
the statement of comprehensive income in amortisation. If an impairment indication arises, the recoverable amount is estimated and an
impairment loss is recognised to the extent that the recoverable amount is lower than the carrying amount.
b) ImPAIRmENT LOSSES RECOGNISED
No impairment losses were recognised during the period. (2010: Nil)
12. TRADE AND OTHER PAYABLES
Trade payables (a)
Other payables (b)
Total trade and other payables
a) TRADE PAyABLES
Trade payables are non-interest bearing and are normally settled on 30 day terms.
b) OThER PAyABLES
Other payables are non-interest bearing and are normally settled on 30 day terms.
13. PROVISIONS
Current Provisions
Annual Leave
Long Service Leave
Lease incentive
Clawback
Other
Total
Non-current Provisions
Long Service Leave
Lease incentive
Total
27
CONSOLIDATED
2011
$‘000
833
8,687
9,520
2010
$‘000
1,652
5,569
7,221
CONSOLIDATED
2011
$‘000
2010
$‘000
1,011
153
48
1,162
1,049
3,423
183
–
183
692
102
191
775
78
1,838
124
143
267
a) NATuRE AND TImING OF PROvISIONS
i) Clawback provision
The Group has recognised a provision for expected clawback of marketing fees receivable from health, life and general funds due to early
termination of policies by new members. This is based on historic and average industry rates of attrition. Clawback of fees is incurred within
two to twelve months of the sale of the relevant policies.
ii) Provision for lease incentive
Relates to the receipt of lease incentive payments in relation to the Group’s operating premises. This revenue has been deferred and is being
recognised in the statement of comprehensive income over the life of the lease as other income.
ii) Other
Relates to the net of the provision for make good and onerous contract costs for the existing lease at 973 Nepean Highway, Moorabbin,
which will be vacated for new premises in the next financial year.
iSelect Annual Report 2011
28
Notes to the Financial Statements
For the year ended 30 June 2011
13. PROVISIONS (CONTINUED)
b) mOvEmENT IN PROvISIONS
Movements in each class of provision during the financial year, other than provisions relating to employee benefits, are set out below:
Consolidation
As at beginning of the period
Arising during the year
Utilised
At end of the period
14. ISSUED CAPITAL
Issued and paid up capital
Ordinary shares fully paid (number)
Clawback
2010
$‘000
2011
$‘000
Lease
Incentive
2010
$‘000
2011
$‘000
2011
$‘000
Other
2010
$‘000
775
694
334
526
78
3,721
2,407
–
–
1,049
(3,334) (2,326)
(286)
(192)
(78)
1,162
775
48
334
1,049
–
78
–
78
CONSOLIDATED
2011
$‘000
2010
$’000
36,582,000
20,095,510
14,692,314
12,733,588
Share capital increased during the year as a result of the issue of ordinary shares to option holders exercising 832,000 share options
(2010: 75,000) as well as capital raising of 1,126,726 shares (2010: Nil).
The total number of share options outstanding at 30 June 2011 is 6,286,797 (2010: 5,138,201).
Ordinary shares have the right to receive dividends as declared and, in the event of winding up the Group, to participate in the proceeds
from the sale of all surplus assets in proportion to the number of and amounts paid up on shares held.
Ordinary shares entitle their holder to one vote, either in person or by proxy, at a meeting of the Group.
Effective 1 July 1998, the Corporations legislation in place abolished the concepts of authorised capital and par value shares.
Accordingly, the Group does not have authorised capital nor par value in respect of its issued shares.
15. COMMITMENTS AND CONTINGENCIES
a) OPERATING LEASE COmmITmENTS
The Group had entered into commercial lease for the current premises which had a life of 10 years.
The Group has also entered into a new commercial lease for the new premises which also has an initial life of 10 years with the option
to renew at the end of the contract period.
During 2011 the Group also entered into several hire purchase motor vehicle leases with a life of 3 years.
There are no restrictions placed upon the lessee by entering into these leases.
Future minimum rentals payable under non-cancellable operating leases are as follows:
Operating Lease Commitments
minimum lease payments
Not later than one year
Later than 1 year and not later than 5 years
More than 5 years
Total operating lease commitments
Operating lease expenses recognised as an expense during the period:
CONSOLIDATED
2011
$‘000
2010
$’000
1,963
10,843
10,161
22,967
543
541
414
–
955
462
29
b) CONTINGENCIES
On 24 October 2011, iSelect Life Pty Ltd reported to the Australian Securities & Investments Commission a breach in relation to its
Australian Financial Services Licence relating to life insurance policies sold between April 2009 and March 2011. As a result of this breach,
an internal review of all life insurance policies sold during that period is being undertaken. The amount (if any) of any liability cannot be
reliably determined at this time, accordingly no amounts have been recorded in the Financial Statements for the year ended 30 June 2011.
Potential liabilities for the Group, should any obligation be identified, are expected to be covered by insurance maintained by the Group.
16. RELATED PARTY DISCLOSURE
a) SuBSIDIARIES
The consolidated financial statements include the financial statements of iSelect Limited and the subsidiaries listed in the following table:
Name
iSelect Health Pty Ltd
iSelect Life Pty Ltd
iSelect General Pty Ltd
iSelect Media Pty Ltd
iSelect Mortgages Pty Ltd
Country of
incorporation
Australia
Australia
Australia
Australia
Australia
2011
100%
100%
100%
100%
100%
2010
100%
100%
100%
0%
0%
2011
$
2011
$
21,044,113
20,386,038
6,900,000
3,250,000
7,530,000
5,730,000
1,190,000
775,000
–
–
b) uLTImATE PARENT
iSelect Limited is the ultimate Australian parent entity of the Group.
c) kEy mANAGEmENT PERSONNEL
Details relating to key management personnel, including remuneration paid, are included in note 19.
d) TRANSACTIONS WITh RELATED PARTIES
The following table provides the total amount of transactions that were entered into with related parties for the relevant financial year
(for information regarding outstanding balances on related party trade receivables and payables at year end, refer to notes 7 and 12
respectively):
Related party
Consolidated
Shareholder related entities
Ninemsn – Advertising Services
2011
2010
Director related entities
martin Dalgleish – Consultancy fees
2011
2010
Sales
to related
parties
$
Purchases
from related
parties
$
Other
transactions
with related
parties
$
Balances
outstanding
at balance
date
$
–
–
–
–
174,504
59,337
20,000
80,000
85,000
–
–
–
259,504
59,337
20,000
80,000
Terms and conditions of transactions with related parties
Sales to and purchases from related parties are made in arm’s length transactions both at normal market prices and on normal
commercial terms.
Outstanding balances at period-end are unsecured, interest free and settlement occurs in cash.
No guarantees were provided or received for any related party receivables or payables.
iSelect Annual Report 2011
30
Notes to the Financial Statements
For the year ended 30 June 2011
17. EVENTS AFTER THE BALANCE SHEET DATE
In relation to the current premises, which iSelect intend to move out from in late October 2011, iSelect Health Pty Ltd (a wholly owned
subsidiary of iSelect Limited) has raised provisions of $500k and $549k for make good costs and onerous contracts for rent respectively.
The Group is in the process of formalising the surrender of the lease over its current premises before the end of the lease (with no make
good obligation). As part of the surrender arrangements, the Group has agreed to pay a licence fee for the continued display of its outdoor
signage at the premises at a cost of $165k. As a result, in the 2012 financial year, iSelect anticipates to recoup the $500k in relation to the
make good costs and will likely be able to recoup approximately $314k in relation to the onerous contract for rent, subject to finalisation
of all arrangements.
On 19 August 2011, iSelect Limited announced an off-market takeover bid for all of the shares of Infochoice Ltd for total consideration
of $33.538 million. iSelect’s offer to Infochoice shareholders is now unconditional. As at the date of this report, iSelect has received
acceptances from 98.72% of the Infochoice shares. iSelect will fund the acquisition from drawings under a $35 million bridge loan
note facility arranged by Goldman Sachs & Partners Australia Capital Markets Limited with a maturity date of 20 August 2012.
Other than the matters discussed above, in the interval between the end of the financial year and the date of this report no item,
transaction or event of a material and unusual nature likely, in the opinion of the Directors of Group, to affect significantly the operations
of the Group, the results of those operations or the state of affairs of the Group, in future financial years.
18. AUDITORS’ REMUNERATION
The following total remuneration was received, or is due and receivable, by the auditor of the Group in respect of:
Amounts received or due and receivable by Ernst & Young Australia for:
Audit of the financial statements
Other Services:
– tax compliance
– assurance related
– due diligence
– equity raising
– regulatory compliance
Total
CONSOLIDATED
2011
$
2010
$
149,300
114,073
47,800
25,650
94,615
58,674
26,400
30,000
39,000
_
_
24,720
402,439
207,793
31
Non-Executive Chairman
Chief Executive Officer and Managing Director
Non-Executive Director
Non-Executive Director
Non-Executive Director – resigned 22 September 2010
Non-Executive Director – resigned 25 May 2011
Non-Executive Director
Non-Executive Director – appointed 22 September 2010
19. DIRECTOR AND ExECUTIVE DISCLOSURE
a) DETAILS OF kEy mANAGEmENT PERSONNEL
Directors
Martin Dalgleish
Damien Waller
Shaun Bonett
Leslie Webb
Nicholas Gray
Joanne Pollard
Michael McLeod
Patrick O’Sullivan
Executives
Chris Brant
Mark Blackburn
Matthew McCann
Gerald Brown
Paul Cullinan
David May
Alla Keogh
Chris Billing
Group Chief Financial Officer – appointed 24 October 2011
Group Chief Financial Officer – appointed 1 October 2010 – resigned 4 October 2011
Corporate Development Director/Company Secretary (from 22 September 2010)
Chief Executive Officer – Insurance
Chief Financial Officer – Insurance – resigned 22 January 2011 (Company Secretary to 22 September 2010)
Chief Marketing Officer – appointed 1 June 2011
Human Resource Director – to 19 September 2011
Products Director
b) COmPENSATION OF kEy mANAGEmENT PERSONNEL
Aggregated compensation of Directors and key management personnel was as follows:
Consolidated
2011
Total compensation
2010
Total compensation
Short-term
employee
benefits
$
Post
employment
benefits
$
Termination
benefits
$
Share
based
payment
$
Other
long-term
benefits
$
Total
$
2,610,643
215,804
1,850,435
157,190
–
–
369,046
233,204
–
–
3,195,493
2,240,829
All equity transactions with key management personnel other than those arising from the exercise of remuneration options have been
entered into under terms and conditions no more favourable than those the Group would have adopted if dealing at arm’s length.
iSelect Annual Report 2011
32
Notes to the Financial Statements
For the year ended 30 June 2011
19. DIRECTOR AND ExECUTIVE DISCLOSURE (CONTINUED)
c) OPTION hOLDINGS OF kEy mANAGEmENT PERSONNEL
Balance at
1 July 2010
Granted as
Remun-
eration
Options
Exercised
Net
Change
Balance
at end
of period
Other # 30 June 2011
Total
Exercisable
Not
Exercisable
Total Options
vested at 30 June 2011
30 June 2011
Directors
Damien Waller
2,685,276
450,000
(113,202)
Martin Dalgleish
Shaun Bonnett
Leslie Webb
Michael McLeod
Patrick O’Sullivan*
Executives
Mark Blackburn**
180,000
139,147
30,000
–
–
–
–
–
–
–
–
100,000
–
(109,147)
–
–
–
–
–
–
–
–
–
–
–
3,022,074
2,751,483
2,572,074
179,409
180,000
134,836
134,836
30,000
30,000
–
–
30,000
30,000
–
–
30,000
30,000
–
–
–
–
–
–
–
100,000
39,869
_
39,869
Matthew McCann
90,000
150,000
93,750
150,000
–
–
–
240,000
149,803
90,000
59,803
–
243,750
153,553
93,750
59,803
Gerald Brown
Paul Cullinan^^
David May***
Alla Keogh~
Chris Billing***
Total
30 June 2010
Directors
Martin Dalgleish
Shaun Bonnett
Leslie Webb
Nicholas Gray^
Joanne Pollard^^^
Michael McLeod
Patrick O’Sullivan*
Executives
Mark Blackburn**
Matthew McCann
Gerald Brown
Paul Cullinan
Total
195,000
–
(90,000)
105,000
74,918
15,000
59,918
–
100,000
–
100,000
20,000
100,000
–
–
–
–
100,000
24,691
–
24,691
–
100,000
39,869
–
39,869
–
120,000
50,243
–
50,243
3,433,173
1,150,000
(312,349)
–
4,270,824
3,479,265
2,965,660
513,605
Balance at
1 July 2009
Granted as
Remun-
eration
Options
Exercised
Net
Change
Balance
at end
of period
Other # 30 June 2010
Total
Exercisable
Not
Exercisable
Total Options
vested at 30 June 2010
180,000
139,147
105,000
–
–
–
–
–
90,000
90,000
195,000
–
–
–
–
–
–
–
–
–
–
3,750
–
–
–
–
(75,000)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2,685,276
2,685,276
2,685,276
180,000
139,147
30,000
74,945
139,147
30,000
74,945
139,147
30,000
–
–
–
–
–
–
–
–
–
–
90,000
93,750
56,976
89,918
–
–
–
–
–
–
17,984
195,000
135,000
101,250
–
–
–
–
–
–
–
–
–
56,976
71,934
33,750
3,413,173
3,211,262
3,048,602
162,660
Damien Waller
2,685,276
3,484,423
3,750
(75,000)
^
*
**
^^
Nicholas Gray Resigned 22 September 2010
Patrick O’Sullivan appointed 22 September 2010
Mark Blackburn appointed 4 October 2010,
resigned 4 October 2011
Paul Cullinan resigned 22 January 2011
^^^ Joanne Pollard resigned 25 May 2011
~
***
#
Alla Keogh departed 19 September 2011
Staff were not considered KMP in 2010
included forfeiture
33
d) ShAREhOLDINGS OF kEy mANAGEmENT PERSONNEL (CONSOLIDATED)
30 June 2011
Directors
Damien Waller
Martin Dalgleish
Shaun Bonett
Leslie Webb
Nicholas Gray^
Joanne Pollard^^^
Michael McLeod
Patrick O’Sullivan *
Executives
Mark Blackburn**
Matthew McCann
Gerald Brown
Paul Cullinan^^
David May
Alla Keogh~
Chris Billing
Total
30 June 2010
Directors
Damien Waller
Martin Dalgleish
Shaun Bonett
Leslie Webb
Nicholas Gray^
Joanne Pollard^^^
Michael McLeod
Patrick O’Sullivan*
Executives
Mark Blackburn**
Matthew McCann
Gerald Brown
Paul Cullinan^^
David May
Alla Keogh~
Chris Billing
Total
Balance at
Granted as
30 June 2010 Remuneration
On Exercise Other changes
of Options during the year
Balance at
30 June 2011
1,487,234
–
113,202
(439,641)
1,160,795
–
–
–
–
–
389,017
–
109,147
(498,164)
–
310,000
–
–
(70,000)
240,000
–
–
–
–
–
–
–
–
–
–
–
–
–
14,935
14,935
–
–
–
–
–
–
– –
32,258
32,258
7,035
–
–
–
7,035
7,035
–
–
–
7,035
41,497
–
90,000
(51,497)
80,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2,241,818
–
312,349
(1,012,109)
1,542,058
Balance
Granted as
1 July 2009 Remuneration
On Exercise Other changes
of Options during the year
Balance
30 June 2010
1,487,234
–
389,017
235,000
–
–
–
–
–
7,035
7,035
41,497
–
–
–
2,166,818
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
75,000
–
–
–
–
–
–
–
–
–
–
–
75,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,487,234
–
389,017
310,000
–
–
–
–
–
7,035
7,035
41,497
–
–
–
2,241,818
Paul Cullinan resigned 22 January 2011
Nicholas Gray Resigned 22 September 2010
Patrick O’Sullivan appointed 22 September 2010
^
*
** Mark Blackburn appointed 4 October 2010, resigned 4 October 2011
^^
^^^ Joanne Pollard resigned 25 May 2011
~
***
#
Alla Keogh departed 19 September 2011
Staff were not considered KMP in 2010
included forfeiture
iSelect Annual Report 2011
34
Notes to the Financial Statements
For the year ended 30 June 2011
19. DIRECTOR AND ExECUTIVE DISCLOSURE (CONTINUED)
All equity transactions with key management personnel other than those arising from the exercise of remuneration options have been
entered into under terms and conditions no more favourable than those the Group would have adopted if dealing at arm’s length.
20. SHARE BASED PAYMENT PLANS
a) RECOGNISED ShARE BASED PAymENT ExPENSES
The expense recognised for employee services received during the period is shown in the table below:
Expense arising from equity settled share based payment transactions
CONSOLIDATED
2011
$‘000
658
2010
$‘000
274
The share based payment plans are described below. There have been no cancellations or modifications to any of the plans
during the period. On the reorganisation of the corporate group on 27 April 2007, all plans were novated from iSelect Health Pty Ltd
(formerly iSelect Pty Ltd) to the parent Company iSelect Limited.
b) TyPES OF ShARE BASED PAymENT PLANS
Employee Share Option Plan (ESOP)
ESOP (Post 1 July 2010)
Under the iSelect ESOP, share options may be granted to Company Directors, Company Secretary, Senior Executives and employees.
The ESOP is designed to align participant’s interests with those of shareholders by increasing the value of the Group’s shares. Under the
ESOP, the exercise price of the options is set at or above the market price of the shares on the date of grant. Typical vesting period for
options granted is the equivalent of two and half years. The term of the options is typically three years. For all participants, in the event of
change of control or departure from iSelect after the required service period, the issued options will be pro-rated to determine the applicable
qualifying options based on service term. In addition, all shares have an attached Groups performance condition hurdle which needs
to be achieved in order for options to be exercisable. Specific conditions exist in relation to a takeover where more than 90% of the share
capital is acquired by another entity.
When a participant ceases employment prior to the service period of their share options, the non vested share options are pro-rated based
on the proportion of the service period completed. The vested options will also be forfeited in circumstances where the participant has
breached their contract of employment. All ESOP options are forfeited on the insolvency of the iSelect Limited. There are no cash settlement
alternatives.
ESOP (Pre 1 July 2010)
Under the iSelect ESOP, share options are granted to Company Directors, secretary and Senior Executives. The ESOP is designed to align
participant’s interests with those of shareholders by increasing the value of the Group’s shares. Under the ESOP, the exercise price of
the options is set at or above the market price of the shares on the date of grant. For all participants, excluding Company Directors and
secretary, 50% of deemed options granted will vest over the prescribed vesting period subject to CEO performance assessment. Typical
vesting period for options granted varies from three to four years. The term of the options is typically five years. For all participants,
excluding Company Directors and secretary, vested options can be exercised on an Initial Public Offering (IPO) event or trade sale event
or within six months prior to their expiry or at the discretion of the Board. For all participants, 75% of any unvested options immediately
vest on an IPO or trade sale event.
When a participant ceases employment prior to the vesting of their share options, the non vested share options are forfeited. The vested
options will also be forfeited in circumstances where the participant has breached their contract of employment. All ESOP options
are forfeited on the insolvency of the iSelect Limited or iSelect Health Pty Ltd. There are no cash settlement alternatives.
CEO Performance Plan
The CEO Performance Plan (CEO Plan) is a contract between the Group and the current Chief Executive Officer (CEO) Damien Waller
for the grant of share options in the Group. The share options under the CEO Plan were granted on 20 December 2005 by iSelect Health
Pty Ltd and novated to the Group on 27 April 2007. The CEO Plan is designed to align the CEO’s interests with those of shareholders
by increasing the value of the Group. If all vesting conditions are met and the Group’s valuation is equal to or exceeds $265m then
all options can be exercised. The share options have an exercise price of $2.22 and fully vested to 30 June 2008. The share options expire
two years (or later if a compulsory escrow period is required) from the date of IPO or Trade Sale or if neither of these have occurred prior
to 1 January 2010 then the expiry will be 1 January 2012.
Terms of an agreement with ninemsn Pty Ltd relating to the purchase of shares in the Group on 31 March 2006 granted ninemsn Pty Ltd
share options in the Group. The exercise price of the options is $4.25. The number of exercisable options is calculated, so that ninemsn
Pty Ltd has the same equity interest in the Group based on the total number of shares on issue after the CEO options are exercised but
before any additional ninemsn exercisable options are issued.
35
c) SummARIES OF OPTIONS GRANTED uNDER ESOP, CEO PLAN AND NINEmSN PTy LTD AGREEmENTS
The following table illustrates the number (No.) and weighted average exercise prices (WAEP) of, and movements in, share options during
the year:
Outstanding at the beginning of the period
Granted during the period
Forfeited during the period
Exercised during the period
Expired during the period
Outstanding at the end of the period
Exercisable at the end of the year
2011 No.
2011 WAEP
$
2010 No.
2010 WAEP
$
5,119,597
2,000,000
–
(832,800)
–
6,286,797
3,901,797
3.93
22.50
–
1.78
–
10.12
3.56
5,213,767
118,750
–
(189,716)
(23,204)
5,119,597
4,537,272
3.70
9.82
–
1.13
4.25
3.93
3.05
The outstanding balance as at 30 June 2011 is represented by:
–
–
–
–
2,557,074 options over ordinary shares with an exercise of $2.22, exercisable upon meeting the ESOP conditions
and CEO Plan conditions;
945,384 options over ordinary shares with an exercise of $4.25, exercisable upon meeting the ESOP conditions
and CEO Plan conditions;
291,681 options over ordinary shares with an exercise price of $7.50 to $9.50 (WAEP of $8.31), exercisable upon meeting
the ESOP conditions;
355,000 options over ordinary shares with an exercise price ranging from $10.00 to $12.50 (WAEP of $11.26),
exercisable upon meeting the ESOP conditions;
– 47,658 options over ordinary shares with an exercise price of $15.35, exercisable upon meeting the ESOP conditions.
– 90,000 options over ordinary shares with an exercise price of $20.00, exercisable upon meeting the ESOP conditions.
– 2,000,000 options over ordinary shares with an exercise price of $22.50, exercisable upon meeting the ESOP conditions.
d) WEIGhTED AvERAGE REmAINING CONTRACTuAL LIFE
The weighted average remaining contractual life for the share options outstanding as at 30 June 2011 is 1.11 years.
e) RANGE OF ExERCISE PRICE
The range of exercise prices for options outstanding at the end of the period was $2.22 to $22.50.
As the range of exercise prices is wide, refer to section (c) above for further information in assessing the number and timing
of additional shares that may be issued and the cash that may be received upon exercise of those options.
f) WEIGhTED AvERAGE FAIR vALuE
The weighted average fair value of options granted during the year was $0.72.
iSelect Annual Report 2011
36
Notes to the Financial Statements
For the year ended 30 June 2011
20. SHARE BASED PAYMENT PLANS (CONTINUED)
g) OPTION PRICING mODEL: ESOP, CEO PLAN AND NINEmSN PTy LTD AGREEmENTS
The fair value of the equity settled share options granted under the ESOP, CEO Plan and ninemsn Pty Ltd agreements is estimated
as at the date of grant using a Binomial model taking into account the terms and conditions upon which the options were granted.
The following table lists the inputs to the models used for the period ended 30 June 2011:
Dividend Yield (%)
Years 0 to 3
Years 4 to 5
Years 6 to 7
Years 8 plus
Expected Volatility (%)
Expected life of Options (years)
Option Exercise price (WAEP) ($)
Weighted average share price at measurement date ($)
* inclusive of ninemsn Pty Ltd agreement
ESOP
Post 1 July
2010
ESOP
Pre 1 July
2010
CEO PLAN*
–
N/A
N/A
N/A
42.00
3
22.50
15.50
–
1.00
1.50
2.00
–
1.00
1.50
2.00
40.00
40.00
4.98
6.33
3.80
5.97
2.74
2.44
The expected volatility was determined by considering volatility for similar sized and industry listed companies. The expected volatility
therefore reflects the assumption that the comparison volatility is indicative of future trends, which may also not necessarily be the actual
outcome.
21. PARENT ENTITY INFORMATION
Information relating to iSelect Limited
Current assets
Non-current assets
Total Assets
Current liabilities
Non-current liabilities
Total Liabilities
Issued capital
Share based payments reserve
Retained earnings
Total shareholders’ equity
Profit or loss of parent entity
Total comprehensive income of the parent entity
2011
$‘000
2010
$‘000
11,284
41,633
52,917
541
12,073
12,614
36,581
1,827
1,895
40,303
409
409
4,653
33,559
38,212
2,200
13,262
15,462
20,095
1,169
1,486
22,750
208
208
37
Directors’ Declaration
In accordance with a resolution of the Directors of iSelect Limited (formerly iSelect Pty Ltd), I state that:
1. In the opinion of the Directors:
a) the financial statements and notes of the Company and of the Consolidated Entity are in accordance with the
Corporations Act 2001, including:
i)
giving a true and fair view of the Company’s and Consolidated Entity’s financial position as at 30 June 2011
and of their performance for the period ended on that date.
ii)
complying with Accounting Standards and Corporations Regulations 2001.
b) there are reasonable grounds to believe that the Group will be able to pay its debts as and when they become due and payable.
2.
This declaration has been made after receiving the declarations required to be made to the Directors in accordance with section
295A of the Corporations Act 2001 for the financial year ended 30 June 2011.
On behalf of the Board
Damien Waller
Chief Executive Officer & Managing Director
Melbourne
27 October 2011
iSelect Annual Report 2011
38
Independent Auditor’s Report
to the members of iSelect Limited
Independent auditor's report to the members of iSelect Limited
Independent auditor's report to the members of iSelect Limited
Report on the financial report
Report on the financial report
We have audited the accompanying financial report of iSelect Limited, which comprises the consolidated
statement of financial position as at 30 June 2011, the consolidated statement of comprehensive
We have audited the accompanying financial report of iSelect Limited, which comprises the consolidated
income, the consolidated statement of changes in equity and the consolidated statement of cash flows for
statement of financial position as at 30 June 2011, the consolidated statement of comprehensive
the year then ended, notes comprising a summary of significant accounting policies and other
income, the consolidated statement of changes in equity and the consolidated statement of cash flows for
explanatory information and the directors' declaration of the consolidated entity comprising the company
the year then ended, notes comprising a summary of significant accounting policies and other
and the entities it controlled at the year's end or from time to time during the financial year.
explanatory information and the directors' declaration of the consolidated entity comprising the company
and the entities it controlled at the year's end or from time to time during the financial year.
Directors' responsibility for the financial report
Directors' responsibility for the financial report
The directors of the company are responsible for the preparation of the financial report that gives a true
and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for
The directors of the company are responsible for the preparation of the financial report that gives a true
such internal controls as the directors determine are necessary to enable the preparation of the financial
and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for
report that is free from material misstatement, whether due to fraud or error.
such internal controls as the directors determine are necessary to enable the preparation of the financial
report that is free from material misstatement, whether due to fraud or error.
Auditor's responsibility
Auditor's responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our
audit in accordance with Australian Auditing Standards. Those standards require that we comply with
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our
relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain
audit in accordance with Australian Auditing Standards. Those standards require that we comply with
reasonable assurance about whether the financial report is free from material misstatement.
relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain
reasonable assurance about whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the financial report. The procedures selected depend on the auditor's judgment, including the assessment
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
of the risks of material misstatement of the financial report, whether due to fraud or error. In making
the financial report. The procedures selected depend on the auditor's judgment, including the assessment
those risk assessments, the auditor considers internal controls relevant to the entity's preparation and
of the risks of material misstatement of the financial report, whether due to fraud or error. In making
fair presentation of the financial report in order to design audit procedures that are appropriate in the
those risk assessments, the auditor considers internal controls relevant to the entity's preparation and
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's
fair presentation of the financial report in order to design audit procedures that are appropriate in the
internal controls. An audit also includes evaluating the appropriateness of accounting policies used and
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's
the reasonableness of accounting estimates made by the directors, as well as evaluating the overall
internal controls. An audit also includes evaluating the appropriateness of accounting policies used and
presentation of the financial report.
the reasonableness of accounting estimates made by the directors, as well as evaluating the overall
presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
Independence
Independence
In conducting our audit we have complied with the independence requirements of the Corporations Act
2001. We have given to the directors of the company a written Auditor’s Independence Declaration, a
In conducting our audit we have complied with the independence requirements of the Corporations Act
copy of which is included in the directors’ report.
2001. We have given to the directors of the company a written Auditor’s Independence Declaration, a
copy of which is included in the directors’ report.
Liability limited by a scheme approved
under Professional Standards Legislation
Liability limited by a scheme approved
under Professional Standards Legislation
39
2
Opinion
In our opinion:
a.
the financial report of iSelect Ltd is in accordance with the Corporations Act 2001, including:
i
ii
giving a true and fair view of the consolidated entity's financial position as at 30 June 2011
and of its performance for the year ended on that date; and
complying with Australian Accounting Standards and the Corporations Regulations 2001.
Ernst & Young
Ashley Butler
Partner
Melbourne
27 October 2011
iSelect Annual Report 2011
40
Corporate Directory
DIRECTORS
Martin Dalgleish
Damien Waller
Chairman
Group Chief Executive Officer
and Managing Director
Shaun Bonett
Non-Executive Director
Michael McLeod
Non-Executive Director
Pat O’Sullivan
Non-Executive Director
Leslie Webb
Non-Executive Director
COMPANY SECRETARY
Matt McCann
DISCLAIMER
Although care has been taken by iSelect, its related companies
and their contractors and agents (iSelect parties) in the
preparation of this document to ensure that the information
provided is accurate, the contents of the document have not
been independently verified by the iSelect parties (other than
to the extent that Ernst & Young have carried out verification).
No liability other than that which may not be excluded by law
is accepted for any damage, loss, injury or expense caused by
errors or omissions in this document or arising from any action
taken by any person in reliance upon it.
The information in this document is subject to variation
if changes occur after the document has been prepared.
REGISTERED OFFICE AND PRINCIPAL PLACE OF BUSINESS
294 Bay Road
Cheltenham, Victoria 3192
Nothing in the contents (express or implied) of this document
will be taken to constitute any warranty or representation by any
iSelect party.
BANKERS
ANZ Bank Limited
Level 3, 287 Collins Street
Melbourne, Victoria 3000
AUDITORS, ACCOUNTING AND TAxATION SERVICES
Ernst & Young
8 Exhibition Street
Melbourne, Victoria 3000
WEBSITE ADDRESS
www.iselect.com.au
Any person using the information in this document does so at
his or her own risk and should conduct independent enquiries
to verify the accuracy of the information.
The contents of this document are the confidential information
of iSelect and its related companies. This document is provided
on the condition that the contents must not, in whole or in part,
be disclosed to any person except to the extent that any part
of the document is already in the public domain through no
breach of this confidentiality obligation.
© 2011 All rights reserved. No part of this document may
be reproduced, stored on a retrieval system or transmitted
in any form or by any means without the prior written consent
of iSelect Ltd, other than as permitted under the
Copyright Act 1968 (Cth).
iSelect Ltd
294 Bay Road
Cheltenham
Victoria 3192
Australia