iSentia Group Ltd
Annual Report 2017

Plain-text annual report

2017 Annual Report An annual perspective of real media intelligence Table of Contents 2 4 10 31 34 35 36 37 38 85 86 91 Chairman’s Letter CEO’s Report Directors’ Report Auditor’s independence declaration Statementofprofitorlossandother comprehensive income Statementoffinancialposition Statement of changes in equity Statementofcashflows Notestothefinancialstatements Directors’ Declaration Independent auditor’s report to the members of Isentia Group Limited Shareholder Information Real data intelligence is centred around our clients – creating value for their organisation by informing their decision making with data. Isentia Group Limited – 2017 Annual ReportChairman’s Letter “Our firm focus in FY2018 is to build on our core strengths and pursue growth opportunities, while cementing our position as a leader in data intelligence.” DearShareholder, While2017FinancialYear(‘FY2017’)hasbeenachallengingandformativeyear forIsentia,weareconfidentthatthedecisionswemadetoachieveourlong- termstrategyhavebeentherightonesforbothclientsandshareholders. OurfirmfocusinFY2018istobuildonourcorestrengthsandpursuegrowth opportunities,whilecementingourpositionasaleaderindataintelligence. Throughoutthisformativeyear,weencounteredchallengesinthetransitionof ourcontentbusiness,metcopyrightadjustmentsfortheAustralianbusiness, andthusreportedalowerprofitthanexpected,adisappointingoverallresult. However,IampleasedtoreportthatthroughFY2017thefundamentalsofthe businessremainedstrong–includingastrongbalancesheetandsolidcash conversion. InFY2017,wehaveworkedonbuildingthefoundationsforfuturegrowth.With ourenhancedintegratedserviceoffer,backedbyleadingtechnology,whichis detailedfurtherinCEOJohnCroll’sreport,wehaveimprovedourcompetitive positionintheAustralianandNewZealandmarkets,wherewearewell establishedandenjoyexcellentclientrelationships.Inaddition,wenowhave excellentpresenceacrossAsia,withastrongteaminplacetodeliveracross thesehighpotentialmarkets. Asia provides strong growth opportunities for Isentia AsignificantdrivertoIsentia’sfuture growthwillbeinAsia,whichisakey leverinIsentia’smediumtolong- termgrowthstrategy.Ourgoalisto strengthen our Asian business and becometheclearmarketleaderin thisregion. I am passionate about the Asian opportunityforIsentia.Thisregion, withenormousconsumptionof traditionalandsocialmedia,rich economic centres and corporate hubs,showsarealmarketappetite forourintegratedservicemodel. InFY2017weopenedinKorea–a marketplacewithanequivalentGDP toAustralia,the12th-largesteconomy intheworld,oneofthemostsocially connected through its platforms and mobiledevices,combinedwithsome oftheworld’slargestbrands.Wealso openedinTaiwaninJuly2017,and are exploring future opportunities inAsia. OurSydneyandSingaporeIT developmenthubshavebeenbuilt to set in place strong foundations forourplatform,ensuringwehave thebestpeopleintheworldbuilding powerfultechnologythatwillhelpour clientsgainstrategicadvantage. Our technology enables us to connect ourmarket-leadingSoftwareasa Service(SaaS)platformdirectlyinto Asia,ensuringaconsistentglobal customerexperience.Thisagility demonstrates the real potential of this platformforourfuturegrowthacross theregion. Asia market performance and potential TheAsianbusinessisgrowing revenuewithmid-teensgrowthfor FY2017,andwhileEBITDAislower thanFY2016duetomarketentries,it remainsasolidperformance. Our expectations are that Asia hasthepotentialtogrowstrongly viaacquiredandorganicgrowth. Currentmarketpenetrationisaround 10%to15%,withlong-termmarket penetrationpotentialequivalentto Australianlevels,whicharecurrently 60%to70%.Thisisunquestionablya strongpotentialgrowthrunway forIsentia. WithfewAustraliandomiciled organisations expanding into and operatinginAsia,wehaveaunique opportunitytoestablishafirm footprint on Asian soil and cement adominantregion-focusedmarket position. Advantage of scale and efficiency Buildingscaleandefficiencyisa corestrategyofthebusiness,in particularsothatanyinvestmentsin launching our platform and model in newmarketsarehighlycompetitive againstlocal,smalleroperators.The investmentsmadebyIsentiaoverthe lastthreetofiveyearshaveallbeen basedonbeingagileandadaptable, toreachnewmarketswitheaseand efficiency. Enteringnewmarketsasa technology-ledbusinessenables amuchsmallercostofentry.Our investmentinback-endinfrastructure, forexample,allowsuslightertouch marketentryasthecontentingest into Mediaportal has been designed toscaleandabsorbhighvolumes. Continuing momentum for FY2018 WeseeFY2018asayearof cementing our transition from a media-ledtoadata-andtechnology- ledorganisation,andwe’re anticipatingincreasedclienttake-up ofourfullyintegratedservicemodel. Doug Flynn Chairman 22 August 2017 Sydney 2 Chairman’s Letter 3 Isentia Group Limited – 2017 Annual ReportCEO’s Report “We have continued to invest in technology as a fundamental platform for business growth and service enhancement, and to provide us with a vital springboard into key new markets.” The2017financialyearwas evolutionaryforIsentia.Ourchallenge wastorespondtodynamicshifts inthewayconsumersusemedia, and offer clients clear insights from complex data to inform better decisionmaking. Buildingonourcorestrengths,we setinplacenewbuildingblocks to help our clients address online socialmediadisruptionwithnear real-timedataintelligence–shifting ourvaluepropositionfromdata collectionalone,toafullyintegrated data intelligence business including insights,strategyandcontent functions. Welaunchedournewbusiness model,forthefirsttimeofferingthree fully integrated streams: Media & Intelligence,Research&Insightsas wellasStrategy&Contentservicesto clientsacrosstheAsia-Pacific. Technology investments as a platform for growth Wehavecontinuedtoinvestin technology as a fundamental platform forbusinessgrowthandservice enhancement,andtoprovideus withavitalspringboardintokeynew markets. Wehavemadeseveraldecisive enhancements to our technology platformsthisfinancialyear.These includetransformingourback- endsystemstomanagehigh- scalecontentvolumesinmultiple languagesforkeygrowthmarkets. Approximatelysevenmillionpieces of information are ingested on a daily basis,combinedwithsignificant metadatatoaddtangiblevaluefor ourclients. Thebusinesshasalsodelivereda newversionofMediaportal,built entirelyinthecloud,whichthousands of communications professionals acrosstheAsia-Pacificloginto, aroundtheclock.Thishasprovided uswithanexcellentplatformfor deliveringarangeofenhancements tobereleasedthroughoutFY2018. In recognition of our clients needing tobeinformed,wherevertheyare,and ourstrategytobeagile,accessible andalwaysbyourclients’sides,we’ve deliveredanewmobileapplicationto enablenearreal-timeaccesstoour richdataintelligence. Lateinthefinancialyear,wedelivered Stories,aglobalmediaintelligence industryfirst–aproductthatbrings social and mainstream media together in a single system to analyse relativeinfluenceoveranissueor campaignatanygiventime.Stories helpsunlockthecomplexityfor clients,providingthemwithaclear opportunitytoseewheretheyshould interactwithmediatopositiontheir brand,orlimitacrisisinthebest possibleway. Withtheserobusttechnology foundationsinplace,wearefirmly ahead of our competitors in supplying realdataintelligencetoclients. 4 CEO’s Report 5 Isentia Group Limited – 2017 Annual ReportCEO’s Report (continued) London andchangemanagement,andhave investedininformationhubsin AustraliaandSingaporetoensurewe havetherightskillsforthefuture. WewereagainawardedAMEC MeasurementCompanyoftheYear, judgedbybothpeercompaniesfrom aroundtheworldandacademics, forthethirdtimeinarowthisyear. WeattributethistoIsentia’stalented people,whoserichinformationand insightsaresovaluedbyourclients. 12 countries 20 offices 1,211 people 1 team 1 focus Launch of our new integrated service model Increased media complexity has been asignificantdisruptionforclients, creatinganewmarketplaceforour insights,reportingandanalysis services,whichhavebeensignificant driversofbusinessgrowthforusthis financialyear. Ourbusinessnowhasthreefully integrated streams: • Media&Intelligence,toprovide real-timeandrelevantinformation, • Research&Insights,providing smart systems and people to add depthofanalysis,and • Strategy&Content,totake insights into action and content creation. Backedbyourleadingtechnology andpeople,themodelisastrong differentiatorforIsentia. Investments in people to power our technology Our talented people bring our rich datatolife,andthisiswherethe realvalueliesforourclients.This financialyearwehaveshiftedour people strategy to reduce numbers inspecificareas,whileseeking anevolvedskillsetinadvanced technology,insightsanddata intelligencecapabilities. Wehavere-equippedourITteamand engaged specialist consultancies to powerourtechnologydevelopments 6 Beijing Seoul Shanghai Hong Kong Taipei Bangkok Manila Kuala Lumpur Ho Chi Minh City Singapore Jakarta Perth Canberra Brisbane Sydney Auckland Adelaide Melbourne Wellington CEO’s Report 7 Isentia Group Limited – 2017 Annual Report CEO’s Report (continued) Integrating the content business into ournewmodel,creatingcontentfrom theMedia&Intelligenceaswellas Research&Insightsstreams,remains acomponentofourlong-term strategy.Weareconfidentthatthe coordinatedstreamsareapowerful clientserviceengineinthenewworld ofdigitalcommunications,andcan already see clients embracing the valuepropositionandextractingreal benefitfromtheservice. Forecasts and financials Overallourfinancialresultsthisyear did not meet our expectations or thoseofourshareholders.Assuch, weareveryfocusedonelevatingthe financialperformanceinFY2018, rightacrossthebusiness. ContentMarketing,asnoted,wasa drag on the results as it transitioned intothebusinessandservicemodel, takingtheresultbackthisyearwith a30%declineand$4.4mEBITDA loss.Weexpectthistobeginto makepositivecontributionaspart oftheintegratedmodelthisyear. InAustralia,despitecopyright renegotiationimpacts,theMedia Intelligencebusinessstillgrew 1%andwehavemaintainedour competitiveadvantage. Our Asian business continues to performwell,andwehaveopenedin twonewmarketsoverthepast 12months. AswemoveintoFY2018,wehave strengthinourcorebusiness,with solidareasofgrowthandgoodfuture growthprospects. Our evolution is a response to market transformation: We’re all on the journey together Thereisatransformationoccurring inthecommunicationsindustry,for Isentiaandourclients,andweareall onthisjourneytogether. Isentiahasevolvedsignificantlythis yearinourstrategicposition,service offerandvaluetoclients.Weare nowatechnology-ledbusinesswith incrediblecapabilitytounlockreal datainsights,broughttolifebyhighly talentedpeople.Ourtechnologyis smarter,ourpeoplearesmarter,and we’reansweringmorequestionsfor ourclients.We’renotjustproviding data–butinformingtheirdecision- making. Theintegratedbrandproposition, product pipeline and strength in our Asianbusinessesprovideuswith momentumaswemoveintoFY2018. John Croll ChiefExecutiveOfficer 22 August 2017 Sydney Dynamic client engagement continues as core strength An amazing core strength of our businessisthatwehavetouchpoints withourclients,everyday,aspartof adynamicclientengagementculture. Wethriveonreceivingclientfeedback andinformationdaily,andresponding tothatdynamicallytobuildaneven betterbusiness.Thiswillcontinueas partofalong-termfocusonIsentia’s strengths. Withsomeofthedeepestdata setsacrosstheAsia-Pacificregion, enablingpowerfulstrategicinsights, insomeareasweareaheadofwhere theclientisthinking,andinother areasweareworkingwithclientsto unravelcomplexdata. Ourclientsaretellinguswehave moredatathancompetitors,and wecandelivermoreanswers,better insights and more informed content strategy,allthrougharegion-wide lens–andthisisofrealvalue tothem. Key challenges this financial year Itwasachallengingyearforthe Australian business in that the copyrightfeesincreased;however,I feelconfidentinourpositiongoing forward. Forthecontentbusiness,there wastransitionaldifficulty,notinthe qualityoftheservicesitdelivered toclients,butasittransitioned from founder management into an integratedbusinesswithinIsentia. Theperformancealsofellshortof expectations,withadeclineinboth top-linerevenuegrowthandmargin. 8 Our business now has three fully integrated streams: Intelligence • Socialtracking • Media alerts • Dailybriefings • Media analysis Media • SaaS platform • Media monitoring • Social listening E N C E DIA & INTE L L I G E M Clients R E S E A R C H & I N S I G H T S S T R ATEGY & CO N T E N T Insights • Media insights • Quantitative media analysis • Qualitative media analysis • Category and sector trend analysis Research • Content audit • Keywordanalysis • Influencer identification • Primaryconsumer research Strategy Amplification Content Creation • Personadevelopment • Socialmediaadvertising • Editorial • Channel audit and purpose • Gap analysis • Creativeideation • Influencerprograms • Social media campaigns • Community management • Video content • Nativeadvertising • Designdevelopment • Pressandmedia • UGC campaigns distribution • Digital campaigns • SaaS platform CEO’s Report 9 Isentia Group Limited – 2017 Annual Report Directors’ Report The directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as the ‘group’) consisting of Isentia Group Limited (referred to hereafter as the ‘company’ or ‘parent entity’) and the entities it controlled at the end of, or during, the year ended 30 June 2017. Review of operations Thelossforthegroupafterprovidingforincometax amountedto$13,523,000(30June2016:profitof $24,252,000). Information on directors Doug Flynn Independent Non-Executive Chairman Directors ThefollowingpersonsweredirectorsofIsentiaGroup Limitedduringthewholeofthefinancialyearanduptothe dateofthisreport,unlessotherwisestated: Doug Flynn   Chairman and Independent Non-ExecutiveDirector JohnCroll CEOandManagingDirector PatO’Sullivan FionaPak-Poy DrGeoffRaby IndependentNon-Executive Director IndependentNon-Executive Director IndependentNon-Executive Director    Principal activities Duringthefinancialyeartheprincipalcontinuing activitiesofthegroupconsistedoftheprovisionofmedia intelligenceservicestopublicandprivatesectorclients throughmediadatabase,mediareleasedistribution,media monitoring,socialmediamonitoring,mediaanalysisand contentmarketing. Dividends Dividendspaidduringthefinancialyearwereasfollows: Finaldividendfortheyear ended30June2016(2016: 30June2015)of4.43cents (2016:3.8cents)perordinary share Interimdividendfortheyear ended30June2017(2016:30 June2016)of3.1cents(2016: 3.7cents)perordinaryshare CONSOLIDATED 2017 $’000 2016 $’000 8,860 7,600 6,200 7,400 15,060 15,000 On22August2017,thedirectorsdeclareda50%franked finaldividendfortheyearended30June2017of3.08 centsperordinaryshare,tobepaidon20September2017 to eligible shareholders on the register as at 6 September 2017.Thisequatestoatotalestimateddistributionof $6,160,000,basedonthenumberofordinaryshareson issueasat30June2017.Thefinancialeffectofdividends declaredafterthereportingdateisnotreflectedinthe30 June2017financialstatementsandwillberecognisedin subsequentfinancialreports. 10 RefertoChairman’sletterandChiefExecutiveOfficer’s reportforfurthercommentaryonthereviewofoperations. Significant changes in the state of affairs Therewerenosignificantchangesinthestateofaffairsof thegroupduringthefinancialyear. Matters subsequent to the end of the financial year Apartfromthedividenddeclaredasdiscussedabove,no othermatterorcircumstancehasarisensince30June 2017thathassignificantlyaffected,ormaysignificantly affectthegroup’soperations,theresultsofthose operations,orthegroup’sstateofaffairsinfuture financialyears. Likely developments and expected results of operations Likelydevelopmentsintheoperationsofthegroupandthe expected results of those operations are contained in the Chairman’sletterandChiefExecutiveOfficer’sreport. Environmental regulation Thegroupisnotsubjecttoanysignificantenvironmental regulationunderInternational,AustralianCommonwealth orStatelaw. Qualifications: DegreeinChemicalEngineeringfromtheUniversityof NewcastleandaMBAwithdistinctionfromtheUniversity ofMelbourne. Experience and expertise: Doughasover30yearsofinternationalexperienceinthe media and information and communication technology industries,includingholdingvariousseniormanagement andBoardpositions.DougisapreviousDirectorofSeven WestMediaLtdandcurrentDirectorandChairman ofAPNOutdoorGroupLimited,NEXTDCLimitedand KonektLimited.Previously,DougwasChiefExecutiveof newspaperpublisherDaviesBrothersLimited,whichwas acquiredbyNewsCorporationin1989,andin1995was appointedtheManagingDirectorofNewsInternational Plc.AfterleavingNewsInternationalin1998,Dougjoined AegisGroupPlcandwasappointedasCEOin1999,where hewasinstrumentalindoublingthesizeofthecompany andestablishedaglobalmarketresearchbusiness SynovateandinternetservicesbusinessIsobar.From2005 to2008DougservedastheChiefExecutiveoffacilities managementproviderRentokilInitialPlc.Dougreturnedto Australiain2008andfromApril2008toApril2012wasa consultanttoandaDirectorofQinJiaYuanMediaServices Ltd,aprivatetelevisioncompanyinChina. Other current directorships: NEXTDCLimited(ASX:NXT)(Chairman),KonektLimited (ASX:KKT)(Chairman)andAPNOutdoorGroupLimited (ASX:APO)(Chairman) Former directorships (last 3 years): SevenWestMediaLimited Special responsibilities: MemberoftheAuditandRiskCommitteeandthe Nomination and Remuneration Committee Interests in shares: 73,530ordinarysharesheldindirectly Interests in options: None Directors’ Report 11 Isentia Group Limited – 2017 Annual Report Directors’ Report (continued) Information on directors (continued) John Croll Chief Executive Officer, Managing Director Qualifications: LifeFellowofthePublicRelationsInstituteofAustralia, FellowoftheInternationalAssociationforthe MeasurementandEvaluationofCommunications(AMEC) andamemberoftheInstituteofCompanyDirectors. Experience and expertise: Johnhasbeenactiveinthemediaindustrysince1982 andwasappointedChiefExecutiveOfficerandManaging DirectorofIsentia(thenMediaMonitors)in1999.Priorto hisappointment,Johnheldsalesandoperationalroles withCrollCommunicationsandMediaMonitors.Johnisa formerExecutiveVicePresidentofFIBEP,theInternational FederationofPressClippingBureaus.Inadditiontohis Industryappointments,heisChairmanofDisabilitySports Australia. Other current directorships: None Former directorships (last 3 years): None Special responsibilities: CEO Interests in shares: 6,260,056ordinarysharesofwhich214,398areheld indirectly Interests in options: 1,622,021options Pat O’Sullivan Independent Non-Executive Director Qualifications: GraduateoftheHarvardBusinessSchool’sAdvanced ManagementProgram,memberofCharteredAccountant AustraliaandNewZealandandmemberoftheInstituteof CharteredAccountantsIreland. Experience and expertise: Pathasover30yearsofinternationalcommercialand businessmanagementexperience,includingholding variousseniormanagementandboardpositions.Heis currentlyChairmanofHealthEngine.com.auandLocal AgentFinderandanon-executiveDirectorofCarsales.com Limited,APNOutdoorGroupLimitedandLittleCompany ofMaryHealthcare.PatwasformerlyChiefOperating OfficerandFinanceDirectorofNineEntertainmentCo, aswellasservingasChairmanofNineMSNandasan independentdirectorofiinetLimited.Priortohisroleat NineEntertainmentCoPatwastheCFOofOptus,andheld anumberofpositionsatGoodmanFielder,Burns,Philp& Company,andPwC. Other current directorships: Carsales.comLimited(ASX:CAR)andAPNOutdoorGroup Limited(ASX:APO) Former directorships (last 3 years): iSelect Limited and iiNet Limited Special responsibilities: ChairoftheAuditandRiskCommitteeandamemberof theNominationandRemunerationCommittee. Interests in shares: 29,412ordinaryshares Interests in options: None Fiona Pak-Poy Independent Non-Executive Director Dr Geoff Raby Independent Non-Executive Director Qualifications: HonoursdegreeinCivilEngineeringfromTheUniversityof AdelaideandaMBAfromHarvardBusinessSchool. Qualifications: BachelorofEconomics(Hons),MasterofEconomicsand PhDdegreesfromLaTrobeUniversity. Experience and expertise: Fionabringssignificantexperiencegainedparticularly withtechnologycompanies.Sheiscurrentlyanon- executivedirectorofMYOBGroupLimited,TheSydney School of Entrepreneurship and the Securities Industry ResearchCentreofSouthEastAsia(SIRCA).Fionaisa memberofASIC’sDirectorAdvisoryPanel.Previously, shewasamemberoftheboardofStatePlus,theFederal Government’sNationalPrecinctsBoardandInnovation AustraliaBoardwheresheChairedorwasamemberofa numberoftheinnovationcommittees.FionawasaGeneral PartnerofanAustralianventurecapitalfundthatinvested inAustraliantechnologycompanies.Shealsoservedas aCouncilloroftheAustralianVentureCapitalandPrivate EquityAssociation(AVCAL).Priortothis,Fionaco-founded acatalogueande-commercebusiness,wasastrategy consultantwithTheBostonConsultingGroup,anR&D engineeratStratcoandworkedwithconsultingengineering firmPak-PoyandKneebone. Other current directorships: MYOBGroupLimited(ASX:MYO) Former directorships (last 3 years): None Special responsibilities: Chair of the Nomination and Remuneration Committee and amemberoftheAuditandRiskCommittee Interests in shares: 29,412ordinarysharesheldindirectly Interests in options: None Experience and expertise: Geoff is an Independent Director on the boards of OceanaGoldandYancoalAustralia.Geoffwasformerly adirectorofASX-listedFortescueMetalsGroupLimited (retired5December2016),SmartTransHoldingsLtdand YPBGroupLimited.GeoffwastheAustralianAmbassador to China from February 2007 to August 2011 and Deputy SecretaryoftheDepartmentofForeignAffairsandTrade fromNovember2002toNovember2006.Between1993 and1995,GeoffwasheadoftheTradePolicyIssues DivisionoftheOECD,Paris. Other current directorships: OceanaGoldCorporation(ASX:OGC)andYancoalAustralia Limited(ASX:YAL) Former directorships (last 3 years): SmartTransHoldingsLimited(Chairman),YPBGroup Limited and Fortescue Metals Group Limited Special responsibilities: Member of the Nomination and Remuneration Committee andamemberoftheAuditandRiskCommittee Interests in shares: 29,412ordinaryshares Interests in options: None ‘Othercurrentdirectorships’quotedabovearecurrentdirectorshipsforASXlistedentitiesonlyandexcludesdirectorships ofallothertypesofentities,unlessotherwisestated. ‘Formerdirectorships(last3years)’quotedabovearedirectorshipsheldinthelast3yearsforASXlistedentitiesonlyand excludesdirectorshipsofallothertypesofentities,unlessotherwisestated. 12 Directors’ Report 13 Isentia Group Limited – 2017 Annual Report Directors’ Report (continued) Company secretary JacquieShanahan,CompanySecretaryandLegalCounsel,joinedthegroupinAugust2015.Jacquiebringsmanyyears ofcompanysecretarial,corporategovernanceandcommerciallawexperiencetothegroup.Shehasheldcompany secretarialandlegalroleswithsubsidiariesofUnitedParcelServiceofAmerica,ASXlistedRocOilCompanyLimitedand RGAAustraliaLimited(continuing).Inadditiontotheseroles,Jacquiehasbeeninvolvedintheregulationofcorporate governancereportingattheASXandwasaseniorassociateincorporatecommercialpracticeatCorrsChambers Westgarth.JacquieholdsBachelorofArtsandBachelorofLawsfortheUniversityofQueenslandandisamemberof theLawSocietyofNewSouthWales,theAssociationofCorporateCounselAustraliaandasubscribermemberofthe GovernanceInstituteofAustralia. NimeshShah,formerCFOandCompanySecretaryceasedemploymentwiththecompanyon7July2017. Meetings of directors Thenumberofmeetingsofthecompany’sBoardofDirectors(‘theBoard’)andofeachBoardcommitteeheldduringthe yearended30June2017,andthenumberofmeetingsattendedbyeachdirectorwere: FULL BOARD NOMINATION AND REMUNERATION COMMITTEE AUDIT AND RISK COMMITTEE Attended Held Attended Held Attended Held 14 15 15 15 12 15 15 15 15 15 1 – 2 2 2 2 – 2 2 2 3 – 3 3 3 3 – 3 3 3 Doug Flynn JohnCroll PatO'Sullivan FionaPak-Poy Dr Geoff Raby Letter from the Chair of the Nomination and Remuneration Committee DearShareholder, I am pleased to present to you the remuneration report on behalf of the Nomination and RemunerationCommitteeforthefinancialyearended30June2017(‘FY2017’).Theremuneration structurefordirectorsandseniorexecutiveshasremainedrelativelyunchangedsinceIsentiaGroup Limited(‘Isentia’or‘group’)listedontheAustralianSecuritiesExchange(‘ASX’)inJune2014and again,therewerenomajorchangestothelevelsofexecutiveanddirectorremunerationinFY2017. Itwasencouragingtonotethatover99%ofvoteswerecastinfavouroftheresolutiontoadopt thefinancialyearended30June2016remunerationreportatthe2016AnnualGeneralMeeting. TheBoardwillcontinuetoengagewithshareholdersandothercompanystakeholdersaroundany changestothedesignoftheremunerationandincentivesframework. FinancialperformancewasbelowtheinternaltargetssetbytheBoardforFY2017andasaresult noannualbonuspaymentwasawardedtoanyexecutiveKMPgiventhatthefinancialcomponentof theshorttermincentivegatewaywasnotsatisfied.TheNominationandRemunerationCommittee considersthatshorttermincentiveoutcomesforFY2017illustrateastrictalignmentbetween financialperformance,annualbonuspaymentsandshareholders’interests.TheNominationand RemunerationCommitteewillcontinuetoensurethatremunerationoutcomestokeymanagement personnelreflectAustraliancorporategovernancebestpractice,andthereforewelcomefeedbackand continuedengagementwithourshareholdersaroundanycomponenttoIsentia’sremunerationpolicy. On behalf of the Nomination and Remuneration Committee Held:representsthenumberofmeetingsheldduringthetimethedirectorheldofficeorwasamemberoftherelevant committee. AlldirectorsattendedallscheduledBoardmeetings.NotalldirectorswereabletoattendunscheduledBoardmeetingsheld onshortnotice. Fiona Pak-Poy Chair 22 August 2017 Sydney 14 Directors’ Report 15 Isentia Group Limited – 2017 Annual Report Directors’ Report (continued) Remuneration report (audited) Theprimaryobjectiveoftheremunerationreport,which hasbeenaudited,istosetouttheremunerationfor KeyManagementPersonnel(‘KMP’)andtheunderlying philosophy and principles that underpin the structure and designofremunerationarrangementsforthegroup,in accordancewiththerequirementsoftheCorporationsAct 2001anditsRegulations. IndevelopingremunerationarrangementsforKMP,the Boardcontinuestowelcomefeedbackfromexternal partiesincludinglegalcounsel,institutionalshareholders andtheiradvisors. KMParedefinedinAASB124‘RelatedPartyDisclosures’ as “those persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including any director (whether executive or otherwise)”andarelistedinsection‘2.KMP remunerationdisclosures’below. Theremunerationreportissetoutunderthefollowing main headings: 1. Principlesusedtodeterminetheremuneration framework • Non-executivedirectors’remuneration • Executiveremuneration • Groupperformanceandlinktoremuneration • Shorttermincentives • Longtermincentives 2. KMPremunerationdisclosures 3. Servicecontracts 4. Share-basedcompensation 5. KMPinterestsinIsentiasecuritiesandother information 1. Principles used to determine the remuneration framework Thegroup’sremunerationphilosophyistoprovideaclear linkbetweenthegroup’sstrategy,shareholderreturnsand remunerationawarded.Theremunerationstructureand policiesaredesignedtohelpbuild,retainandmotivate Isentia’stalentedleadershipteamtodelivergrowingand sustainablereturnsforshareholders.TheNominationand Remuneration Committee recognises that the performance of the group depends on the quality of its directors and otherKMP. Theobjectiveofthegroup’sremunerationframework istoensurerewardforperformanceiscompetitiveand appropriatefortheresultsdelivered.Theframeworkseeks toalignremunerationwiththeachievementofstrategic objectivesandthecreationoflongterm,sustainablevalue forshareholders.TheNominationandRemuneration Committeeensuresremunerationsatisfiesthefollowing criteriaofAustraliancorporategovernancebestpractice: • Competitivenessandreasonableness; • Acceptability and alignment to shareholders’ interests; • Alignmentbetweenpayoutcomesandbothgroupand individualperformance;and • Transparency. TheNominationandRemunerationCommitteeis responsiblefordeterminingandreviewingremuneration arrangementsfordirectorsandotherKMP.TheNomination and Remuneration Committee comprises three independentnon-executivedirectorsandmeetsasrequired throughouttheyear.ThisfinancialyeartheNomination andRemunerationCommitteemetthreetimes.Thechief executiveofficerattendscommitteemeetingsbyinvitation andwhenmanagementinputisrequired.Toensurethere arenoconflictsofinterest,thechiefexecutiveofficeris notpresentduringanydiscussionsrelatedtohisown remunerationarrangements. TheNominationandRemunerationCommitteehas structuredaremunerationframeworkthatismarket competitiveandcomplementarytoIsentia’sstrategic objectives. Inaccordancewithcorporategovernancebestpractice, theremunerationstructurefornon-executivedirectorsand executivesaredealtwithseparately. Non-executive directors’ remuneration Feesprovidedtonon-executivedirectorsreflectthe demandswhicharemadeon,andtheresponsibilities of,thedirectors,aswellastheneedtoattractandretain non-executivedirectorsofsuitablecalibre.Non-executive directors’feesandpaymentsarereviewedannuallyby theNominationandRemunerationCommittee.The NominationandRemunerationCommitteemay,fromtime totime,receiveadvicefromindependentremuneration consultantstoensurenon-executivedirectors’feesand paymentsareappropriateandconsistentwithcomparable ASX200companies. Thechairman’sfeesaredeterminedindependentlytothe feesofothernon-executivedirectorsbasedoncomparative rolesintheexternalmarket.Thechairmanisnotpresent duringanydiscussionsconcerninghisownremuneration. Therewasnochangetothefeespaidtonon-executive directorsinFY2017.UnderthecompanyConstitution andassetoutinthe2014Prospectus,totalaggregate remunerationavailabletonon-executivedirectorsisset atamaximumannualaggregateamountof$900,000. ASXListingRulesrequirethatanyproposedincreaseto theaggregatenon-executivedirectorremunerationcapis subjecttoshareholderapproval.Non-executivedirector feeswerewithinthisapprovedlimitforFY2017andthe Boarddoesnotproposeanyincreasetothefeecapfor FY2018. Non-executivedirectorremunerationconsistsofdirectors’ fees and committee fees only and therefore does not includeanylinktogroupperformance.Consistentwith goodgovernanceprinciples,theabsenceofperformance- linkedremunerationtonon-executivedirectorsservesto protect the independence of the directors and ensures thattheirinterestsremainproperlyalignedwiththoseof Isentia’sshareholdersandnotwithseniormanagement. Thenon-executivedirectorsarereimbursedforexpenses incurredinperformingtheirdutiesasdirectorsofIsentia. TheChairmanoftheBoardattendsallcommitteemeetings butdoesnotreceivecommitteefeesinrespectofhisrole asmemberofanycommittee.Non-executivedirectorsdo notreceiveretirementbenefitsotherthansuperannuation andtheydonotparticipateinanyincentiveprograms. Whilstdirectorsarenotrequiredunderthecompany’s Constitutiontoholdanyshares,allhaveinterestsinIsentia securities,eitherdirectlyorindirectly(refertosection‘5. KMPinterestsinIsentiasecuritiesandotherinformation’ below),holdingsuchsecuritiesdemonstratessupportfor thecompanyandfacilitatesalignmentbetweendirectors andlongtermshareholderwealthoutcomes.Incontextof thecurrentshareholdingsofthenon-executivedirectors, the Nomination and Remuneration Committee does not regard a formal shareholding guideline to be necessary at thistime. Ifnon-executivedirectorsarerequiredtoperformservices outsideofthescopeofordinarydutiesofadirector,the company may compensate the director for additional responsibilitiesorworkloadincurredduringthereporting period.Nodirectorsprovidedanyservicesoutsideofthe normal course of duty in FY2017 and hence no additional directorfeeshavebeenpaid. Alldirectorshaveadequatetimetodevotetogroup activitiesandhaveinthepastyearattendedallscheduled BoardandCommitteemeetings.Referto‘Meetingsof directors’abovefordetailsofmeetingsattended.Notall directorswereabletoattendunscheduledBoardmeetings heldonshortnotice. Executive remuneration Thegroupaimstorewardexecutivesbasedontheir positionandresponsibility,withalevelandmixof remunerationwhichhasbothfixedandvariable components,whilstensuringalignmentwithanASXlisted peergroup. ForFY2017,theexecutiveremunerationframework consistedoffixedremunerationandshortandlong-term incentivesasoutlinedbelow. FY2017 target pay mix FIXED REMUNERATION CEO CFO* CEOANZ CEO Asia 50% 53% 53% 53% STI 25% 21% 21% 21% LTI 25% 26% 26% 26% *references to the CFO in this report refer to Nimesh Shah unless otherwisestated. Thelongtermincentiveplan(‘LTIP’)wasintroducedin 2014tofocusKMPonlongtermgrowthopportunitiesthat areexpectedtodelivershareholderwealthbenefitsover time.Sinceitsinception,theNominationandRemuneration CommitteehasextendedparticipationintheLTIPto broadenengagementthroughouttheseniorexecutive team.TheNominationandRemunerationCommittee monitorstheeffectivenessofthisscheme andwillcontinuetodosoinordertodrivelongterm strategicgoals. 16 Directors’ Report 17 Isentia Group Limited – 2017 Annual Report Directors’ Report (continued) COMPONENT OF REMUNERATION HOW THIS OPERATES IN PRACTICE TARGET AND MAXIMUM (STRETCH) OPPORTUNITY PURPOSE AND LINK TO ISENTIA STRATEGY CHANGE FIXED COMPONENT OF REMUNERATION HOW THIS OPERATES IN PRACTICE LongTermIncentive Plan(‘LTIP’) TheLTIPwas introducedinJune 2014toprovideafocus onlongtermgrowth opportunities. Each offer made undertheLTIPtodate represents 50% of the TFRoftherecipient andisprovidedinthe formofperformance- basedoptions. TheNomination and Remuneration Committeewillextend participationintheLTIP whereitisdetermined tobeaneffective tool in engaging the executiveanddriving the long term goals of thegroup. Any future offer of equityincentivestothe CEO/MDwillbeput forwardforshareholder approval. JohnCrollreceivednoincrease inbasesalaryinFY2017.Nimesh ShahandDavidLiueachreceived an increase in base salary of less than5%.Followinghisappointment asChiefExecutiveMedia IntelligenceSeanSmithreceived anincreaseinbasesalaryoverthe FY2017yearofapproximately13%. OverthisperiodSeantransitioned fromhispreviousroleofCEOof theAustralianandNewZealand operations to leading the media intelligence business globally includingsalesandclientsservices, acrossANZ,globalmonitoring production(acrossallIsentia markets)andproductdevelopment in the media intelligence business withcommensurateincreasein responsibilitiesandworkload. AsfinancialKPIscomprise68%to 75%ofavailableSTIandinclude revenueEBITA,EBITDAandNPATA andNetPromoterScoretargets relevanttoeachindividual’srole,it isaconditionoftheSTIthatnoSTI ispaidifrelevantfinancialKPIsare notmet. AsfinancialKPIswerenotmetin FY2017,noSTIpaymentswere awardedtoeligibleparticipants inFY2017. Basesalary, allowances, superannuation and salary sacrificed benefits. Basesalaryis paid in cash or fringebenefits (suchasmotor vehicle). Superannuation is paid at the statutoryrate. Fixed remuneration isreviewed annually. n/a Toprovidecashbenefits whicharecompetitive withequivalentroles in peer companies and offerbasepackagesthat are designed to attract and retain high calibre employees. Torewardperformance relativetoexpectations basedonindividualrole andresponsibility. STIsarepaid in cash to rewardeligible executives ondelivering against annual keyperformance indicators that arelinkedto the group’s strategy and are expected to deliverbenefits toshareholders. TheBoard retains its discretion to rewardfor outstanding performance. VARIABLE CEO target 50% ofTotalFixed Remuneration(‘TFR’), withamaximumof 75%ofTFR. CFO target 40% of TFR,withamaximum of60%ofTFR. NoportionofSTIP willbepayableto the CEO and CFO unlessallfinancial targets are equalled orexceeded. OtherexecutiveKMP targets are 40% of basesalary,witha maximum 60% of basesalary. Forotherexecutive KMPnoportionof STIPwillbepayable unless at least one of thefinancialtargets are equalled or exceeded. STIawardsareonly awardedwhereexecutives meetorexceedKey PerformanceIndicators (‘KPIs’),whichare set annually and are components of the group’s annual budget and businessplan. FinancialKPIsaccount for68%-75%ofavailable STIandincluderevenue, EBITA,EBITDAandNPATA targets.NoSTIwillbepaid if these targets are not met orexceeded. Non-financialKPIsthat comprise the remaining 25%-32%ofavailable STIopportunityinclude strategic business objectivessuchasNet PromotorScore(‘NPS’), product penetration targets and subscription basedrevenuemetricsand personalperformance. ShortTerm Incentive(‘STI’) Plan(‘STIP’) 18 PURPOSE AND LINK TO ISENTIA STRATEGY CHANGE LTIawardsare designedtomotivate participants to achievelongterm strategic goals and providerewardwhere Isentiadeliversbetter shareholdervaluethan its comparator group (withreferencetothe TSRcondition)and/or deliverstherequisite EPSgrowth(‘EPS condition’). LTIswereofferedto allexecutiveKMPin FY2017. Details of the number andvalueofLTI granted are set out in the option table in section4.Share-based compensation’below. TARGET AND MAXIMUM (STRETCH) OPPORTUNITY VARIABLE 50%ofTFRperannum. All performance optionsapplyrelative total shareholder return (‘TSR’)andearnings pershare(‘EPS’) hurdles measured overathreeyear performanceperiod. Allincentiveoptions granted are issued for nil consideration andvestsubject to the satisfaction of predetermined performance conditions,withno opportunityforre- testing. OtherthantheJune 2014offers,which werespecifictothe IPO,allunvested options lapse on resignation of the participant. Directors’ Report 19 Isentia Group Limited – 2017 Annual Report Directors’ Report (continued) Group performance and link to remuneration Isentia’srelativesharepriceoutperformancesincelistinginJune2014isdepictedagainsttheASXAllOrdinaries Accumulationindex(‘AllOrds’). 240 220 200 180 160 140 120 100 80 60 4 1 / 6 0 / 4 4 1 / 8 0 / 4 4 1 / 0 1 / 4 4 1 / 2 1 / 4 5 1 / 2 0 / 4 5 1 / 4 0 / 4 5 1 / 6 0 / 4 5 1 / 8 0 / 4 5 1 / 0 1 / 4 5 1 / 2 1 / 4 6 1 / 2 0 / 4 6 1 / 4 0 / 4 6 1 / 6 0 / 4 6 1 / 8 0 / 4 6 1 / 0 1 / 4 6 1 / 2 1 / 4 7 1 / 2 0 / 4 7 1 / 4 0 / 4 7 1 / 6 0 / 4 ThetablebelowshowstherevenueandEBITDAgrowthoverthepastfiveyears: ISD All Ords UNAUDITED PRO-FORMA FY2013 UNAUDITED PRO-FORMA ACTUAL FY2014 FY2015 FY2016 FY2017 Revenue$m EBITDA$m(d) TSR(b) EPS(cents/share)(c) NPAT$m(e) Staffcosts$m(a) Staffcoststorevenueratio 103.0 22.9 – – 7.0 51.2 49.7% 110.6 30.9 15.7% 6.4 12.8 50.3 127.3 41.9 60.2% 9.8 19.6 52.5 156.0 48.7 (5.5%) 12.1 24.3 62.8 45.5% 41.2% 40.3% 155.1 35.6 (35.9%) (6.8) (13.5) 63.2 40.7% ThecompanylistedontheASXonthe5June2014.Dividendspaidand/ordeclaredinFY2015,FY2016andFY2017are disclosedinthenotestothefinancialstatements.TherehavebeennoreturnsofcapitalmadeorproposedbytheBoard sincethelisting. a. ProformastaffcostsforFY2013toFY2014havebeenadjustedforareclassificationbetweenotherexpensesand employeebenefitexpensetoconformwiththepresentationadoptedfromFY2015onwards. b. ThegrouplistedontheASXon5June2014,thereforeTSRforFY2014isfortheperiod5June2014to30June2014. c. ActualProformaEPSnumberfor2014iscalculatedbasedonproformaNPATof$12.8millionand200,000,001 ordinarysharesonissueasat30June2014. d. ActualProformaEBITDAforFY2014iscalculatedbyadjustingstatutoryEBITDAof$18.5millionforrestructuringand acquisitioncosts($3.9million),listedcompanycosts($1.2million),offercosts($9.1million)andforeignexchange (gains)/losses($0.7million).EBITDAforFY2017iscalculatedbyadjustingstatutoryEBITDAof$4.0millionlossfor impairmentofassets($39.4million)anddisposalofassets($0.2million). e. ActualProformaNPATforFY2014iscalculatedbyadjustingstatutoryNPATof($18.4million)fornetfinancecost ($12.2million),offercosts($9.1million),restructuringandacquisitionscosts($3.9million),listedcompanycosts ($1.2million)andotheradjustments($7.2million). Pro-formaamountshavebeenincludedinthetableaboveastheBoardisoftheopinionthatthesefiguresmost appropriatelyrepresentthegroup’sunderlyingcurrentandhistoricalperformance.FY2013figuresarepresentedasper theIPOProspectusdatedMay2014andtheFY2014ActualPro-formaispresentedaspertheFY2014FinancialResults PresentationdatedAugust2014. Short term incentives FY2017 STI performance measures TheKPIsdrivingSTIforFY2017comprisedamixofrevenue,EBITDAorNPATA,andNetPromoterScoretargetsaswellas apersonalperformanceratingmeasuredthoughtheformalyear-endperformancereviewprocess. PersonalperformanceKPIsinFY2017focussedondevelopinglongertermstrategiesandbuildingonstrongclient relationships,thegeographicstrengthofthebusinessandtheintegrationofacquiredbusinessesintothegroupwitha viewtobuildingonshareholderwealthandreturnsoverthelongerterm.InadditiontopersonalperformanceKPIs,financial metricsareemphasisedastheyareregardedtobethemostappropriateindicatorsofIsentia’scommunicatedgrowth strategy. FurtherdetailaroundexecutiveKMPperformanceisprovidedbelow: FY2017 STI – financial performance achieved EXECUTIVE JohnCroll Nimesh Shah Sean Smith DavidLiu METRIC Revenue NPATA Revenue NPATA Revenue EBITDA Revenue EBITDA WEIGHTING (% OF TARGET STI OPPORTUNITY) PERFORMANCE OUTCOME 37.5% 37.5% 37.5% 37.5% 34.0% 34.0% 34.0% 34.0% Belowtarget* Belowtarget* Belowtarget* Belowtarget* Belowtarget* Belowtarget* Belowtarget* Belowtarget* *Targetsvarybetweenindividualsbasedontheirroles. 20 Directors’ Report 21 Isentia Group Limited – 2017 Annual Report Directors’ Report (continued) FY2017 STI – Non-financial performance achieved EXECUTIVE WEIGHTING (% OF TARGET STI OPPORTUNITY) PERFORMANCE ACHIEVED JohnCroll Nimesh Shah Sean Smith DavidLiu 25% 25% 32% 32% DeliveredaBoardapproved5-yearstrategicplanfortheIsentia businesstoleveragethestrongclientrelationships,thegeographic strengthofthebusinessandtheuniquedatasets.Deliveryof strategicobjectivesagainstthe2020Strategyincludingintegrated ITproductionplatformsandnewcloudbasedproductplatforms. Alignedskillsofthemanagementteamfocussedonthedeliveryof the2020Strategy. Alignedcompanyreportingwiththe5-yearplantoimprove companyperformance.Implementedfinancialreportingplatforms toenhancethequalityandtimingofthefinancialreporting. IntegratedacquisitionsontotheIsentiafinancialplatforms. DeliveredconsistentclientserviceacrosstheAustralianand NewZealandbusinessasmeasuredbyNPSandclientretention. Established the Isentia product team to manage media intelligence productsoncloudbasedplatformsandmobiledevicesasoutlined intheIsentiastrategicplan. ConsolidatedanIsentiapresenceinAsianofficesinthecontext ofthelocalenvironmentandlocalrelationships.Implemented astrongsalescultureacrossAsianbusinesses.Integrated acquisitionsinAsiaontotheIsentiaplatformandprovidedclients withaserviceacrossallIsentiabusinessstreams. Thenon-financialperformancemetricsappliedforFY2017weredesignedtodriveboththegroup’sgrowthstrategyand consolidatetheintegrationofacquiredbusinessacrossthevariouslocationsinwhichthegroupoperates. WhilstallexecutiveseithermetorexceededtheirindividualperformancetargetsinFY2017whichdrovesignificantvalue forthecompany,noSTIpaymentwasawardedtoeligibleKMPforFY2017asgatewayfinancialperformancefellshortof targets. Long term incentives Theperformanceconditionsmustbesatisfiedinorderfortheoptionstovestandbecomeexercisable.Theperformance conditionsarebaseduponthegroup’srelativetotalshareholderreturn(‘TSR’)anditsearningspershare(‘EPS’)compound annualgrowthrate(‘CAGR’)overtheperformanceperiod(equally-weighted),whichprovidesappropriatealignmentwith longtermshareholderinterests.Asdescribedinthetablebelow,thereisapro-ratavestingscaleappliedforoptionstovest, whichtheBoardbelievesprovidestheappropriateincentivetoachievesuitableandsustainablegrowth. Thegroup’sTSRovertheperformanceperiodwillbeassessedagainsttheTSRsofa‘ComparatorGroup’definedatthe dateofgrant,whichrelatetocompaniesintheS&P/ASX200Index(excludingthoseintheFinancials,Materialsand Energysectors). Thepercentageofoptionsthatvestandbecomeexercisable,ifany,willbedeterminedbyreferencetotheTSRandEPS vestingschedules.TheBoardconsideredthespecificvestinghurdlesandagreedthatthetargetssetforthepreviousyear werestillappropriate,despiteincreasinglytoughmarketconditions.ItisalsotheBoard’sviewthatthesehurdlesfullyalign executiveswithshareholders.Theyaresummarisedasfollows: TSR PERFORMANCE RELATIVE TO TSR COMPARATOR GROUP % OF TSR OPTIONS THAT BECOME EXERCISABLE Less than the 50th percentile 50thpercentile(thresholdperformance) Nil 50% Greater than 50th percentile but less than 75th percentile Straight-linepro-ratavestingbetween50%and100% Greaterthanorequalto75thpercentile(stretch) 100% CAGR OF EPS OVER THE PERFORMANCE PERIOD % OF EPS OPTIONS THAT BECOME EXERCISABLE Less than 7% 7%(thresholdperformance) Between7%and17% Nil 50% Straight-linepro-ratavestingbetween50%and100% Above17%(stretchperformance) 100% Anyoptionsthatremainunvestedattheendoftheperformanceperiodlapseimmediately.Theoptionholder(‘Participant’) mustexerciseanyvestedoptionswithin12monthsofvesting.After12months,anyunexercisedoptionslapse.The Participantwillbeentitledtoreceiveoneshareforeachoptionthatvestsandisexercised.TheBoardretainsdiscretionto makeanequivalentcashpaymentinlieuofprovidingsharestotheParticipant. Theoptionsdonotcarrydividendorvotingrightspriortovestingandexercise.Participantsmustnotsell,transfer, encumber,hedgeorotherwisedealwiththeoptions. TheperformanceperiodandapplicableperformanceconditionsforanyfutureLTIofferswillbedeterminedbytheBoard andspecifiedintherelevantofferdocument. 2. KMP remuneration disclosures AlldirectorsandexecutiveslistedbelowwereconsideredKMPfortheyearended30June2017.Allnon-executivedirectors areconsideredtobeindependent.TheChiefFinancialOfficerandCompanySecretaryNimeshShahannouncedhis resignationfromtheCompanyon23March2017andceasedemploymenton7July2017.On6June2017theCompany announcedtheappointmentofJamesOrlandoasnewChiefFinancialOfficerandJamescommencedemploymentwith theCompanyon28June2017.MrOrlandoreceivednoremunerationfromtheCompanyinFY2017.Therewerenoother changestoKMPafter30June2017andbeforethedateofthisreport. TheKMPofthegroupinFY2017consistsofthefollowingdirectors: • DougFlynn–ChairmanandIndependentNon-ExecutiveDirector • JohnCroll–CEOandManagingDirector • PatO’Sullivan–IndependentNon-ExecutiveDirector • FionaPak-Poy–IndependentNon-ExecutiveDirector • DrGeoffRaby–IndependentNon-ExecutiveDirector 22 Directors’ Report 23 Isentia Group Limited – 2017 Annual ReportDirectors’ Report (continued) TheKMPofthegroupinFY2017consistsofthefollowingseniorexecutives: • NimeshShah–ChiefFinancialOfficerandCompanySecretary(ceased7July2017) • SeanSmith–ChiefExecutive,Media&Intelligence(formerlyChiefExecutive,AustraliaandNewZealand) • DavidLiu–ChiefExecutiveAsia ForthepurposesofthisreportareferencetoanexecutiveKMPisareferencetotheseniorexecutiveslistedaboveandthe CEOandManagingDirector,JohnCroll. DetailsoftheremunerationforKMPofthegrouparesetoutinthetablesbelow: SHORT-TERM BENEFITS POST- EMPLOYMENT BENEFITS LONG- TERM BENEFITS SHARE- BASED PAYMENTS 2017 CASH SALARY AND FEES $ Non-Executive Directors: Doug Flynn 190,000 PatO’Sullivan 110,000 FionaPak-Poy 110,000 Dr Geoff Raby 100,000 Executive Directors: JohnCroll 654,636 Other Key Management Personnel: Nimesh Shah* 434,926 Sean Smith 332,828 DavidLiu 464,523 JamesOrlando** 4,027 2,400,940 STI $ NON- MONETARY $ SUPER- ANNUATION $ EMPLOYEE BENEFIT $ EQUITY- SETTLED $ TOTAL $ – – – – – – – – – – – – – – – – – – – – 18,050 10,450 10,450 9,500 – – – – – – – – 208,050 120,450 120,450 109,500 19,616 10,889 331,885 1,017,026 19,616 – 70,000 524,542 19,616 5,667 155,795 513,906 6,172 383 – – 150,981 621,676 – 4,410 113,853 16,556 708,661 3,240,010 *NimeshShahceasedemploymenton7July2017andreceivednoterminationbenefitsotherthanstatutoryentitlements. **JamesOrlandocommencedemploymenton28June2017. EquitysettledremunerationrepresentsonethirdofthevalueofoptionsgrantedinFY2015,FY2016andFY2017.Total valueofoptionsgrantedisapportionedoverthreeyearsinlinewiththeperformanceperiodoftheoptionsgranted. SHORT-TERM BENEFITS POST- EMPLOYMENT BENEFITS LONG- TERM BENEFITS SHARE- BASED PAYMENTS 2016 CASH SALARY AND FEES $ NON- MONETARY $ STI $ SUPER- ANNUATION $ EMPLOYEE BENEFIT $ EQUITY- SETTLED $ Non-Executive Directors: Doug Flynn PatO’Sullivan FionaPak-Poy Dr Geoff Raby 190,000 110,000 110,000 100,000 Executive Directors: JohnCroll 654,636 Other Key Management Personnel: Nimesh Shah Sean Smith DavidLiu 419,614 300,000 466,478 2,350,728 – – – – – – – – – – – – – – – – – – TOTAL $ 208,050 120,450 120,450 109,500 18,050 10,450 10,450 9,500 – – – – – – – – 19,308 10,904 215,561 900,409 19,308 19,308 5,039 6,981 5,007 143,154 589,057 101,349 425,664 - 72,311 543,828 111,413 22,892 532,375 3,017,408 Non-executivedirectorsdonotreceiveincentivepaymentsanddonotparticipateinthecompany’sincentiveprograms. ForexecutivedirectorsandotherKMP,theproportionofremunerationlinkedtoperformanceandthefixedproportion areassetoutinthefollowingtable.TheLTIproportionofremunerationnotedinthetablebelowequatestoonethirdof thevalueofoptionsgrantedinFY2017.BasedonAustralianaccountingstandards,thetotalvalueofoptionsgrantedis apportionedoverthreeyearsinlinewiththeperformanceperiodoftheoptionsgranted.Assuch,shareholdersshouldnote thattheLTIproportionswillgrowasnewoffersaremade. FIXED REMUNERATION AT RISK – STI AT RISK – LTI NAME 2017 2016 2017 2016 2017 2016 Executive Directors: JohnCroll 67% 76% Other Key Management Personnel: Nimesh Shah Sean Smith DavidLiu 87% 70% 76% JamesOrlando* 100% 76% 76% 87% –% *JamesOrlandocommencedemploymenton28June2017. –% –% –% –% –% –% –% –% –% –% 33% 24% 13% 30% 24% –% 24% 24% 13% –% 24 Directors’ Report 25 Isentia Group Limited – 2017 Annual ReportDirectors’ Report (continued) 3. Service contracts RemunerationandothertermsofemploymentforKMPareformalisedinservicecontracts.AllexecutiveKMPservice contractsprovideforimmediateterminationintheeventofseriousmisconduct.Detailsofotherkeytermsaresummarised below: EXECUTIVE KMP CONTRACT TERM BY EXECUTIVE BY ISENTIA NOTICE PERIOD FOR TERMINATION JohnCroll Nimesh Shah* Sean Smith DavidLiu JamesOrlando** Nofixedterm Nofixedterm Nofixedterm Nofixedterm Nofixedterm 6 months 3 months 3 months 3 months 6 months 6 months 3 months 3 months 3 months 6 months *NimeshShahceasedemploymenton7July2017. **JamesOrlandocommencedemploymenton28June2017. NopaymentsundertheSTIPorLTIPwillbemadeintheeventofanexecutivebeingterminatedforcause. STIpaymentsarenotpaidiftheexecutivehasceasedemploymentbeforethepaymentisapproved.TheBoardretains discretiontolapseorpro-rateunvestedentitlementsundertheLTIPontheresignationoftheexecutive. Minimum shareholding requirement Thereisnominimumshareholdingrequirementforexecutivesunderthecompany’sConstitution.Thecompanyseeksto satisfyequityexposureforexecutivesthroughthevestingofincentivesundertheLTIPovertime. 4. Share-based compensation Issue of shares TherewerenosharesissuedtodirectorsorotherKMPaspartofcompensationduringtheyearended30June2017. Options OptionsweregrantedtothefollowingKMPduringtheyearended30June2017. ThetermsofeachgrantofoptionsoverordinarysharesaffectingremunerationofKMPinthisfinancialyearorfuture reportingyearsareasfollows: GRANT DATE VESTING DATE AND EXERCISABLE DATE EXPIRY DATE EXERCISE PRICE FAIR VALUE PER OPTION AT GRANT DATE (TSR TRANCHE) FAIR VALUE PER OPTION AT GRANT DATE (EPS TRANCHE) 16June2014 1July2017 30June2018 10 December 2014 1July2017 30June2018 19November2015 1July2018 30June2019 17November2016 1July2019 30June2020 $2.04 $2.04 $3.75 $3.47 $0.55 $1.06 $0.59 $0.69 $0.55 $1.06 $0.62 $0.71 Theperformanceperiod,towhichvestingoftheoptionsissubject,isinallcases,3yearscommencingon1Julyofthe calendaryearofthegrant.FurthervestingconditionsrelatingtotheperformanceperiodincluderelativeTSRandEPS growthhurdles.Theseconditionsaredetailedearlierinthisreport.Optionsgrantedcarrynodividendorvotingrights. ThenumberandvalueofoptionsoverordinarysharesgrantedvestedandlapsedbyKMPaspartofcompensationduring theyearended30June2017aresetoutbelow: VALUE OF OPTIONS GRANTED DURING THE YEAR NUMBER OF OPTIONS GRANTED DURING THE YEAR NUMBER OF OPTIONS LAPSED DURING THE YEAR 2017 $ 2016 $ 2017 NUMBER 2016 NUMBER 2017 NUMBER 2016 NUMBER Executive Directors: JohnCroll 348,970 326,684 498,627 540,304 – Other Key Management Personnel: Nimesh Shah Sean Smith DavidLiu 227,913 163,340 236,011 219,461 159,654 216,933 325,656 233,390 337,228 362,969 264,053 358,787 688,625* – – – – – – *OptionsgrantedtoNimeshShahin2015and2016lapseduponhisresignation.ThetermsoftheOptionsgrantedin2014providedthat theOptionssurviveresignation. 5. KMP interests in Isentia securities and other information Shareholding TherewerenosharesreceivedaspartofKMPremunerationduringtheyear.Thenumberofsharesinthecompanyheld duringthefinancialyearbyeachdirectorandotherKMPofthegroup,includingrelatedparties,issetoutbelow: ORDINARY SHARES BALANCE AT THE START OF THE YEAR ADDITIONS DISPOSALS BALANCE AT THE END OF THE YEAR 73,530 6,560,056 29,412 29,412 29,412 410,569 – – – 7,132,391 – – – – – – – – – – – 73,530 (300,000) 6,260,056 – – – (410,569) – – – 29,412 29,412 29,412 – – – – (710,569) 6,421,822 Doug Flynn* JohnCroll** PatO’Sullivan FionaPak-Poy* Dr Geoff Raby Nimesh Shah* Sean Smith DavidLiu JamesOrlando *Allareheldindirectly. **Ofwhich214,398areheldindirectly. 26 Directors’ Report 27 Isentia Group Limited – 2017 Annual ReportDirectors’ Report (continued) Option holding Thenumberofoptionsoverordinarysharesinthecompanyheldduringthefinancialyearbyeachdirectorandother membersofkeymanagementpersonnelofthegroup,includingrelatedparties,issetoutbelow: Shares under option Unissued ordinary shares of Isentia Group Limited under optionatthedateofthisreportareasfollows: Duringthefinancialyear,thecompanyhasnotpaida premium in respect of a contract to insure the auditor of thecompanyoranyrelatedentity. Executive Directors: JohnCroll Other Key Management Personnel: Nimesh Shah Sean Smith DavidLiu OPTIONS BALANCE AT THE START OF THE YEAR GRANTED EXERCISED LAPSED BALANCE AT THE END OF THE YEAR 1,123,394 498,627 745,622 325,656 399,696 233,390 358,787 337,228 2,627,499 1,394,901 – – – – – – 1,622,021 (688,625) 382,653 – 633,086 – 696,015 (688,625) 3,333,775 Noneoftheoptionshavevestedorareexercisable. Other information Duringthefinancialyearended30June2017,nofeeswerepaidtoexternalremunerationconsultantsandtherewereno loansorothertransactionswiththeKMPduringtheyear. This concludes the remuneration report, which has been audited. Proceedings on behalf of the company No person has applied to the Court under section 237oftheCorporationsAct2001forleavetobring proceedingsonbehalfofthecompany,ortointervenein anyproceedingstowhichthecompanyisapartyforthe purposeoftakingresponsibilityonbehalfofthecompany forallorpartofthoseproceedings. Non-audit services Details of the amounts paid or payable to the auditor for non-auditservicesprovidedduringthefinancialyearbythe auditorareoutlinedinnote29tothefinancialstatements. Thedirectorsaresatisfiedthattheprovisionofnon- auditservicesduringthefinancialyear,bytheauditor (orbyanotherpersonorfirmontheauditor’sbehalf),is compatiblewiththegeneralstandardofindependencefor auditorsimposedbytheCorporationsAct2001. Thedirectorsareoftheopinionthattheservicesas disclosedinnote29tothefinancialstatementsdo not compromise the external auditor’s independence requirements of the Corporations Act 2001 for the followingreasons: • allnon-auditserviceshavebeenreviewedandapproved to ensure that they do not impact the integrity and objectivityoftheauditor;and • noneoftheservicesunderminethegeneralprinciples relatingtoauditorindependenceassetoutinAPES110 CodeofEthicsforProfessionalAccountantsissued bytheAccountingProfessionalandEthicalStandards Board,includingreviewingorauditingtheauditor’s ownwork,actinginamanagementordecision-making capacityforthecompany,actingasadvocatefor thecompanyorjointlysharingeconomicrisksand rewards. GRANT DATE EXPIRY DATE EXERCISE PRICE NUMBER UNDER OPTION 16/06/2014 30/06/2018 $2.04 965,743 10/12/2014 30/06/2018 $2.04 310,518 19/11/2015 30/06/2019 $3.75 1,717,646 17/11/2016 30/06/2020 $3.47 1,468,582 4,462,489 No person entitled to exercise the options had or has any rightbyvirtueoftheoptiontoparticipateinanyshareissue ofthecompanyorofanyotherbodycorporate. Shares issued on the exercise of options TherewerenoordinarysharesofIsentiaGroupLimited issued on the exercise of options during the year ended 30 June2017anduptothedateofthisreport. Indemnity and insurance of officers Thecompanyhasindemnifiedthedirectorsandexecutives ofthecompanyforcostsincurred,intheircapacityasa directororexecutive,forwhichtheymaybeheldpersonally liable,exceptwherethereisalackofgoodfaith. Duringthefinancialyear,thecompanypaidapremiumin respectofacontracttoinsurethedirectorsandexecutives of the company against a liability to the extent permitted bytheCorporationsAct2001.Thecontractofinsurance prohibits disclosure of the nature of the liability and the amountofthepremium. Indemnity and insurance of auditor Thecompanyhasnot,duringorsincethefinancialyear, indemnifiedoragreedtoindemnifytheauditorofthe company or any related entity against a liability incurred by theauditor. 28 Directors’ Report 29 Isentia Group Limited – 2017 Annual Report Directors’ Report (continued) Officers of the company who are former audit partners of Deloitte Touche Tohmatsu TherearenoofficersofthecompanywhoareformerauditpartnersofDeloitteToucheTohmatsu. Rounding of amounts ThecompanyisofakindreferredtoinCorporationsInstrument2016/191,issuedbytheAustralianSecuritiesand InvestmentsCommission,relatingto‘rounding-off’.Amountsinthisreporthavebeenroundedoffinaccordancewiththat CorporationsInstrumenttothenearestthousanddollars,orincertaincases,thenearestdollar. Auditor’s independence declaration Acopyoftheauditor’sindependencedeclarationasrequiredundersection307CoftheCorporationsAct2001followsthis directors’report. Auditor DeloitteToucheTohmatsucontinuesinofficeinaccordancewithsection327oftheCorporationsAct2001. Thisreportismadeinaccordancewitharesolutionofdirectors,pursuanttosection298(2)(a)oftheCorporationsAct2001. On behalf of the directors      John Croll ChiefExecutiveOfficerandManagingDirector Doug Flynn Chairman 22 August 2017 Sydney                               DeloitteToucheTohmatsu ABN74490121060  GrosvenorPlace 225 George Street SydneyNSW2000 POBoxN250GrosvenorPlace SydneyNSW1220Australia DX: Tel: Fax: www.deloitte.com.au 10307SSE +61(0)293227000 +61(0)293227021 TheBoardofDirectors Isentia Group Limited 219-241ClevelandStreet StrawberryHills SYDNEYNSW2012 22 August 2017 DearBoardMembers, Isentia Group Limited Inaccordancewithsection307CoftheCorporationsAct2001,Iampleasedtoprovidethefollowingdeclarationof independencetothedirectorsofIsentiaGroupLimited. AsleadauditpartnerfortheauditofthefinancialstatementsofIsentiaGroupLimitedforthefinancialyearended30June 2017,Ideclarethattothebestofmyknowledgeandbelief,therehavebeennocontraventionsof:   (i)theauditorindependencerequirementsoftheCorporationsAct2001inrelation to the audit; and (ii)anyapplicablecodeofprofessionalconductinrelationtotheaudit. Yourssincerely, DeloitteToucheTohmatsu Sandeep Chadha Partner Chartered Accountants LiabilitylimitedbyaschemeapprovedunderProfessionalStandardsLegislation. MemberofDeloitteToucheTohmatsuLimited 30 Auditor’s Independence Declaration 31 Isentia Group Limited – 2017 Annual Report FY17 Financial Statements General information ThefinancialstatementscoverIsentiaGroupLimitedasagroupconsisting ofIsentiaGroupLimited(the‘company’or‘parententity’)anditssubsidiaries (collectivelyreferredtoasthe‘group’).Thefinancialstatementsarepresented inAustraliandollars,whichisIsentiaGroupLimited’sfunctionaland presentationcurrency. IsentiaGroupLimitedisalistedpubliccompanylimitedbyshares, incorporatedanddomiciledinAustralia.Itsregisteredofficeandprincipal place of business is: Level3 219-241ClevelandStreet StrawberryHillsNSW2012 A description of the nature of the group’s operations and its principal activitiesareincludedintheDirectors’report,whichisnotpartofthefinancial statements. Thefinancialstatementswereauthorisedforissue,inaccordancewitha resolutionofdirectors,on22August2017. 32 FY17 Financial Statements 33 Isentia Group Limited – 2017 Annual ReportFY17 Financial Statements (continued) Statement of profit or loss and other comprehensive income For the year ended 30 June 2017 Statement of financial position As at 30 June 2017 Revenue Other income Expenses Copyright,consumablesandotherdirectpurchases Employeebenefitsexpense Amortisation expenses Depreciation expense Impairment of assets Loss on disposal of assets Occupancy costs Other expenses Finance costs (Loss)/profit before income tax expense Income tax expense (Loss)/profit after income tax expense for the year attributable to the owners of Isentia Group Limited Other comprehensive income Items that may be reclassified subsequently to profit or loss Netchangeinfairvalueofcashflowhedgestakentoequity,netoftax Exchangedifferencesontranslatingforeignoperations,netoftax Othercomprehensiveincomefortheyear,netoftax Total comprehensive income for the year attributable to the owners of Isentia Group Limited Basicearningspershare Diluted earnings per share NOTE 5 6 7 7 7 7 8 38 38 CONSOLIDATED 2017 $’000 155,129 13,863 (38,558) (63,234) (14,561) (1,685) (39,399) (254) (5,650) (12,092) (2,855) (9,296) (4,227) (13,523) 302 (3,538) (3,236) 2016 $’000 155,996 70 (32,088) (62,809) (12,389) (1,315) – – (5,364) (7,029) (2,898) 32,174 (7,922) 24,252 197 (453) (256) (16,759) 23,996 CENTS (6.761) (6.761) CENTS 12.126 12.098 Assets Current assets Cashandcashequivalents Tradeandotherreceivables Income tax refund due Prepayments Totalcurrentassets Non-current assets Property,plantandequipment Intangibles Deferred tax assets Other Totalnon-currentassets Total assets Liabilities Current liabilities Tradeandotherpayables Borrowings Derivativefinancialinstruments Current tax liabilities Provisions Contingent consideration Totalcurrentliabilities Non-current liabilities Borrowings Deferred tax liabilities Provisions Contingent consideration Totalnon-currentliabilities Total liabilities Net assets Equity Issued capital Reserves Accumulated losses Total equity NOTE CONSOLIDATED 2017 $’000 2016 $’000 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 13,252 31,245 1,360 1,756 47,613 4,712 153,027 5,320 40 163,099 210,712 19,315 – – 822 5,132 2,989 28,258 64,869 17,105 784 4,963 87,721 115,979 94,733 8,139 40,042 – 2,140 50,321 3,915 196,316 8,057 133 208,421 258,742 19,261 55,875 532 2,774 5,959 6,995 91,396 – 19,083 813 21,748 41,644 133,040 125,702 403,662 (253,673) (55,256) 94,733 403,662 (251,287) (26,673) 125,702 Theabovestatementofprofitorlossandothercomprehensiveincomeshouldbereadinconjunctionwiththeaccompanyingnotes Refertonote3fordetailedinformationonRestatementofcomparatives. Theabovestatementoffinancialpositionshouldbereadinconjunctionwiththeaccompanyingnotes 34 FY17 Financial Statements 35 Isentia Group Limited – 2017 Annual ReportFY17 Financial Statements (continued) Statement of changes in equity For the year ended 30 June 2017 Statement of cash flows For the year ended 30 June 2017 CONSOLIDATED Balanceat1July2015 Profitafterincometaxexpensefortheyear Othercomprehensiveincomefortheyear,netoftax Totalcomprehensiveincomefortheyear Transactions with owners in their capacity as owners: Share-basedpayments(note39) Dividendspaid(note25) Balanceat30June2016 CONSOLIDATED Balanceat1July2016 Loss after income tax expense for the year Othercomprehensiveincomefortheyear,netoftax Totalcomprehensiveincomefortheyear Transactions with owners in their capacity as owners: Share-basedpayments(note39) Dividendspaid(note25) Balanceat30June2017 ISSUED CAPITAL $’000 RESERVES $’000 ACCUMULATED LOSSES $’000 TOTAL EQUITY $’000 403,662 (251,781) (35,925) 115,956 – – – – – – (256) (256) 750 – 24,252 24,252 – (256) 24,252 23,996 – 750 (15,000) (15,000) 403,662 (251,287) (26,673) 125,702 ISSUED CAPITAL $’000 RESERVES $’000 ACCUMULATED LOSSES $’000 TOTAL EQUITY $’000 403,662 (251,287) (26,673) 125,702 – – – – – – (13,523) (13,523) (3,236) (3,236) 850 – – (3,236) (13,523) (16,759) – 850 (15,060) (15,060) 403,662 (253,673) (55,256) 94,733 Theabovestatementofchangesinequityshouldbereadinconjunctionwiththeaccompanyingnotes CONSOLIDATED NOTE 2017 $’000 2016 $’000 Cash flows from operating activities Receiptsfromcustomers(inclusiveofGST) 179,631 167,536 Paymentstosuppliersandemployees(inclusiveofGST) (136,071) (127,548) Interestreceived Interestandotherfinancecostspaid Income taxes paid Netcashfromoperatingactivities Cash flows from investing activities Paymentforpurchaseofbusiness,netofcashacquired Paymentstovendorsforprioryearassetsacquisition Paymentsforsecuritydeposits Paymentsforproperty,plantandequipment Paymentsforintangibles Paymentforpurchaseofassetacquisition Proceedsfromdisposalofproperty,plantandequipment Netcashusedininvestingactivities Cash flows from financing activities Proceedsfromborrowings Repaymentofborrowings Dividendspaid Netcash(usedin)/fromfinancingactivities Netincreaseincashandcashequivalents Cashandcashequivalentsatthebeginningofthefinancialyear Cashandcashequivalentsattheendofthefinancialyear 62 (2,933) (6,940) 33,749 70 (2,667) (6,620) 30,771 – (29,216) (7,033) – (2,846) (11,458) (1,239) – (303) (448) (2,446) (6,716) (1,219) 3 (22,576) (40,345) 15,000 (6,000) (15,060) (6,060) 5,113 8,139 13,252 38,500 (11,500) (15,000) 12,000 2,426 5,713 8,139 37 27 25 9 Theabovestatementofcashflowsshouldbereadinconjunctionwiththeaccompanyingnotes 36 FY17 Financial Statements 37 Isentia Group Limited – 2017 Annual ReportFY17 Financial Statements (continued) Note 1. Significant accounting policies Theprincipalaccountingpoliciesadoptedinthe preparationofthefinancialstatementsaresetoutbelow. Thesepolicieshavebeenconsistentlyappliedtoallthe yearspresented,unlessotherwisestated. Parent entity information InaccordancewiththeCorporationsAct2001,these financialstatementspresenttheresultsofthegrouponly. Supplementary information about the parent entity is disclosedinnote33. New or amended Accounting Standards and Interpretations adopted Thegrouphasadoptedalloftheneworamended Accounting Standards and Interpretations issued by the AustralianAccountingStandardsBoard(‘AASB’)thatare mandatoryforthecurrentreportingperiod.Theadoption of these Accounting Standards and Interpretations did not haveanysignificantimpactonthefinancialperformanceor positionofthegroup. AnyneworamendedAccountingStandardsor Interpretationsthatarenotyetmandatoryhavenotbeen earlyadopted. Basis of preparation Thesegeneralpurposefinancialstatementshavebeen preparedinaccordancewithAustralianAccounting Standards and Interpretations issued by the Australian AccountingStandardsBoard(‘AASB’)andtheCorporations Act2001,asappropriateforfor-profitorientedentities. ThesefinancialstatementsalsocomplywithInternational Financial Reporting Standards as issued by the InternationalAccountingStandardsBoard(‘IASB’). Historical cost convention Thefinancialstatementshavebeenpreparedunder thehistoricalcostconventionexceptforcontingent consideration payable on business combinations and certainfinancialinstrumentsthataremeasuredatrevalued amountsorfairvalues,asdetailedintheaccounting policiesinthisnote. Critical accounting estimates Thepreparationofthefinancialstatementsrequiresthe useofcertaincriticalaccountingestimates.Italsorequires managementtoexerciseitsjudgementintheprocess ofapplyingthegroup’saccountingpolicies.Theareas involvingahigherdegreeofjudgementorcomplexity,or areaswhereassumptionsandestimatesaresignificantto thefinancialstatements,aredisclosedinnote2. Principles of consolidation Theconsolidatedfinancialstatementsincorporatethe assets and liabilities of all subsidiaries of Isentia Group Limited(‘company’or‘parententity’)asat30June2017 andtheresultsofallsubsidiariesfortheyearthenended. Isentia Group Limited and its subsidiaries together are referredtointhesefinancialstatementsasthe‘group’. Subsidiariesareallthoseentitiesoverwhichthegroup hascontrol.Thegroupcontrolsanentitywhenthegroup isexposedto,orhasrightsto,variablereturnsfromits involvementwiththeentityandhastheabilitytoaffect thosereturnsthroughitspowertodirecttheactivitiesof theentity.Subsidiariesarefullyconsolidatedfromthedate onwhichcontrolistransferredtothegroup.Theyare de-consolidatedfromthedatethatcontrolceases. Intercompanytransactions,balancesandunrealised gainsontransactionsbetweenentitiesinthegroupare eliminated.Unrealisedlossesarealsoeliminatedunless thetransactionprovidesevidenceoftheimpairmentofthe assettransferred.Accountingpoliciesofsubsidiarieshave beenchangedwherenecessarytoensureconsistencywith thepoliciesadoptedbythegroup. Theacquisitionofcommoncontrolsubsidiariesis accountedforatbookvalue.Theacquisitionofother subsidiaries is accounted for using the acquisition method ofaccounting.Achangeinownershipinterest,withoutthe lossofcontrol,isaccountedforasanequitytransaction, wherethedifferencebetweentheconsideration transferredandthebookvalueoftheshareofthenon- controlling interest acquired is recognised directly in equity attributabletotheparent. Wherethegrouplosescontroloverasubsidiary,it derecognisestheassetsincludinggoodwill,liabilitiesand non-controllinginterestinthesubsidiarytogetherwithany cumulativetranslationdifferencesrecognisedinequity. Thegrouprecognisesthefairvalueoftheconsideration receivedandthefairvalueofanyinvestmentretained togetherwithanygainorlossinprofitorloss. Operating segments Operatingsegmentsarepresentedusingthe‘management approach’,wheretheinformationpresentedisonthe samebasisastheinternalreportsprovidedtotheChief OperatingDecisionMakers(‘CODM’).TheCODMis responsible for the allocation of resources to operating segmentsandassessingtheirperformance. Foreign currency translation ThefinancialstatementsarepresentedinAustralian dollars,whichisIsentiaGroupLimited’sfunctionaland presentationcurrency. Foreign currency transactions Foreign currency transactions are translated into Australian dollarsusingtheexchangeratesprevailingatthedates ofthetransactions.Foreignexchangegainsandlosses resulting from the settlement of such transactions and fromthetranslationatfinancialyear-endexchangerates of monetary assets and liabilities denominated in foreign currenciesarerecognisedinprofitorloss. Foreign operations Theassetsandliabilitiesofforeignoperationsare translated into Australian dollars using the exchange ratesatthereportingdate.Therevenuesandexpenses of foreign operations are translated into Australian dollars usingtheaverageexchangerates,whichapproximatethe ratesatthedatesofthetransactions,fortheperiod.All resulting foreign exchange differences are recognised in othercomprehensiveincomethroughtheforeigncurrency reserveinequity. Theforeigncurrencyreserveisrecognisedinprofitor losswhentheforeignoperationornetinvestmentis disposedof. Revenue recognition Revenueisrecognisedwhenitisprobablethatthe economicbenefitwillflowtothegroupandtherevenue canbereliablymeasured. Revenueismeasuredatthefairvalueofconsideration receivedorreceivable.Thegrouprecognisesrevenuewhen theamountoftherevenuecanbereliablymeasured,it isprobablethatfutureeconomicbenefitswillflowtothe groupandspecificcriteriahavebeenmetforeachofthe group’soperationsasdescribedbelow. Revenueisrecognisedforthemajorbusinessoperationas follows: Rendering of services Revenuefromtherenderingofservicesisrecognisedupon thedeliveryoftheservicetothecustomers. (i) Software as a service: Revenuefromprovidingcustomersaccesstogroup platformsisrecognisedinaccordancewiththetermsof thecontractsprovidedinthesubscriptionagreement. (ii) Value added service: Forsocialmediamonitoring,revenueisrecognised accordingtotermsofengagementandwhenservicehas beenrendered.Foranalysisreports,revenueisrecognised inproportiontotheirstageofcompletion,typicallyin accordancewiththeachievementofcontractmilestones. (iii) Content marketing: Revenuefromcontentcreationandmarketingservicesis recognised according to the terms of the engagement and whenservicehasbeenrendered.Revenueisrecognised inproportiontotheirstageofcompletionofthecontracts. Stage of completion is measured by reference to labour hours incurred to date as percentage of total estimated labourhoursforeachcontract.Whenthecontractoutcome cannotbemeasuredreliably,revenueisrecognisedonly to the extent that the expenses incurred are eligible to be recovered. Interest Interestrevenueisrecognisedasinterestaccruesusingthe effectiveinterestmethod.Thisisamethodofcalculating theamortisedcostofafinancialassetandallocatingthe interestincomeovertherelevantperiodusingtheeffective interestrate,whichistheratethatexactlydiscounts estimated future cash receipts through the expected life ofthefinancialassettothenetcarryingamountofthe financialasset. Other revenue Otherrevenueisrecognisedwhenitisreceivedorwhenthe righttoreceivepaymentisestablished. 38 FY17 Financial Statements 39 Isentia Group Limited – 2017 Annual Report FY17 Financial Statements (continued) deferredtaxamounts.Thetaxconsolidatedgrouphas appliedthe‘separatetaxpayerwithingroup’approachin determining the appropriate amount of taxes to allocate to membersofthetaxconsolidatedgroup. Inadditiontoitsowncurrentanddeferredtaxamounts, theheadentityalsorecognisesthecurrenttaxliabilities(or assets)andthedeferredtaxassetsarisingfromunused tax losses and unused tax credits assumed from each subsidiaryinthetaxconsolidatedgroup. Assets or liabilities arising under tax funding agreements withthetaxconsolidatedentitiesarerecognisedas amountsreceivablefromorpayabletootherentitiesin thetaxconsolidatedgroup.Thetaxfundingarrangement ensures that the intercompany charge equals the currenttaxliabilityorbenefitofeachtaxconsolidated groupmember,resultinginneitheracontributionbythe head entity to the subsidiaries nor a distribution by the subsidiariestotheheadentity. Current and non-current classification Assets and liabilities are presented in the statement offinancialpositionbasedoncurrentandnon-current classification. Anassetisclassifiedascurrentwhen:itiseitherexpected to be realised or intended to be sold or consumed in the group’s normal operating cycle; it is held primarily for the purposeoftrading;itisexpectedtoberealisedwithin12 months after the reporting period; or the asset is cash or cashequivalentunlessrestrictedfrombeingexchanged or used to settle a liability for at least 12 months after the reportingperiod.Allotherassetsareclassifiedasnon- current. Aliabilityisclassifiedascurrentwhen:itiseitherexpected to be settled in the group’s normal operating cycle; it is held primarily for the purpose of trading; it is due to be settled within12monthsafterthereportingperiod;orthereisno unconditional right to defer the settlement of the liability foratleast12monthsafterthereportingperiod.Allother liabilitiesareclassifiedasnon-current. Deferredtaxassetsandliabilitiesarealwaysclassifiedas non-current. Income tax Theincometaxexpenseorbenefitfortheperiodisthe tax payable on that period’s taxable income based on the applicableincometaxrateforeachjurisdiction,adjusted by the changes in deferred tax assets and liabilities attributabletotemporarydifferences,unusedtaxlosses andtheadjustmentrecognisedforpriorperiods,where applicable. Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to be appliedwhentheassetsarerecoveredorliabilitiesare settled,basedonthosetaxratesthatareenactedor substantivelyenacted,exceptfor: • Whenthedeferredincometaxassetorliabilityarises fromtheinitialrecognitionofgoodwilloranasset or liability in a transaction that is not a business combinationandthat,atthetimeofthetransaction, affectsneithertheaccountingnortaxableprofits;or • Whenthetaxabletemporarydifferenceisassociated withinterestsinsubsidiaries,associatesorjoint ventures,andthetimingofthereversalcanbe controlled and it is probable that the temporary differencewillnotreverseintheforeseeablefuture. Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probablethatfuturetaxableamountswillbeavailableto utilisethosetemporarydifferencesandlosses. Thecarryingamountofrecognisedandunrecognised deferredtaxassetsarereviewedateachreporting date.Deferredtaxassetsrecognisedarereducedtothe extent that it is no longer probable that future taxable profitswillbeavailableforthecarryingamounttobe recovered.Previouslyunrecogniseddeferredtaxassetsare recognised to the extent that it is probable that there are futuretaxableprofitsavailabletorecovertheasset. Deferredtaxassetsandliabilitiesareoffsetonlywhere there is a legally enforceable right to offset current tax assets against current tax liabilities and deferred tax assets against deferred tax liabilities; and they relate to the same taxable authority on either the same taxable entityordifferenttaxableentitieswhichintendtosettle simultaneously. IsentiaGroupLimited(the‘headentity’)anditswholly- ownedAustraliansubsidiarieshaveformedanincometax consolidatedgroupunderthetaxconsolidationregime. Theheadentityandeachsubsidiaryinthetaxconsolidated groupcontinuetoaccountfortheirowncurrentand 40 Cash and cash equivalents Cashandcashequivalentsincludescashonhand, depositsheldatcallwithfinancialinstitutions,othershort- term,highlyliquidinvestmentswithoriginalmaturitiesof threemonthsorlessthatarereadilyconvertibletoknown amountsofcashandwhicharesubjecttoaninsignificant riskofchangesinvalue. Trade and other receivables Tradereceivablesareinitiallyrecognisedatfairvalue and subsequently measured at amortised cost using theeffectiveinterestmethod,lessanyprovisionfor impairment.Tradereceivablesaregenerallyduefor settlementbetween30and90days. Collectabilityoftradereceivablesisreviewedonan ongoingbasis.Debtswhichareknowntobeuncollectable arewrittenoffbyreducingthecarryingamountdirectly. Aprovisionforimpairmentoftradereceivablesisraised whenthereisobjectiveevidencethatthegroupwillnotbe able to collect all amounts due according to the original termsofthereceivables.Significantfinancialdifficultiesof thedebtor,probabilitythatthedebtorwillenterbankruptcy orfinancialreorganisationanddefaultordelinquencyin payments(morethan60daysoverdue)areconsidered indicatorsthatthetradereceivablemaybeimpaired.The amountoftheimpairmentallowanceisthedifference betweentheasset’scarryingamountandthepresentvalue ofestimatedfuturecashflows,discountedattheoriginal effectiveinterestrate.Cashflowsrelatingtoshort-term receivablesarenotdiscountediftheeffectofdiscounting isimmaterial. Otherreceivablesarerecognisedatamortisedcost,less anyprovisionforimpairment. Derivative financial instruments Derivativesareinitiallyrecognisedatfairvalueonthedate aderivativecontractisenteredintoandaresubsequently remeasuredtotheirfairvalueateachreportingdate.The accountingforsubsequentchangesinfairvaluedepends onwhetherthederivativeisdesignatedasahedging instrument,andifso,thenatureoftheitembeinghedged. Cash flow hedges Cashflowhedgesareusedtocoverthegroup’sexposure tovariabilityincashflowsthatisattributabletoparticular risksassociatedwitharecognisedassetorliabilityor afirmcommitmentwhichcouldaffectprofitorloss. Theeffectiveportionofthegainorlossonthehedging instrumentisrecognisedinothercomprehensiveincome throughthecashflowhedgesreserveinequity,whilstthe ineffectiveportionisrecognisedinprofitorloss.Amounts takentoequityaretransferredoutofequityandincluded inthemeasurementofthehedgedtransactionwhenthe forecasttransactionoccurs. Cashflowhedgesaretestedforeffectivenessona regularbasisbothretrospectivelyandprospectivelyto ensurethateachhedgeishighlyeffectiveandcontinues tobedesignatedasacashflowhedge.Iftheforecast transactionisnolongerexpectedtooccur,theamounts recognisedinequityaretransferredtoprofitorloss. Ifthehedginginstrumentissold,terminated,expires, exercisedwithoutreplacementorrollover,orifthehedge becomesineffectiveandisnolongeradesignatedhedge, theamountspreviouslyrecognisedinequityremainin equityuntiltheforecasttransactionoccurs. Investments and other financial assets Investmentsandotherfinancialassetsareinitially measuredatfairvalue.Transactioncostsareincluded aspartoftheinitialmeasurement,exceptforfinancial assetsatfairvaluethroughprofitorloss.Suchassets are subsequently measured at either amortised cost or fairvaluedependingontheirclassification.Classification is determined based on the purpose of the acquisition andsubsequentreclassificationtoothercategoriesis restricted. Financialassetsarederecognisedwhentherightsto receivecashflowsfromthefinancialassetshaveexpired orhavebeentransferredandthegrouphastransferred substantiallyalltherisksandrewardsofownership. Loans and receivables Loansandreceivablesarenon-derivativefinancialassets withfixedordeterminablepaymentsthatarenotquotedin anactivemarket.Theyarecarriedatamortisedcostusing theeffectiveinterestratemethod.Gainsandlossesare recognisedinprofitorlosswhentheassetisderecognised orimpaired. FY17 Financial Statements 41 Isentia Group Limited – 2017 Annual Report FY17 Financial Statements (continued) Impairment of financial assets Thegroupassessesattheendofeachreportingperiod whetherthereisanyobjectiveevidencethatafinancial assetorgroupoffinancialassetsisimpaired.Objective evidenceincludessignificantfinancialdifficultyofthe issuer or obligor; a breach of contract such as default or delinquencyinpayments;thelendergrantingtoaborrower concessions due to economic or legal reasons that the lenderwouldnototherwisedo;itbecomesprobable thattheborrowerwillenterbankruptcyorotherfinancial reorganisation;thedisappearanceofanactivemarketfor thefinancialasset;orobservabledataindicatingthatthere isameasurabledecreaseinestimatedfuturecashflows. Theamountoftheimpairmentallowanceforloansand receivablescarriedatamortisedcostisthedifference betweentheasset’scarryingamountandthepresentvalue ofestimatedfuturecashflows,discountedattheoriginal effectiveinterestrate.Ifthereisareversalofimpairment, thereversalcannotexceedtheamortisedcostthatwould havebeenrecognisedhadtheimpairmentnotbeenmade andisreversedtoprofitorloss. Property, plant and equipment Plantandequipmentisstatedathistoricalcostless accumulateddepreciationandimpairment.Historicalcost includes expenditure that is directly attributable to the acquisitionoftheitems. Depreciationiscalculatedonastraight-linebasisto writeoffthenetcostofeachitemofproperty,plantand equipmentovertheirexpectedusefullivesasfollows: Leaseholdimprovements Furnitureandfittings Officeequipment  Computerequipment         3-5years 3-13years 3-7years 2-3years Theresidualvalues,usefullivesanddepreciationmethods arereviewed,andadjustedifappropriate,ateachreporting date. Leaseholdimprovementsandplantandequipmentunder leasearedepreciatedovertheunexpiredperiodofthe leaseortheestimatedusefullifeoftheassets,whichever isshorter. Anitemofproperty,plantandequipmentisderecognised upondisposalorwhenthereisnofutureeconomicbenefit tothegroup.Gainsandlossesbetweenthecarrying amountandthedisposalproceedsaretakentoprofit orloss. Leases Thedeterminationofwhetheranarrangementisor contains a lease is based on the substance of the arrangementandrequiresanassessmentofwhetherthe fulfilmentofthearrangementisdependentontheuseof aspecificassetorassetsandthearrangementconveysa righttousetheasset. Adistinctionismadebetweenfinanceleases,which effectivelytransferfromthelessortothelessee substantiallyalltherisksandbenefitsincidentaltothe ownershipofleasedassets,andoperatingleases,under whichthelessoreffectivelyretainssubstantiallyallsuch risksandbenefits. Financeleasesarecapitalised.Aleaseassetandliability areestablishedatthefairvalueoftheleasedassets,or iflower,thepresentvalueofminimumleasepayments. Leasepaymentsareallocatedbetweentheprincipal componentoftheleaseliabilityandthefinancecosts,so astoachieveaconstantrateofinterestontheremaining balanceoftheliability. Leasedassetsacquiredunderafinanceleaseare depreciatedovertheasset’susefullifeorovertheshorter of the asset’s useful life and the lease term if there is no reasonablecertaintythatthegroupwillobtainownershipat theendoftheleaseterm. Operatingleasepayments,netofanyincentivesreceived fromthelessor,arechargedtoprofitorlossonastraight- linebasisoverthetermofthelease. Intangible assets Intangible assets acquired as part of a business combination,otherthangoodwill,areinitiallymeasured attheirfairvalueatthedateoftheacquisition.Intangible assetsacquiredseparatelyareinitiallyrecognisedatcost. Indefinitelifeintangibleassetsarenotamortisedandare subsequentlymeasuredatcostlessanyimpairment.Finite life intangible assets are subsequently measured at cost lessamortisationandanyimpairment.Thegainsorlosses recognisedinprofitorlossarisingfromthederecognition of intangible assets are measured as the difference betweennetdisposalproceedsandthecarryingamount oftheintangibleasset.Themethodandusefullivesof finitelifeintangibleassetsarereviewedannually.Changes in the expected pattern of consumption or useful life are accountedforprospectivelybychangingtheamortisation methodorperiod. Goodwill Goodwillarisesontheacquisitionofabusiness.Goodwill isnotamortised.Instead,goodwillistestedannuallyfor impairment,ormorefrequentlyifeventsorchangesin circumstancesindicatethatitmightbeimpaired,and iscarriedatcostlessaccumulatedimpairmentlosses. Impairmentlossesongoodwillaretakentoprofitorloss andarenotsubsequentlyreversed. Customer relationships and contracts Customer contracts purchased or acquired in a business combinationareamortisedonastraight-linebasisover theperiodoftheirexpectedbenefit,beingtheirfiniteuseful livesofbetweenfiveandtenyears. Software, research and capitalised development Researchcostsareexpensedintheperiodinwhichthey areincurred.Developmentcostsarecapitalisedwhenitis probablethattheprojectwillbeasuccessconsideringits commercial and technical feasibility; the group is able to useorselltheasset;thegrouphassufficientresources; andintenttocompletetheinternaldevelopmentandtheir costscanbemeasuredreliably.Thesecapitalisedcosts andothersoftwarecosts,purchasedfromthirdparties, aredeferredandamortisedonastraight-linebasisover theperiodoftheirexpectedbenefit,beingtheirfiniteuseful livesofbetweentwoandfiveyears. Brands Brandsacquiredinabusinesscombinationarenot amortised,onthebasisofindefinitelife,whichis reassessedeveryyear.Instead,brandsaretestedannually forimpairment,ormorefrequentlyifeventsorchangesin circumstancesindicatethatitmightbeimpaired,andare carriedatcostlessaccumulatedimpairmentlosses. Impairment of non-financial assets Goodwillandotherintangibleassetsthathaveanindefinite usefullifearenotsubjecttoamortisationandaretested annuallyforimpairment,ormorefrequentlyifeventsor changes in circumstances indicate that they might be impaired.Othernon-financialassetsarereviewedfor impairmentwhenevereventsorchangesincircumstances indicatethatthecarryingamountmaynotberecoverable. An impairment loss is recognised for the amount by whichtheasset’scarryingamountexceedsitsrecoverable amount. Recoverableamountisthehigherofanasset’sfairvalue lesscostsofdisposalandvalue-in-use.Thevalue-in-use isthepresentvalueoftheestimatedfuturecashflows relatingtotheassetusingapre-taxdiscountratespecific totheassetorcash-generatingunittowhichtheasset belongs.Assetsthatdonothaveindependentcashflows aregroupedtogethertoformacash-generatingunit. Trade and other payables Theseamountsrepresentliabilitiesforgoodsandservices providedtothegrouppriortotheendofthefinancialyear andwhichareunpaid.Duetotheirshort-termnaturethey aremeasuredatamortisedcostandarenotdiscounted. Theamountsareunsecuredandareusuallypaidwithin30 daysofrecognition. Borrowings Loansandborrowingsareinitiallyrecognisedatthefair valueoftheconsiderationreceived,netoftransaction costs.Theyaresubsequentlymeasuredatamortisedcost usingtheeffectiveinterestmethod. Finance costs Finance costs attributable to qualifying assets are capitalisedaspartoftheasset.Allotherfinancecostsare expensedintheperiodinwhichtheyareincurred. Provisions Provisionsarerecognisedwhenthegrouphasapresent (legalorconstructive)obligationasaresultofapast event,itisprobablethegroupwillberequiredtosettle theobligation,andareliableestimatecanbemadeofthe amountoftheobligation.Theamountrecognisedasa provisionisthebestestimateoftheconsiderationrequired tosettlethepresentobligationatthereportingdate,taking intoaccounttherisksanduncertaintiessurroundingthe obligation.Ifthetimevalueofmoneyismaterial,provisions arediscountedusingacurrentpre-taxratespecifictothe liability.Theincreaseintheprovisionresultingfromthe passageoftimeisrecognisedasafinancecost. 42 FY17 Financial Statements 43 Isentia Group Limited – 2017 Annual Report FY17 Financial Statements (continued) Theamountrecognisedinprofitorlossfortheperiodisthe cumulativeamountcalculatedateachreportingdateless amountsalreadyrecognisedinpreviousperiods. Marketconditionsaretakenintoconsiderationin determiningfairvalue.Thereforeanyawardssubjectto marketconditionsareconsideredtovestirrespective ofwhetherornotthatmarketconditionhasbeenmet, providedallotherconditionsaresatisfied. Ifequity-settledawardsaremodified,asaminimum anexpenseisrecognisedasifthemodificationhas notbeenmade.Anadditionalexpenseisrecognised, overtheremainingvestingperiod,foranymodification thatincreasesthetotalfairvalueoftheshare-based compensationbenefitasatthedateofmodification. Ifthenon-vestingconditioniswithinthecontrolofthe grouporemployee,thefailuretosatisfytheconditionis treatedasacancellation.Iftheconditionisnotwithinthe controlofthegrouporemployeeandisnotsatisfiedduring thevestingperiod,anyremainingexpensefortheawardis recognisedovertheremainingvestingperiod,unlessthe awardisforfeited. Ifequity-settledawardsarecancelled,itistreatedasifit hasvestedonthedateofcancellation,andanyremaining expenseisrecognisedimmediately.Ifanewreplacement awardissubstitutedforthecancelledaward,thecancelled andnewawardistreatedasiftheywereamodification. Fair value measurement Whenanassetorliability,financialornon-financial,is measuredatfairvalueforrecognitionordisclosure purposes,thefairvalueisbasedonthepricethatwould bereceivedtosellanassetorpaidtotransferaliabilityin anorderlytransactionbetweenmarketparticipantsatthe measurementdate;andassumesthatthetransactionwill takeplaceeither:intheprincipalmarket;orintheabsence ofaprincipalmarket,inthemostadvantageousmarket. Fairvalueismeasuredusingtheassumptionsthatmarket participantswouldusewhenpricingtheassetorliability, assumingtheyactintheireconomicbestinterests. Fornon-financialassets,thefairvaluemeasurementis basedonitshighestandbestuse.Valuationtechniques thatareappropriateinthecircumstancesandforwhich sufficientdataareavailabletomeasurefairvalue,areused, maximisingtheuseofrelevantobservableinputsand minimisingtheuseofunobservableinputs. Employee benefits Short-term employee benefits Employeebenefitsexpectedtobesettledwithin12 months of the reporting date are measured at the amounts expectedtobepaidwhentheliabilitiesaresettled. Other long-term employee benefits Employeebenefitsnotexpectedtobesettledwithin12 months of the reporting date is measured as the present valueofexpectedfuturepaymentstobemadeinrespect ofservicesprovidedbyemployeesuptothereportingdate usingtheprojectedunitcreditmethod.Considerationis giventoexpectedfuturewageandsalarylevels,experience ofemployeedeparturesandperiodsofservice.Expected futurepaymentsarediscountedusingmarketyieldsatthe reportingdateoncorporatebondswithtermstomaturity andcurrencythatmatch,ascloselyaspossible,the estimatedfuturecashoutflows. Defined contribution superannuation expense Contributionstodefinedcontributionsuperannuationplans areexpensedintheperiodinwhichtheyareincurred. Share-based payments Equity-settledcompensationbenefitsareprovidedto employees. Equity-settledtransactionsareawardsofshares,or optionsovershares,thatareprovidedtoemployeesin exchangefortherenderingofservices. Thecostofequity-settledtransactionsismeasuredatfair valueongrantdate.Fairvalueisindependentlydetermined usingeithertheBlack-Scholesoptionpricingmodel orMonteCarloSimulationthattakesintoaccountthe exerciseprice,thetermoftheoption,theimpactofdilution, thesharepriceatgrantdateandexpectedpricevolatility oftheunderlyingshare,theexpecteddividendyieldandthe riskfreeinterestrateforthetermoftheoption,together withnon-vestingconditionsthatdonotdeterminewhether thegroupreceivestheservicesthatentitletheemployees toreceivepayment.Noaccountistakenofanyother vestingconditions. Thecostofequity-settledtransactionsisrecognisedasan expensewithacorrespondingincreaseinequityoverthe vestingperiod.Thecumulativechargetoprofitorlossis calculatedbasedonthegrantdatefairvalueoftheaward, thebestestimateofthenumberofawardsthatarelikelyto vestandtheexpiredportionofthevestingperiod. 44 group’s operating or accounting policies and other pertinentconditionsinexistenceattheacquisition-date. Wherethebusinesscombinationisachievedinstages, thegroupremeasuresitspreviouslyheldequityinterest intheacquireeattheacquisition-datefairvalueandthe differencebetweenthefairvalueandthepreviouscarrying amountisrecognisedinprofitorloss. Contingent consideration to be transferred by the acquirer isrecognisedattheacquisition-datefairvalue.Subsequent changesinthefairvalueofthecontingentconsideration classifiedasanassetorliabilityisrecognisedinprofitor loss.Contingentconsiderationclassifiedasequityisnot remeasured and its subsequent settlement is accounted forwithinequity. Thedifferencebetweentheacquisition-datefairvalue ofassetsacquired,liabilitiesassumedandanynon- controllinginterestintheacquireeandthefairvalueof theconsiderationtransferredandthefairvalueofany pre-existinginvestmentintheacquireeisrecognised asgoodwill.Iftheconsiderationtransferredandthe pre-existingfairvalueislessthanthefairvalueofthe identifiablenetassetsacquired,beingabargainpurchase totheacquirer,thedifferenceisrecognisedasagain directlyinprofitorlossbytheacquirerontheacquisition- date,butonlyafterareassessmentoftheidentification andmeasurementofthenetassetsacquired,thenon- controllinginterestintheacquiree,ifany,theconsideration transferredandtheacquirer’spreviouslyheldequity interestintheacquirer. Businesscombinationsareinitiallyaccountedforona provisionalbasis.Theacquirerretrospectivelyadjusts theprovisionalamountsrecognisedandalsorecognises additional assets or liabilities during the measurement period,basedonnewinformationobtainedaboutthefacts andcircumstancesthatexistedattheacquisition-date. Themeasurementperiodendsoneithertheearlierof(i) 12monthsfromthedateoftheacquisitionor(ii)whenthe acquirerreceivesalltheinformationpossibletodetermine fairvalue. Assetsandliabilitiesmeasuredatfairvalueareclassified, intothreelevels,usingafairvaluehierarchythatreflects thesignificanceoftheinputsusedinmakingthe measurements.Classificationsarereviewedateach reportingdateandtransfersbetweenlevelsaredetermined basedonareassessmentofthelowestlevelofinputthat issignificanttothefairvaluemeasurement. Forrecurringandnon-recurringfairvaluemeasurements, externalvaluersmaybeusedwheninternalexpertise iseithernotavailableorwhenthevaluationisdeemed tobesignificant.Externalvaluersareselectedbased onmarketknowledgeandreputation.Wherethereisa significantchangeinfairvalueofanassetorliabilityfrom oneperiodtoanother,ananalysisisundertaken,which includesaverificationofthemajorinputsappliedinthe latestvaluationandacomparison,whereapplicable,with externalsourcesofdata. Issued capital Ordinarysharesareclassifiedasequity. Incrementalcostsdirectlyattributabletotheissueofnew sharesoroptionsareshowninequityasadeduction,net oftax,fromtheproceeds. Dividends Dividendsarerecognisedwhendeclaredduringthe financialyearandnolongeratthediscretionofthe company. Business combinations Theacquisitionmethodofaccountingisusedtoaccount forbusinesscombinationsregardlessofwhetherequity instrumentsorotherassetsareacquired. Theconsiderationtransferredisthesumoftheacquisition- datefairvaluesoftheassetstransferred,equity instruments issued or liabilities incurred by the acquirer toformerownersoftheacquireeandtheamountofany non-controllinginterestintheacquiree.Foreachbusiness combination,thenon-controllinginterestintheacquireeis measuredateitherfairvalueorattheproportionateshare oftheacquiree’sidentifiablenetassets.Allacquisition costsareexpensedasincurredtoprofitorloss. Ontheacquisitionofabusiness,thegroupassesses thefinancialassetsacquiredandliabilitiesassumedfor appropriateclassificationanddesignationinaccordance withthecontractualterms,economicconditions,the FY17 Financial Statements 45 Isentia Group Limited – 2017 Annual ReportFY17 Financial Statements (continued) Earnings per share Basic earnings per share Basicearningspershareiscalculatedbydividingthe profitattributabletotheownersofIsentiaGroupLimited, excludinganycostsofservicingequityotherthanordinary shares,bytheweightedaveragenumberofordinaryshares outstandingduringthefinancialyear,adjustedforbonus elementsinordinarysharesissuedduringthefinancial year. Diluted earnings per share Dilutedearningspershareadjuststhefiguresusedinthe determinationofbasicearningspersharetotakeinto account the after income tax effect of interest and other financingcostsassociatedwithdilutivepotentialordinary sharesandtheweightedaveragenumberofshares assumedtohavebeenissuedfornoconsiderationin relationtodilutivepotentialordinaryshares. Goods and Services Tax (‘GST’) and other similar taxes Revenues,expensesandassetsarerecognisednetof theamountofassociatedGST,unlesstheGSTincurred isnotrecoverablefromthetaxauthority.Inthiscaseitis recognised as part of the cost of the acquisition of the assetoraspartoftheexpense. Receivablesandpayablesarestatedinclusiveofthe amountofGSTreceivableorpayable.Thenetamount ofGSTrecoverablefrom,orpayableto,thetaxauthority isincludedinotherreceivablesorotherpayablesinthe statementoffinancialposition. Cashflowsarepresentedonagrossbasis.TheGST componentsofcashflowsarisingfrominvestingor financingactivitieswhicharerecoverablefrom,orpayable tothetaxauthority,arepresentedasoperatingcashflows. Commitments and contingencies are disclosed net of the amountofGSTrecoverablefrom,orpayableto,thetax authority. Rounding of amounts ThecompanyisofakindreferredtoinCorporations Instrument2016/191,issuedbytheAustralianSecurities andInvestmentsCommission,relatingto‘rounding- off’.Amountsinthisreporthavebeenroundedoffin accordancewiththatCorporationsInstrumenttothe nearestthousanddollars,orincertaincases,the nearestdollar. Comparatives Comparativesinthestatementofprofitorlossand othercomprehensiveincomeandnotestothefinancial statementshavebeenrealignedtocurrentyear presentation.Therehasbeennoeffectontheprofit fortheyear. New Accounting Standards and Interpretations not yet mandatory or early adopted Australian Accounting Standards and Interpretations thathaverecentlybeenissuedoramendedbutarenot yetmandatory,havenotbeenearlyadoptedbythegroup fortheannualreportingperiodended30June2017. Thegroup’sassessmentoftheimpactofthesenewor amendedAccountingStandardsandInterpretations,most relevanttothegroup,aresetoutbelow. AASB 9 Financial Instruments Thisstandardisapplicabletoannualreportingperiods beginningonorafter1January2018.Thestandard replacesallpreviousversionsofAASB9andcompletes theprojecttoreplaceIAS39‘FinancialInstruments: RecognitionandMeasurement’.AASB9introducesnew classificationandmeasurementmodelsforfinancial assets.Afinancialassetshallbemeasuredatamortised cost,ifitisheldwithinabusinessmodelwhoseobjective is to hold assets in order to collect contractual cash flows,whichariseonspecifieddatesandsolelyprincipal andinterest.Allotherfinancialinstrumentassetsareto beclassifiedandmeasuredatfairvaluethroughprofit orlossunlesstheentitymakesanirrevocableelection on initial recognition to present gains and losses on equityinstruments(thatarenotheld-for-trading)inother comprehensiveincome(‘OCI’).Forfinancialliabilities, designatedatfairvaluethroughprofitorloss,thestandard requirestheportionofthechangeinfairvaluethatrelates totheentity’sowncreditrisktobepresentedinOCI (unlessitwouldcreateanaccountingmismatch).New simpler hedge accounting requirements are intended to morecloselyaligntheaccountingtreatmentwiththerisk managementactivitiesoftheentity.Newimpairment requirementswillusean‘expectedcreditloss’(‘ECL’)model torecogniseanallowance.Impairmentwillbemeasured undera12-monthECLmethodunlessthecreditriskon afinancialinstrumenthasincreasedsignificantlysince initialrecognitioninwhichcasethelifetimeECLmethod isadopted.Thestandardintroducesadditionalnew disclosures.Thegroupwilladoptthisstandardfrom1July 2018,andtheadoptionofthisstandardisnotexpectedto significantlyimpactthefinancialstatementsonthebasis thatthemainfinancialassetsrecognisedrepresentcash andcashequivalentandtradereceivablesthatdonotcarry asignificantfinancingcomponentandinvolveasingle cashflowrepresentingtherepaymentofprincipal,whichin thecaseoftradereceivablesisthetransactionprice.Both assetclasseswillcontinuetobemeasuredatfacevalue. Otherfinancialassetclassesarenotmaterialtothegroup. Financial liabilities of the group are not impacted as the groupdoesnotcarrythematfairvalue. AASB 15 Revenue from Contracts with Customers Thisstandardisapplicabletoannualreportingperiods beginningonorafter1January2018.Thestandard providesasinglestandardforrevenuerecognition. Thecoreprincipleofthestandardisthatanentitywill recogniserevenuetodepictthetransferofpromisedgoods orservicestocustomersinanamountthatreflectsthe considerationtowhichtheentityexpectstobeentitled inexchangeforthosegoodsorservices.Thestandard willrequire:contracts(eitherwritten,verbalorimplied) tobeidentified,togetherwiththeseparateperformance obligationswithinthecontract;determinethetransaction price,adjustedforthetimevalueofmoneyexcludingcredit risk;allocationofthetransactionpricetotheseparate performanceobligationsonabasisofrelativestand-alone sellingpriceofeachdistinctgoodorservice,orestimation approachifnodistinctobservablepricesexist;and recognitionofrevenuewheneachperformanceobligation issatisfied.Creditriskwillbepresentedseparatelyas anexpenseratherthanadjustedtorevenue.Forgoods, theperformanceobligationwouldbesatisfiedwhenthe customerobtainscontrolofthegoods.Forservices,the performanceobligationissatisfiedwhentheservice hasbeenprovided,typicallyforpromisestotransfer servicestocustomers.Forperformanceobligations satisfiedovertime,anentitywouldselectanappropriate measureofprogresstodeterminehowmuchrevenue should be recognised as the performance obligation is satisfied.Contractswithcustomerswillbepresentedin anentity’sstatementoffinancialpositionasacontract liability,acontractasset,orareceivable,dependingon therelationshipbetweentheentity’sperformanceandthe customer’spayment.Sufficientquantitativeandqualitative disclosure is required to enable users to understand the contractswithcustomers;thesignificantjudgements made in applying the guidance to those contracts; and anyassetsrecognisedfromthecoststoobtainorfulfil acontractwithacustomer.Thegroupexpectstoadopt thisstandardfrom1July2018.Thegroupiscurrently undertakingacomprehensivereviewoftheimplementation impactsofIFRS15.Thegrouphasnotyetreacheda determination as to the impacts of these accounting standards. AASB 16 Leases Thisstandardisapplicabletoannualreportingperiods beginningonorafter1January2019.Thestandard replacesAASB117‘Leases’andforlesseeswilleliminate theclassificationsofoperatingleasesandfinanceleases. Subjecttoexceptions,aleaseliabilitywillbecapitalised inthestatementoffinancialposition,measuredasthe presentvalueoftheunavoidablefutureleasepayments tobemadeovertheleaseterm.Theexceptionsrelate toshort-termleasesof12monthsorlessandleasesof low-valueassets(suchaspersonalcomputersandsmall officefurniture)whereanaccountingpolicychoiceexists wherebyeithera‘right-of-use’assetisrecognisedorlease paymentsareexpensedtoprofitorlossasincurred.A ‘rightofuse’assetcorrespondingtotheleaseliability willalsoberecognised,adjustedforleaseprepayments, leaseincentivesreceived,initialdirectcostsincurred andanestimateofanyfuturerestoration,removalor dismantlingcosts.Straight-lineoperatingleaseexpense recognitionwillbereplacedwithadepreciationcharge fortheleasedasset(includedinoperatingcosts)andan interestexpenseontherecognisedleaseliability(included infinancecosts).Intheearlierperiodsofthelease,the expensesassociatedwiththeleaseunderAASB16will behigherwhencomparedtoleaseexpensesunderAASB 117.HoweverEBITDA(EarningsBeforeInterest,Tax, DepreciationandAmortisation)resultswillbeimproved as the operating expense is replaced by interest expense anddepreciationinprofitorlossunderAASB16.For classificationwithinthestatementofcashflows,thelease paymentswillbeseparatedintobothaprincipal(financing activities)andinterest(eitheroperatingorfinancing activities)component.Forlessoraccounting,thestandard doesnotsubstantiallychangehowalessoraccountsfor leases.Thegroupwilladoptthisstandardfrom1July 2019.Informationontheundiscountedamountofthe group’soperatingleasecommitmentsunderAASB117,the currentleasingstandard,isdisclosedinnote31.TheGroup isconsideringtheavailableoptionsfortransition.Todate, workhasfocusedontheidentificationoftheprovisionsof thestandardwhichwillmostimpactthegroup.Inthenext financialyear,workonthedetailedreviewofthecontracts andfinancialreportingimpactswillcommence. 46 FY17 Financial Statements 47 Isentia Group Limited – 2017 Annual ReportFY17 Financial Statements (continued) therecoverableamountoftheassetisdetermined.This involvesfairvaluelesscostsofdisposalorvalue-in-use calculations,whichincorporateanumberofkeyestimates andassumptions. Income tax Thegroupissubjecttoincometaxesinthejurisdictions inwhichitoperates.Significantjudgementisrequired indeterminingtheprovisionforincometax.Thereare manytransactionsandcalculationsundertakenduring theordinarycourseofbusinessforwhichtheultimate taxdeterminationisuncertain.Thegrouprecognises liabilities for anticipated tax audit issues based on the group’scurrentunderstandingofthetaxlaw.Wherethe finaltaxoutcomeofthesemattersisdifferentfromthe carryingamounts,suchdifferenceswillimpactthecurrent anddeferredtaxprovisionsintheperiodinwhichsuch determinationismade. Recovery of deferred tax assets Deferred tax assets are recognised for deductible temporary differences only if the group considers it is probablethatfuturetaxableamountswillbeavailable toutilisethosetemporarydifferencesandlosses.Such deferred tax assets are not recognised if the temporary differencearisesfromtheinitialrecognition(otherthan inabusinesscombination)ofassetsandliabilitiesina transactionthataffectsneitherthetaxableprofitnorthe accountingprofit.Thecarryingamountofthedeferredtax assetsisreviewedattheendofeachperiodandreduced totheextentthatitisnolongerprobablethatsufficient taxableprofitswillbeavailabletoallowallorpartofthe assettoberecovered. Business combinations Asdiscussedinnote1,businesscombinationsareinitially accountedforonaprovisionalbasis.Thefairvalue ofassetsacquired,liabilitiesandcontingentliabilities assumedareinitiallyestimatedbythegrouptakinginto considerationallavailableinformationatthereporting date.Fairvalueadjustmentsonthefinalisationofthe businesscombinationaccountingisretrospective,where applicable,totheperiodthecombinationoccurredandmay haveanimpactontheassetsandliabilities,depreciation andamortisationreported. Note 2. Critical accounting judgements, estimates and assumptions Thepreparationofthefinancialstatementsrequires managementtomakejudgements,estimatesand assumptions that affect the reported amounts in the financialstatements.Managementcontinuallyevaluatesits judgementsandestimatesinrelationtoassets,liabilities, contingentliabilities,revenueandexpenses.Management basesitsjudgements,estimatesandassumptions onhistoricalexperienceandonothervariousfactors, includingexpectationsoffutureevents,management believestobereasonableunderthecircumstances.The resultingaccountingjudgementsandestimateswill seldomequaltherelatedactualresults.Thejudgements, estimatesandassumptionsthathaveasignificantriskof causingamaterialadjustmenttothecarryingamountsof assetsandliabilities(refertotherespectivenotes)within thenextfinancialyeararediscussedbelow. Estimation of useful lives of assets Thegroupdeterminestheestimatedusefullivesand related depreciation and amortisation charges for its property,plantandequipmentandfinitelifeintangible assets.Theusefullivescouldchangesignificantlyasa resultoftechnicalinnovationsorsomeotherevent.The depreciationandamortisationchargewillincreasewhere theusefullivesarelessthanpreviouslyestimatedlives,or technicallyobsoleteornon-strategicassetsthathavebeen abandonedorsoldwillbewrittenofforwrittendown. Goodwill and other indefinite life intangible assets Thegrouptestsannually,ormorefrequentlyifevents orchangesincircumstancesindicateimpairment, whethergoodwillandotherindefinitelifeintangible assetshavesufferedanyimpairment,inaccordancewith theaccountingpolicystatedinnote1.Therecoverable amountsofcash-generatingunitshavebeendetermined basedonvalue-in-usecalculations.Thesecalculations requiretheuseofassumptions,includingestimated discount rates based on the current cost of capital and growthratesoftheestimatedfuturecashflows. Impairment of non-financial assets other than goodwill and other indefinite life intangible assets Thegroupassessesimpairmentofnon-financialassets otherthangoodwillandotherindefinitelifeintangible assetsateachreportingdatebyevaluatingconditions specifictothegroupandtotheparticularassetthat mayleadtoimpairment.Ifanimpairmenttriggerexists, 48 Note 3. Restatement of comparatives Change in accounting policy InNovember2016,theIFRSInterpretationsCommittee(‘IFRIC)clarifiedthatanintangibleassetwithanindefiniteuseful lifeisnotanon-depreciableasset(unlikeland)andthatnon-amortisationdidnotnecessarilymeanthatanentitywill recoverthecarryingamountofthatassetonlythroughsaleandnotthroughuse.Thetaxaccountingstandardrequires deferredtaxtoberecognisedbasedonmanagement’sexpectedmannerofrecovery.Managementhavereconsideredthe expectedrecoveryofitsindefinitelifebrandsasbeingrecoveredthroughuse.Therefore,inaccordancewiththestandards adeferredtaxliabilityof$5,467,000hasbeenrecognisedonthebrandsacquiredinpreviousbusinesscombinationswith acorrespondingincreaseingoodwill,intheearliestperiodpresentedon1July2015.Inaddition,adeferredtaxliabilityof $1,829,000hasbeenrecognisedinrelationtotheacquisitionof‘KingContentPtyLimited’brand,inthecomparisonyear ended30June2016. Finalisation of business combination Asdetailedinnote34,thegroupfinaliseditsbusinesscombinationsduringtheyear.Theeffectoftheadjustmentsresulted inanincreaseinintangibleassetsby$1,296,000andanincreaseindeferredtaxliabilityof$1,296,000. Statement of profit or loss and other comprehensive income Whenthereisarestatementofcomparatives,itismandatorytoprovideastatementofprofitorlossandother comprehensiveincomefortheyearended30June2016.However,astherewerenoadjustmentsmade,thegrouphas electednottoshowthestatementofprofitorlossandothercomprehensiveincome. Statement of financial position at the beginning of the earliest comparative period Whenthereisarestatementofcomparatives,itismandatorytoprovideathirdstatementoffinancialpositionatthe beginningoftheearliestcomparativeperiod,being1July2015.However,astherewerenoadjustmentsmadeasat1July 2015,thegrouphaselectednottoshowthe1July2015statementoffinancialposition. Statement of financial position at the end of the earliest comparative period EXTRACT Assets Non-current assets Intangibles Totalnon-currentassets Total assets Liabilities Non-current liabilities Deferred tax liabilities Totalnon-currentliabilities Total liabilities Net assets 2016 $’000 REPORTED CONSOLIDATED $’000 ADJUSTMENT 2016 $’000 RESTATED 187,724 199,829 250,150 10,491 33,052 124,448 125,702 8,592 8,592 8,592 8,592 8,592 8,592 – 196,316 208,421 258,742 19,083 41,644 133,040 125,702 FY17 Financial Statements 49 Isentia Group Limited – 2017 Annual Report FY17 Financial Statements (continued) Note 4. Operating segments Identification of reportable operating segments ThegrouphastwogeographicalsegmentsbeingAustraliaandNewZealand(‘ANZ’)andAsia/RestoftheWorld(‘Asia/ RoW’)andaheadofficesegment.Theseoperatingsegmentsarebasedontheinternalreportsthatarereviewedandused bytheBoardofDirectors(whoareidentifiedastheChiefOperatingDecisionMakers(‘CODM’))inassessingperformance andindeterminingtheallocationofresources.Thereisnoaggregationofoperatingsegments. TheCODMreviewsEBITDA(earningsbeforeinterest,tax,depreciationandamortisation).Theaccountingpoliciesadopted forinternalreportingtotheCODMareconsistentwiththoseadoptedinthefinancialstatements. TheinformationreportedtotheCODMisonatleastamonthlybasis. TheCODMdoesnotregularlyreviewsegmentassetsandsegmentliabilities.Refertostatementoffinancialpositionfor assetsandliabilities. Types of revenue Theprincipalrevenuesareasfollows: Software-as-a-Service (‘SaaS’) ThegrouphasdevelopedandhostedanumberofSaaSplatforms,suchasitsflagshipMediaportalthatprovidecustomers accesstotimecriticalandhighlyrelevantinformationaswellastoolstoanalyseandreportonmediaintelligence. Value Added Services (‘VAS’) Thegroupprovidessocialmediainsightsandmonitoring,customisedquantitativeandqualitativeanalysis,andindepth analysisrequiredbycustomers. Content Marketing Thegroupdevelopscomprehensivecontentmarketingstrategiesandengagingdigitalcontentthatempowersbrands toincreaseprofitabilitybycommunicatingeffectivelywithtargetaudiences.ThegroupusesCommuniqué,aproprietary workflowmanagementplatform,tohandletheproductionprocessfromend-to-endandofferclientsatransparentwayto overseebriefing,delivery,publicationandmeasurementofcontentingranulardetail. Major customers Therearenomajorcustomersthatcontributedmorethan10%ofrevenuetothegroup. Operating segment information CONSOLIDATED - 2017 Revenue SaaS VAS Contentmarketing Total revenue Adjusted EBITDA Fairvalueadjustmentoncontingentconsideration Depreciation and amortisation Impairment of assets Interestrevenue Finance costs Loss on disposal of assets Loss before income tax expense Income tax expense Loss after income tax expense CONSOLIDATED - 2016 Revenue SaaS VAS Contentmarketing Total revenue EBITDA Depreciation and amortisation Interestrevenue Finance costs Profit before income tax expense Income tax expense Profit after income tax expense ANZ $’000 ASIA/ROW $’000 HEAD OFFICE $’000 TOTAL $’000 87,498 20,361 8,684 116,543 41,876 15,833 17,063 5,690 38,586 2,872 – – – – (9,151) 103,331 37,424 14,374 155,129 35,597 13,799 (16,246) (39,399) 62 (2,855) (254) (9,296) (4,227) (13,523) ANZ $’000 ASIA/ROW $’000 HEAD OFFICE $’000 TOTAL $’000 86,652 20,308 12,351 119,311 51,435 15,258 13,218 8,209 36,685 8,266 – – – – (10,995) 101,910 33,526 20,560 155,996 48,706 (13,704) 70 (2,898) 32,174 (7,922) 24,252 50 FY17 Financial Statements 51 Isentia Group Limited – 2017 Annual ReportFY17 Financial Statements (continued) Note 5. Revenue Note 7. Expenses Renderingofservices Note 6. Other income Governmentgrants Interest income Netgainrecognisedonreversalofcontingentconsideration(note27) Other income CONSOLIDATED 2017 $’000 155,129 2016 $’000 155,996 CONSOLIDATED 2017 $’000 2 62 13,799 13,863 2016 $’000 – 70 – 70 Otherincomeincludesfairvalueadjustmentonthecontingentconsiderationthatmayhavebeenpayableonprevious acquisitions.Specifically,longerthanexpectedleadtimestoconvertcertainkeyprojectsandcustomershaveresulted inlowerestimatedFY2017EBITDA(earningsbeforeinterest,tax,depreciationandamortisation)andrevenueusedto determinetheearn-outpayment.Asaresult,thefairvalueofcontingentconsiderationhasbeenadjusted. (Loss)/profitbeforeincometaxincludesthefollowingspecificexpenses: Depreciation Leaseholdimprovements Furnitureandfittings Officeequipment Computer equipment Totaldepreciation Amortisation Customer relationships and contracts Acquiredsoftware Internallygeneratedsoftware Totalamortisation Totaldepreciationandamortisation Impairment Goodwill Customer relationships and contracts Softwareandcapitaliseddevelopment Brands Totalimpairment Finance costs Interestandfinancechargespaid/payable Loan establishment fee Finance costs expensed Net foreign exchange fluctuation Netforeignexchangeloss/(gain) Rental expense relating to operating leases Lease payments Superannuation expense and statutory contribution Definedcontributionsuperannuationexpense Impairment of receivables Badanddoubtfuldebtexpense CONSOLIDATED 2017 $’000 431 184 106 964 1,685 8,341 1,787 4,433 14,561 16,246 32,717 201 386 6,095 39,399 2,647 208 2,855 (536) 4,816 6,081 1,026 52 FY17 Financial Statements 2016 $’000 315 115 87 798 1,315 7,144 1,899 3,346 12,389 13,704 – – – – – 2,742 156 2,898 (118) 4,394 5,181 244 53 Isentia Group Limited – 2017 Annual ReportFY17 Financial Statements (continued) Note 8. Income tax expense Note 9. Current assets – cash and cash equivalents Income tax expense Current tax expense Deferredtax–originationandreversaloftemporarydifferences Prioryearunders/overs Aggregate income tax expense Deferred tax included in income tax expense comprises: Decreaseindeferredtaxassets(note13) Decreaseindeferredtaxliabilities(note20) Deferredtax–originationandreversaloftemporarydifferences Numerical reconciliation of income tax expense and tax at the statutory rate (Loss)/profitbeforeincometaxexpense Taxatthestatutorytaxrateof30% Taxeffectamountswhicharenotdeductible/(taxable)incalculatingtaxableincome: Non-deductibleexpenses Effectoftaxratesinoverseasjurisdictions Current year tax loss not recognised Researchanddevelopmenttaxoffset Utilisationoftaxlossnotrecognisedpreviously Taxexemptincome Prioryearovers/unders Current year temporary differences not recognised Income tax expense Amounts charged directly to equity Deferredtaxassets(note13) 54 CONSOLIDATED 2017 $’000 3,557 (18) 688 4,227 2,099 (2,117) (18) (9,296) (2,789) 7,247 120 562 2016 $’000 7,096 1,083 (257) 7,922 1,354 (271) 1,083 32,174 9,652 550 (348) 61 Cash on hand Cashatbank Note 10. Current assets – trade and other receivables Tradereceivables Less:Provisionforimpairmentofreceivables Otherreceivables Security deposits (1,533) (1,587) Impairment of receivables (68) – 688 – 4,227 CONSOLIDATED 2017 $’000 – (32) (257) (117) 7,922 2016 $’000 130 84 Theageingoftheimpairedreceivablesprovidedforaboveareasfollows: Over6monthsoverdue Movementsintheprovisionforimpairmentofreceivablesareasfollows: Opening balance Additionalprovisionsrecognised Receivableswrittenoffduringtheyearasuncollectable Closing balance CONSOLIDATED 2017 $’000 12 13,240 13,252 CONSOLIDATED 2017 $’000 27,578 (568) 27,010 3,210 1,025 31,245 CONSOLIDATED 2017 $’000 568 CONSOLIDATED 2017 $’000 426 1,026 (884) 568 FY17 Financial Statements 2016 $’000 25 8,114 8,139 2016 $’000 34,759 (426) 34,333 4,668 1,041 40,042 2016 $’000 426 2016 $’000 196 244 (14) 426 55 Isentia Group Limited – 2017 Annual ReportFY17 Financial Statements (continued) Past due but not impaired Reconciliations Customerswithbalancespastduebutwithoutprovisionforimpairmentofreceivablesamountto$5,019,000asat30June 2017($6,029,000asat30June2016). Reconciliationsofthewrittendownvaluesatthebeginningandendofthecurrentandpreviousfinancialyeararesetout below: LEASEHOLD IMPROVEMENTS $’000 FURNITURE AND FITTINGS $’000 OFFICE EQUIPMENT $’000 COMPUTER EQUIPMENT $’000 Thegroupdidnotconsideracreditriskontheaggregatebalancesafterreviewingthecredittermsofcustomersbasedon recentcollectionpractices. Theageingofthepastduebutnotimpairedreceivablesareasfollows: CONSOLIDATED 2017 $’000 3,389 741 889 5,019 CONSOLIDATED 2017 $’000 4,557 (2,704) 1,853 2,337 (1,661) 676 2,502 (2,210) 292 11,383 (9,492) 1,891 4,712 2016 $’000 5,602 116 311 6,029 2016 $’000 4,576 (3,297) 1,279 2,145 (1,553) 592 2,486 (2,216) 270 11,406 (9,632) 1,774 3,915 0to3monthsoverdue 3to6monthsoverdue Over6monthsoverdue Note 11. Non-current assets – property, plant and equipment Leaseholdimprovements–atcost Less: Accumulated depreciation Furnitureandfittings–atcost Less: Accumulated depreciation Officeequipment–atcost Less: Accumulated depreciation Computerequipment–atcost Less: Accumulated depreciation 56 CONSOLIDATED Balanceat1July2015 Additions Additions through business combinations(note34) Disposals Exchange differences Writeoffofassets Transfersin/(out) Depreciation expense Balanceat30June2016 Additions Disposals Exchange differences Depreciation expense Balanceat30June2017 622 890 162 (21) (5) (14) (40) (315) 1,279 1,271 (210) (56) (431) 1,853 537 114 25 (2) 3 (10) 40 (115) 592 289 (13) (8) (184) 676 Note 12. Non-current assets – intangibles Goodwill–atcost Less: Accumulated impairment Customerrelationshipsandcontracts–atcost Less: Accumulated amortisation Less: Accumulated impairment Softwareandcapitaliseddevelopment–atcost Less: Accumulated amortisation Less: Impairment Brands–atcost Less: Impairment 172 127 70 (1) (3) (8) – (87) 270 152 (15) (9) (106) 292 1,182 1,315 104 – (29) – – (798) 1,774 1,134 (16) (37) (964) 1,891 CONSOLIDATED 2017 $’000 116,446 (37,555) 78,891 82,774 (50,151) (1,980) 30,643 59,626 (34,212) (386) 25,028 24,560 (6,095) 18,465 153,027 FY17 Financial Statements TOTAL $’000 2,513 2,446 361 (24) (34) (32) – (1,315) 3,915 2,846 (254) (110) (1,685) 4,712 2016 $’000 119,960 (6,668) 113,292 82,642 (41,941) (1,779) 38,922 47,403 (28,020) – 19,383 24,719 – 24,719 196,316 57 Isentia Group Limited – 2017 Annual ReportFY17 Financial Statements (continued) Reconciliations TheremaininggoodwillacquiredthroughbusinesscombinationshasbeenallocatedtothefollowingCGUs: Reconciliationsofthewrittendownvaluesatthebeginningandendofthecurrentandpreviousfinancialyeararesetout below: CONSOLIDATED GOODWILL* $’000 CUSTOMER RELATIONSHIPS AND CONTRACTS* $’000 SOFTWARE AND CAPITALISED DEVELOPMENT $’000 BRANDS $’000 TOTAL $’000 Balanceat1July2015 72,352 35,066 Additions – – 9,992 6,677 18,590 136,000 39 6,716 40,620 8,166 7,970 6,095 62,851 Additions through business combinations(note34) Additions through asset acquisition Exchange differences Transfersin/(out) Amortisation expense – 320 – – Balanceat30June2016 113,292 Additions Exchange differences Impairment of assets Amortisation expense Balanceat30June2017 – (1,684) (32,717) – 78,891 2,645 226 (37) (7,144) 38,922 424 (161) (201) (8,341) 30,643 – (48) 37 (5,245) 19,383 12,268 (17) (386) (6,220) 25,028 – (5) – – 2,645 493 – (12,389) 24,719 196,316 5 12,697 (164) (2,026) (6,095) (39,399) – (14,561) 18,465 153,027 *Refertonote34forthefinalisationofprioryearbusinesscombinationswhichhasresultedincomparativesbeingadjusted.Alsoreferto note3fordetailsofrestatementofcomparatives. Duringtheyear,managementhasundergoneaninternalreorganisationofitsreportingstructure.Thishasresultedinthe KingContentgoodwillof$32,717,000andbrand$6,095,000beingseparatedfromtheANZandAsiacash-generatingunits ('CGUs')andmonitoredasaseparatecash-generatingunit,resultinginanimpairmentoftheKingContentCGU. Asatthereportingdate,animpairmentchargeof$38,812,000hasbeenappliedasthecarryingamountofgoodwilland brandsexceededitsrecoverableamountwithintheKingContentCGU.Theimpairmentwasaresultofthefinancialunder performanceofKingContentPtyLimitedanditssubsidiariesduringFY2017.Thisimpairmentexpenseispartiallyoffsetby thenetgainrecognisedonreversalofcontingentconsiderationfromtheKingContentacquisitionof$11,819,000referto note27. ANZ AsiaandRestoftheWorld('Asia/RoW') BrandshavebeenallocatedtothefollowingCGUs: ANZ AsiaandRestoftheWorld('Asia/RoW') CONSOLIDATED 2017 $’000 52,356 26,535 78,891 CONSOLIDATED 2017 $’000 16,413 2,052 18,465 2016 $’000 75,470 37,822 113,292 2016 $’000 21,254 3,465 24,719 TheKingContentCGUisfullyimpaired(2016:nil). Keyassumptionsarethosetowhichtherecoverableamountofanassetorcash-generatingunitsismostsensitive. Therecoverableamountofthegroup’sgoodwillandindefinitelifeintangibleshavebeendeterminedbyvalue-in-use calculations.ThefollowingkeyassumptionswereusedinthediscountedcashflowmodelforthedifferentCGUs: 1.DiscountedcashflowmodelbasedonapprovedFY2018budgetandbusinessplanforthenext4years.Terminalgrowth ratesappliedareANZ4%,Asia/RoW9%andKingContent4%.(2016:ANZ(7%)andAsia/RoW(9%)). 2.Weightedaveragecostofcapital:ANZ11.75%(2016:11.75%),Asia/RoW:15%(2016:15%)andKingContent11.75%. Sensitivity FortheANZandAsiaCGU,anyreasonablechangeinthekeyassumptionsonwhichtherecoverableamountisbased wouldnotcausetheCGU’scarryingamounttoexceeditsrecoverableamount. Refertonote34forthefinalisationofprioryearbusinesscombinationswhichhasresultedincomparativesbeingadjusted. Alsorefertonote3fordetailsofrestatementofcomparatives. 58 FY17 Financial Statements 59 Isentia Group Limited – 2017 Annual ReportFY17 Financial Statements (continued) Note 13. Non-current assets – deferred tax assets Note 14. Current liabilities – trade and other payables Deferred tax assets comprise temporary differences attributable to: Amountsrecognisedinprofitorloss: Taxlosses Impairmentofreceivables Employeebenefits Provisionforleasemakegood Provisionforauditfees Accruedleaseincentives Accruals and prepayments Unrealised foreign exchange gain/loss Intangibles IPOtransactioncosts Derivativefinancialinstruments Property,plantandequipment Amounts recognised in equity: Derivativefinancialinstruments IPOtransactioncosts Share based payment Deferred tax assets Movements: Opening balance Chargedtoprofitorloss(note8) Chargedtoequity(note8) Adjustmentstoprofitorloss–Prioryearunders/overs Exchange differences Closing balance CONSOLIDATED 2017 $’000 2016 $’000 – 70 1,066 58 98 55 220 318 2,682 486 – (51) 5,002 – 318 – 318 5,320 8,057 (2,099) (130) (487) (21) 5,320 562 57 969 42 94 47 71 312 3,823 971 30 – 6,978 130 635 314 1,079 8,057 9,455 (1,354) (84) 40 – 8,057 Tradepayables Amountsreceivedinadvance Accrued expenses Other payables Refertonote26forfurtherinformationonfinancialinstruments. Note 15. Current liabilities – borrowings Bankloans Prepaidfacilitycosts CONSOLIDATED 2017 $’000 3,142 5,256 9,416 1,501 2016 $’000 5,884 4,206 8,187 984 19,315 19,261 CONSOLIDATED 2017 $’000 – – – 2016 $’000 56,000 (125) 55,875 Refertonote19forfurtherinformationonassetspledgedassecurityandfinancingarrangements. Refertonote26forfurtherinformationonfinancialinstruments. Note 16. Current liabilities – derivative financial instruments Interestrateswapcontracts–cashflowhedges Refertonote26forfurtherinformationonfinancialinstruments. Refertonote27forfurtherinformationonfairvaluemeasurement. CONSOLIDATED 2017 $’000 – 2016 $’000 532 60 FY17 Financial Statements 61 Isentia Group Limited – 2017 Annual ReportFY17 Financial Statements (continued) Note 17. Current liabilities – provisions Total secured liabilities Thetotalsecuredliabilities(currentandnon-current)areasfollows: Employeebenefits CONSOLIDATED 2017 $’000 5,132 2016 $’000 5,959 Amounts not expected to be settled within the next 12 months Thecurrentprovisionforemployeebenefitsincludesallunconditionalentitlementswhereemployeeshavecompletedthe requiredperiodofserviceandalsothosewhereemployeesareentitledtopro-ratapaymentsincertaincircumstances.The entireamountispresentedascurrent,sincethegroupdoesnothaveanunconditionalrighttodefersettlement.However, basedonpastexperience,thegroupdoesnotexpectallemployeestotakethefullamountofaccruedleaveorrequire paymentwithinthenext12months. Thefollowingamountsreflectleavethatisnotexpectedtobetakenwithinthenext12months: Bankloans Assets pledged as security CONSOLIDATED 2017 $’000 65,000 2016 $’000 56,000 On7July2016,thegroupenteredintoasecondamendmentandrestatementdeedandincreasedthetotalbankloans facilityfrom$65,000,000to$75,000,000.Thebankloansaresecuredbyfixedandfloatingchargeoverthegroup’sassets. Therenewedfacilityisfor3yearswithamaturitydateof7July2019. Financing arrangements Unrestrictedaccesswasavailableatthereportingdatetothefollowinglinesofcredit: CONSOLIDATED 2017 $’000 636 CONSOLIDATED 2017 $’000 2,989 CONSOLIDATED 2017 $’000 65,000 (131) 64,869 2016 $’000 613 2016 $’000 6,995 2016 $’000 - - - Employeebenefitsobligationexpectedtobesettledafter12months Note 18. Current liabilities – contingent consideration Contingent consideration Refertonote27forfurtherinformationonfairvaluemeasurement. Note 19. Non-current liabilities – borrowings Bankloans Prepaidfacilitycosts Refertonote26forfurtherinformationonfinancialinstruments. 62 Totalfacilities Bankloans Used at the reporting date Bankloans Unused at the reporting date Bankloans CONSOLIDATED 2017 $’000 2016 $’000 75,000 65,000 65,000 56,000 10,000 9,000 Ofthe$10,000,000(2016:$9,000,000)remainingfacility,$515,000(2016:$316,000)hasbeenusedforbankguarantees. FY17 Financial Statements 63 Isentia Group Limited – 2017 Annual Report FY17 Financial Statements (continued) Note 20. Non-current liabilities – deferred tax liabilities Lease make good Deferred tax assets comprise temporary differences attributable to: Amountsrecognisedinprofitorloss: Property,plantandequipment Customer relationships and contracts from acquisition Brandsfromacquisition Internallygeneratedsoftware Deferredrevenueandunpaidrent Deferred tax liability Movements: Opening balance Creditedtoprofitorloss(note8) Additionsthroughbusinesscombinations(note34) Adjustmentstoprofitorloss–prioryearunders/overs Closing balance Theprovisionrepresentsthepresentvalueoftheestimatedcoststomakegoodthepremisesleasedbythegroupatthe endoftherespectiveleaseterms. Movements in provisions Movementsineachclassofprovisionduringthecurrentfinancialyear,otherthanemployeebenefits,aresetoutbelow: CONSOLIDATED 2017 $’000 – 6,614 5,467 4,699 325 2016 $’000 (15) 8,893 7,296 2,327 582 CONSOLIDATED – 2017 Carrying amount at the start of the year Additionalprovisionsrecognised Unusedamountsreversed 17,105 19,083 Carrying amount at the end of the year DEFERRED LEASE INCENTIVES $’000 LEASE MAKE GOOD $’000 243 25 (86) 182 139 56 – 195 19,083 (2,117) – 139 17,105 14,069 (271) 5,086 199 19,083 Note 22. Non-current liabilities – contingent consideration Contingent consideration CONSOLIDATED 2017 $’000 4,963 2016 $’000 21,748 Refertonote34forthefinalisationofprioryearbusinesscombinationswhichhasresultedincomparativesbeingadjusted. Alsorefertonote3fordetailsofrestatementofcomparatives. Refertonote27forfurtherinformationonfairvaluemeasurement. Note 21. Non-current liabilities – provisions Note 23. Equity – issued capital Employeebenefits Deferredleaseincentives Leasemakegood Deferred lease incentives CONSOLIDATED 2017 $’000 407 182 195 784 2016 $’000 431 243 139 813 Theprovisionrepresentsoperatingleaseincentivesreceived.Theincentivesareallocatedtoprofitorlossinsuchamanner thattherentexpenseisrecognisedonastraight-linebasisovertheleaseterm. CONSOLIDATED 2017 SHARES 2016 SHARES 2017 $’000 2016 $’000 Ordinaryshares–fullypaid 200,000,001 200,000,001 403,662 403,662 Ordinary shares Ordinarysharesentitletheholdertoparticipateindividendsandtheproceedsonthewindingupofthecompanyin proportiontothenumberofandamountspaidonthesharesheld.Thefullypaidordinaryshareshavenoparvalueandthe companydoesnothavealimitedamountofauthorisedcapital. Onashowofhandseverymemberpresentatameetinginpersonorbyproxyshallhaveonevoteanduponapolleach shareshallhaveonevote. Share buy-back Therewerenoon-marketbuy-backofIsentiaGroupLimitedshares. 64 FY17 Financial Statements 65 Isentia Group Limited – 2017 Annual Report FY17 Financial Statements (continued) Capital risk management Movements in reserves Thegroup’sobjectiveswhenmanagingcapitalaretosafeguarditsabilitytocontinueasagoingconcern,sothatitcan providereturnsforshareholdersandbenefitsforotherstakeholdersandtomaintainanoptimumcapitalstructureto reducethecostofcapital. Capitalisregardedastotalequity,asrecognisedinthestatementoffinancialposition,plusnetdebt.Netdebtiscalculated astotalborrowingslesscashandcashequivalents. Inordertomaintainoradjustthecapitalstructure,thegroupmayadjusttheamountofdividendspaidtoshareholders, returncapitaltoshareholders,issuenewsharesorsellassetstoreducedebt. Thegroupwouldlooktoraisecapitalwhenanopportunitytoinvestinabusinessorcompanywasseenasvalueadding relativetothecurrentcompany’ssharepriceatthetimeoftheinvestment.Thegroupisnotactivelypursuingadditional investmentsintheshorttermasitcontinuestointegrateandgrowitsexistingbusinessesinordertomaximisesynergies. Thegroupissubjecttocertainfinancingarrangementscovenantsandmeetingtheseisgivenpriorityinallcapitalrisk managementdecisions.Therehavebeennoeventsofdefaultonthefinancingarrangementsduringthefinancialyear. Thecapitalriskmanagementpolicyremainsunchangedfromthe30June2016AnnualReport. Note 24. Equity – reserves Foreigncurrencyreserve Hedgingreserve–cashflowhedges Share-basedpaymentsreserve Capitalreserve Foreign currency reserve CONSOLIDATED 2017 $’000 2,658 – 1,898 2016 $’000 6,196 (302) 1,048 (258,229) (253,673) (258,229) (251,287) Thereserveisusedtorecogniseexchangedifferencesarisingfromthetranslationofthefinancialstatementsofforeign operationstoAustraliandollars.Itisalsousedtorecognisegainsandlossesonhedgesofthenetinvestmentsinforeign operations. Hedging reserve – cash flow hedges Thereserveisusedtorecognisetheeffectiveportionofthegainorlossofcashflowhedgeinstrumentsthatisdetermined tobeaneffectivehedge. Share-based payments reserve Thereserveisusedtorecognisethevalueofequitybenefitsprovidedtoemployeesanddirectorsaspartoftheir remuneration,andotherpartiesaspartoftheircompensationforservices. Capital reserve ThereserveisusedtorecognisecontributionsfromortoIsentiaGroupLimitedanditscontrolledsubsidiariesby shareholdersandtorecognisetheacquisitionofnon-controllinginterest. Movementsineachclassofreserveduringthecurrentandpreviousfinancialyeararesetoutbelow: FOREIGN CURRENCY $’000 HEDGING $’000 SHARE-BASED PAYMENT $’000 CAPITAL $’000 TOTAL $’000 CONSOLIDATED Balanceat1July2015 Foreign currency translation Netchangeinfairvalueof cashflowhedges Share-basedpayment Balanceat30June2016 Foreign currency translation Netchangeinfairvalueof cashflowhedges Sharebuy-back 6,649 (453) – – 6,196 (3,538) – – Balanceat30June2017 2,658 Note 25. Equity – dividends Dividends Dividendspaidduringthefinancialyearwereasfollows: (499) – 197 – (302) – 302 – – 298 (258,229) (251,781) – – 750 – – – (453) 197 750 1,048 (258,229) (251,287) – – 850 – – – (3,538) 302 850 1,898 (258,229) (253,673) Finaldividendfortheyearended30June2016(2016:30June2015)of4.43cents (2016:3.8cents)perordinaryshare Interimdividendfortheyearended30June2017(2016:30June2016)of3.1cents (2016:3.7cents)perordinaryshare CONSOLIDATED 2017 $’000 8,860 6,200 15,060 2016 $’000 7,600 7,400 15,000 On22August2017,thedirectorsdeclareda50%frankedfinaldividendfortheyearended30June2017of3.08cents perordinaryshare,tobepaidon20September2017toeligibleshareholdersontheregisterasat6September2017. Thisequatestoatotalestimateddistributionof$6,160,000,basedonthenumberofordinarysharesonissueasat30 June2017.Thefinancialeffectofdividendsdeclaredafterthereportingdateisnotreflectedinthe30June2017financial statementsandwillberecognisedinsubsequentfinancialreports. 66 FY17 Financial Statements 67 Isentia Group Limited – 2017 Annual Report FY17 Financial Statements (continued) Franking credits Frankingcreditsavailableforsubsequentfinancialyearsbasedonataxrateof30% CONSOLIDATED 2017 $’000 2,048 2016 $’000 2,720 Thegrouphadnetassetsdenominatedinforeigncurrenciesof$4,808,000(assets$5,385,000lessliabilities$577,000) asat30June2017(2016:$3,921,000(assets$4,426,000lessliabilities$505,000).Basedonthisexposure,hadthe Australiandollarweakenedby10%/strengthenedby10%(2016:weakenedby10%/strengthenedby10%)againstthese foreigncurrencieswithallothervariablesheldconstant,thegroup’slossbeforetaxfortheyearandequitywouldhave been$481,000lower/$481,000higher(2016:profitbeforetaxwouldhavebeen$392,000higher/$392,000lower).The percentagechangeistheexpectedoverallvolatilityofthesignificantcurrencies,whichisbasedonmanagement’s assessmentofreasonablepossiblefluctuationstakingintoconsiderationmovementsoverthelastsixmonthseachyear andthespotrateateachreportingdate.Theactualforeignexchangegainfortheyearended30June2017was$536,000 (2016:gainof$118,000). Theaboveamountsrepresentthebalanceofthefrankingaccountasattheendofthefinancialyear,adjustedfor: • • • frankingcreditsthatwillarisefromthepaymentoftheamountoftheprovisionforincometaxatthereportingdate frankingdebitsthatwillarisefromthepaymentofdividendsrecognisedasaliabilityatthereportingdate frankingcreditsthatwillarisefromthereceiptofdividendsrecognisedasreceivablesatthereportingdate Price risk Thegroupisnotexposedtoanysignificantpricerisk. Interest rate risk Note 26. Financial instruments Financial risk management objectives Thegroup’sactivitiesexposeittoavarietyoffinancialrisks:marketrisk(includingforeigncurrencyriskandinterestrate risk),creditriskandliquidityrisk.Thegroup’soverallriskmanagementprogramfocusesontheunpredictabilityoffinancial marketsandseekstominimisepotentialadverseeffectsonthefinancialperformanceofthegroup.Thegroupuses derivativefinancialinstrumentssuchasinterestratecontractstohedgecertainriskexposures.Derivativesareexclusively usedforhedgingpurposes,i.e.notastradingorotherspeculativeinstruments.Thegroupusesdifferentmethodsto measuredifferenttypesofrisktowhichitisexposed.Thesemethodsincludesensitivityanalysisinthecaseofinterestrate andforeignexchangerisksandageinganalysisforcreditrisk. Market risk Foreign currency risk Thegroup’smaininterestrateriskarisesfromlong-termborrowings.Borrowingsissuedatvariableratesexposethegroup tointerestraterisk.Borrowingsissuedatfixedratesexposethegrouptofairvalueinterestraterisk.Duringtheyear,the groupdiscontinueditshedgingpolicy.Actualhedgeat30June2017was0%(2016:74%)oftheprincipaloutstanding. Asatthereportingdate,thegrouphadthefollowingvariableratecashbalances,borrowingsandinterestrateswap contracts: CONSOLIDATED Bankloans Interestrateswapscontracts-cashflowhedges(notionalprincipalamount) Cashatbank Netexposuretocashflowinterestraterisk 2017 BALANCE $'000 65,000 – (13,240) 51,760 2016 BALANCE $'000 56,000 (41,250) (8,114) 6,636 Thegroupundertakescertaintransactionsdenominatedinforeigncurrencyandisexposedtoforeigncurrencyrisk throughforeignexchangeratefluctuations. Anofficialincrease/decreaseininterestratesof50(2016:50)basispointswouldhaveanadverse/favourableeffecton lossbeforetaxof$259,000(2016:$33,000)perannumbasedonthenetbalance. Foreignexchangeriskarisesfromfuturecommercialtransactionsandrecognisedfinancialassetsandfinancialliabilities denominatedinacurrencythatisnottheentity’sfunctionalcurrency.Theriskismeasuredusingsensitivityanalysisand cashflowforecasting. Thecarryingamountofthegroup’sforeigncurrencydenominatedfinancialassetsandfinancialliabilitiesatthereporting datewereasfollows: ASSETS LIABILITIES 2017 $’000 5,316 11 58 5,385 2016 $’000 3,852 200 374 4,426 2017 $’000 94 44 439 577 2016 $’000 390 – 115 505 CONSOLIDATED US dollars Singapore dollars Others 68 Credit risk Creditriskreferstotheriskthatacounterpartywilldefaultonitscontractualobligationsresultinginfinanciallosstothe group.Thegrouphasastrictcodeofcredit,includingobtainingagencycreditinformation,confirmingreferencesand settingappropriatecreditlimits.Thegroupobtainsguaranteeswhereappropriatetomitigatecreditrisk.Themaximum exposuretocreditriskatthereportingdatetorecognisedfinancialassetsisthecarryingamount,netofanyprovisionsfor impairmentofthoseassets,asdisclosedinthestatementoffinancialpositionandnotestothefinancialstatements.The groupdoesnotholdanycollateral. FY17 Financial Statements 69 Isentia Group Limited – 2017 Annual Report FY17 Financial Statements (continued) Liquidity risk Vigilantliquidityriskmanagementrequiresthegrouptomaintainsufficientliquidassets(mainlycashandcash equivalents)andavailableborrowingfacilitiestobeabletopaydebtsasandwhentheybecomedueandpayable. Thegroupmanagesliquidityriskbymaintainingadequatecashreservesandavailableborrowingfacilitiesbycontinuously monitoringactualandforecastcashflowsandmatchingthematurityprofilesoffinancialassetsandliabilities. Financing arrangements Unusedborrowingfacilitiesatthereportingdate: Bankloans CONSOLIDATED 2017 $’000 10,000 2016 $’000 9,000 Ofthe$10,000,000(2016:$9,000,000)remainingfacility,$515,000(2016:$316,000)hasbeenusedforbankguarantees. Remaining contractual maturities Thefollowingtablesdetailthegroup’sremainingcontractualmaturityforitsfinancialinstrumentliabilities.Thetables havebeendrawnupbasedontheundiscountedcashflowsoffinancialliabilitiesbasedontheearliestdateonwhichthe financialliabilitiesarerequiredtobepaid.Thetablesincludebothinterestandprincipalcashflowsdisclosedasremaining contractualmaturitiesandthereforethesetotalsmaydifferfromtheircarryingamountinthestatementoffinancial position. WEIGHTED AVERAGE INTEREST RATE % 1 YEAR OR LESS $’000 BETWEEN 1 AND 2 YEARS $’000 BETWEEN 2 AND 5 YEARS $’000 OVER 5 YEARS $’000 REMAINING CONTRACTUAL MATURITIES $’000 CONSOLIDATED – 2017 Non-derivatives Non-interest bearing Tradepayables Other payables Contingent consideration Interest-bearing - variable – – – 3,142 1,501 – – 2,989 5,122 – – – – – – – – 3,142 1,501 8,111 70,264 83,018 Bankloans 4.01% 2,607 Totalnon-derivatives 10,239 2,607 7,729 65,050 65,050 WEIGHTED AVERAGE INTEREST RATE % 1 YEAR OR LESS $’000 BETWEEN 1 AND 2 YEARS $’000 BETWEEN 2 AND 5 YEARS $’000 OVER 5 YEARS $’000 REMAINING CONTRACTUAL MATURITIES $’000 CONSOLIDATED – 2016 Non-derivatives Non-interest bearing Tradepayables Other payables Contingent consideration Interest-bearing – variable – – – 5,884 984 – – – – 6,995 16,731 6,054 Bankloans 5.19% 58,153 – – Totalnon-derivatives 72,016 16,731 6,054 Derivatives Interestrateswapsnet settled – Totalderivatives 532 532 – – – – – – – – – – – 5,884 984 29,780 58,153 94,801 532 532 Note 27. Fair value measurement Fair value hierarchy Thefollowingtablesdetailthegroup’sassetsandliabilities,measuredordisclosedatfairvalue,usingathreelevel hierarchy,basedonthelowestlevelofinputthatissignificanttotheentirefairvaluemeasurement,being: Level1:Quotedprices(unadjusted)inactivemarketsforidenticalassetsorliabilitiesthattheentitycanaccessatthe measurement date Level2:InputsotherthanquotedpricesincludedwithinLevel1thatareobservablefortheassetorliability,eitherdirectlyor indirectly Level3:Unobservableinputsfortheassetorliability CONSOLIDATED – 2017 Liabilities Contingent consideration Totalliabilities LEVEL 1 $’000 LEVEL 2 $’000 LEVEL 3 $’000 TOTAL $’000 – – – – 7,952 7,952 7,952 7,952 70 FY17 Financial Statements 71 Isentia Group Limited – 2017 Annual Report FY17 Financial Statements (continued) CONSOLIDATED – 2016 Liabilities Interestrateswapcontracts–cashflowhedges Contingent consideration Totalliabilities LEVEL 1 $’000 LEVEL 2 $’000 LEVEL 3 $’000 TOTAL $’000 – – – 532 – 532 – 28,743 28,743 532 28,743 29,275 Therewerenotransfersbetweenlevelsduringthefinancialyear. Thecarryingvaluesoffinancialassetsandfinancialliabilitiespresentedrepresentareasonableapproximationoffairvalue. Thecarryingamountsoftradeandotherreceivablesandtradeandotherpayablesapproximatetheirfairvaluesduetotheir short-termnature.Thefairvalueoffinancialliabilitiesisestimatedbydiscountingtheremainingcontractualmaturitiesat thecurrentmarketinterestratethatisavailableforsimilarfinancialliabilities. Valuation techniques for fair value measurements categorised within level 2 and level 3 Interestrateswapcontractshavebeenvaluedateachreportingdateusingquotedmarketrates.Futurecashflowsare estimatedbasedonforwardinterestrates(fromobservableyieldcurvesattheendofthereportingperiod)andcontract interestrates,discountedataratethatreflectsthecreditriskofvariouscounterparties.Thisvaluationtechnique maximisestheuseofobservablemarketdatawhereitisavailableandreliesaslittleaspossibleonentityspecific estimates. Contingentconsiderationisvaluedateachreportingdatebasedonthelikelysettlementamount,discountedtopresent value.Thefairvalueisdeterminedusingthediscountedcashflowmethod.Significantunobservablevaluationinputsin relationtocontingentconsiderationincludeestimatedrevenueandthediscountrate. Level 3 assets and liabilities Movementsinlevel3assetsandliabilitiesduringthecurrentandpreviousfinancialyeararesetoutbelow: CONSOLIDATED Balanceat1July2015 Contingentconsiderationrecognisedonbusinesscombinations(note34) Contingent consideration recognised on purchase of intangibles Net(loss)/gainrecognisedinotherexpensesinprofitorloss Contingent consideration payout Balanceat30June2016 Gainsrecognisedinprofitorloss Exchange difference Contingent consideration payout Balanceat30June2017 72 CONTINGENT CONSIDERATION $’000 (384) (27,897) (1,426) 661 303 (28,743) 13,799 (41) 7,033 (7,952) Thelevel3assetsandliabilitiesunobservableinputsandsensitivityareasfollows: DESCRIPTION UNOBSERVABLE INPUTS RANGE (WEIGHTED AVERAGE) SENSITIVITY Contingentconsideration– SNCKoreaacquisition Revenue Contingentconsideration– BeyondKorea Revenue Contingentconsideration– NewPointMarketingLimited Revenue Rangeof$5,879,000 to$7,186,000(average $6,533,000) Rangeof$2,729,000 to$3,336,000(average $3,033,000) Rangeof$1,689,000 to$2,064,000(average $1,877,000) 10%increaseinRevenue wouldresultinincreaseinfair valueby$490,000and10% decreaseinRevenuewould resultindecreaseinfairvalue by$490,000. 10%increaseinRevenue wouldresultinincreaseinfair valueby$133,000and10% decreaseinRevenuewould resultindecreaseinfairvalue by$133,000. 10%increaseinRevenue wouldresultinincreaseinfair valueby$142,000and10% decreaseinRevenuewould resultindecreaseinfairvalue by$142,000. Discountrateof4%wasappliedincalculatingthediscountedcashflowmodel.0.5%increaseindiscountratewould decreasefairvalueby$40,000.0.5%decreaseindiscountratewouldincreasefairvalueofcontingentconsiderationby $40,000. Note 28. Key management personnel disclosures Compensation Theaggregatecompensationmadetodirectorsandothermembersofkeymanagementpersonnelofthegroupissetout below: Short-termemployeebenefits Post-employmentbenefits Long-termbenefits Share-basedpayments CONSOLIDATED 2017 $’000 2016 $’000 2,400,940 2,350,728 113,853 16,556 708,661 111,413 22,892 532,375 3,240,010 3,017,408 FY17 Financial Statements 73 Isentia Group Limited – 2017 Annual Report FY17 Financial Statements (continued) Note 29. Remuneration of auditors Note 31. Commitments DuringthefinancialyearthefollowingfeeswerepaidorpayableforservicesprovidedbyDeloitteToucheTohmatsu,the auditorofthecompany,itsnetworkfirmsandunrelatedfirms: Audit services – Deloitte Touche Tohmatsu Auditorreviewofthefinancialstatements Other services – Deloitte Touche Tohmatsu Taxservices Otherservices CONSOLIDATED 2017 $’000 2016 $’000 315,000 299,500 55,000 – 55,000 370,000 55,000 45,000 100,000 399,500 Lease commitments – operating Committedatthereportingdatebutnotrecognisedasliabilities,payable: Withinoneyear Onetofiveyears Morethanfiveyears CONSOLIDATED 2017 $’000 2016 $’000 3,975 9,088 640 13,703 3,939 5,523 – 9,462 Operatingleasecommitmentsincludescontractedamountsforofficeaccommodationandofficeequipmentundernon- cancellableoperatingleasesexpiringwithinonetosixyearswith,insomecases,optionstoextend.Contractualescalation clauseshavebeenfactoredintothecommitmentsdisclosedabove.Onrenewal,thetermsoftheleasesarerenegotiated. Audit services – Deloitte International Associates – Services provided to International Subsidiaries Note 32. Related party transactions Auditorreviewofthefinancialstatements Other services – Deloitte International Associates TaxServices Audit services – unrelated firms Auditorreviewofthefinancialstatements Other services – unrelated firms Taxcomplianceservices UnrelatedfirmsareforauditfirmsnotrelatedtoDeloitteToucheTohmatsu. Note 30. Contingent liabilities Bankguarantees 74 163,620 126,169 Parent entity IsentiaGroupLimitedistheparententity. Subsidiaries Interestsinsubsidiariesaresetoutinnote35. Key management personnel Disclosuresrelatingtokeymanagementpersonnelaresetoutinnote28andtheremunerationreportincludedinthe directors’report. Transactions with related parties Therewerenotransactionswithrelatedpartiesduringthecurrentandpreviousfinancialyear. Receivable from and payable to related parties Therewerenotradereceivablesfromortradepayablestorelatedpartiesatthecurrentandpreviousreportingdate. Loans to/from related parties Therewerenoloanstoorfromrelatedpartiesatthecurrentandpreviousreportingdate. 28,890 192,510 18,114 144,283 48,116 43,901 110,330 158,446 110,336 154,237 CONSOLIDATED 2017 $’000 515 2016 $’000 316 FY17 Financial Statements 75 Isentia Group Limited – 2017 Annual ReportFY17 Financial Statements (continued) Note 33. Parent entity information Setoutbelowisthesupplementaryinformationabouttheparententity. Statement of profit or loss and other comprehensive income Significant accounting policies Theaccountingpoliciesoftheparententityareconsistentwiththoseofthegroup,asdisclosedinnote1,exceptforthe following: • Investmentsinsubsidiariesareaccountedforatcost,lessanyimpairment,intheparententity. • Dividendsreceivedfromsubsidiariesarerecognisedasotherincomebytheparententityanditsreceiptmaybean PARENT indicatorofanimpairmentoftheinvestment. Loss after income tax Totalcomprehensiveincome Statement of financial position Totalcurrentassets Totalassets Totalcurrentliabilities Totalliabilities Equity Issued capital Share-basedpaymentsreserve Accumulated losses Totalequity 2017 $’000 (52,825) (52,825) PARENT 2017 $’000 1 2016 $’000 (387) (387) 2016 $’000 – 306,300 373,335 – – – – 403,662 403,662 1,898 1,048 (99,260) (31,375) 306,300 373,335 Guarantees entered into by the parent entity in relation to the debts of its subsidiaries TheparententityanditsAustraliansubsidiariesarepartytoadeedofcrossguaranteeunderwhicheachcompany guaranteesthedebtsoftheothers.Nodeficienciesofassetsexistinanyofthesesubsidiaries.Refertonote36for furtherdetails. Contingent liabilities Theparententityhadnocontingentliabilitiesasat30June2017and30June2016. Capital commitments – Property, plant and equipment Theparententityhadnocapitalcommitmentsforproperty,plantandequipmentatas30June2017and30June2016. Note 34. Business combinations Acquisition of Isentia SNC Korea Co., Ltd & The Beyond Co., Ltd. (comparative year) Intheprioryear,thegroupacquired100%oftheordinarysharesofIsentiaSNCKoreaCo.Ltd(‘SNC’)and51%ofthe ordinarysharesofTheBeyondCo.Ltd.(‘Beyond’)foratotalconsiderationof$11,305,000. Thesebusinesscombinationswerefinalisedinthecurrentfinancialyearandthishasresultedintherecognitionof customerrelationshipsandcontractsintangibleassetof$4,321,000,deferredtaxliabilityof$1,296,000andadecreasein goodwillof$3,025,000.Thesebalanceswererecognisedasadjustmentstothebalancesheetasat30June2016. Finalisationofprovisionalaccountingdidnotimpactthecomparativeyearstatementofprofitorlossandother comprehensiveincomeoropeningaccumulatedlosses. Detailsoftheacquisitionsaresummarisedasfollows,andhavebeenupdatedaccordingly: Cashandcashequivalents Tradereceivables Prepayments Property,plantandequipment Customer relationships and contracts Othernon-currentassets Tradeandotherpayables Deferred tax liability Net assets acquired Goodwill Acquisition-datefairvalueofthetotalconsiderationtransferred FAIR VALUE $’000 73 436 11 52 4,321 93 (288) (1,296) 3,402 7,903 11,305 76 FY17 Financial Statements 77 Isentia Group Limited – 2017 Annual ReportFY17 Financial Statements (continued) King Content Pty Limited (comparative year) Intheprioryear,thegroupacquired100%oftheordinarysharesofKingContentPtyLimitedanditssubsidiaries(‘King Content’)forthetotalconsiderationtransferredof$46,798,000. Thebusinesscombinationwasadjustedinthecurrentfinancialyearforthechangeinaccountingpolicydisclosedinnote 3andthishasresultedintherecognitionofdeferredtaxliabilityof$1,829,000andanincreaseingoodwillof$1,829,000. Thesebalanceswererecognisedasadjustmentstothebalancesheetasat30June2016. Theaboveadjustmentdidnotimpactthecomparativeyearstatementofprofitorlossandothercomprehensiveincomeor openingaccumulatedlosses. Detailsoftheacquisitionsaresummarisedasfollows,andhavebeenupdatedaccordingly: Cashandcashequivalents Tradeandotherreceivables Other current assets Plantandequipment Intangiblesotherthangoodwill Tradeandotherpayables Provisionforincometax Deferred tax liability Net assets acquired Goodwill Acquisition-datefairvalueofthetotalconsiderationtransferred FAIR VALUE $’000 917 4,511 113 309 17,910 (5,136) (754) (3,789) 14,081 32,717 46,798 Note 35. Interests in subsidiaries Theconsolidatedfinancialstatementsincorporatetheassets,liabilitiesandresultsofthefollowingsubsidiariesin accordancewiththeaccountingpolicydescribedinnote1: OWNERSHIP INTEREST NAME IsentiaHoldingsPtyLimited IsentiaFinancePtyLimited IsentiaPtyLimited SliceMediaPtyLimited MediaMonitorsPtyLimited BuzzNumbersPtyLimited KingContentPtyLtd Isentia Limited IsentiaOperationsSdn.Bhd. IsentiaGroupSdn.Bhd. IsentiaLibraryGroupSdn.Bhd. Isentia(M)Sdn.Bhd. Isentia(JohorBahru)Sdn.Bhd. BrandtologySdn.Bhd.(Malaysia)Company* IsentiaPteLimited IsentiaBrandtologyPteLimited PTIsentiaJakarta IsentiaVietnamCo.Investment IsentiaManilaInc. IsentiaMonitoringServices(Thailand)Ltd IsentiaBangkokCompanyLimited Brandtology,Inc. KingContent(USA),Inc Isentia Limited KingContentLimited KingContent(SG)PteLtd BrandtologyCo.,Ltd BeijingIsentiaInformationConsultingCo.,Limited Shanghai Isentia Consulting Ltd KingContentLtd IsentiaSNCKoreaCo.,Ltd TheBeyondCo.,Ltd.** PRINCIPAL PLACE OF BUSINESS / COUNTRY OF INCORPORATION Australia Australia Australia Australia Australia Australia Australia NewZealand Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia Singapore Singapore Indonesia Vietnam Philippines Thailand Thailand USA USA HongKong HongKong Singapore China China China UK SouthKorea SouthKorea 2017 % 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% – 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 51% 2016 % 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% – 100% 100% 51% *Denotesentitiesderegisteredduringtheyear. **Thegroupholdsoptionsontheremainingissuedshares,whicharedeemedtohavebeenacquired,andthereforenonon-controlling interestisrecognised. 78 FY17 Financial Statements 79 Isentia Group Limited – 2017 Annual ReportFY17 Financial Statements (continued) Note 36. Deed of cross guarantee Thefollowingentitiesarepartytoadeedofcrossguaranteeunderwhicheachcompanyguaranteesthedebtsofthe others: Isentia Group Limited IsentiaFinancePtyLimited IsentiaHoldingsPtyLimited IsentiaPtyLimited Byenteringintothedeed,thewholly-ownedentitieshavebeenrelievedfromtherequirementtopreparefinancial statementsanddirectors’reportunderCorporationsInstrument2016/785issuedbytheAustralianSecuritiesand InvestmentsCommission. Theabovecompaniesrepresenta‘ClosedGroup’forthepurposesoftheCorporationsInstrument,andasthereareno otherpartiestothedeedofcrossguaranteethatarecontrolledbyIsentiaGroupLimited,theyalsorepresentthe‘Extended ClosedGroup’. Setoutbelowisaconsolidatedstatementofprofitorlossandothercomprehensiveincomeandstatementoffinancial positionofthe‘ClosedGroup’. STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME Revenue Other income Copyright,consumablesandotherdirectpurchases Depreciation and amortisation expense Employeebenefitsexpense Impairment of assets Occupancy costs Other expenses Finance costs (Loss)/profit before income tax expense Income tax expense (Loss)/profit after income tax expense Other comprehensive income Netchangeinfairvalueofcashflowhedgestakentoequity,netoftax Exchangedifferencesontranslatingforeignoperations,netoftax Othercomprehensiveincomefortheyear,netoftax Total comprehensive income for the year EQUITY – RETAINED PROFITS Accumulatedlossesatthebeginningofthefinancialyear (Loss)/profitafterincometaxexpense Dividendspaid Accumulatedlossesattheendofthefinancialyear 80 2017 $’000 96,800 17,224 (30,747) (9,615) (28,377) (37,571) (2,295) (4,676) (3,109) (2,366) (4,685) (7,051) 302 (800) (498) (7,549) 2017 $’000 (37,764) (7,051) (15,060) (59,875) 2016 $’000 100,742 51 (25,808) (8,759) (31,312) – (2,259) (4,733) (3,176) 24,746 (6,312) 18,434 197 84 281 18,715 2016 $’000 (41,198) 18,434 (15,000) (37,764) STATEMENT OF FINANCIAL POSITION Current assets Cashandcashequivalents Tradeandotherreceivables Income tax refund due Prepayments Non-current assets Receivablefromsubsidiaries Investmentinsubsidiaries Property,plantandequipment Intangibles Deferred tax assets Other Total assets Current liabilities Tradeandotherpayables Borrowings Derivativefinancialinstruments Current tax liabilities Provisions Contingent consideration Non-current liabilities Borrowings Deferred tax liabilities Provisions Contingent consideration Total liabilities Net assets Equity Issued capital Reserves Accumulated losses Total equity 2017 $’000 5,945 16,671 1,360 782 24,758 10,858 52,570 2,204 96,505 5,284 40 167,461 192,219 12,704 – – – 3,658 2,989 19,351 64,869 12,747 783 3,494 81,893 101,244 90,975 2016 $’000 2,750 19,018 – 828 22,596 9,360 90,141 1,337 95,696 7,285 40 203,859 226,455 12,150 55,875 532 1,605 4,029 6,995 81,186 – 11,487 727 20,321 32,535 113,721 112,734 403,662 (252,812) (59,875) 90,975 403,662 (253,164) (37,764) 112,734 FY17 Financial Statements 81 Isentia Group Limited – 2017 Annual ReportFY17 Financial Statements (continued) Note 37. Reconciliation of (loss)/profit after income tax to net cash from operating activities Note 38. Earnings per share (Loss)/profitafterincometaxexpensefortheyear Adjustmentsfor: Depreciation and amortisation Impairment of intangibles Writeoffofproperty,plantandequipment Share-basedpayments Financecosts–non-cash Otherexpenses–non-cash Netfairvaluemovementoncontingentconsideration Badanddoubtfuldebtexpense Change in operating assets and liabilities: Decrease/(increase)intradeandotherreceivables Increase in income tax refund due Decrease in deferred tax assets Decrease/(increase)inprepayments Decrease in other operating assets Decrease in trade and other payables Decreaseinderivativeliabilities Decreaseinprovisionforincometax Decrease in deferred tax liabilities Decreaseinemployeebenefits Increase/(decrease)inotherprovisions CONSOLIDATED 2017 $’000 (13,523) 16,246 39,399 254 850 – 50 (13,799) 1,026 7,755 (1,360) 2,737 384 93 (1,347) (230) (1,952) (1,978) (851) (5) 2016 $’000 24,252 13,704 – 53 750 231 – (661) 244 (7,756) – 1,398 (662) – (510) – (24) (72) (276) 100 Netcashfromoperatingactivities 33,749 30,771 (Loss)/profitafterincometaxattributabletotheownersofIsentiaGroupLimited CONSOLIDATED 2017 $’000 (13,523) 2016 $’000 24,252 NUMBER NUMBER Weightedaveragenumberofordinarysharesusedincalculatingbasicearningspershare 200,000,001 200,000,001 Adjustmentsforcalculationofdilutedearningspershare: Optionsoverordinaryshares – 462,887 Weightedaveragenumberofordinarysharesusedincalculatingdilutedearningspershare 200,000,001 200,462,888 Basicearningspershare Diluted earnings per share CENTS (6.761) (6.761) CENTS 12.126 12.098 Note 39. Share-based payments Thegrouphasalongtermincentiveplan(‘LTIP’)whichprovideseligibleemployeeswithanadditionalincentivetoworkto improvetheperformanceofthegroupbygrantingoptionsorrightstoacquireshares. Duringthefinancialyear1,794,238(2016:2,228,643)optionsweregranted.Theshare-basedpaymentexpensefortheyear was$850,000(2016:$750,000). Setoutbelowaresummariesofoptionsgrantedundertheplan: 2017 GRANT DATE EXPIRY DATE EXERCISE PRICE BALANCE AT THE START OF THE YEAR GRANTED EXERCISED 16/06/2014 30/06/2018 $2.04 965,743 10/12/2014 30/06/2018 $2.04 341,348 19/11/2015 30/06/2019 $3.75 2,228,643 – – – 17/11/2016 30/06/2020 $3.47 – 1,794,238 3,535,734 1,794,238 – – – – – EXPIRED/ FORFEITED/ OTHER BALANCE AT THE END OF THE YEAR – 965,743 (30,830) 310,518 (510,997) 1,717,646 (325,656) 1,468,582 (867,483) 4,462,489 Weightedaverageexerciseprice $3.12 $3.47 $0.00 $3.58 $3.17 Noneoftheoptionsoutstandingasat30June2017arevestedandexercisable(30June2016:Nil). 82 FY17 Financial Statements 83 Isentia Group Limited – 2017 Annual ReportFY17 Financial Statements (continued) Directors’ Declaration 2016 GRANT DATE EXPIRY DATE EXERCISE PRICE BALANCE AT THE START OF THE YEAR GRANTED EXERCISED EXPIRED/ FORFEITED/ OTHER 16/06/2014 30/06/2018 $2.04 965,743 10/12/2014 30/06/2018 $2.04 341,348 – – 19/11/2015 30/06/2019 $3.75 – 2,228,643 1,307,091 2,228,643 – – – – – – – – BALANCE AT THE END OF THE YEAR 965,743 341,348 2,228,643 3,535,734 In the directors’ opinion: • • • • theattachedfinancialstatementsandnotescomplywiththeCorporationsAct2001,theAccountingStandards,the Corporations Regulations 2001 and other mandatory professional reporting requirements; theattachedfinancialstatementsandnotescomplywithInternationalFinancialReportingStandardsasissuedbythe InternationalAccountingStandardsBoardasdescribedinnote1tothefinancialstatements; theattachedfinancialstatementsandnotesgiveatrueandfairviewofthegroup’sfinancialpositionasat30June 2017andofitsperformanceforthefinancialyearendedonthatdate; therearereasonablegroundstobelievethatthecompanywillbeabletopayitsdebtsasandwhentheybecomedue and payable; and • atthedateofthisdeclaration,therearereasonablegroundstobelievethatthemembersoftheExtendedClosedGroup willbeabletomeetanyobligationsorliabilitiestowhichtheyare,ormaybecome,subjectbyvirtueofthedeedofcross guaranteedescribedinnote36tothefinancialstatements. Thedirectorshavebeengiventhedeclarationsrequiredbysection295AoftheCorporationsAct2001. Weightedaverageexerciseprice $2.04 $3.75 $0.00 $0.00 $3.12 Signedinaccordancewitharesolutionofdirectorsmadepursuanttosection295(5)(a)oftheCorporationsAct2001. On behalf of the directors Theweightedaveragesharepriceduringthefinancialyearwas$2.30(2016:$3.74). Theweightedaverageremainingcontractuallifeofoptionsoutstandingattheendofthefinancialyearwasonetothree years(2016:twotothreeyears). Fortheoptionsgrantedduringthecurrentfinancialyear,thevaluationmodelinputsusedtodeterminethefairvalueatthe grantdate,areasfollows: GRANT DATE EXPIRY DATE SHARE PRICE AT GRANT DATE EXERCISE PRICE EXPECTED VOLATILITY DIVIDEND YIELD RISK-FREE INTEREST RATE FAIR VALUE AT GRANT DATE 17/11/2016 30/06/2020 $2.60 $3.47 31.00% 2.20% 1.60% $0.69 OptionsissuedunderEPSTranche:KeyassumptionsarethesameastheTSRTranchedisclosedabove,fairvalueatgrant dateamountedto$0.71. Note 40. Events after the reporting period Apartfromthedividenddeclaredasdisclosedinnote25,noothermatterorcircumstancehasarisensince30June2017 thathassignificantlyaffected,ormaysignificantlyaffectthegroup’soperations,theresultsofthoseoperations,orthe group’sstateofaffairsinfuturefinancialyears.      John Croll ChiefExecutiveOfficerandManagingDirector Doug Flynn Chairman 22 August 2017 Sydney 84 Directors’ Declaration 85 Isentia Group Limited – 2017 Annual Report                                         DeloitteToucheTohmatsu ABN74490121060  GrosvenorPlace 225 George Street SydneyNSW2000 POBoxN250GrosvenorPlace SydneyNSW1220Australia DX: Tel: Fax: www.deloitte.com.au 10307SSE +61(0)293227000 +61(0)293227021 Independent Auditor's Report to the Members of Isentia Group Limited Report on the Financial Report WehaveauditedthefinancialreportofIsentiaGroupLimited(the“Company”)anditssubsidiaries(the“Group”),which comprisesthestatementoffinancialpositionasat30June2017,thestatementofprofitorlossandothercomprehensive income,thestatementofchangesinequityandthestatementofcashflowsfortheyearthenended,andnotestothe financialstatements,includingasummaryofsignificantaccountingpoliciesandthedirectors’declaration. Inouropinion,theaccompanyingfinancialreportoftheGroupisinaccordancewiththeCorporationsAct2001,including: (i)givingatrueandfairviewoftheGroup’sfinancialpositionasat30June2017andofitsfinancialperformancefor the year then ended; and (ii)complyingwithAustralianAccountingStandardsandtheCorporationsRegulations2001. Basis for Opinion WeconductedourauditinaccordancewithAustralianAuditingStandards.Ourresponsibilitiesunderthosestandards arefurtherdescribedintheAuditor’sResponsibilitiesfortheAuditoftheFinancialReportsectionofourreport.Weare independentoftheGroupinaccordancewiththeauditorindependencerequirementsoftheCorporationsAct2001and theethicalrequirementsoftheAccountingProfessionalandEthicalStandardsBoard’sAPES110CodeofEthicsfor ProfessionalAccountants(theCode)thatarerelevanttoourauditofthefinancialreportinAustralia.Wehavealsofulfilled ourotherethicalresponsibilitiesinaccordancewiththeCode. WeconfirmthattheindependencedeclarationrequiredbytheCorporationsAct2001,whichhasbeengiventothedirectors oftheCompany,wouldbeinthesametermsifgiventothedirectorsasatthetimeofthisauditor’sreport. Webelievethattheauditevidencewehaveobtainedissufficientandappropriatetoprovideabasisforouropinion. LiabilitylimitedbyaschemeapprovedunderProfessionalStandardsLegislation. MemberofDeloitteToucheTohmatsuLimited Key Audit Matters Keyauditmattersarethosemattersthat,inourprofessionaljudgement,wereofmostsignificanceinourauditofthe financialreportforthecurrentperiod.Thesematterswereaddressedinthecontextofourauditofthefinancialreportasa whole,andinformingouropinionthereon,andwedonotprovideaseparateopiniononthesematters. KEY AUDIT MATTER Revenue recognition Fortheyearended30June2017,theGroup’srevenue recognisedfromcontentmarketingtotals$14.4millionas disclosedinnote4. Contentmarketingisarevenuestreamthatrequires managementtoexercisejudgementtodeterminehowrevenue shouldberecognised,basedonworkinprogress. HOW THE SCOPE OF OUR AUDIT RESPONDED TO THE KEY AUDIT MATTER Ourproceduresincluded,butwerenotlimitedto: • Assessingthecontentmarketingrevenuestream,and challengingtheidentificationofthekeyperformance deliverables,theallocationofrevenuetosuchdeliverables andthetimingofrecognitionofrevenue, • Assessing the accrued income recognised in the statement offinancialpositionthroughsupportingdocumentation suchastimesheets,costsincurredandenquiriesofproject managersonthedeliverytimeframesforspecificprojects, • Evaluatingsupportingevidenceforthedeliveryofcontent marketingservices,throughagreeingtocontractual arrangementsandevidenceofcashreceiptsfrom customers,and • Assessing the appropriateness of the disclosures in Note 1 tothefinancialstatements. Assessment of impairment of assets Asat30June2017,theGroupimpaired$39.3millionof assetsassociatedwithKingContentofwhich$32.7million and$6.1millionisattributabletoKingContentgoodwilland brandrespectivelyasdisclosedinnote12. Assessing the quantum of the impairment is an area of judgementasitisreliantonfutureforecastsoftheKingContent business. Ourproceduresincluded,butwerenotlimitedto: • Testingthemathematicalaccuracyofmanagement’s calculations, • Challengingmanagement’skeyassumptionsincluding forecastsforKingContent,and • Assessing the appropriateness of the disclosures in note 12 tothefinancialstatements. Capitalisation of development costs Asat30June2017,theGroup’scarryingvalueofthesoftware anddevelopmentcostscapitalisedasintangiblestotals $25millionofwhich$12.3millionisattributabletocapitalisation inthecurrentfinancialyearasdisclosedinnote12. Judgementisinvolvedindeterminingwhetherthelabourcosts aredirectlyattributabletodeveloptheGroup’sproductsuite andnewsoftware,andtheappropriatenessofthecoststobe capitalised. Ourproceduresincluded,butwerenotlimitedto: • Makingenquiriesofdepartmentheadsinvolvedinproduct developmenttounderstandthebasisandrationalefor capitalisinglabourcosts, • Testingonasamplebasis,capitalisedlabourcoststhrough reviewingprojectbudgetsand/ortimesheetsandholding discussionswithstaffmembersoutsidethefinance department, • Challengingmanagement’skeyassumptionsinthelabour capitalisation calculation including the treatment of employeeon-costs,percentagesappliedtolabourcosts, • Testingthemathematicalaccuracyofmanagement’s capitalisationschedule,and • Assessing the appropriateness of the disclosures in note 12 tothefinancialstatements. 86 IndependentAuditor'sReporttotheMembersofIsentiaGroupLimited 87 Isentia Group Limited – 2017 Annual Report Other Information Thedirectorsareresponsiblefortheotherinformation.Theotherinformationcomprisestheinformationincludedinthe Group’sannualreportfortheyearended30June2017,butdoesnotincludethefinancialreportandourauditor’sreport thereon. Ouropiniononthefinancialreportdoesnotcovertheotherinformationandwedonotexpressanyformofassurance conclusionthereon. Inconnectionwithourauditofthefinancialreport,ourresponsibilityistoreadtheotherinformationand,indoingso, considerwhethertheotherinformationismateriallyinconsistentwiththefinancialreportorourknowledgeobtainedinthe audit,orotherwiseappearstobemateriallymisstated. If,basedontheworkwehaveperformed,weconcludethatthereisamaterialmisstatementofthisotherinformation,we arerequiredtoreportthatfact.Wehavenothingtoreportinthisregard. The Directors’ Responsibilities for the Financial Report ThedirectorsoftheGroupareresponsibleforthepreparationofthefinancialreportthatgivesatrueandfairviewin accordancewithAustralianAccountingStandardsandtheCorporationsAct2001andforsuchinternalcontrolasthe directorsdetermineisnecessarytoenablethepreparationofthefinancialreportthatgivesatrueandfairviewandisfree frommaterialmisstatement,whetherduetofraudorerror. Inpreparingthefinancialreport,thedirectorsareresponsibleforassessingtheabilityoftheGrouptocontinueasagoing concern,disclosing,asapplicable,mattersrelatedtogoingconcernandusingthegoingconcernbasisofaccounting unlessthedirectorseitherintendtoliquidatetheGrouportoceaseoperations,orhasnorealisticalternativebuttodoso. Auditor’s Responsibilities for the Audit of the Financial Report Ourobjectivesaretoobtainreasonableassuranceaboutwhetherthefinancialreportasawholeisfreefrommaterial misstatement,whetherduetofraudorerror,andtoissueanauditor’sreportthatincludesouropinion.Reasonable assuranceisahighlevelofassurance,butisnotaguaranteethatanauditconductedinaccordancewiththeAustralian AuditingStandardswillalwaysdetectamaterialmisstatementwhenitexists.Misstatementscanarisefromfraudor errorandareconsideredmaterialif,individuallyorintheaggregate,theycouldreasonablybeexpectedtoinfluencethe economicdecisionsofuserstakenonthebasisofthisfinancialreport. AspartofanauditinaccordancewiththeAustralianAuditingStandards,weexerciseprofessionaljudgementandmaintain professionalscepticismthroughouttheaudit.Wealso: • Identifyandassesstherisksofmaterialmisstatementofthefinancialreport,whetherduetofraudorerror,design andperformauditproceduresresponsivetothoserisks,andobtainauditevidencethatissufficientandappropriateto provideabasisforouropinion.Theriskofnotdetectingamaterialmisstatementresultingfromfraudishigherthan foroneresultingfromerror,asfraudmayinvolvecollusion,forgery,intentionalomissions,misrepresentations,orthe overrideofinternalcontrol. • Obtainanunderstandingofinternalcontrolrelevanttotheauditinordertodesignauditproceduresthatareappropriate inthecircumstances,butnotforthepurposeofexpressinganopinionontheeffectivenessoftheGroup’sinternal control. • Evaluatetheappropriatenessofaccountingpoliciesusedandthereasonablenessofaccountingestimatesandrelated disclosuresmadebythedirectors. • Concludeontheappropriatenessofthedirectors’useofthegoingconcernbasisofaccountingand,basedonthe auditevidenceobtained,whetheramaterialuncertaintyexistsrelatedtoeventsorconditionsthatmaycastsignificant doubtontheGroup’sabilitytocontinueasagoingconcern.Ifweconcludethatamaterialuncertaintyexists,weare requiredtodrawattentioninourauditor’sreporttotherelateddisclosuresinthefinancialreportor,ifsuchdisclosures areinadequate,tomodifyouropinion.Ourconclusionsarebasedontheauditevidenceobtaineduptothedateofour auditor’sreport.However,futureeventsorconditionsmaycausetheGrouptoceasetocontinueasagoingconcern. • Evaluatetheoverallpresentation,structureandcontentofthefinancialreport,includingthedisclosures,andwhether thefinancialreportrepresentstheunderlyingtransactionsandeventsinamannerthatachievesfairpresentation. Wecommunicatewiththedirectorsregarding,amongothermatters,theplannedscopeandtimingoftheauditand significantauditfindings,includinganysignificantdeficienciesininternalcontrolthatweidentifyduringouraudit. Wealsoprovidethedirectorswithastatementthatwehavecompliedwithrelevantethicalrequirementsregarding independence,andtocommunicatewiththemallrelationshipsandothermattersthatmayreasonablybethoughttobear onourindependence,andwhereapplicable,relatedsafeguards. Fromthematterscommunicatedwiththedirectors,wedeterminethosemattersthatwereofmostsignificanceinthe auditofthefinancialreportofthecurrentperiodandarethereforethekeyauditmatters.Wedescribethesematters inourauditor’sreportunlesslaworregulationprecludespublicdisclosureaboutthematterorwhen,inextremelyrare circumstances,wedeterminethatamattershouldnotbecommunicatedinourreportbecausetheadverseconsequences ofdoingsowouldreasonablybeexpectedtooutweighthepublicinterestbenefitsofsuchcommunication. 88 IndependentAuditor'sReporttotheMembersofIsentiaGroupLimited 89 Isentia Group Limited – 2017 Annual ReportShareholder Information Theshareholderinformationsetoutbelowwasapplicableasat4August2017. Distribution of equitable securities Analysis of number of equitable security holders by size of holding: 1to1,000 1,001to5,000 5,001to10,000 10,001to100,000 100,001andover Holdinglessthanamarketableparcel Equity security holders Twenty largest quoted equity security holders NUMBER OF HOLDERS OF ORDINARY SHARES NUMBER OF HOLDERS OF OPTIONS OVER ORDINARY SHARES 2,328 4,662 1,531 1,112 50 9,683 463 – – – – 8 8 – Thenamesofthetwentylargestsecurityholdersofquotedequitysecuritiesarelistedbelow: HSBCCUSTODYNOMINEES(AUSTRALIA)LIMITED JPMORGANNOMINEESAUSTRALIALIMITED CITICORPNOMINEESPTYLIMITED UBSNOMINEESPTYLTD NATIONALNOMINEESLIMITED CSTHIRDNOMINEESPTYLIMITED(HSBCCUSTNOMAULTD13A/C) JOHNANDREWCROLL RBCINVESTORSERVICESAUSTRALIANOMINEESPTYLTD(VFAA/C) CITICORPNOMINEESPTYLIMITED(COLONIALFIRSTSTATEINVA/C) RBCINVESTORSERVICESAUSTRALIANOMINEESPTYLIMITED(MBAA/C) AUSTRALIANFOUNDATIONINVESTMENTCOMPANYLIMITED BNPPARIBASNOMS(NZ)LTD(DRP) MIRRABOOKAINVESTMENTSLIMITED UBSNOMINEESPTYLTD BNPPARIBASNOMINEESPTYLTD(AGENCYLENDINGDRPA/C) RBCINVESTORSERVICESAUSTRALIANOMINEESPTYLTD(BKMINIA/C) AMCILLIMITED WARBONTNOMINEESPTYLTD(UNPAIDENTREPOTA/C) DJERRIWARRHINVESTMENTSLIMITED BNPPARIBASNOMSPTYLTD(DRP) ORDINARY SHARES NUMBER HELD % OF TOTAL SHARES ISSUED 34,169,504 20,598,312 15,351,210 10,823,875 10,273,168 6,812,603 6,045,658 5,238,777 5,065,882 4,650,000 3,800,000 3,098,160 2,853,816 2,294,869 2,255,703 1,945,377 1,775,000 1,697,310 1,500,000 1,273,550 17.08 10.30 7.68 5.41 5.14 3.41 3.02 2.62 2.53 2.32 1.90 1.55 1.43 1.15 1.13 0.97 0.89 0.85 0.75 0.64 141,522,774 70.77 Shareholder Information 91 Report on the Remuneration Report Opinion on the Remuneration Report WehaveauditedtheRemunerationReportincludedinpages20to32oftheDirectors’Reportfortheyearended30June 2017. Inouropinion,theRemunerationReportofIsentiaGroupLimited,fortheyearended30June2017,complieswithsection 300AoftheCorporationsAct2001. Responsibilities ThedirectorsofIsentiaGroupLimitedareresponsibleforthepreparationandpresentationoftheRemunerationReport inaccordancewithsection300AoftheCorporationsAct2001.Ourresponsibilityistoexpressanopiniononthe RemunerationReport,basedonourauditconductedinaccordancewithAustralianAuditingStandards. Yours sincerely DeloitteToucheTohmatsu Sandeep Chadha Partner Chartered Accountants Sydney,22August2017 LiabilitylimitedbyaschemeapprovedunderProfessionalStandardsLegislation. MemberofDeloitteToucheTohmatsu 90 Isentia Group Limited – 2017 Annual ReportShareholder Information (continued) Corporate Directory Unquoted equity securities Optionsoverordinarysharesissued Substantial holders NUMBER ON ISSUE NUMBER OF HOLDERS 4,462,489 8 Thenamesofsubstantialshareholderswhohavenotifiedthecompanyinaccordancewithsection671Bofthe Corporations Act 2001 are: CommonwealthBankofAustralia JCPInvestmentPartnersLtd AustralianSuperPtyLtd Yarra Funds Management Ltd ORDINARY SHARES NUMBER HELD % OF TOTAL SHARES ISSUED 19,058,562 15,978,735 11,296,003 17,090,178 9.53 7.99 5.65 8.55 Auditor DeloitteToucheTohmatsu Level9,GrosvenorPlace 225 George Street Sydney,NSW2000 Bankers WestpacBankingCorporation WestpacPlace,275KentStreet, Sydney,NSW2000 Stock exchange listing Isentia Group Limited shares are listed on the Australian SecuritiesExchange(ASXcode:ISD) Website www.isentia.com Corporate governance statement Corporategovernancestatementwhichwasapprovedat the same time as the Annual Report can be found at http://www.isentia.com/investor-centre/corporate- governance Directors Doug Flynn ChairmanandIndependentNon-ExecutiveDirector John Croll ChiefExecutiveOfficerandExecutiveDirector Pat O'Sullivan IndependentNon-ExecutiveDirector Fiona Pak-Poy IndependentNon-ExecutiveDirector Dr Geoff Raby IndependentNon-ExecutiveDirector Company secretary Ms Jacquie Shanahan Company Secretary Notice of annual general meeting Thedetailsoftheannualgeneralmeetingof Isentia Group Limited are: Isaac Nichols Auditorium 219-241ClevelandStreet StrawberryHills,NSW2012 11amonThursday23November2017 Registered office Level3 219-241ClevelandStreet StrawberryHills,NSW2012 Headofficetelephone:+61293184000 Share register LinkMarketServicesLimited Level12 680GeorgeStreet Sydney,NSW2000 Share registry telephone: 1300 554 474 92 Corporate Directory 93 Isentia Group Limited – 2017 Annual ReportPowered by technology. Inspired by people. 94 95 Isentia Group Limited – 2017 Annual ReportIsentia Group Limited Level3,219-241ClevelandStreet, StrawberryHillsNSWAustralia2012 www.isentia.com 

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