ASX RELEASE – IVE GROUP LIMITED (ASX: IGL)
23 October 2020
2020 ANNUAL REPORT
IVE Group Limited (ASX: IGL) attaches its 2020 Annual Report which has been sent to
shareholders today.
ENDS
Contact Details:
Richard Nelson
Investor Relations
0455 088 099
investors@ivegroup.com.au
Authorised for release: Geoff Selig, Executive Chairman
Annual Report 2020
Founded in 1921, IVE is Australia’s leading
holistic marketing company. With
an unmatched breadth and depth of
offering, we guide our clients from idea
to execution.
Our landscape is constantly shifting
and evolving, and as marketing natives
so are we. We are forever seeking new
ways to navigate the marketing maze
to connect our clients with customers,
wherever and whenever.
Specialising in creative, data-driven
communications (DDC), integrated
marketing, production and distribution,
we bring together the capabilities,
specialists and technology needed to
make customer connection seamless.
By forever seeking new ways to simplify,
integrate, and amplify their marketing
activity, we take our clients, their
businesses and their customers, further.
ASX: IGL
IVE Group Limited’s 2020
AGM will be held on Tuesday,
24 November 2020 commencing
at 10:00am (Sydney time) at
IVE Building, Level 1, Huntingwood
Drive, Huntingwood NSW 2148
Registered office
IVE Group Limited
Level 3, 35 Clarence Street
Sydney NSW 2000
Phone: +61 2 8020 4400
ABN 62 606 252 644
Designed.
Refined.
Delivered.
Bringing brands
to life.
We connect our
clients with
customers.
Wherever,
whenever.
Retail displays
that convert
shoppers to
customers.
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Year in review
Financial results
Chair’s review
CEO’s review
Board of Directors
Operating and financial review
Our vision, purpose and values
Strategy
Environmental, social and corporate governance
— People and culture
— Workplace Health & Safety
— Sustainability and risk management
Our offering
Sector and client spread
Our clients
Year in review
Business and brand simplification
Acquisition of Salmat Marketing Solutions, Reach Media
New Zealand and Lasoo
Response and impact of COVID-19
Review of financial performance
Financial results
Directors’ report
Remuneration report
Lead auditor’s independence declaration
Financial report
Financial report contents
Consolidated financial statements
Notes to the consolidated financial statements
Directors’ declaration
Independent auditor’s report
ASX additional information
Corporate governance statement
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119
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126
128
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IVE Group LimitedAnnual Report 2020 Year in review
Financial results
The year was defined by the unprecedented
impacts of COVID-19
> We moved quickly at the outset of the
pandemic to implement appropriate
measures to ensure the safety and
wellbeing of our staff
> We effectively executed a range of
initiatives to mitigate the expected financial
impacts of revenue declines and volatility
> We ensured throughout that we continued
to provide high levels of customer service
> We took the opportunity to leverage our
supply chain, logistics capability and
strong client relationships to significantly
expand our personal protective equipment
(PPE) range
The Company delivered a solid financial
performance as a result of:
> The flexibility of our cost base and our
capacity to respond to the impacts of
COVID-19
> Consistent gross profit margin
> The diversity of our offer
> The quality of our people
> The strength of our customer relationships
The acquisition of Salmat Marketing
Solutions (now IVE Distribution), Reach
Media NZ and Lasoo in January 2020
completed the final phase of our strategic
road map over recent years to further
strengthen and expand our offer to
retail clients
The business was streamlined
and strengthened through brand
simplification to the one IVE brand in
December 2019
The Group remains well capitalised and
highly liquid
> Free cash conversion to EBITDA of 110%
> At 30 June, 2020
— cash of $51.6m with working capital
facility of $30m fully undrawn
— net debt to EBITDA of 1.79x
> Cash at 30 September, 2020 of $67.3m
with working capital facility of $30m
fully undrawn
> Capital expenditure of $12.3m
significantly reduced on prior years
Dividends
> No dividend was declared during the FY20
year as a result of COVID-19
> $72m in fully franked dividends have
been paid since listing on the ASX in
December 2015
We are confident that we are ideally
placed to maintain and grow our strong
market position as we emerge from the
COVID-19 crisis
REVENUE
$691.5m
EBITDA
$76.6m
EBITDA MARGIN
11.1%
NPATA
$36.7m
NET DEBT TO EBITDA
1.79x
FREE CASH CONVERSION
TO EBITDA OF
110%
— NPAT excluding amortisation of customer contracts
— The underlying financial results are on a non-IFRS basis and are not audited or reviewed
— The underlying results are on a continuing operations basis and exclude non-operating items
(see reconciliation page 41)
— The underlying results include net JobKeeper receipts ($15.1m).
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IVE Group LimitedAnnual Report 2020Annual Report 2020 Chair’s review
2021 will mark a significant milestone with the
centenary year of our business. I reflect with
much pride at what has been created over
the last 100 years, starting with the humble
beginnings of my grandfather Oscar Selig who
in March 1921 launched a suburban newspaper
called ‘the Link’ in Balmain NSW. It was my
father Gordon’s vision and leadership for
decades that undoubtedly formed the solid
foundations of the Group we have today.
We commenced the evolution in the late
1990s from ‘just a printing company’ to a
broader product and service offering through a
combination of organic growth initiatives and a
strategic acquisition program. Twenty years on,
the successful execution of our long-term strategy
has resulted in the unparalleled value proposition
IVE currently takes to market and the leading
positions we hold across the marketing sector.
I feel strongly that core to our longevity and
success has been the commitment of our people,
and our capacity to understand and respond
to the constantly changing and expanding
communications needs of our clients.
As I consider the unprecedented and ongoing
impacts of the COVID-19 crisis, it has been our
heritage, the culture of our business, and the
collective experience and dedication of our
people that placed us in a position of strength
from which to respond. Notwithstanding the
extent and speed with which the crisis impacted
their personal and professional lives, our entire
workforce of 1700 staff responded together as
one. They committed to do whatever was required
to maintain a safe workplace, and to ensure
we continued delivering high levels of service
to our clients. Under the circumstances, I don’t
believe we could have responded any better to
the impacts of COVID-19, and I thank our CEO
Matt Aitken, our leadership team, and all of our
amazing staff for their outstanding efforts and
commitment over the last year, particularly
the last 8 months. Matt moved seamlessly into
the CEO’s role in August 2019, and since has
clearly demonstrated through his leadership how
fortunate we are to have someone of his calibre,
personal style and skill set at the helm.
An important component of our growth and
continued diversification over the last 5 years was
our decision to list on the ASX in December 2015.
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I feel strongly that
core to our longevity
and success has been
the commitment of
our people, and our
capacity to understand
and respond to the
constantly changing
and expanding
communications needs
of our clients.
Our strong free cashflow combined with access to
capital has enabled us to undertake a significant
investment program to further expand and
strengthen our integrated communications offer to
enhance our long-term client relationships.
The acquisition of Salmat Marketing Solutions
(now IVE Distribution), Reach Media NZ and
Lasoo in January 2020 completed the final phase
of our strategic roadmap over recent years to
further strengthen and expand our offer to retail
clients. The now enhanced structure of these
businesses has resulted in a more streamlined,
nimble and lower cost operation.
Lasoo is the market leader in online digital
catalogue aggregation, offering shoppers an
interactive experience across a broad range of
retailers. Lasoo provides Australian shoppers
with a single platform to search for product
pricing comparisons, with the detailed analytics
that flow further, informing our clients on their
customer activity. We see significant opportunity
to grow the scale, reach and effectiveness of
Lasoo over the year ahead as the printed and
digital catalogue work in unison.
Whilst we did not pay a dividend for the last year,
as a result of the pandemic, the solid financial
performance of the business since listing in late
2015 has enabled us to pay $72 million in fully
franked dividends to our shareholders.
Notwithstanding the impacts of COVID-19 and
the most recent acquisitions, the Company
remains well capitalised and highly liquid. The
Board intends to resume dividend payments
consistent with the existing dividend policy
commencing with the H1 FY21 interim dividend.
We are confident that we are ideally placed to
maintain and grow our strong market position
as we emerge from the COVID-19 crisis, albeit
the global and domestic uncertainty and
volatility continues.
We believe our investment and diversification
strategy over the last decade to be sound, and
we have confidence that the value proposition
IVE takes to market, and our extensive customer
base, places us in a flexible position to adapt
to movements in client expectations over the
years ahead.
We are fortunate to have a highly skilled, diverse
and engaged board. Thank you to my fellow
directors for their commitment and valuable
input over what has been a seminal year for
the business and all of us in the context of the
COVID-19 pandemic.
Geoff Selig
Executive Chairman
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IVE Group LimitedAnnual Report 2020 CEO’s review
My first year as CEO of IVE has clearly been
defined by the COVID-19 pandemic and how
the business has managed to navigate its
way through an environment we have never
experienced previously. I couldn’t be more proud
or appreciative of the commitment of our 1700
staff over the last year, particularly since the
outbreak of the pandemic in late March – we
are so fortunate to have such a wonderful team.
I am also of the view that IVE entered the
COVID-19 crisis in a position of strength, this view
validated by our capacity to continue servicing
our clients throughout, and the strong financial
performance of the business highlighted below.
The impacts of COVID-19 on the business
were varied, driving in some respects positive
initiatives whilst at the same time resulting in
lower earnings impacts due to a meaningful
reduction in revenue. We estimated a COVID-19
impacted revenue reduction to budget of circa
$80m in Q4 FY20, which ultimately impacted
our full year financial performance. The revenue
shortfall resulted in the Company qualifying for
the Federal Government’s JobKeeper program
which played an important role in supporting the
ongoing employment of many staff across the
business.
Due to the impacts of COVID-19 and relative
to the previous year, revenue was down 4%
to $691.5m, EBITDA down 5% to $76.6m, and
NPATA down 2% to $36.7m. Both gross profit
margin and EBITDA margin were consistent with
previous year. Capital expenditure of $12.3m was
significantly reduced on the prior year and we
expect this to remain around $10m per annum for
the next couple of years. Free cash conversion of
110% resulted in net debt to EBITDA consistent
with previous 2 years at 1.79x.
We moved quickly at the outset of the pandemic
to implement appropriate measures to ensure
the safety and wellbeing of our staff. We also
executed a range of initiatives to mitigate the
expected financial effects of COVID-impacted
revenue volatility, whilst still ensuring high levels
of customer service. More detail around our
COVID-19 response and impacts is contained on
I couldn’t be more
proud or appreciative
of the commitment of
our 1700 staff over the
last year, particularly
since the outbreak of
the pandemic in late
March – we are so
fortunate to have such
a wonderful team.
pages 34-39 of this report. It is important to note
that this crisis demonstrated the flexibility of our
cost base, and the strong liquidity position we
have worked hard to achieve.
The year also saw the Company cease going to
market under multiple brands with the move to
one IVE brand with four core offerings. This move
was in recognition of our increasingly integrated
offer, and will ensure we build further on the IVE
brand to create a highly impactful, strong and
simplified offer to the market. We also took the
opportunity due to COVID-19 to leverage our
supply chain and strong client relationships to
significantly expand our personal protective
equipment (PPE) range.
At the same time as rebranding we also launched
our IVE Care program which focuses on ensuring
and improving two key areas of our business: the
quality and security of our products and services
for our clients, and the wellbeing, safety, diversity
and inclusion of our people.
Every year we commit a significant amount of
resource to workplace health and safety through
our IVE Care program, and the program was core
to our COVID-19 response as we managed the
health and wellbeing (physical and mental) of
our staff and ensured continuity of operations
across all of our sites.
We are executing a range of important initiatives
across the business over the year ahead and I
look forward to updating shareholders in more
detail at our AGM in November.
As I have said previously, we will always strive to
be focused on high levels of performance for our
customers, looking after our staff, and ensuring
we operate as efficiently as possible to deliver an
acceptable return for our shareholders.
My sincere thanks to our Executive Chairman
Geoff Selig for his invaluable contribution
and mentorship, my cohesive and committed
leadership team, and to other members of
the board for their ongoing support and
encouragement since taking on the role of CEO
in August of last year.
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We look forward to celebrating our centenary
year in 2021.
Matt Aitken
Chief Executive Officer
IVE Group LimitedAnnual Report 2020 Board of Directors
Geoff Selig
Executive Chairman
Paul Selig
Executive Director
Sandra Hook
Independent
Non-Executive Director
James Todd
Independent
Non-Executive Director
Carole Campbell
Independent
Non-Executive Director
Gavin Bell
Independent
Non-Executive Director
Geoff has over 30 years’
experience in the marketing
communications sector. Geoff
was managing director of the
IVE Group prior to moving into
the role of executive chairman
following the Company’s listing
on the ASX in December 2015.
Geoff is a director of Caxton
Group and Caxton Print
Holdings, and also sits on
the board of The Lysicrates
Foundation. He was the State
President of the NSW Liberal
Party from 2005-08.
Geoff holds a Bachelor of
Economics from Macquarie
University and is a member
of the Australian Institute of
Company Directors.
Paul’s career commenced
in banking and treasury
management before moving
into the print and marketing
communications sector over
25 years ago. He has been
a director of the Company
since 2012 and appointed
to IVE Group Limited on its
incorporation in 2015. Paul is
an experienced director and
investor having run the Caxton
Group family office for over
15 years.
Paul is also a director of
Caxton Group, Caxton Print
Holdings and Caxton Property
Developments. He holds a
Bachelor of Economics (Hons)
from Macquarie University.
Sandra has a track record
in driving customer-centred
business transformation
and transitioning traditional
organisations in rapidly
evolving environments. She
has extensive operational,
digital, financial management
and strategic experience built
over 25 years as a CEO and
in senior executive roles for
some of Australia’s largest
media companies including
News Limited, Foxtel, Federal
Publishing Company, Murdoch
Magazines and Fairfax.
Since 2000 she has also served
as a non-executive director
on listed, public and private
companies and government
bodies. Sandra is currently
director of digital/technology
companies RXP Services
Ltd (ASX: RXP), MedAdvisor
Ltd (ASX: MDR) and Redhill
Education (ASX: RDH) as well as
the Sydney Fish Market. She is a
trustee of the Sydney Harbour
Federation Trust.
Committees:
Member of the Nominations &
Remuneration Committee.
Gavin is an experienced
director, executive and lawyer.
Gavin is currently a director
of Smartgroup Corporation
Limited (ASX: SIQ). He is also a
member of the Advisory Council
of the UNSW School of Business.
Prior to becoming a director,
Gavin was the CEO of global
law firm Herbert Smith Freehills.
He was a partner in the firm for
25 years.
Gavin holds a Bachelor of Laws
from the University of Sydney
and a Master of Business
Administration from the AGSM,
University of New South Wales.
Committees:
Chair of the Nominations &
Remuneration Committee and
Member of the Audit, Risk &
Compliance Committee.
James is an experienced
company director, corporate
adviser and investor. He
commenced his career in
investment banking and has
taken active roles in a range of
private and public companies.
He was until recently Managing
Director of Wolseley Private
Equity, an independent private
equity firm he co-founded
in 1999.
James is also a Non-Executive
Director of three other ASX
listed companies, HRL Holdings
Limited (ASX: HRL), Coventry
Group Limited (ASX: CYG) and
Bapcor Limited (ASX: BAP).
James holds a Bachelor of
Commerce and a Bachelor of
Laws from the University of New
South Wales, and a Graduate
Diploma of Applied Finance
from the Financial Services
Institute of Australasia (FINSIA),
where he is a Fellow. He is also
a member of the Australian
Institute of Company Directors.
Committees:
Member of the Audit, Risk &
Compliance Committee and
Nominations & Remuneration
Committee.
Carole Campbell is a
professional company director
with more than 30 years’
experience across a diverse
range of industries including
professional services, financial
services, media, mining and
industrial services.
Carole commenced her career
with KPMG and has held senior
finance roles with Macquarie
Group, Westpac Institutional
Bank, Seven West Media, Bis
Industries and Merivale.
Carole is a Non-Executive
Director and Chair of Audit
Committee of FlexiGroup
Limited (ASX: FXL), Southern
Cross Media Group Limited
(ASX: SXL) and Deputy Chair
of Council and Chair of the
Finance, Audit and Risk
Management Committee of
the Australian Film Television
and Radio School. She is also a
Non-Executive Director of The
Sydney Film Festival.
Carole is a Fellow of Chartered
Accountants Australia and New
Zealand (FCA) and a Graduate
Member of the Australian
Institute of Company Directors
(GAICD).
Committees:
Chair of the Audit, Risk &
Compliance Committee.
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IVE Group LimitedAnnual Report 2020 Our vision, purpose and values
Our vision and purpose is to maintain and grow a
highly respected, strong and sustainable business
for all key stakeholders – our staff, our clients and
our shareholders. Core to this is ensuring a value
proposition that maintains its relevance to our
clients’ ever evolving communications needs.
IVE unlocks value for our stakeholders through the
powerful combination of our brand values that
are the guiding principles of our behaviour – core
to this is our ‘one company philosophy’.
> Flexible
> Friendly
> Specialised
> Customer
focused
> Reliable
> Honest
> Effective
> Always on
point
Collaborative
Accountable
Smart
Passionate
> Progressive
> Practical
> Innovative
> Leading the
way
> Genuine
> Driven
> Dynamic
> At the ready
Operating and
financial review
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IVE Group LimitedAnnual Report 2020IVE Group Limited Strategy
IVE commenced the evolution to a broader
product and service offering late in the
1990’s through a combination of organic
growth initiatives and a long-term strategic
acquisition program. Our continued growth
and diversification, and the convergence
of technologies on the back of the digital
revolution over the last decade, has coincided
with meaningful consolidation across the
more traditional parts of the marketing
communications sector. This has resulted in a
more defined competitive landscape than ever
before with a reduced number of competitors.
IVE has led sector consolidation and innovation
over the last 10 years and today has the most
diversified integrated marketing communications
offer in the Australian market.
Core to the ongoing sustainability of the business
is that the value proposition we take to market
has always remained relevant by being closely
aligned to our clients evolving marketing
communications requirements.
The diversity of IVE’s value proposition places
us in a strong position relative to a number of
competitors across the sector. IVE does not have
one headline competitor that has an equivalent
breadth of offering, and we continue to hold
dominant market positions across the sub sectors
we operate in. In this context we believe the
impact of the COVID-19 pandemic will further
strengthen our position to grow market share.
The strength of our long-term client relationships,
continued high levels of customer service,
combined with a powerful commercial offer, are
core to protecting revenue. This, combined with
the continued drive to grow new revenues, places
IVE in a unique position from which to build
market share as the sector consolidates further
post COVID-19, and on the back of potentially
softer macro-economic conditions.
IVE’s strengths relative to competitors places us
in an ideal position to defend and grow revenue:
> Our people and culture
> Our customer first philosophy
> Significant and ongoing investment in our
asset base and operations over many years
> Efficient operations enhanced further through
further cost recalibration and business
simplification over the last 12 months
> Diversified value proposition facilitates
‘bundled offer’ to our clients
> Scale of business ensures powerful buying
power
> Strong financial position provides staff,
clients and suppliers with security
> Very well credentialed in terms of quality,
environment and data security
The move in November 2019 to simplify our brand
further supports the increasingly integrated offer
IVE takes to market.
The Company believes that its investment and
diversification strategy over the last decade to
be sound, and has confidence that the value
proposition IVE takes to market places us in a
flexible position to adapt to movements in client
expectations in the post COVID-19 world.
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IVE Group LimitedAnnual Report 2020 Environmental, social and
corporate governance
People and culture
Wealth and security
Proudly inclusive, we believe we are an employer
of choice across all the sectors in which we
operate, continuing to attract and retain the
best diversity of talent. Our IVE Care program is
focused on ensuring and improving the wellbeing,
diversity and inclusion, and health and safety
of all our employees. We believe in ‘a better you,
a better workplace’ for a people and for their
families.
We’re exceptionally proud of our people. Our IVE
Care program aims to help our people, through
recognition and support, to achieve their personal
and professional goals. Designed to create an
environment that embraces our diverse workforce,
our employee wellbeing program provides our
1,700+ employees access to a wide range of
benefits, including:
Health and wellbeing
Our Employee Assistance Program (EAP) is
designed to help employees resolve issues and
challenges arising in the workplace or in their
personal life in a positive way. The EAP provides
access to independent, confidential counselling
and advice from qualified and experienced
psychologists. We also provide onsite health
assessments at specified times to help employees
understand and increase awareness of their
health. To support this, from time to time,
education and information programs will be
made available to assist employees in making
changes for a healthier lifestyle. Flu vaccinations
are also offered across the IVE business on an
annual basis. In FY20, we again ran awareness
events surrounding R U OK Day.
Lifestyle benefits
IVE Rewards program provides our employees
and their families the opportunity to stretch their
dollar further through significant savings at all
of their favourite retailers. Our employees spend
more than $1m per annum through this program.
IVE have partnered with Bupa to provide a
corporate health insurance offer with an
employee discount on rates. In addition to
receiving competitive premiums, the cover reduces
the waiting periods for certain benefits and
provides access to the Bupa Life Skills program.
IVE has also made an additional superannuation
fund choice available to employees via a key
client partner.
Diversity and inclusion
We come from many different nationalities,
backgrounds, experiences and lines of work.
Our rich diversity is at the centre of our success,
and at the heart of our evolution as Australia’s
leading holistic marketing company.
An inclusive working environment that embraces
our unique differences and diverse perspectives,
brings greater creativity and innovation, leads to
higher wellbeing, productivity and engagement,
and importantly, enables us to better reflect and
relate to our customers.
IVE Group is committed to ensuring diversity and
inclusion permeates all areas and levels of our
business, with every individual feeling included,
safe and supported to express themselves
authentically. In recognition and support of this,
we have established IVE’s Diversity & Inclusion
Program, reinforcing our commitment to growing
a diverse and inclusive organisational culture
encompassing and benefiting all employees.
Our Diversity and Inclusion program identifies six
key areas of focus:
> Gender equality and inclusion
> Cultural and linguistic diversity
> Intergenerational and mature age
> Aboriginal and Torres Strait Islander
Australians
> LGBTI (lesbian, gay, bisexual, trans/
transgender and intersex)
> Disability
In FY20 we ran employee events related to both
Pride Week and International Women’s Day.
Personal, family and community
Our Workplace Giving Program has been
developed to build a stronger link between IVE
Group and the community. We believe each of
us have an important role to play in the broader
community. We have designed this program
around a number of great charity partners to
provide employees with a simple and effective way
to regularly donate from their pre-tax earnings.
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IVE Group LimitedAnnual Report 2020 Environmental, social and
corporate governance – continued
Workplace Health and Safety
(WH&S)
IVE Group is committed to providing a healthy
and safe workplace for all of our employees,
contractors, visitors and suppliers, through our
IVE Care program.
IVE Care embeds WH&S principles into everything
that we do. Our WH&S commitments include:
> Providing effective performance through
continual improvement, innovation and
capability.
> Empowering our people to make informed,
effective, risk based decisions through
education, instruction and continual
improvement models.
> Achievement of our objectives, targets and
actions through evidence-based decision-
making.
> Planning, implementation and evaluation of
all activities for operational excellence.
> Education through information, instruction,
data and analytics.
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We have a dedicated, full-time team continually
enhancing our WH&S processes and amplifying
awareness to ensure all of our people, across
all of our locations, experience the best work
conditions possible.
In FY20, these efforts focused on three key WH&S
Risk Areas with projects in:
> Improving physical safety through fixed plant
and traffic management critical risk controls
to ensure we manage our most significant risks
in a standardised and effective manner.
> Collaborating with key industry leaders
to ensure we provide our contractors and
suppliers with the right work health, safety,
environmental, and quality information to
perform their work in line with IVE Group’s
WHSEQ commitments.
> Enhanced the consultation mechanisms
our business needs to allow our people to
collaborate on hazard identification, risk
reduction and WH&S innovation to accelerate
our WH&S journey.
Sustainability and Risk
Management
Quality assurance
FS 729422
IVE understands the importance of quality
management and has maintained certification
to ISO 9001 in Quality Management for almost
20 years. This commitment to quality ensures we
can provide superior products and services to our
customers, measured in terms of performance,
reliability and durability and returned in
customer satisfaction and loyalty. We regularly
receive positive and welcomed feedback from our
clients and strive to continue to provide this level
of excellence from marketing technology through
to production and distribution.
Ethical sourcing and environmental
management
IVE Group continues to deliver a number of
processes to ensure that we have a focus
on improved sustainability and the ongoing
protection of the environments that we source
from, work in and supply.
IVE expects all our suppliers (companies and
individuals who conduct business with any IVE
Group business unit) to adhere to the same
ethical values we uphold and as such has put
in place controls to ensure that every supplier is
assessed, complies to our values and standards,
and meets and exceeds our delivery expectations.
Through the blending of our best practices and
our socially responsible supply base, we are able
to achieve the optimal levels of cost efficiency,
product/service effectiveness and product
safety in a sustainable, inclusive and socially
ethical manner.
IVE are active members of Supplier Ethical
Data Exchange (SEDEX). Supplier membership
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IVE Group LimitedAnnual Report 2020 Environmental, social and
corporate governance – continued
is highly regarded, and allows IVE to assess risk
relating to labour standards, health and safety,
environmental impact and provide supply chain
visibility. We understand that ensuring good
business practices is important to our clients, our
employees, our shareholders and we support the
introduction of the Australian Modern Slavery
Act 2018.
We continue to hold accreditation with the
Programme for the Endorsement of Forest
Certification® (PEFC), which tracks forest-based
products from sustainable sources to the final
product. It demonstrates close monitoring of each
step of the supply chain through independent
auditing to ensure that unsustainable sources are
excluded.
Additionally, certification of our fibre, paper
and fibre-based product supply chains to Forest
Stewardship Council® standards assure they
are free from any direct or indirect involvement
in activities that violate traditional and human
rights in forestry operations, as required by
the International Labour Organization (ILO)
Convention 169.4.
Our outstanding credentials include ISO
14001 Environment certification and our focus
remains on delivering our promise of continual
improvement by establishing sustainability
targets that reflect our commitment to our
customers and the communities we work in.
Paper
As the largest printer in Australia, IVE is a
significant user of paper from sustainably
managed forests. These sustainably run forests
help prevent the land being sold and lost to
non-forest use eg agriculture or infrastructure
development.
The benefits of ‘forest land’ include prevention
of soil erosion, improved water quality – fighting
salinity, providing habitat for native birds and
wildlife and reducing the use of fertilizer and
chemicals.
The industry is a leading recycler as 87% of
paper is recovered for recycling in Australia,
a substantial increase from 28% in 1990.
[Specifically 77% of catalogues are recycled
(Australasian catalogue assoc. 2014)*.]
Recycling complements the need for virgin wood
fibre, further supporting the growth in fibre based
packaging as an environmentally sustainable
alternative to plastic.
Around 70% of our paper requirement is sourced
offshore as the Australian paper we use is quite
specific in nature. We source paper from North
America, Finland, Sweden, Germany, South Korea
and China.
Though we have seen a proliferation of electronic
screens across society, findings conclude that
74% of consumers prefer to read from paper than
from screens and 71% enjoy the tactile nature of
paper. Consumers also fundamentally believe
that when sourced from sustainably managed
forests, paper and print remain a sustainable
way to communicate.
Source: ‘The Attractiveness and Sustainability of
Paper and Print’ – Two Sides survey July 2016
Data security
IVE invests over $2 million dollars annually to
ensure we maintain best in class data security
certifications such as ISO 27001, PCI DSS (RoA)
and IRAP, all of which are complex and provide a
mature information security profile that supports
our customer’s obligations and commitment to
protecting their customers’ data.
In July 2020, IVE communicated to our customers
a group wide initiative to conduct a full
infrastructure upgrade which demonstrates
our commitment to continual investment and
improvement in the confidentiality, integrity and
availability of our information systems and the
future growth of our business.
APRA’s latest regulation, CPS234, which came into
effect from July 2020, was introduced to ensure
we provide cybersecurity controls and strong
processes for managing security vulnerabilities
and breaches. The Company is well supported by
IVE’s cybersecurity policies.
We believe that IVE leads the way in providing
robust and technologically advanced systems,
with the highest security requirements giving our
customers the assurance they require.
20
21
IVE Group LimitedAnnual Report 2020 Environmental, social and
corporate governance – continued
Risk Management Framework
Over the last year IVE has focused on further
enhancing our Risk Management Framework.
The purpose of the Framework is to provide a
mechanism for IVE to identify opportunities
and challenges that could impact the business,
understand the risk appetite, and ensure
appropriate mitigations are in place.
The Framework provides a method to:
> identify risks including any emerging risks;
> regularly review risks facing the organisation
and update the risk register;
> determine the materiality of those risks and
the development of a plan to minimise the
impact of such risks;
> formulate and update the risk management
processes and procedures to address any
significant risks;
> monitor the risk culture to ensure alignment
with the Board’s risk appetite and risk
priorities;
> monitor the effectiveness of the risk
management processes and procedures that
have been implemented; and
> monitor and evaluate the personnel within the
organisation responsible for risk management.
IVE’s Risk Management Framework and risk
register were recently reviewed in light of recent
events including COVID-19, and as the economic
impacts affecting sales and client demand.
A key focus area was the impact of COVID-19 on
the business, that was elevated to an extreme
risk where multiple contingencies have been
applied to mitigate any negative impact on IVE
business units. These are outlined below in our
response to COVID-19. The business will continue
to monitor the impacts of COVID-19 on our clients
and any flow-on effect to IVE.
Other risks elevated within the risk register
included the effects of climate change and the
impact on the supply chain through the past
year, with Australia experiencing bushfires in
January 2020 and floods in February 2020.
The introduction of APRA’s CPS234 has increased
the workload for our Compliance team, with
numerous client security assessments, audits
and attestations being undertaken. Contracts
for APRA entities have all required updating to
confirm IVE’s ability to support our customer’s
regulatory obligations. IVE has been able to
manage any potential risks by ensuring strict
compliance to ISO 27001 Information Security
Management. Additionally, IVE has recently
implemented PCI DSS. IVE’s accreditations make
us a preferred partner for many of our customers.
22
23
IVE Group LimitedAnnual Report 2020 Environmental, social and
corporate governance – continued
IVE has identified the following key risks as being the most relevant to the business achieving its
operational and financial targets:
Key Risk
Description
Risk Appetite
Mitigation
Pandemic
Failure to respond
and recover from
the effects of the
COVID-19 pandemic
resulting in the
potential loss of
employee health,
suppliers and
customers.
External
macro-
economic
factors
Reduced general
economic conditions
across Australia,
lower employment
levels and
deterioration in
consumer confidence
may reduce demand
for marketing and
communications
services and products.
Competition
Increased competitive
behaviour in various
market segments
Changing
Customer
Preferences
Failure to adapt
to changing
customer and client
expectations driven
by new or disruptive
technologies.
IVE will take a balanced
approach to the risks
associated with changes in
the macro environment. The
level of risk taken will be
planned for each risk event.
This will be measured by
monitoring:
> employee health,
> the revenue to budget in
customer sectors,
> increased debtor days,
forward bookings; and
> economic indicators.
IVE will take a balanced
approach to the risks
associated with changes in
the macro environment. The
level of risk taken will be
planned for each risk event.
This will be measured by
monitoring:
> the revenue to budget in
customer sectors,
> increased debtor days’
forward bookings; and
> economic indicators
IVE will take risks in response
to competition and the
competitive environment
that represents value
for money in the returns
obtained for the risk taken.
This will be measured
through:
> pricing and margin
pressures,
> talent and client
retention; and
> competitor mergers or
failures.
When adapting to the
expectations of clients and
customers in the changing
external environment IVE
will take risk to drive value
for money. This will be
measured by:
> customer retention,
> number of services per
customer; and
> customer feedback.
> Manage work from home for
employees – wherever possible
– monitor employee’s health,
additional cleaning at sites,
provide hand sanitiser and
temperature checks, split shifts
> Pandemic/Business Continuity
Plans (BCP), identification of Key
Customers/Suppliers/Staff &
Functions, site redundancy, staff
stand downs, revenue and cost
forecast management
> Essential service support for
clients/supply chain mitigation
> Monitor pricing in the market
> Continuous engagement with
customers
> Driving consistent and high-level
customer service
> Ensure flexibility in operating
model across multiple sites
> Monitor pricing in the market
> Continuous engagement with
customers
> Driving consistent and high-level
customer service
> Participate in industry
consolidation if the opportunity
meets appropriate risk and return
parameters
> Maintaining a diverse customer
base of over 2,000 customers
across a range of different sectors
of the economy
> Customer contracts will vary in
renewal length with an average
customer tenure of 8 years
> IVE will continue to provide multiple
strands of offerings and provide
scalability in the technology
through the investment in both
digital and printed media.
Climate risks
Risks elevated within the risk register included
the effects of climate change and the impact
on the supply chain through the past year,
with Australia experiencing bushfires and
floods, and more recently a pandemic.
IVE’s business portfolio is diverse and is
supported by a portfolio of relatively fixed,
long life assets across a number of locations.
This diversity of portfolio strongly positions the
company to mitigate and manage its exposure
to physical climate risks and to maximise the
business opportunities it may present.
IVE’s major supply chains are also diversified
across multiple regions – especially our paper
supplies which are drawn from multiple
destinations in Europe, Asia, the United States
and locally in Australia.
It is IVE’s intention to further analyse the
potential for climate change risk and the
impacts of such risks, as well as regulation
and legislation developments, known as
‘transition risks’ specifically related to climate
change, as part of our regular Risk Review.
This analysis would include the environmental
factors such as water and energy usage,
supply chain diversity, transportation and
physical risks which form part of our current
certifications in Environment, Quality and
Information Security and any transition risks
that may affect IVE’s business or suppliers.
24
25
IVE Group LimitedAnnual Report 2020 Our offering
Specialising in creative, data-driven
communications, integrated marketing, production
and distribution, we bring together the capabilities,
specialists and technology needed to make
customer connection seamless.
Our offering is supported by robust integrated
technology platforms that make complex
marketing simpler for our clients.
Creative
Services
Visual
Motion
Digital
Personalised
Structural (3D)
Data-Driven
Communications
CX data & insights
Marketing technology
Omni-channel deployment
Retrieval & enrichment
Tele-fundraising
Production
& Distribution
Integrated
Marketing
Print
Retail display
Premiums & merchandising
Integrated logistics
Collateral optimisation
Resource management
Supply chain
Business intelligence
26
27
IVE Group LimitedAnnual Report 2020
Sector and client spread
Our clients
IVE enjoys long-standing relationships with a tier 1 client base. The table below provides a snapshot of
our revenue by sector for the year ended June 2020.
Revenue Sector Analysis
Retail: White goods, electronics, furniture, clothing
Supermarkets
Health / personal products
Food / beverage
Financial / Corporate Services
Publishing
Charity / Not for Profit
Government
Tourism / Entertainment
Health
Telecommunications
Manufacturing
Other*
Grand Total
$m
142.3
86.6
62.9
12.0
101.8
55.1
32.9
30.5
23.7
15.8
15.5
10.8
102.1
692.0
%
20.6
12.5
9.1
1.7
14.7
8.0
4.8
4.4
3.4
2.3
2.2
1.6
14.7
100.0
*Other includes: Media, Associations, Education, Service, Automotive, Food, Transport, Agency, Utilities, Broker,
Advertising Agency, IT, Building / Construction, Property, Legal Sectors.
28
2929
IVE Group LimitedAnnual Report 2020Annual Report 2020
Business and brand simplification
In November 2019 the Group ceased going to
market under four divisional brands (Kalido,
Blue Star, Pareto, IVEO). The evolution to one IVE
brand with four core offerings (Creative, Data-
Driven Communications, Integrated Marketing,
Production & Distribution) is in recognition of
our increasingly integrated offering, and will
ensure we build further on the IVE brand to
create a highly impactful, strong and simplified
offer to the market. The brand simplification
incorporated a complete refresh of all Group
marketing material.
The brand simplification coincided with a number
of initiatives to further streamline and strengthen
the operational structure of the business:
> Refined and enhanced organisational structure
> The closure of our CX (Customer Experience)
operations (formerly Kalido) in Asia from
May 2020
> The closure of our Queensland DDC operations,
with revenue transferred into our existing NSW
and Victorian operations
> The integration of our Pareto Fundraising and
Pareto Phone businesses into our DDC division
Year in review
30
30
31
IVE Group LimitedAnnual Report 2020IVE Group Limited Acquisition of Salmat Marketing Solutions,
Reach Media New Zealand and Lasoo
The acquisition of Salmat Marketing Solutions
(now IVE Distribution), Reach Media New Zealand
and Lasoo was completed on 1 January 2020
for a purchase consideration of $25.4 million.
The acquisitions were fully debt funded and
at the time of the completion we expected the
acquisitions to be accretive to earnings in H2 FY20.
These acquisitions completed the final phase
of our strategic roadmap over recent years to
further expand and strengthen our offer to retail
clients. The combination of Australia’s largest
letterbox distribution business with IVE’s broader
print, data analytics and marketing services
offer provides a powerful opportunity for clients
to enhance returns on their marketing spend
through our highly integrated offer.
The integration and restructure plans for the
business that were developed through the due
diligence program were further refined and
expedited as a result of the material negative
impact of COVID-19 on the business.
The enhanced structure has resulted in a more
streamlined, nimble and lower cost base business.
Lasoo is Australia’s largest aggregated digital
catalogue site. Lasoo transforms printed
materials such as catalogues and brochures
into an interactive shoppable experience where
products can be purchased through the Lasoo
site with a simple click to cart.
With all the latest offers, Lasoo provides
Australian shoppers with a single platform to
search for specials across a range of retailers,
the detailed analytics that flow are valuable
in measuring activity and further informing our
clients on their customer activity.
Lasoo is the market leader in online digital
catalogue aggregation attracting over 800,000
shoppers per month. More than 2 million digital
catalogues are opened each month on Lasoo
generating 21 million interactions. On average
more than 70,000 buy-now clicks are recorded
through the site per month.
32
33
IVE Group LimitedAnnual Report 2020 We have experienced
strong growth in sales of
our PPE range since April
as we continue to meet
the needs of our existing
and new customers.
Response and impact of COVID-19
IVE moved quickly at the outset of the pandemic
to implement appropriate measures to protect, to
the extent possible, the safety and wellbeing of
our valued staff.
Notwithstanding the extent and speed with
which the COVID-19 crisis impacted their personal
and professional lives, our entire workforce of
circa 1,700 staff responded amazingly by coming
together and committing to do whatever was
required to ensure we continued caring for each
other and maintaining high levels of service to
our clients.
The Company, throughout the period, continued
to maintain high levels of customer service
through a hybrid of continuing operations across
multiple production/service facilities and staff
working remotely.
IVE entered this crisis in a position of strength,
with the Company responding very well on
all fronts to the unprecedented and volatile
operating environment. IVE remains well
capitalised, highly liquid, and confident that
we are ideally placed to maintain our strong
market position as we emerge from this period of
uncertainty and disruption.
The Company qualified for the Federal
Government’s JobKeeper Program based on
the year on year revenue reduction measured
at 30 April 2020. The JobKeeper subsidy will
be received up until the end of September 2020
(Q1 FY21).
Outlined below is a summary of impacts,
initiatives and focus areas in response to the
crisis:
> Health and safety of our staff
> Customers and revenue
> Operational
> Banking and liquidity
The Company, through
the period, continued to
maintain high levels of
customer service through
a hybrid of continuing
operations across
multiple production/
service facilities and staff
working remotely.
34
35
IVE Group LimitedAnnual Report 2020 Response and impact of COVID-19 – continued
Health and safety of our staff
Driven by the Business Leadership Team, regular
meetings were held to ensure a Pandemic Plan
was established for each site, in conjunction with
a review of site failover and recovery plans in the
event a site needed to be shut down for cleaning.
This identified key suppliers, key customers and
key personnel. Risks were tracked, mitigated and
managed across the entire group.
Updates to Policies such as Working from Home
and the development of a COVID-19 Site Safety
Procedures and Action Plan have enabled the
business to continue to operate with minimum
impact on our customers, whilst maintaining the
health and safety of all our people.
Additional actions taken included enabling all
office staff to work remotely where possible and
establishing ‘tribes’ within production areas
with staggered shifts to minimise the number
of staff onsite and reduce the impact of any
possible infection within a shift. Additional
cleansing of amenities, temperature checks at
entry and providing staff with hand sanitiser
and PPE Masks has also allowed staff to protect
themselves and their families.
IVE issued numerous client, staff and supplier
communications to provide assurance that we
were well prepared. We continue to monitor the
situation closely and respond to Government
advice. IVE is an essential supplier to many of
our clients whose businesses must continue to
operate throughout these times.
Customers and revenue
As outlined in the strategy overview, IVE continues
to benefit from its diversified value proposition
and loyal strong customer base.
Across the four (retailing, supermarkets, health
& personal products, food & beverage) retail
sectors, IVE delivers a broad range of products
and services – these include creative, catalogue
production/letterbox distribution, publications,
in store retail display/point of sale, data-driven
personalised communications and packaging.
To the extent we are able to fully measure, the
short-term (Q4 FY20) direct revenue impacts of
the COVID-19 crisis have been:
> A meaningful reduction in catalogue
production and letterbox distribution for a
number of our retail customers
> A meaningful reduction in activity across the
tourism/entertainment & publishing sectors
> Data-driven communications (DDC) has
remained strong on the back of an increased
desire from our clients to communicate 1 to 1
with their customers.
> Solid revenues across the not for profit and
health sectors
> We have experienced strong growth in
sales of our PPE range since April as we
continue to meet the needs of our existing
and new customers. The growth of this new
revenue stream is an excellent example of
management’s ability to leverage existing
competencies (sourcing/logistics in this case)
and client relationships to drive organic
revenue growth
> A general softening of activity levels across our
broader customer base
Given the residual effects of the crisis, the
resurgence of the virus in late July 2020,
particularly in Victoria, we would expect, given
the prevailing uncertainty, that this revenue
volatility will be ongoing throughout H1 FY21.
Operational
As communicated in our market update on
23 March 2020, the Company executed a range
of initiatives to mitigate the financial impacts
of COVID-19 whilst still ensuring high levels of
customer service.
The Federal Government’s JobKeeper Program
has fortunately enabled us to retain staff
through this period of revenue volatility. The
Group received a gross amount from JobKeeper
of $16.8m, with a final net amount of $15.1m net of
payments to employees on stand down.
Data-driven
communications has
remained strong on the
back of an increased
desire from our clients to
communicate 1 to 1 with
their customers.
36
37
IVE Group LimitedAnnual Report 2020 Response and impact of COVID-19 – continued
Flexibility across the cost base
The flexibility of the Company’s cost base has
been core to mitigation.
The Company has executed a range of actions
to reduce both short-term and permanent
labour cost:
> Staff stand downs as a component of the
JobKeeper Program
> Significant reduction/elimination of casual
and temporary labour with enhanced resource
sharing across the Group
comprehensive integration and business
simplification plan that resulted in a
significant permanent labour cost reduction
across the business.
— Further reductions took place across the
broader business.
— We have also continued to reduce labour
costs across the broader business as we
progressively implement our Group wide
MIS/ERP upgrade(s).
> Utilisation of accrued annual leave and long
service leave
> Reduced hours, including overtime, for a
proportion of temporary and permanent staff
Reducing costs and discretionary expenditure
across the Group.
Supply chain
IVE’s extensive supply chain consists of:
> Both domestic and global suppliers for our raw
materials (primarily paper)
> Both domestic and Asian supply chain for
finished goods (primarily premiums and
merchandise, personal protective equipment
(PPE) and permanent retail display)
From the outset of the pandemic, our entire
supply chain has remained stable/reliable and
we did not experience any material negative
impact through the period.
Our sourcing team based in Guangdong
Province in China remained highly engaged
with our accredited suppliers on the ground to
ensure timelines and quality standards were
maintained. We have continued the move to
expand our global supply chain to incorporate
South East Asia and the Sub Continent.
The response from our supply partners through
the crisis reaffirms the strength of relationship we
have developed over many years. Some suppliers
requested early payment to assist through the
crisis which we agreed to.
> A voluntary temporary reduction in fixed
remuneration in Q4 FY20:
— 50% reduction for all board members
including the Executive Chairman
— 25% reduction for the leadership team
including Chief Executive Officer and Chief
Financial Officer
— A range of fixed remuneration reductions
for a meaningful number of staff across
the Company
> Permanent labour cost reductions:
— In late 2019 the Company moved from
multiple brands to one simplified IVE brand
and go to market. This resulted in the
bringing together of three existing businesses
(Blue Star DIRECT, Kalido and Pareto) to form
our DDC (Data-driven Communications)
offering. The integration of these three
business resulted in a refined and enhanced
national structure with a meaningful
number of permanent positions removed
from the business as a result. A number of
these redundancies took place following
a decision to discontinue our Kalido Asia
operations and close our Queensland
production operations.
— The Group completed the acquisition of
Salmat Marketing Solutions (now IVE
Distribution) and Reach Media NZ in early
January 2020. In response to revenue
impacts as a result of the COVID-19
crisis, we moved quickly to accelerate a
38
From the outset of
the pandemic, our
entire supply chain
has remained stable/
reliable and we did not
experience any material
negative impact through
the period.
39
IVE Group LimitedAnnual Report 2020 Review of financial performance
Basis of preparation
IVE’s Financial Report for FY2020 is presented
in accordance with Australian Accounting
Standards which comply with International
Financial Reporting Standards (IFRS).
In this OFR, certain non-IFRS financial
information (underlying) has also been included
to allow investors to understand the underlying
performance of IVE. The non-IFRS financial
information relates to FY2020 and FY2019 results
presented before the impact of certain non-
operating items and on a continuing business
basis as well as before impacts of adoption of
AASB16, which allow for a direct comparison
to FY2019. The Directors believe the non-IFRS
underlying results better reflect the underlying
operating performance and is consistent with
prior year reporting, this differs from the IFRS
presentation.
The non-IFRS underlying financial information
has not been audited or reviewed.
Financial information in this OFR is expressed
in millions and has been rounded to one
decimal place. This differs from the interim
Financial Report where numbers are expressed
in thousands. As a result, some minor rounding
discrepancies occur.
IGL Financial Results (Pre adoption of AASB16)
IFRS and Underlying (Pre AASB16)
Actual
FY2020
$m
Actual
FY2019
$m
Variance
$m
Variance
%
Revenue
Gross Profit
% of Revenue
Underlying EBITDA continuing operations
Underlying EBITDA continuing operations (ex JobKeeper)
Underlying EBITDA margin %
Underlying EBITDA margin % (ex JobKeeper)
Non-Operating items
Non-Operating item (ex JobKeeper)
EBITDA
Depreciation, amortisation and impairment
EBIT
Net finance costs
NPBT
Income tax expense
NPAT from continuing operations
Discontinued Operations (NPAT)
NPAT
NPATA continuing operations
Underlying NPAT continuing operations
Underlying NPAT continuing operations (ex JobKeeper)
Underlying NPATA continuing operations
Underlying NPATA continuing operations (ex JobKeeper)
691.5
329.6
47.7%
76.6
61.5
11.1%
8.9%
(12.7)
2.4
63.9
63.7
0.2
7.3
(7.0)
11.4
(18.4)
(1.8)
(20.2)
(14.3)
32.6
22.1
36.7
26.2
723.6
346.6
47.9%
82.0
82.0
11.3%
11.3%
(3.0)
(3.0)
79.0
22.7
56.3
9.7
46.5
13.5
33.0
(1.7)
31.3
36.7
35.4
35.4
39.1
39.1
The underlying financial results are on a non-IFRS basis and are not audited or reviewed
(32.1)
(17.0)
(5.4)
(20.5)
(9.7)
5.4
(15.1)
41.0
(56.1)
(2.5)
(53.6)
(2.1)
(51.4)
(0.1)
(51.5)
(51.1)
(2.8)
(13.4)
(2.5)
(13.0)
(4.4%)
(4.9%)
(0.5%)
(6.6%)
(25.0%)
(2.2%)
(21.6%)
326.1%
(180.3%)
(19.1%)
180.4%
(99.6%)
(25.3%)
(115.1%)
(15.9%)
(155.8%)
3.9%
(164.6%)
(139.0%)
(8.0%)
(37.7%)
(6.3%)
(33.2%)
Non-Operating items excluded from underlying NPAT
Statutory to underlying NPAT reconciliation
Statutory NPAT continuing operations
Restructure costs
Acquisition costs
Prior period other
Sub Total Non-Operating items
Tax effect of adjustments
Goodwill impairment
Underlying NPAT continuing operations
Adoption of AASB16
The full year statutory results are reported
in accordance with new leasing standard
AASB16, which has resulted in a change to the
Company’s reported FY20 statutory result. There
is no change to the economic performance and
cash generation of the business due to AASB16
adoption.
Pre AASB16
FY2020
$m
Post AASB16
FY2020
$m
(18.4)
8.7
3.6
0.4
12.7
(1.7)
40.0
32.6
(18.4)
8.7
3.6
0.4
12.7
(1.7)
40.0
32.6
Impact of adoption of AASB16 on
the profit and loss Statement
The adoption of AASB16 has increased the EBITDA
of the business for the year compared to prior
reporting periods. This is due to certain lease
costs now being excluded from operating costs
in the profit and loss and offset by an increase in
depreciation and finance cost charge over the life
of the lease. The lease costs are now classified as
a right to use asset and lease liability which will
reduce over the remaining lease period.
The net result of excluding the lease costs
from the profit and loss and increasing the
depreciation and finance charges is an increase
of $25.4m on a EBITDA basis, however NIL on a
NPAT and NPATA basis as outlined in the table
below.
It should be noted any impacts in reported
earnings is non-cash and is temporary timing
difference which will reverse over the life of the
leases impacted.
Banking covenants are on a pre AASB16 adoption
basis.
40
41
IVE Group LimitedAnnual Report 2020 Review of financial performance – continued
IFRS and Underlying FY20 Pre and Post AASB16
Pre AASB16
Actual
FY2020
$m
Post
AASB16
Actual
FY2020
$m
Variance
$m
Variance
%
Revenue
Gross Profit
% of Revenue
Underlying EBITDA continuing operations
Underlying EBITDA continuing operations (ex JobKeeper)
Underlying EBITDA margin %
Underlying EBITDA margin % (ex JobKeeper)
Non-Operating items
Non-Operating item (ex JobKeeper)
EBITDA
Depreciation, amortisation and impairment
EBIT
Net finance costs
NPBT
Income tax expense
NPAT from continuing operations
Discontinued Operations (NPAT)
NPAT
NPATA continuing operations
Underlying NPAT continuing operations
Underlying NPAT continuing operations (ex JobKeeper)
Underlying NPATA continuing operations
Underlying NPATA continuing operations (ex JobKeeper)
691.5
329.6
47.7%
76.6
61.5
11.1%
8.9%
(12.7)
2.4
63.9
63.7
0.2
7.3
(7.0)
11.4
(18.4)
(1.8)
(20.2)
(14.3)
32.6
22.1
36.7
26.2
691.5
326.8
47.3%
102.0
86.9
14.7%
12.6%
(12.7)
2.4
89.4
85.6
3.7
10.7
(7.0)
11.4
(18.4)
(1.8)
(20.2)
(14.3)
32.6
22.1
36.7
26.2
0.0
2.8
0.0
(25.3)
(25.4)
0.0
0.0
0.0
(25.4)
(21.9)
(3.5)
(3.4)
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0%
0.9%
0.8%
(24.9%)
(29.3%)
(24.9%)
(29.3%)
0.0%
0.0%
(28.5%)
(25.6%)
(93.8%)
(32.1%)
1.1%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
The underlying financial results are on a non-IFRS basis and are not audited or reviewed
All financial commentary is based on pre AASB16 adoption and continuing operations basis, this is in order for
comparatives to pcp to be meaningful. All impacts of adoption of AASB16 on the profit and loss are outlined in the
table above.
Revenue
Total revenue for the Group for FY20 was $691.5m.
This includes acquisition revenue for H2 for
Salmat Marketing Solutions (now IVE Distribution)
and Reach Media of $50.0m. Normalised for the
acquisitions, revenue declined by $82.1m from pcp
of $723.6m to $641.5m. The main drivers in the
decreased revenue relate to
> COVID-19 negatively impacting revenues from
March and the balance of Q4
— Catalogue production and distribution
revenue was impacted due to major
supermarket clients not needing to advertise
as a result of significantly increased sales
through the crisis. Some retail clients also
reduced or cancelled catalogue production
and distribution due to a combination
of their ongoing supply issues and store
closures.
— Travel sector clients reduced spend over the
period, however it should be noted that we
are still doing work for travel clients albeit
at reduced levels.
Despite the negative impacts of COVID-19
on some parts of the business other sectors
continued to perform strongly:
— benefits of work mix, bringing more work into
‘in-house’ operations as the group continues
to refine offering to its clients
— continuing to procure well through
leveraging the Group’s scale across the
supply chain
> Distribution revenues have a lower gross profit
> Retail Display had strong growth year on year
margin than other parts of the business.
> COVID-19 resulted in many clients increasing 1
to 1 communications with their with customers
> Many clients/sectors not impacted by
COVID-19 and activity levels remain strong (eg:
healthcare and not for profit)
> No material client losses of note during FY20
including post COVID-19
> Secured contract extensions for a large number
of existing clients
Production and Administration expense on an
IFRS basis reflect the net benefits of the Federal
Government JobKeeper scheme of $15.1m (net of
amounts paid to staff placed on stand down)
which is a credit to the profit and loss and
reflected as an offset reducing labour expense.
> On an underlying and continuing business
basis production and selling labour is a
decrease of $24.8m to pcp ($171.5m to pcp
$196.3m), this has largely been driven by:
> Continued strong momentum on organic
— Reduction in volume results in reduce
revenue growth
> Revenue from the PPE product lines in our
premiums and merchandise business was much
higher than anticipated
As a result of COVID-19 impacts outlined above
the Group qualified for the Federal Governments
JobKeeper Program (i.e. April 2020 revenue down
by more than 30% to pcp).
> Prior to COVID-19 and as discussed in H1,
revenues were also impacted by softer macro-
economic conditions, particularly in some
parts of the retail sector.
Earnings
IFRS and underlying gross profit was $329.6m
and compares to $346.6m in pcp.
> The Group’s gross profit margin (revenue
less material cost of goods sold) has
remained stable over the period at 47.7% and
normalising for Salmat/Reach revenue, gross
profit margin is 48.6%, an increase on pcp.
The increase reflects
— benefits of paper price reduction savings
partly reflected in FY20, with positive signs
indicating further benefits may support
margin improvement moving forward.
variable labour in line with the revenue
reduction. As a result of the significant
revenue reductions relating to COVID-19
impacts, the Group further reduced its labour
cost through a combination of:
• Benefits of JobKeeper
• Staff stand downs
• Reduction/elimination of casual and
temporary labour
• Reduced hours, including overtime
• Voluntary reduction in fixed remuneration
for Q4
• Permanent labour cost reduction
(redundancies)
• Utilisation of accrued annual and long
service leave
— Offset by an increase due to Salmat/Reach
acquisition labour in H2 of $10.1m, this is net
of redundancies in H2 due to acquisition
synergies as a result of expediting
integration plans.
42
43
IVE Group LimitedAnnual Report 2020
Review of financial performance – continued
> On an underlying and continuing business
Depreciation and amortisation
Depreciation and amortisation (pre AASB16)
remained in line with pcp normalising for Salmat/
Reach. Amortisation expense of $6.3m to pcp of
$5.9m with increase relating to Salmat/Reach
acquisition customer contracts amortisation.
Net finance costs
Net finance costs improved on pcp with IFRS
net finance costs reducing to $7.3m from $9.7m,
and on an underlying basis $7.3m to $9.0m (pcp
underlying excludes write off of prior facility
costs). The savings in finance cost to pcp relates
to a full year of the new finance facility with
improved pricing. Offset by additional borrowings
in relation to the Salmat/Reach acquisitions.
Net profit after tax (NPAT)
IFRS NPAT loss of ($18.4m) impacted by goodwill
impairment (non-cash) of $40.0m, following
annual impairment testing of the Group’s Cash
Generating Unit (CGU), a goodwill impairment
has been recognised in relation to the Production
& Distribution CGU. More specifically, the
impairment relates to Large Format Web
Offset (formally Franklin Web) and Distribution
(formally Salmat Marketing Solutions/Reach
Media NZ). A full explanation is contained in Note
15 of the financial statements. On an underlying
basis (including JobKeeper) profit of $32.6m to
pcp $35.4m. Again impacted by COVID-19 and
softer macro-economic conditions, particularly in
some parts of the retail sector.
basis, production and administration expense
(excluding depreciation) is an increase of $7.3m
to pcp ($76.7m to pcp $69.4m) –
— Increase due to Salmat/Reach acquisition
$6.4m
— Bad and doubtful debts
• There have been no bad debts to date as
a direct result of COVID-19
• As a result of COVID-19, we considered it
prudent to increase the provision at year
end for bad and doubtful debts
• $0.7m bad debt for Harris Scarfe has been
fully provided for
EBITDA
IFRS EBITDA of $63.9m also includes the net
benefits of JobKeeper of $15.1m.
> Non-operating items excluded from underlying
earnings
— $8.7m restructure costs (predominantly
redundancies and business relocations)
— $3.6m acquisition costs (predominantly
Salmat Marketing Solutions and Reach
Media acquisitions)
— $40m impairment to goodwill
Underlying EBITDA of $76.6m and an EBITDA
margin of 11.1% including JobKeeper on a
continuing business basis compares to FY19 of
$82.0m. The decrease in EBITDA to pcp is due to
revenue reduction over the COVID-19 period as
well as softer macro-economic conditions in some
parts of the retail sector impacting H1 and into
the later part of Q3.
> EBITDA margin reduction was partly due to
an increased cost base for Salmat/Reach
acquisitions impacting H2, however revenue
significantly reduced in Q4 as a direct result
of COVID-19 on catalogue and distribution
revenue. This was partly offset by net
JobKeeper receipts
> The Group remained profitable throughout Q4
Net Debt, Balance Sheet and liquidity
IVE Group Limited Net Debt
FY2020
Actual
$m
6.9
181.8
188.7
(51.6)
137.1
FY2019
Actual
$m
6.3
168.9
175.2
(31.5)
143.7
Capital expenditure
The Company’s operational footprint is in
excellent shape as a result of its substantial
investment program over the last 5 years.
> H1 FY20 capital expenditure was $6.3m
excluding MIS/ERP upgrade(s)
> In line with previous communication, FY20 full
year capital expenditure was $8.7m excluding
MIS/ERP upgrade(s) of $3.6m
> FY21 capital expenditure expected to be
approximately $10m including MIS/ERP
upgrade(s)
> As communicated in March 2020, the previously
foreshadowed capital expenditure of $25-30m
on catalogue collation automation is currently
on hold
Loans & borrowings – short term
Loans & borrowings – long term
Loans & borrowings* – Sub Total
Cash
Net Debt
* Loans & borrowings are gross of facility establishment costs
* Excludes right of use liabilities impacts from adopting AASB16
> Net debt to underlying EBITDA of $76.6m and
leverage of 1.79x
> Net debt reduced from 23 March 2020 market
update by $36.9m to $137.1m at 30 June 2020
due to tight liquidity control and working
capital management from the start of
COVID-19 period and ongoing
> As at 30 June 2020 working capital facility of
$30.0m is fully undrawn
> As at 31 July cash at bank was $56.7m (with
the working capital facility remaining fully
undrawn)
> To be prudent, the Company moved quickly
at the outset of the pandemic to obtain
leverage covenant waivers for 30 June 2020
and 31 December 2020. Based on positive
trading and the close management of working
capital the Company was covenant compliant
at 30 June 2020
> IVE’s senior debt facility matures in April 2023.
> As announced on 23 March 2020, the Company
took the pre-emptive and conservative decision
to cancel the previously announced H1 FY20
interim dividend of $12.7m (8.6 cents per share).
We have continued to maintain a high level of
liquidity since then and expect this to continue.
44
45
IVE Group LimitedAnnual Report 2020 Additional information
IVE Group Ltd
Level 3, 35 Clarence St
Sydney NSW 2000
For further information contact:
Geoff Selig
Executive Chairman
+ 61 2 9089 8550
Darren Dunkley
Chief Financial Officer
+ 61 2 8020 4400
and travel sector clients, and as a result we
have ensured the appropriate amount of
provisioning.
— During the period Harris Scarfe went into
administration with an amount of $0.7m
fully provided for at 30 June 2020.
> Inventory
— At 30 June 2019 paper inventory levels were
higher than average due to stock supply
issues in the prior period
— In FY20 the Group has made a concerted
effort to reduce these holdings, which was
made more difficult given the reduced
volumes impacting revenues during Q4 due
to COVID-19.
— Despite this the Group inventory levels have
decreased by circa $10.0m to pcp.
As a result of the actions taken to strengthen
liquidity our free cash flow conversion of 112%
to EBITDA on an IFRS basis and110% on an
underlying basis.
Review of financial performance – continued
Cash Flow
EBITDA
Movement in NWC/non-cash items in EBITDA
Free Cash Flow
Capital expenditure (net)
Payments for acquisitions & deferred consideration
Net cash flow before financing and taxation
Tax
Net proceeds from bank loans
Payment of finance lease liabilities
New facility transaction costs
Dividends paid
Interest paid
Discontinued operations
Net cash flow
Free cash conversion to EBITDA
Underlying
FY2020
$m
Stat
FY2020
$m
76.6
7.3
83.9
(9.5)
(25.5)
48.9
(12.5)
14.9
(3.9)
(0.2)
(11.4)
(5.9)
0.0
29.8
110%
63.9
7.9
71.8
(9.5)
(25.5)
36.7
(8.9)
14.9
(3.9)
(0.2)
(11.4)
(5.9)
(1.2)
20.1
112%
Underlying cash flow is presented on a continuing operations basis pre AASB16 including JobKeeper
The underlying financial results are on a non-IFRS basis and are not audited or reviewed
During the period the Group managed its working
capital closely through debtors, creditors and
inventory levels:
— Some key suppliers requested early payment
to assist through the COVID-19 period to
which IGL agreed
> Creditors
> Debtors
— Extended agreed payment terms with a
limited number of key suppliers with most
suppliers reverting to normal payment terms
from July 2020
— Deferred rent for 3 months for some facilities
(circa $3.0m which is to be repaid to
landlords over a 6-12 month period starting
July 2020)
— Some clients requested payment plans with
which the company agreed. All of these
clients are currently now back to normal
trading terms or are paying to agreed
payment plan
— The Group took COVID-19 as an opportunity
to further focus on reducing debtors wherever
possible in order to reduce credit risk.
— Payroll tax payments deferred for Q4 as
— As at 30 June 20 we have had no bad debts
agreed with state revenue offices
specifically related to COVID-19, however we
do service clients who have been negatively
impacted such as some retail, publishing
46
47
IVE Group LimitedAnnual Report 2020 Operating and financial review
The loss after tax of the Group for the year
ended 30 June 2020 was $20,189 thousand (2019:
profit after tax of $31,304 thousand). A review of
operations and results of the Group for the year
ended 30 June 2020 are set out in the Operating and
Financial Review, which forms part of the Annual
Financial Report.
Dividends
On 23 March 2020, the Group announced the
cancellation of the H1 FY20 interim dividend (8.6
cents per share – $12,700 thousand in total). The
Board has decided to suspend the final dividend
for FY20 given the ongoing economic impact of
COVID-19, and to continue strengthening the
balance sheet to further support opportunities to
create additional value for shareholders.
The Board intends to resume dividend payments
consistent with the existing dividend policy
commencing the H1 FY21 interim dividend.
Total dividends of $11,412 thousand were declared
and paid by the Company to members during the
2020 financial year. Further details on dividends are
included in note 20 of the Financial Report.
Significant changes in the state
of affairs
In the opinion of the directors there were no other
significant changes in the state of affairs of the
Group that occurred during the financial year under
review.
The directors present their report
together with the consolidated financial
statements of the Group comprising
of IVE Group Limited (the Company), and
its subsidiaries (the Group) for the financial
year ended 30 June 2020 and the auditor’s
report thereon.
Principal activities
The principal activities of the Group during the
course of the financial year were:
> Conceptual and creative design across print,
mobile and interactive media;
> Printing and distribution of catalogues,
magazines, marketing and corporate
communications materials and stationery;
> Manufacturing of point of sale display material
and large format banners for retail applications;
> Personalised communications including
marketing automation, marketing mail,
publication mail, eCommunications,multi-
channel solutions, and call center services;
> Data analytics, customer experience strategy,
and CRM; and
> Outsourced communications solutions for
large organisations including development of
customised multi-channel management models
covering creative and digital services, supply
chain optimisation, inventory management,
warehousing and logistics.
The Group services all major industry sectors in
Australia including financial services, publishing,
retail, communications, property, clubs and
associations, not-for-profit, utilities, manufacturing,
education and government.
Aside from the acquisition of Salmat Limited’s
distribution business (refer note 23 of the financial
report), there were no other significant changes
in the nature of the activities of the Group during
the year.
Directors’ report
for the year ended 30 June 2020
48
48
49
IVE Group LimitedAnnual Report 2020IVE Group Limited Directors’ report – continued
Information on Directors
The directors of the Company at any time during or since the end of the financial year are:
Director
Experience, special responsibilities and other directorships
Director
Experience, special responsibilities and other directorships
Geoff Bruce Selig
Executive Chairman
Appointed:
10 June 2015
Gavin Terence Bell
Independent Non-
executive Director
Appointed:
25 November 2015
Carole Louise
Campbell
Independent Non-
executive Director
Appointed:
21 November 2018
Sandra Margaret
Hook
Independent Non-
executive Director
Appointed:
1 June 2016
Geoff has over 30 years experience in the marketing communications sector. Geoff
was managing director of IVE Group prior to moving in to the role of executive
chairman following the Company’s listing on the ASX in December 2015.
Geoff is a director Caxton Group and Caxton Print Holdings, and also sits on the
board of The Lysicrates Foundation. He was the State President of the NSW Liberal
Party from 2005-8.
Geoff holds a Bachelor of Economics from Macquarie University and is a member
of the Australian Institute of Company Directors.
Gavin is an experienced director, executive and lawyer. Gavin is currently a director
of Smartgroup Corporation Limited (ASX: SIQ). Prior to becoming a director, Gavin
was the CEO of global law firm Herbert Smith Freehills. He was a partner in the
firm for 25 years.
Gavin holds a Bachelor of Laws from the University of Sydney and a Master of
Business Administration from the AGSM, University of New South Wales.
Committees: Chair of the Nomination & Remuneration Committee and Member of
the Audit, Risk & Compliance Committee.
Carole Campbell is a professional company director with more than 30 years’
experience across a diverse range of industries including professional services,
financial services, media, mining and industrial services.
Carole commenced her career with KPMG and has held executive roles with
Macquarie Group, Westpac Institutional Bank, Seven West Media, Bis Industries
and Merivale.
Carole is a Non-Executive Director and Chair of Audit Committee of FlexiGroup
Limited (ASX: FXL), Non-Executive Director of Seven West Media Group Limited
(ASX: SXL), Southern Cross Media Group Limited (ASX: SXL) and Deputy Chair of
Council and Chair of the Finance, Audit and Risk Management Committee of the
Australian Film Television and Radio School. She is also a Non-Executive Director
of The Sydney Film Festival.
Carole is a Fellow of Chartered Accountants Australia and New Zealand (FCA)
and a Graduate Member of the Australian Institute of Company Directors (GAICD).
Committees: Chair of the Audit, Risk & Compliance Committee.
Sandra has a track record in driving customer-centred business transformation
and transitioning traditional organisations in rapidly evolving environments. She
has extensive operational, digital, financial management and strategic experience
built over 25 years as a CEO and in senior executive roles for some of Australia’s
largest media companies including News Limited, Foxtel, Federal Publishing
Company, Murdoch Magazines and Fairfax.
Since 2000 she has also served as a non-executive director on listed, public and
private companies and government bodies. Sandra is currently director of digital/
technology companies RXP Services Ltd (ASX: RXP), MedAdvisor Ltd (ASX: MDR) and
Redhill Education Limited (ASX: RDH) as well as the Sydney Fish Market and CRC
Fight Food Waste. She is a trustee of the Sydney Harbour Federation Trust.
Committees: Member of the Nomination & Remuneration Committee.
Paul Stephen Selig
Executive Director
Appointed:
10 June 2015
Paul’s career commenced in banking and treasury management before moving
into the print and marketing communications sector over 25 years ago. He has
been a director of the Company since 2012, and appointed to IVE Group Limited on
it’s incorporation in 2015. Paul is an experienced director and investor having run
the Caxton Group family office for over 15 years.
James Scott
Charles Todd
Independent Non-
executive Director
Appointed:
10 June 2015
Paul is also a director of Caxton Group, Caxton Print Holdings and Caxton
Property Developments. He holds a Bachelor of Economics (Hons) from Macquarie
University.
James is an experienced company director, corporate adviser and investor. He
commenced his career in investment banking and has taken active roles in a range
of private and public companies. He was until recently Managing Director of
Wolseley Private Equity, an independent private equity firm he co-founded in 1999.
James is also a Non-Executive Director of three other ASX listed companies, HRL
Holdings Limited (ASX: HRL), Coventry Group Limited (ASX: CYG) and Bapcor
Limited (ASX: BAP).
James holds a Bachelor of Commerce and a Bachelor of Laws from the University
of New South Wales, and a Graduate Diploma of Applied Finance from the
Financial Services Institute of Australasia (FINSIA), where he is a Fellow. He is also
a member of the Australian Institute of Company Directors.
Committees: Member of the Audit, Risk & Compliance Committee and Nomination
& Remuneration Committee.
Warwick Leslie Hay
Managing Director
Appointed:
25 November 2015
Ceased:
5 August 2019
After joining IVE Group in 2009 as CEO of Blue Star WEB, Warwick was appointed
Managing Director in 2014. Warwick has over 20 years’ of management experience
across all business functions in complex B2B environments. His expertise lies in his
ability to lead through significant change, from business turnarounds to growth
strategies such as building greenfield facilities. He has a proven track record
and passion for delivering customer centric strategies, including new product
innovation and market launch, implementation of complex importing supply
chains and large capital investment projects.
Between 2004 and 2009 Warwick was General Manager of Huhtamaki Flexibles
Packaging Oceania. His prior work history includes 15 years within Carter Holt
Harvey’s Packaging division across a broad range of senior roles. Warwick
completed his tertiary education in New Zealand, a Graduate Diploma in
Packaging Technology from Massey University and a Post Graduate Diploma in
Business from Auckland University.
50
51
IVE Group LimitedAnnual Report 2020 Directors’ report – continued
Company Secretary
Directors’ interest and benefits
The relevant interests of each director in the shares
of the Company as at the date of this report are
disclosed in the Remuneration Report (on page 54).
Environmental regulation
The Group’s operation is not subject to any
significant environmental regulations under either
Commonwealth or State legislation. However,
the Board believes that the Group has adequate
systems in place for the management of its
environmental requirements and is not aware of any
breach of those environmental requirements as they
may apply to the Group during the period covered
by this report.
Naomi Dolmatoff
Naomi was appointed as joint Company Secretary
on 26 March 2019. Naomi is an experienced
Company Secretary and has worked with ASX-
listed entities in the financial services, technology,
telecommunications and mining and resources
industries. Naomi holds a Bachelor of Commerce
(Finance) with distinction and a graduate Diploma
in Applied Corporate Governance. Naomi is also
an Associate of both the Governance Institute of
Australia and the Institute of Chartered Secretaries
and Administrators (UK).
Darren Dunkley
Darren has been the Chief Financial Officer (CFO)
of the Group since 2012, and has been with IVE for
over 15 years. He has over 25 years of experience
with a range of blue chip companies including Sharp
Corporation, ANZ Banking Group Ltd and Nashua
Australia. Darren has a Bachelor of Commerce
majoring in Accounting and is a CPA.
Meetings of Directors
The number of directors’ meetings (including meetings of committees of directors) and number of meetings
attended by each of the directors of the Company during the financial year are:
Board
Audit, Risk &
Compliance
Committee (ARCC)
Nominations &
Remuneration
Committee (NRC)
Other
Committees
Eligible
Attended
Eligible
Attended
Eligible
Attended
Eligible
Attended
Geoff Selig
Gavin Bell
Sandra Hook
Paul Selig
James Todd
Carole Campbell
Warwick Hay1
20
20
20
20
20
20
2
20
18
19
20
20
20
2
–
4
–
–
4
4
–
–
4
–
–
4
4
–
–
3
3
–
3
–
–
–
3
3
–
3
–
–
2
–
–
–
–
2
–
2
–
–
–
–
2
–
1 Warwick Hay resigned as Managing Director effective 5 August 2019 and ceased employment on 31 January 2020.
Events subsequent to
reporting date
Aside from the event below, there has not arisen in
the interval between the end of the financial year
and the date of this report any item, transaction or
event of a material and unusual nature likely, in the
opinion of the directors of the Company, to affect
significantly the operations of the Group, the results
of those operations, or the state of affairs of the
Group, in future financial years.
On 11 August 2020, Coles Group Limited informed the
Group that it would reduce catalogue printing. This
will affect the Group’s revenue with an estimated
reduction of between $35,000-$40,000 thousand.
Likely developments
Information about likely developments in the
operations of the Group and the expected results
of those operations in future financial years has
not been included in this report because disclosure
of the information would be likely to result in
unreasonable prejudice to the Group.
Indemnification and insurance of officers
During the financial year, the Group paid a premium
insuring the directors of the Group, the company
secretaries, and executive officers to the extent
permitted by the Corporations Act 2001.
The Group indemnified its directors and company
secretaries to the extent permitted by law against a
liability incurred.
Indemnification and insurance of auditor
During or since the end of the financial year the
Group has not indemnified or made a relevant
agreement to indemnify the auditor of the Group
against a liability incurred as the auditor. In
addition, the Group has not paid, or agreed to pay,
a premium in respect of a contract insuring against
a liability incurred by the auditor.
Insurance premiums
During the financial year the Company has paid
premiums in respect of directors’ and officers’
liability insurance contracts for the year ended
30 June 2020. In addition, since the financial year,
the Company paid or agreed to pay premiums in
respect of such insurance contracts for the year
ending 30 June 2021. Such insurance contracts
insure against certain liability (subject to specific
exclusions) for persons who are or have been
directors or executive officers of the Company.
The directors have not included details of the
nature of the liabilities covered or the amount
of the premiums paid in respect of the directors’
and officers’ liability insurance contracts, as such
disclosure is prohibited under the terms of the
contract.
52
53
IVE Group LimitedAnnual Report 2020 Directors’ report – continued
Remuneration Report (Audited)
Introduction
This Remuneration Report (Report), which has been
audited, describes the Key Management Personnel
(KMP) remuneration arrangements for the 12 months
ended 30 June 2020 for IVE Group, in accordance
with the Corporations Act 2001 (Cth) (Corporations
Act) and its regulations.
The Report is designed to provide shareholders
with an understanding of IVE Group’s remuneration
philosophy and the link between this philosophy
and IVE Group’s strategy and performance.
The Board is committed to having remuneration
policies and practices which are designed to
ensure remuneration is equitable, competitive and
reasonable to attract and retain key talent who
are critical to IVE Group’s business success, align
with long-term interests of the Company and its
shareholders, and to ensure that any incentives
do not reward conduct that is contrary to the
Company’s values or risk appetite. IVE Group will
align remuneration to strategies and business
objectives and provide a balance between fixed
and variable rewards to ensure that rewards are
given for performance. Remuneration structures are
designed to be transparent to employees and other
stakeholders and easily understood. In addition,
the remuneration framework is designed to be
acceptable to shareholders by being consistent
with market practice and creating value for
shareholders.
The remuneration framework was reviewed in
2018 and a staged process was commenced to
appropriately reward Key Management Personnel
through base pay and short term incentive levels
that are in line with IVE Group’s peers and reward
performance and ensure an appropriate level of
long-term incentives aligned with shareholder
objectives of long-term sustainable performance.
The remuneration framework was reviewed again in
2019. Following the promotion of Matt Aitken from
the role of Chief Operating Officer to Chief Executive
Officer during 2019, Mr Aitken’s fixed remuneration
was reviewed and increased 27% to $604,000 per
annum and his short term incentive for FY20 was
also increased by $50,000. These increases were
considered by the Board to be appropriate and in-
line with a KMP Remuneration Benchmark Review
conducted by Egan Associates Pty Limited, an
independent external remuneration consultant. No
changes were made to the overall remuneration
framework, quantum or components of any other
member of the KMP for the 2020 financial year
During the second half of the 2020 financial year
the impacts of the unprecedented global COVID-19
pandemic brought about significant uncertainty
and change. The Company was not immune from
the impacts and implemented cost reduction
initiatives across the whole of the organisation
which included a review of remuneration resulting in
the implementation of temporary salary reductions
for Directors, senior executives and staff and the
decision to suspend the FY20 short term incentive.
The salary reductions applied to the June 2020
quarter. Directors agreed to a 50% reduction in
their fees and the Chief Executive Officer and Chief
Financial Officer agreed to a 25% reduction in their
salaries. No increases to fixed remuneration were
agreed to be paid to Directors, senior executives and
staff for FY21.
The Board is mindful that the unprecedented impact
of COVID-19 has affected IVE Group’s people in
many different ways and are extremely proud of the
manner in which its people rose to the challenges
presented to continue to focus on delivering
excellent service and products to its customers.
No changes have been made to the overall
remuneration framework for the 2021 financial year
as the Board considers that the existing structure
comprising fixed remuneration balanced with short
and long-term incentives, appropriate to continue
to incentivise, retain and recognise senior executives
and staff for their significant contribution during
2020 and into the future.
The Board considers that the members of the
Nomination and Remuneration Committee (NRC)
possess the necessary expertise and independence
to fulfil their responsibilities and are able to access
independent experts in remuneration for advice
should this be required. The governance processes in
relation to remuneration are working effectively and
the Board trusts that shareholders find this Report
useful and informative.
As outlined on pages 40 to 46, the FY20 financial
performance was impacted by the unprecedented
global COVID-19 pandemic. This is in the context
of a competitive market and challenging macro-
economic environment. The Board believes that the
remuneration outcomes for the executive KMP for
the 2020 financial year reflect this and satisfy the
goals of the remuneration framework.
The remuneration report contains the following sections:
> Persons covered by this Report
> Overview of the remuneration framework for executive KMPs
> Linking reward and performance
> Grant of Performance Share Rights and the Long-term Incentive Plan
> Non-Executive Director remuneration framework
> Contractual arrangements with executive KMPs
> Details of remuneration for KMPs
> Rights Granted to executive KMP
> Directors and executive KMP shareholdings in IVE Group Limited
> Other statutory disclosures.
Who this report covers
This report covers Non-Executive Directors and executive KMPs (collectively KMP) and includes:
Non-Executive Directors
Gavin Bell
Carole Campbell
Sandra Hook
James Todd
Executive Directors
Geoff Selig
Warwick Hay1
Paul Selig
Role
Independent Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
Executive Chairman
Managing Director
Executive Director
Executive Key Management Personnel
Matthew (Matt) Aitken
Chief Executive Officer (appointed 5 August 2019)
Chief Operating Officer (ceased 5 August 2019)
Darren Dunkley
Chief Financial Officer & Company Secretary
1 Warwick Hay resigned as Managing Director effective 5 August 2019 and ceased employment on 31 January 2020.
54
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IVE Group LimitedAnnual Report 2020 Directors’ report – continued
Overview of IVE Group’s remuneration
framework for executive KMP
The objective of IVE Group’s remuneration
philosophy is to ensure KMPs are rewarded for
business performance and retained to continue to
grow the business. The objectives underpinning the
remuneration philosophy are that remuneration
will:
Any advice that may be received from remuneration
consultants in future will be carefully considered by
the NRC to ensure it is given free of undue influence
by IVE Group executives.
Structure of remuneration
The remuneration framework for executive KMP
includes both fixed and performance-based pay.
> Be competitive and reasonable to attract and
retain key talent;
Fixed remuneration
> Align to IVE Group’s strategies and business
objectives;
> Provide a balance between fixed and variable
rewards;
> Be transparent and easily understood; and
> Be acceptable to shareholders.
A key factor in IVE Group’s business success will be
being able to attract and retain key talent and
the remuneration framework has been designed to
enable this.
Governance
IVE Group has established the NRC whose role
is to assist the Board with its remuneration
responsibilities, including reviewing and
recommending to the Board for approval,
arrangements for executives, Executive Directors
and Non-Executive Directors. The NRC has three
members, all of whom are independent, including an
independent committee chair. The members of the
NRC have appropriate qualifications and experience
to enable the NRC to fulfil its role.
In addition, the Board has appointed Gavin Bell as
the Lead Independent Director to fulfil the role of
chair whenever the Executive Chairman is conflicted
and to assist in reviewing the Executive Chairman’s
performance as part of the Board performance
evaluation process.
External remuneration consultants
The Terms of Reference for the NRC requires
that any remuneration consultants engaged be
appointed by the NRC. During 2020 IVE Group
engaged Egan Associates Pty Limited to undertake
a KMP Remuneration Benchmark Review. This
engagement was arranged and supervised by the
chair of the NRC and the report was provided and
considered by the NRC members without executives
present. The fee paid to Egan Associates Pty Limited
was $15,960.
Fixed remuneration is set using a combination
of historical levels and sector comparisons.
Fixed remuneration includes base pay, statutory
contributions for superannuation and non-
monetary benefits. Paying executive KMP the right
fixed remuneration is a key tool in attracting and
retaining the best talent.
The NRC reviews the fixed remuneration of executive
KMP on an annual basis. As indicated in the 2018
remuneration report, fixed remuneration was
reviewed in 2018 and was implemented from 1 July
2018. Fixed remuneration in respect of executive
KMP was again reviewed in 2019 which included
the engagement of Egan Associates Pty Limited
to undertake a KMP Remuneration Benchmark
Review across IVE Group peers. Mr Aitken’s fixed
remuneration was increased 27% from $504,000
to $640,000 to reflect his promotion from the
role of Chief Operating Officer to Chief Executive
Officer. Although Mr Aitken commenced as Chief
Executive Officer in August 2019, the increased
fixed remuneration did not come into effect until 1
January 2020. Following the external benchmark
review, the fixed remuneration of other executive
KMP was considered to be appropriate and no
increases were made.
The NRC has determined that fixed remuneration
for the 2021 financial year will stay the same with
no increases to be made. This follows executive KMP
agreeing to a temporary fixed remuneration salary
reduction ranging between 25% - 50% applying to
the three months ended 30 June 2020, as a result of
COVID-19 and is reflected in the remuneration paid
to executive KMP in the 2020 financial year.
Fixed remuneration is the major component of
the Executive Chairman’s remuneration. Through
his family arrangements, he has an interest in a
substantial shareholding in the Company. This
provides significant alignment with shareholders’
experience.
Short-term incentive (STI)
The NRC reviews the achievement of STI targets at
the end of each year and sets STI targets for the
following year. The STI is the main tool for rewarding
the current year’s performance of the business.
In FY20, executive KMP (excluding Paul Selig)
were eligible to receive an STI payment as a cash
incentive payment conditional on achievement
of target pro-forma Earnings before Interest, Tax,
Depreciation and Amortisation (EBITDA), individual
financial and non-financial performance targets
across strategic and discretionary measurements.
The Board determines the STI payment for executive
KMP by allocating a percentage weighting across
the above measures. At the end of the financial
year, the Board assesses the individual and
collective performance against the STI measures.
In light of the unprecedented impacts of COVID-19
the Board agreed to suspend the FY20 STI and
accordingly, no STI payments to executive KMP have
been made in respect of the 2020 financial year.
The FY21 STI amounts for some of the executive
KMP have been adjusted as shown in the table on
page 58.
Long-term incentive (LTI)
The Board has established a LTI Plan as outlined
in prior years’ Remuneration Reports and outlined
in the section in this Report entitled ‘Share based
remuneration’. The LTI Plan was last approved by
shareholders at IVE’s 2018 Annual General Meeting
(AGM). The LTI Plan is largely used to reward long-
term sustainable performance.
The LTI Plan facilitates the offer of Performance
Share Rights (Rights) to key executives and the Rights
vest and convert to ordinary shares on a one-for-
one basis, subject to meeting specific performance
conditions, specifically achievement of:
> relative total shareholder return (TSR); and
> compound annual earnings per share growth
(EPS) over a three-year performance period.
The LTI Plan, including the combination of TSR and
EPS hurdles, has been designed commensurate
with IVE Group’s long-term strategic objectives so
that executive KMP will only receive a substantial
component of LTI when there has been strong
absolute and relative performance.
The grant of Rights during FY20 to the Executive
Chairman was approved by shareholders at the
2019 AGM and the Rights to be granted to the
Executive Chairman for FY21 will be submitted for
approval by shareholders at the 2020 AGM.
The Board has the discretion to amend the future
vesting terms and performance hurdles at the
grant of each award of Rights to ensure that they
are aligned to market practice and ensure the best
outcome for IVE Group. The Board also has the
discretion to change the LTI Plan and to determine
whether LTI grants will be made in future years.
There is no-retesting of performance hurdles.
The Board makes changes to the level of LTI to grant
each year based on reviews of total remuneration
packages for executives. In FY20 the Board,
following review by the NRC, agreed to grant an
equity-based LTI to Geoff Selig, Executive Chairman.
This was to better align the Executive Chairman’s
remuneration package with other executives and
the results of the peer review undertaken. The NRC
has again reviewed this position and will grant
an equity-based LTI to Geoff Selig as Executive
Chairman in FY21, as well as other executives. Due to
Paul Selig’s executive role being specific in nature, he
does not participate in the LTI Plan.
The NRC decided to not increase the level of long-
term incentives for FY21. They will remain in-line
with the same quantum agreed in respect of FY19
and FY20. The NRC believe that the issue of long-
term equity incentivises and aligns management’s
remuneration with shareholders’ longer term
interests.
The staged approach to executive remuneration over
recent years has led to the current level of executive
remuneration which the Board feels is appropriate
in the challenging and competitive sector in
which the Group operates. All rewards, other than
fixed remuneration, are subject to achieving the
performance conditions outlined above.
Assessment of performance
Performance of executive KMPs is assessed against
the agreed non-financial and financial targets
on a regular basis. Based on this assessment, the
Executive Chairman will make a recommendation
to the NRC for Board approval of the amount of STI
and LTI to award (as applicable) to each KMP, other
than the Executive Chairman. Recommendations in
relation to the Executive Chairman are made by the
chair of the NRC, for Board approval.
The NRC assesses the actual performance of IVE
Group and the Executive Chairman against the
agreed targets and recommends the amount of the
STI and LTI (as applicable) to be paid for approval
by the Board.
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IVE Group LimitedAnnual Report 2020 Directors’ report – continued
Executive KMP remuneration – paid, vested and targets
The table below presents the STI and LTI paid and vested to executive KMP during FY19 and FY20. Further
detail on remuneration is included in the tables at the end of this Report.
All in $
STI
LTI – Number of Rights
Geoff Selig
FY20
Maximum
200,000
Actual
0
Granted
147,058
FY19
200,000
178,000
130,718
Warwick Hay1
FY20
100,000
0
0
FY19
100,000
82,750
130,7181
Matt Aitken
FY20
150,000
0
147,058
FY19
100,000
82,750
130,718
Darren Dunkley
FY20
80,000
0
110,294
FY19
80,000
70,800
98,039
Vested
Not applicable
(3 year vesting)
Not applicable
(3 year vesting)
Not applicable
(3 year vesting)
Not applicable
(3 year vesting)
Not applicable
(3 year vesting)
Not applicable
(3 year vesting)
Not applicable
(3 year vesting)
Not applicable
(3 year vesting)
Paul Selig
FY20
FY19
0
0
0
0
0
0
N/A
N/A
1 Warwick Hay resigned as Managing Director effective 5 August 2019 and ceased employment on 31 January 2020. In accordance
with the IVE Group Equity Incentive Plan Rules, these unvested performance rights have lapsed and were forfeited.
Further detail on the value of the Rights granted is included in the tables at the end of this Report.
Proportions of fixed and variable remuneration
The Board and NRC consider annually the
fixed remuneration and proportion of variable
remuneration that is dependent on performance
(‘at risk’) for each executive KMP. The relative
proportions of fixed versus variable pay (as a
percentage of total remuneration) received by
executive KMP during the past two financial periods
and proposed for the next financial period are
shown below. This chart shows the staged process
the NRC has undertaken to increase the proportion
of at risk remuneration.
As shown below, no changes are proposed
to executive KMP fixed remuneration for FY21
following the assessment of performance, the
annual review of fixed remuneration and STI and
LTI targets. Increases to the FY21 STI of the Matt
Aitken, Chief Executive Officer, and Darren Dunkley,
Chief Financial Officer, are designed to incentivise
performance in what remains an uncertain period.
Payment of STI is of course dependent on the
achievement of relevant key performance measures.
All in $
Fixed Remuneration1
STI
FY19
Actual
FY20
Actual
FY21
Agreed
FY19
Actual
FY20
Actual
FY21
Maximum
FY19
Grant2
LTI
FY20
Grant2
FY21
Grant2
Geoff
Selig
Warwick
Hay5
Matt
Aitken
Darren
Dunkley
952,000
835,566
952,000
178,000
525,000
308,144
N/A
82,750
504,000
537,864
640,000
82,750
420,000
400,971
420,000
70,800
Paul Selig
330,000
289,794
330,000
0
0
0
0
0
0
200,000
200,000
200,000
200,0003
N/A
200,0005
N/A5
N/A
300,000
200,000
200,000
200,000
180,000
150,000
150,000
150,000
0
N/A4
N/A4
N/A4
1 Fixed remuneration includes superannuation and excludes annual leave loading
2 LTI grant is the $ value of the grant approved by the Board.
3 FY21 LTI grant is subject to shareholder approval.
4 Due to the specific nature of his role, Paul Selig does not participate in the LTI Plan.
5 Warwick Hay resigned as Managing Director effective 5 August 2019 and ceased employment on 31 January 2020. In accordance
with the IVE Group Equity Incentive Plan Rules, the unvested performance rights granted under the FY19 LTI lapsed and were
forfeited.
The Board uses a fair value method to determine
the value of performance rights issued under the LTI
Plan, which was last approved by shareholders in
2018. This is consistent with the required accounting
treatment of rights and the basis on which the KMP
remuneration arrangements were agreed. The Board
recognises that some stakeholders advocate the use
of the face value method to determine the value of
performance rights. A face value approach does not
take into account the risk that rights may not vest
and that the rights are not entitled to dividends. In
a year where there is no change to remuneration
arrangements, a move to a face value approach
would effectively reduce the executive KMPs
remuneration.
The executive KMPs remuneration arrangements
were agreed assuming a fair value approach. The
FY21 LTI will again use a fair valuation calculation
to determine the quantity of performance rights to
be granted to executive KMP. Given the significant
volatility in the Company’s share price since March
2020 to the date of this report as a result of the
COVID-19 pandemic, the Board agreed that the
measurement date for the fair valuation report
will be based on the volume weighted average
price of the 20 trading days following the release
of the Company’s full year 2020 results. The Board
believes that this will allow the market to absorb
the full year results and align the fair valuation
closer to the date of grant.
If a face value method were used, the FY20 LTI grant
for each of the executive KMP would be as indicated
in the table below. The number of performance
rights to be granted under the FY21 LTI will be
determined and reported in the 2021 remuneration
report.
FY20 Fair
Value
(No. of rights)
FY20 Face
Value*
(No. of rights)
Geoff Selig
Matt Aitken
147,058
147,058
Darren Dunkley
110,294
Paul Selig
0
97,560
97,560
73,170
N/A
*Based on the closing share price on 1 July 2019 of $2.05 per
share.
58
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IVE Group LimitedAnnual Report 2020 Directors’ report – continued
How reward is linked to performance
Performance indicators and link to performance
Notwithstanding the impacts of the unprecedented
COVID-19 pandemic during the 2020 financial
year, IVE Group’s financial performance has
been strong since listing on the ASX in December
2015. Performance of the business is reflected in
the outcome of the variable components to the
remuneration framework:
> full STI payments are only made if executive KMP
meet agreed financial and non-financial targets
for the year in review (the FY20 STI payment was
suspended due to the impact of COVID-19); and
> LTI grants only vest if IVE Group achieves the
targets set for TSR and EPS over a three year
performance period.
Performance rights granted to KMP in 2016 under
the FY17 LTI vested during FY20. Of these, 25,315
performance rights granted to KMP vested and
92,826 unvested performance rights lapsed in
accordance with the IVE Group Equity Incentive
Plan rules. This is the first vesting of LTI for executive
KMP since IVE Group listed on the ASX and vesting
performance against targets is shown below:
Total LTI Grant
FY17
60% of Performance
Share Rights
Earnings Per Share
Target (EPS)
40% of Performance
Share Rights Relative
Total Shareholder
Return (TSR))
Vested
Lapsed
Geoff Selig
Matt Aitken
32,817
32,817
Darren Dunkley
19,690
Warwick Hay
32,817
Paul Selig
N/A
118,141
19,690
19,690
11,814
19,690
N/A
70,884
13,127
13,127
7,876
13,127
N/A
47,257
7,032
7,032
4,219
7,032
N/A
25,315
25,785
25,785
15,471
25,785
N/A
92,826
Performance rights under the FY17 LTI vested in accordance with the performance conditions shown as
follows:
60% of Performance Share Rights
Earnings Per Share Target (EPS)
40% of Performance Share Rights
Relative Total Shareholder Return (TSR)
EPS Target 7.75%
Performance Share Rights
TSR growth
Performance Share Rights
Less than 90% of
target achieved
90-99% of
target achieved
Target achieved
or exceeded
Nil
80%
100%
Company ranks
below 50th percentile
Company ranks at the
50th percentile
Nil
50%
Company ranks between
the 50th and 75th
percentile
Straight line vesting
Company ranks at or
above 75th percentile
100%
Accumulated pro-forma EPS growth over the three
year vesting period between FY17 to FY19 was less
than 90% of the EPS Target. Accordingly, none of
the EPS tranche of performance rights vested.
IVE Group was ranked as 53.57 compared to
the relevant FY17 LTI peer group as at 30 June
2019. Accordingly, 53.5% of the TSR tranche of
performance rights vested.
Unvested rights were forfeited in accordance with
the LTI plan rules.
Key financial metrics over the last seven years are shown below:
Revenue ($m)
EBITDA ($m)
Net profit after tax ($m)
Dividend payment (cents per share)1
Dividend payout ratio1
Share price change ($)2
FY14
FY15
FY16
FY17
FY18
FY193
FY20
303.5
337.4
382.0
496.6
695.4
723.6
691.5
22.9
30.9
6.4
N/A
N/A
N/A
9.7
N/A
N/A
N/A
42.8
20.9
N/A
N/A
N/A
55.2
24.6
12.7
69%
73.2
32.4
15.5
71%
82.0
35.4
16.3
71%
76.6
32.6
0.0
0%
(0.043)
+0.162
(0.23)
(1.26)
The above results are prepared on an underlying continuing business basis. This excludes all non-operating items and better
reflects the underlying operating performance.
1 Only applicable post-listing on ASX.
2 Calculated as close price on 30 June for the applicable year.
3 FY19 revenue, EBITDA and NPAT have been updated on a continuing business basis for FY20 comparative purposes.
Grant of Performance Share Rights
During the year, the Company made offers of
Rights under the LTI Plan with clear performance
measures.
On 27 November 2019, offers were made granting
647,056 performance rights under the Senior
Leadership Team Plan. Of these, 147,058 were
granted to Geoff Selig for which approval for the
issue was obtained under ASX Listing Rule 10.14 at
the 2019 annual general meeting. These Rights vest
following the release of the FY22 financial results
if certain performance conditions are met during
the Performance period which is 1 July 2019 to
30 June 2022.
In total there were 1,335,244 unvested Rights at
30 June 2020 from the FY18, FY19 and FY20 offers.
There were no offers of options during the year and
there are no unvested options.
The terms of the Equity Incentive Plan which provide
the framework under which the LTI grants were
made in FY18, FY19 and FY20 are as follows:
Feature
Terms of the IVE Group Equity Incentive Plan
Type of security
Performance Share Rights which are an entitlement to receive fully paid ordinary IVE
Group Limited shares (as traded on the ASX) on a one-for-one basis.
Valuation
The number of Performance Share Rights for each KMP is calculated by dividing the
allocated value of the LTI award for that KMP by the fair value of a Performance
Share Right. The fair value is calculated using a Monte Carlo simulation approach
for the Awards subject to the Relative TSR condition and a risk neutral assumption is
used the value the Awards subject to the EPS condition.
For the Executive Chairman and Managing Director (if applicable), the LTI grant, as
recommended by the Board, will be submitted for approval by shareholders at the
relevant Annual General Meeting, as required by the ASX Listing Rules.
Performance Period
The Performance Period is the three year period 1 July to 30 June inclusive.
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IVE Group LimitedAnnual Report 2020 Directors’ report – continued
Feature
Terms of the IVE Group Equity Incentive Plan
Performance
Conditions
The number of Performance Share Rights that may vest will be determined by
reference to:
> Earnings Per Share (EPS) compound annual growth over the Performance Period.
EPS growth will be calculated as IVE Group’s Net Profit After Tax (NPAT) divided
by the undiluted weighted average shares on issue throughout the Performance
Period, using the following formula:
(Benchmark 1); and
> Relative Total Shareholder Return (TSR) performance of the Company in
comparison to similar companies in a peer group determined by the Board. The
peer group for the FY20 offer is shown on the following page. The TSR of each
company will be measured from the start of the Performance Period to the end of
the Performance Period (Benchmark 2),
(collectively the Performance Conditions).
Together Benchmark 1 and Benchmark 2 comprise the total Performance Conditions
but act independently relative to their specific target component of 60% and 40%
of Performance Share Rights, respectively.
There is no re-testing. Any unvested LTI after the test at the end of the Performance
Period will lapse immediately.
All Rights will lapse if the participant elects to cease employment with IVE Group
prior to the Conversion Date (being the date that Performance Share Rights convert
to shares).
Rights will immediately lapse if the participant is dismissed or removed from office
as an employee for any reason which entitles IVE Group to dismiss the participant
without notice or if the participant acts fraudulently, dishonestly or in breach of
their obligations to the Company.
The only exception to the lapse of rights if for a Good Leaver reason detailed below:
> Any unvested Rights will not lapse if the participant’s employment with IVE Group
ceases due to death, ill-health, total permanent disability or sale of the business
in which they are employed.
> Rights for employees who cease employment due to death will vest in full upon
cessation.
> Rights for other good leavers will remain on foot and will be tested against the
Performance Conditions as at the Vesting Date, vesting on a pro-rata basis.
The Board has discretion to allow vesting for other reasons, such as retirement or
redundancy.
The Board has broad ‘clawback’ powers if, amongst other things, the participant
has acted fraudulently or dishonestly, engaged in gross misconduct or has acted
in a manner that has brought the Company into disrepute, or there is a material
financial mis-statement, or the Company is required or entitled under law or
company policy to reclaim remuneration from the participant, or the participant’s
entitlements vest as a result of the fraud, dishonesty or breach of obligations of
any other person and the Board is of the opinion that the incentives would not have
otherwise vested.
Re-testing
Forfeiture
Clawback
62
TSR Peer Group for FY20 Offer
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
19
18
19
20
21
22
23
24
25
26
27
28
AX1
CKF
DHG
FWD
GUD
GWA
HT1
IVC
JBH
KMD
KSC
MTS
NEC
OML
ORA
OVT
PGH
PPG
PRT
QMS
RXP
SLM
SUL
SWM
SXL
TRS
WLL
WPP
Accent Group Limited
Collins Foods Limited
Domain Holdings Australia Limited
Fleetwood Corporation Limited
G.U.D. Holdings Limited
GWA Group Limited
HT&E Limited
InvoCare Limited
JB Hi-Fi Limited
Kathmandu Holdings Limited
K & S Corporation Limited
Metcash Limited
Nine Entertainment Co. Holdings Limited
Ooh!Media Limited
Orora Limited
Ovato Limited
Pact Group Holdings Limited
Pro-Pac Packaging Limited
Prime Media Group Limited
QMS Media Limited
RXP Services Limited
Salmat Limited
Super Retail Group Limited
Seven West Media Limited
Southern Cross Media Group Limited
The Reject Shop Limited
Wellcom Group Limited
WPP Aunz Ltd
The peer group was chosen by the Board. When compiling the peer group, the Board sought to include
similar companies and, in addition to their size, considered characteristics such as being a direct competitor,
operating in a similar industry or sector, generating revenue in Australia only, being exposed to domestic
economic conditions including consumer spending and marketing spend.
Due to changes in the market and the lack of material numbers of useful comparator companies, the Board
proposes to use the companies who are included in the ASX Small Ordinaries Index at the commencement of
the performance period as the peer group for the TSR tranche of performance rights to be offered in future.
63
IVE Group LimitedAnnual Report 2020
Directors’ report – continued
Non-Executive Director Remuneration
Non-Executive Directors enter into service
agreements through letters of appointment which
are not subject to a fixed term. Non-Executive
Directors receive a fee for their contribution as
Directors. Fees are determined with reference to the
demands of the role and the responsibilities carried
out by Directors. The fee setting process also takes
into account market levels, the need to attract high
quality Directors and the size and complexity of the
Company.
Directors receive fees for their role as members of
the Board and, where applicable, for additional
responsibilities. Non-Executive Directors do not
receive additional fees for being a Chair or member
of a Board Committee. Non-Executive Directors do
not receive any variable or performance-based
remuneration. Where Directors are required to
provide additional services, these are paid on a
fixed fee basis or determined on an hourly basis
depending on the nature of the service. There were
no additional services provided in FY20 by Non-
Executive Directors.
During FY20, the Board did not increase fees paid
to Non-Executive Directors and no increase is
proposed for FY21. As set out earlier, this follows
Non-Executive Directors agreeing to a temporary
fee reduction of 50% applying to the three months
ended 30 June 2020, as a result of COVID-19 and
is reflected in the remuneration paid in the 2020
financial year. The current annual fees provided
to Non-Executive Directors, before the COVID-19
temporary salary reduction, are shown below
(inclusive of superannuation):
Chair fee
Non-Executive Director
fee (effective since
1 July 2018)
Contractual arrangements with executive KMPs
Remuneration and other conditions of employment are set out in the executive KMPs employment contracts.
The key elements of these employment contracts are summarised below:
Name:
Title:
Geoff Selig
Executive Chairman
N/A as Executive Chairman
$105,000
Terms of Agreement:
No fixed term – subject to termination provisions detailed below
The total Non-Executive Director fee pool has a
maximum value of $1 million per annum. The total
amount paid to Non-Executive directors in FY20 was
$367,500, being 36.7% of the approved fee pool. This
amount reflects a temporary fee reduction agreed
to by the Non-Executive Directors due to COVID-19
to 30 June 2020. There is no intent to seek approval
to increase the Non-Executive Director fee pool at
the 2020 AGM.
Non-Executive Directors do not receive fees that are
contingent on performance, shares in return for their
services, retirements benefits (other than statutory
superannuation) or termination benefits.
Executive Directors are not remunerated separately
for acting as Directors.
Directors are not required under the Constitution
or any other Board policy to hold any shares in IVE
Group.
The remuneration paid to Non-Executive Directors is
detailed in the tables later in this Report.
Details:
Termination:
Annual remuneration includes cash salary, superannuation and non-cash
benefits
Incentives – eligible to participate in short term incentive and equity remuneration
plans
Termination – 12 months written notice (except in certain circumstances, such as
where committed any breach or material neglect of the material terms of his
contract of employment, or any act of serious or wilful misconduct) by Company
or employee.
All payments on termination will be subject to the termination benefits cap under
the Corporations Act 2001 in the absence of shareholder approval.
Post-employment – 12 months restraint provisions.
Name:
Title:
Paul Selig
Executive Director
Terms of Agreement:
No fixed term – subject to termination provisions detailed below
Details:
Annual remuneration includes cash salary, superannuation and non-cash
benefits
Termination:
Incentives – discretionary bonus
Termination – 3 months written notice (except in certain circumstances, such as
where committed any breach or material neglect of the material terms of his
contract of employment, or any act of serious or wilful misconduct) by Company
or employee.
All payments on termination will be subject to the termination benefits cap under
the Corporations Act 2001 in the absence of shareholder approval.
Post-employment – 12 months restraint provisions.
Name:
Title:
Warwick Hay
Managing Director1
1 Warwick Hay resigned as Managing Director effective 5 August 2019 and ceased employment
on 31 January 2020
Terms of Agreement:
No fixed term – subject to termination provisions detailed below
Details:
Termination:
Annual remuneration includes cash salary, superannuation and non-cash
benefits
Incentives – eligible to participate in short term incentive and equity remuneration
plans
Termination – 6 months written notice (except in certain circumstances, such as
where committed any breach or material neglect of the material terms of his
contract of employment, or any act of serious or wilful misconduct) by Company
or employee.
All payments on termination will be subject to the termination benefits cap under
the Corporations Act 2001 in the absence of shareholder approval.
Post-employment – 9 months restraint provisions.
64
65
IVE Group LimitedAnnual Report 2020
Directors’ report – continued
Name:
Title:
Matt Aitken
Chief Executive Officer (appointed 5 August 2019)
Chief Operating Officer (ceased 5 August 2019)
Terms of Agreement:
No fixed term – subject to termination provisions detailed below
Details:
Termination:
Annual remuneration includes cash salary, superannuation and non-cash
benefits
Incentives – eligible to participate in short term incentive and equity remuneration
plans
Termination – 9 months written notice (except in certain circumstances, such as
where committed any breach or material neglect of the material terms of his
contract of employment, or any act of serious or wilful misconduct) by Company
or employee.
Redundancy
All payments on termination will be subject to the termination benefits cap under
the Corporations Act 2001 in the absence of shareholder approval.
Post-employment – 3 months restraint provisions.
6 months’ pay in circumstance where employment is terminated due to
redundancy.
Name:
Title:
Darren Dunkley
Chief Financial Officer
Terms of Agreement:
No fixed term – subject to termination provisions detailed below
Details:
Termination:
Annual remuneration includes cash salary, superannuation and non-cash
benefits
Incentives – eligible to participate in short term incentive and equity remuneration
plans
Termination – 6 months written notice (except in certain circumstances, such as
where committed any breach or material neglect of the material terms of his
contract of employment, or any act of serious or wilful misconduct) by Company
or employee.
Redundancy
All payments on termination will be subject to the termination benefits cap under
the Corporations Act 2001 in the absence of shareholder approval.
Post-employment – 3 months restraint provisions.
6 months’ pay in circumstance where employment is terminated due to
redundancy.
Details of Remuneration
The table below provides remuneration prepared for on a statutory basis for directors and executive KMPs
year ended 30 June 2020 (except as noted below):
Fixed Remuneration
Variable Remuneration
Name
Year
Cash
salary and
fees4
Super-
annuation
Other
long-term
benefits
Short term
incentive
Fair value
of LTI
award
Total
Total per-
formance
related
Percent-
age per-
formance
related
Executive Directors ($)
Geoff
Selig
Paul
Selig
Warwick
Hay1
2020
814,564
21,003
0
835,566
0
0.0%
2019
931,469
20,531
178,000
20,218
1,150,218
198,218
17.2%
2020
270,373
19,421
2019
309,469
20,531
2020 293,998
14,146
342,756
0
289,794
330,000
650,900
0
0
0
0.0%
0.0%
0.0%
2019 504,469
20,531
82,750
20,218
627,968
102,968
16.4%
Non-executive Directors ($)
Gavin
Bell
Andrew
Harrison2
Carole
Campbell3
Sandra
Hook
James
Todd
2020
91,875
0
2019
96,657
8,351
2019
39,962
3,796
2020
83,904
7,971
2019
58,887
5,594
2020
83,904
2019
95,898
2020
83,904
2019
95,928
7,971
9,110
7,971
9,113
Other Executive KMP ($)
91,875
105,008
43,758
91,875
64,481
91,875
105,008
91,875
105,041
2020 379,968
21,003
0
400,971
0
0
0
0
0
0
0
0
0
0
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
Darren
Dunkley
Matt
Aitken
2019
350,995
20,531
52,238
70,800
15,163
509,727
85,963
16.9%
2020
516,861
21,003
537,864
0
0.0%
2019
493,231
20,531
82,750
20,218
616,730
102,968
16.7%
1 Warwick Hay resigned as Managing Director effective 5 August 2019 and ceased employment on 31 January 2020.
2 Andrew Harrison ceased to be a Director on 20 November 2018.
3 Carole Campbell was appointed as a Director on 21 November 2018.
4 Cash, salary and fees includes annual leave and long service leave.
66
67
IVE Group LimitedAnnual Report 2020
Directors’ report – continued
Rights granted to executive KMP
FY17
Vesting conditions
Grant Date
FY20
KMP
Geoff
Selig
Matt
Aitken
Number of
rights granted
in FY20
147,058
147,058
Darren
Dunkley
110,294
FY19
KMP
Geoff
Selig
Number of
rights granted
in FY19
130,718
Warwick
Hay1
130,718
Matt
Aitken
130,718
Darren
Dunkley
98,039
Relative TSR and
Compound annual EPS
growth over 3 years
Relative TSR and
Compound annual EPS
growth over 3 years
Relative TSR and
Compound annual EPS
growth over 3 years
Relative TSR and
Compound annual EPS
growth over 3 years
Relative TSR and
Compound annual EPS
growth over 3 years
Relative TSR and
Compound annual EPS
growth over 3 years
Relative TSR and
Compound annual EPS
growth over 3 years
Fair value
at grant
date
$200,000
27 November
2019
27 November
2019
$200,000
27 November
2019
$150,000
Fair value
at grant
date
$200,000
21 November
2018
21 November
2018
$200,000
21 November
2018
$200,000
21 November
2018
$150,000
Expiry date
After vesting following release
of FY22 financial results. Any
unvested Rights expire.
After vesting following release
of FY22 financial results. Any
unvested Rights expire.
After vesting following release
of FY22 financial results. Any
unvested Rights expire.
Expiry date
After vesting following release
of FY21 financial results.
Any unvested Rights expire.
After vesting following release
of FY21 financial results.
Any unvested Rights expire.
After vesting following release
of FY21 financial results.
Any unvested Rights expire.
After vesting following release
of FY21 financial results.
Any unvested Rights expire.
Performance rights granted to KMP under the FY17 LTI vested during FY20. Of these, 25,315 performance rights
vested and 92,826 unvested performance rights lapsed in accordance with the IVE Group Equity Incentive
Plan rules.
Number
of rights
granted in
FY18
32,817
KMP
Geoff
Selig
Fair value
at grant
date
$50,000
Vesting conditions Grant Date
Relative TSR and
Compound annual
EPS growth over
3 years
22 November
2016
Warwick
Hay
32,817
Matt
Aitken
32,817
Darren
Dunkley
19,690
Relative TSR and
Compound annual
EPS growth over
3 years
Relative TSR and
Compound annual
EPS growth over
3 years
Relative TSR and
Compound annual
EPS growth over
3 years
22 November
2016
$50,000
16 September
2016
$50,000
16 September
2016
$30,000
Note there were no Rights or options granted in FY16.
Expiry date
After vesting
following
release of FY19
financial results.
Any unvested
Rights expire.
After vesting
following
release of FY19
financial results.
Any unvested
Rights expire.
After vesting
following
release of FY19
financial results.
Any unvested
Rights expire.
After vesting
following
release of FY19
financial results.
Any unvested
Rights expire.
7,032 shares were issued
on vesting of 7,032
performance rights.
25,785 unvested
performance rights
lapsed.
7,032 shares were issued
on vesting of 7,032
performance rights.
25,785 unvested
performance rights
lapsed.
7,032 shares were issued
on vesting of 7,032
performance rights.
25,785 unvested
performance rights
lapsed.
4,219 shares were issued
on vesting of 4,219
performance rights.
15,471 unvested
performance rights
lapsed.
Vesting conditions
Grant Date
1 Warwick Hay resigned as Managing Director effective 5 August 2019. In accordance with the IVE Group Equity Incentive Plan
Rules, these unvested performance rights have lapsed and were forfeited.
FY18
KMP
Warwick
Hay1
Number of
rights granted
in FY18
67,567
Matt
Aitken
60,810
Darren
Dunkley
50,675
Fair value
at grant
date
$100,000
Vesting conditions
Grant Date
Relative TSR and
Compound annual EPS
growth over 3 years
Relative TSR and
Compound annual EPS
growth over 3 years
Relative TSR and
Compound annual EPS
growth over 3 years
17 November
2017
17 November
2017
$90,000
17 November
2017
$75,000
Expiry date
After vesting following release
of FY20 financial results.
Any unvested Rights expire.
After vesting following release
of FY20 financial results.
Any unvested Rights expire.
After vesting following release
of FY20 financial results.
Any unvested Rights expire.
1 Warwick Hay resigned as Managing Director effective 5 August 2019. In accordance with the IVE Group Equity Incentive Plan
Rules, these unvested performance rights have lapsed and were forfeited.
68
69
IVE Group LimitedAnnual Report 2020 Directors’ report – continued
Director and Executive KMP Shareholding
Non-audit services
Lead auditor’s independence declaration
The table below provides the number of shares in IVE Group Limited held by each Director and executive KMP
during the period, including their related parties:
Executive Directors
Geoff Selig,
Executive Chairman1
Paul Selig1
Warwick Hay,
Managing Director3
Non-executive Directors
Gavin Bell
Sandra Hook
James Todd
Carole Campbell
Executive KMP
Darren Dunkley,
CFO and Company Secretary
Matt Aitken,
Chief Executive Officer2
Balance at
1 July 2019
11,210,231
11,260,231
535,681
122,697
12,919
105,836
0
48,051
0
Shares received
during the period
on exercise of
Performance Share
Rights
Shares
acquired
Shares
disposed
Balance at
30 June 2020
7,032
–
7,032
–
–
–
–
4,219
7,032
1,650,000
1,650,000
–
–
–
16,500
50,000
–
–
–
–
–
–
–
–
–
–
-
12,867,263
12,910,231
542,7133
122,697
12,919
122,336
50,000
52,270
7,032
1 Geoff Selig and Paul Selig are each beneficiaries of the Selig Family Trust No. 5, the trustee of which holds 12,860,231 shares.
2 Matt Aitken held the role of Chief Operating Officer until 5 August 2019 and was appointed as Chief Executive Officer on
5 August 2019.
3 Warwick Hay resigned as Managing Director effective 5 August 2019 ceased employment on 31 January 2020. Holdings are
shown as known as at the date of resignation and set out in the Final Director Interest Notice lodged with ASX on 5 August 2019,
and including the issue of shares on vesting of FY17 LTI.
Loans to directors and executives
Shares issued on the exercise of options
No loans were made to directors and executives of
IVE Group including their close family and entities
related to them during the year.
Shares under option
There were no unissued ordinary shares of IVE Group
under option outstanding at the date of this report.
Shares under performance rights
There were no unissued ordinary shares of IVE Group
under Rights outstanding at the date of this report.
There were no ordinary shares of IVE Group Limited
issued on the exercise of options during the year
ended 30 June 2020 and up to the date of this
report.
Shares issued on the exercise of Performance
Share Rights
28,128 rights vested during the year and 28,128
shares were issued on exercise of Rights during the
year.
In total there were 1,335,244 unvested Rights at
30 June 2020.
This concludes the remuneration report, which has
been audited.
The Lead auditor’s independence declaration is
set out on page 72 and forms part of the directors’
report for the financial year ended 30 June 2020.
Rounding off
The Group is of a kind referred to in ASIC
Corporations Instrument 2016/191 dated 24 March
2016 and in accordance with that Instrument,
amounts in the consolidated financial statements
and directors’ report have been rounded off to the
nearest thousand dollars, unless otherwise stated.
This report is made in accordance with a resolution
of the directors:
Geoff Selig
Director
Dated at Sydney this 25th day of August 2020
During the year, KPMG, the Group’s auditor has
performed certain other services in addition to its
statutory duties. The Board has considered the
non-audit services provided during the year by the
auditor, and, in accordance with the advice received
from the Audit Committee, is satisfied that:
1.
2.
the non-audit services provided during the
financial year by KPMG as the external auditor
were compatible with the general standard of
independence for auditors imposed by the Act;
and
any non-audit services provided during the
financial year by KPMG as the external auditor
did not compromise the auditor independence
requirements of the Corporations Act 2001 (Cth)
for the following reasons:
a)
b)
all non-audit services are subject to
corporate governance procedures adopted
by the Group and have been reviewed by
those charged with governance throughout
the year to ensure they do not impact the
integrity and objectivity of the auditor; and
the nature of the services provided do not
undermine the general principles relating
to audit independence in accordance with
APES 110: Code of Ethics for Professional
Accountants, as they did not involve
reviewing or auditing the auditor’s own
work, acting in a management or decision-
making capacity for the Group, acting as an
advocate to the Group or jointly sharing the
risks and rewards.
Details of the amounts paid to the auditor of the
Group, KPMG, for audit and non-audit services
provided during the year are set out in note 31 of the
Financial Report.
70
71
IVE Group LimitedAnnual Report 2020
72
73
44 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.Liability limited by a scheme approved under ProfessionalStandards Legislation.Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001 To the Directors of IVE Group Limited I declare that, to the best of my knowledge and belief, in relation to the audit of IVE Group Limited for the financial year ended 30 June 2020 there have been: i.no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and ii.no contraventions of any applicable code of professional conduct in relation to the audit. KPMG John Wigglesworth Partner Sydney 25 August 2020 IVE Group LimitedAnnual Report 2020 Contents
Consolidated Financial Statements
Consolidated statement of profit or loss and other comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the Consolidated Financial Statements
1. Reporting entity
2. Basis of preparation
3. Significant accounting polices
4. Revenue
5. Other income
6. Personnel expenses
7. Expenses
8. Financial income and finance costs
9. Taxes
10. Cash and cash equivalents
11. Trade and other receivables
12. Inventories
13. Property, plant and equipment
14. Leases
15. Intangible assets and goodwill
16. Trade and other payables
17. Loans and borrowings
18. Employee benefits
19. Provisions
80
80
81
93
93
93
93
94
94
96
97
97
98
99
101
103
103
104
104
Financial report
for the year ended 30 June 2020
74
74
76
77
78
79
105
106
107
108
109
20. Share-based payments
21. Capital and reserves
22. Earnings per share
23. Acquisitions
24. Operating segments
25. Financial risk management and financial
instruments
26. Capital commitments
27. Related parties
28. Group entities
29. Parent entity disclosures
30. Subsequent events
31. Auditors’ remuneration
32. Deed of cross guarantee
33. Discontinued operation
Directors’ declaration
Independent audit report to the members of
IVE Group Limited
109
114
114
115
116
116
117
117
118
119
120
75
IVE Group LimitedAnnual Report 2020IVE Group Limited Consolidated statement of profit or loss and other
comprehensive income
For the year ended 30 June 2020
Consolidated statement of financial position
As at 30 June 2020
Note
2020
2019
Restated*
In thousands of AUD
Assets
Note
2020
2019
In thousands of AUD
Continuing operations
Revenue
Cost of sales
Gross profit
Other income
Production expenses
Administrative expenses
Other expenses
Results from operating activities
Finance income
Finance costs
Net finance costs
Profit/(loss) before tax
Income tax expense
Profit/(loss) from continuing operations
Discontinued operation
Loss from discontinued operation, net of tax**
Profit/(loss) for the year
4
5
7
6, 7
8
9
33
691,538
(364,727)
326,811
168
(156,436)
(114,825)
(52,021)
3,697
149
(10,812)
(10,663)
(6,966)
(11,432)
(18,398)
(1,791)
(20,189)
723,597
(376,963)
346,634
1,383
(176,604)
(111,768)
(3,254)
56,391
191
(10,035)
(9,844)
46,547
(13,519)
33,028
(1,724)
31,304
Other comprehensive income
Items that are or may be reclassified to profit or loss
Cash flow hedges – effective portion of changes in fair value (net of tax)
Cash flow hedges – reclassified to profit or loss (net of tax)
Total other comprehensive income
(392)
224
(168)
(579)
115
(464)
Total comprehensive income/(loss) for the year
(20,357)
30,840
Profit/(loss) attributable to:
Owners of the Company
Profit/(loss) for the year
Total comprehensive income/(loss) attributable to:
Owners of the Company
Total comprehensive income/(loss) for the year
Earnings per share
Basic earnings (loss) per share (dollars)
Diluted earnings (loss) per share (dollars)
Basic earnings (loss) per share (dollars) – continuing operation
Diluted earnings (loss) per share (dollars) – continuing operations
22
22
22
22
(20,189)
(20,189)
(20,357)
(20,357)
(0.14)
(0.14)
(0.12)
(0.12)
31,304
31,304
30,840
30,840
0.21
0.21
0.22
0.22
*The Group has initially applied AASB 16 at 1 July 2019, using the modified retrospective approach. Under this approach, comparative
information is not restated and the cumulative effect of initially applying AASB 16 is recognised in retained earnings at the date of the
initial application. See Note 3 and 14.
**The Group has elected to disclose a single amount of post-tax loss of discontinued operations in the statement of profit or loss
and OCI, and has analysed that single amount into revenue, expenses and the pre-tax loss in Note 33.
The notes on pages 80 to 118 are an integral part of these consolidated financial statements.
Cash and cash equivalents
Trade and other receivables
Inventories
Prepayments
Contract asset
Other current assets
Total current assets
Deferred tax assets
Property, plant and equipment
Right of use assets*
Intangible assets and goodwill
Total non-current assets
Total assets
Liabilities
Trade and other payables
Lease liabilities*
Loans and borrowings
Employee benefits
Contract liabilities
Current tax payable
Provisions
Total current liabilities
Loans and borrowings
Lease liabilities*
Employee benefits
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Share capital
Reserves
Retained earnings
Total equity
10
11
12
4
9
13
14
15
16
17
18
4
19
17
18
19
21
51,640
103,590
56,267
3,654
521
2,519
218,191
15,295
109,793
115,548
142,408
383,044
601,235
84,028
34,343
3,102
16,996
5,805
3,252
993
148,519
169,855
108,084
6,700
3,575
288,214
436,733
164,502
31,501
113,586
66,016
3,076
47
3,901
218,127
13,536
135,278
–
163,612
312,426
530,553
100,957
–
6,192
18,882
6,734
2,864
2,006
137,635
167,349
–
6,182
13,580
187,111
324,746
205,807
156,502
(582)
8,582
156,468
(493)
49,832
164,502
205,807
* The Group has initially applied AASB 16 at 1 July 2019, using the modified retrospective approach. Under this approach,
comparative information is not restated and the cumulative effect of initially applying AASB 16 is recognised in retained earnings
at the date of the initial application. See Note 3 and 14.
The notes on pages 80 to 118 are an integral part of these consolidated financial statements.
76
77
IVE Group LimitedAnnual Report 2020
Consolidated statement of changes in equity
For the year ended 30 June 2020
Consolidated statement of cash flows
For the year ended 30 June 2020
In thousands of AUD
Note
Share-
based
Share payment Hedging
reserve
reserve
capital
Retained
earnings
Total
equity
Balance at 1 July 2018
156,318
173
(148)
42,379
198,722
Total comprehensive income for the year
Profit for the year
Other comprehensive loss
Total comprehensive income for the year
Transactions with owners of the Company
Performance share rights
Issue of share capital
Dividends to owners of the Company
20
21
21
Total transactions with owners
of the Company
Balance at 30 June 2019
Balance at 1 July 2019
Initial application of AASB 16**
Adjusted balance 1 July 2019
Total comprehensive income for the year
Loss for the year
Other comprehensive loss
Total comprehensive income for the year
Transactions with owners of the Company
Performance share rights
Issue of share capital
Dividends to owners of the Company
20
21
21
Total transactions with owners
of the Company
–
–
–
–
150
–
150
156,468
156,468
–
156,468
–
–
–
–
34
–
34
Balance at 30 June 2020
156,502
–
–
–
(54)
–
–
(54)
119
119
–
119
–
–
–
79
–
–
79
198
–
(464)
(464)
31,304
–
31,304
(464)
31,304
30,840
–
–
–
–
–
–
(23,851)
(54)
150
(23,851)
(23,851)
(23,755)
(612)
49,832
205,807
(612)
49,832
205,807
–
(9,649)
(9,649)
(612)
40,183
196,158
–
(168)
(20,189)
–
(20,189)
(168)
(168)
(20,189)
(20,357)
–
–
–
–
–
–
(11,412)
79
34
(11,412)
(11,412)
(11,299)
(780)
8,582
164,502
** The Group has initially applied AASB 16 at 1 July 2019, using the modified retrospective approach. Under this approach,
comparative information is not restated and the cumulative effect of initially applying AASB 16 is recognised in retained
earnings at the date of the initial application. See Note 3 and 14.
In thousands of AUD
Cash flows from operating activities
Cash receipts from customers
Cash paid to suppliers and employees
Cash generated from operating activities
Interest received
Interest paid**
Income tax paid
Payment of acquisition costs
Payment of restructure costs
Net cash from operating activities
Cash flows from investing activities
Proceeds from sale of property, plant and equipment
Discontinued operation***
Acquisition of property, plant and equipment and intangible assets
Acquisitions of businesses, net of cash acquired
Deferred and contingent consideration paid on acquired business
Note
2020
Restated*
2019
785,735
(674,978)
799,969
(731,772)
110,757
102
(10,153)
(8,896)
(3,570)
(8,116)
80,124
880
(1,177)
(10,389)
(25,543)
–
68,197
191
(7,738)
(7,477)
(500)
(2,716)
49,958
58
(2,536)
(21,935)
–
(6,000)
10
33
23
Net cash used in investing activities
(36,229)
(30,413)
Cash flows from financing activities
Proceeds from bank loans
Repayment of bank loans and borrowings
Payment of transaction costs for loans and issued capital
Dividends paid
Payment of lease liabilities (2019: Payment of finance lease liabilities)**
Net cash from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
36,000
(21,135)
(237)
(11,412)
(26,972)
27,000
(5,000)
(1,022)
(23,851)
(7,496)
(23,756)
(10,369)
20,139
31,501
51,640
9,176
22,325
31,501
*The Group has initially applied AASB 16 at 1 July 2019, using the modified retrospective approach. Under this approach,
comparative information is not restated and the cumulative effect of initially applying AASB 16 is recognised in retained earnings
at the date of the initial application. See Note 3 and 14.
**The Group has classified:
– cash payments for the principal portion of lease payments as financing activities.
– cash payments for the interest portion as operating activities consistent with the presentation of interest payments of bank
loans.
The notes on pages 80 to 118 are an integral part of these consolidated financial statements.
– short-term lease payments, payments for leases of low value assets and variable lease payments not included in the
measurement of the lease liability within operating activities.
***The Group has elected to present a statement of cash flows that analyses all cash flows in total – i.e. including both continuing
and discontinuing operations, amounts relating to discontinued operations by operating, investing and financing activities are
disclosed in Note 33.
The notes on pages 80 to 118 are an integral part of these consolidated financial statements.
78
79
IVE Group LimitedAnnual Report 2020
Notes to the consolidated financial statements
For the year ended 30 June 2020
1. Reporting entity
IVE Group Limited (the ultimate parent entity or the
Company) is a company domiciled in Australia. It’s
registered address is Level 3, 35 Clarence Street,
Sydney NSW 2000.
This consolidated financial report as at and for the
year ended 30 June 2020 comprises the Company
and its subsidiaries (IVE or Group).
The Group is a for-profit entity. The Group is primary
involved in:
> Conceptual and creative design across print,
mobile and interactive media;
> Printing and distribution of catalogues,
magazines, marketing and corporate
communications materials and stationery;
> Manufacturing of point of sale display material
and large format banners for retail applications;
> Personalised communications including
marketing automation, marketing mail,
publication mail, eCommunications, multi-
channel solutions, and call center services; Data
analytics, customer experience strategy, and
CRM; and
> Outsourced communications solutions for
large organisations including development of
customised multi-channel management models
covering creative and digital services, supply
chain optimisation, inventory management,
warehousing and logistics.
The Group services all major industry sectors in
Australia including financial services, publishing,
retail, communications, property, clubs and
associations, not-for-profit, utilities, manufacturing,
education and government.
2. Basis of preparation
(a) Statement of compliance
The consolidated financial statements are general
purpose financial statements which have been
prepared in accordance with Australian Accounting
Standards (AASBs) adopted by the Australian
Accounting Standards Board (AASB) and the
Corporations Act 2001. The consolidated financial
statements comply with International Financial
Reporting Standards (IFRSs) adopted by the
International Accounting Standards Board (IASB).
The consolidated financial statements were
authorised for issue by the Board of Directors on
80
25 August 2020. Details of the Group’s accounting
policies is included in Note 3.
> Note 3(h)(ii) & 15 – impairment testing for cash
generating units containing goodwill
changes in the fair value of the contingent
consideration recognised in profit or loss.
(b) Functional and presentation currency
These consolidated financial statements are
presented in Australian dollars, which is the
Company’s functional currency.
The Company is of a kind referred to in ASIC
Corporations Instrument 2016/191 dated 24 March
2016, and in accordance with that Instrument,
all financial information presented in Australian
dollars has been rounded to the nearest thousand
unless otherwise stated.
(c) Use of estimates and judgements
In preparing these consolidated financial
statements, management has made judgements,
estimates and assumptions that affect the
application of accounting policies and the reported
amounts of assets, liabilities, income and expenses.
Actual results may differ from these estimates.
The significant judgements made by management
in applying the Group's accounting policies and the
key sources of estimation uncertainty were the same
as those that applied to the consolidated financial
statements for the year ended 30 June 2019, except
for those identified below.
Estimates and underlying assumptions are reviewed
on an ongoing basis. Revisions to accounting
estimates are recognised prospectively.
(i) Judgements
Information about judgements made in applying
the Group’s accounting policies that have the most
significant effects on the amounts recognised in the
consolidated financial statements is included in the
following notes:
> Note 3(e) & (f) – estimation of useful lives of
assets;
> Note 3(j) – provisions
> Note 25 – Level 3 fair value of contingent
consideration, interest rate swaps and forward
exchange contracts; and
> Note 14 – lease term: whether the Group is
reasonably certain to exercise extension options.
(ii) Assumptions and estimation uncertainties
Information about assumptions and estimation
uncertainties that have a significant risk of resulting
in a material adjustment in the year ending 30 June
2020 is included in the following notes:
> Note 23 – acquisitions: fair value measured on a
(ii) Subsidiaries
provisional basis; and
> Note 25 – measurement of Expected Credit Loss
(ECL) allowance on trade receivables.
Measurement of fair values
When measuring the fair value of an asset or a
liability, the group uses market observable data if
possible. Fair values are categorised into different
levels in a fair value hierarchy based on the inputs
used in the valuation techniques as follows:
> Level 1: quoted prices (unadjusted) in active
markets for identical assets or liabilities.
> Level 2: inputs other than quoted prices included
within Level 1 that are observable for the asset or
liability, either directly (i.e. as prices) or indirectly
(i.e., derived from prices).
> Level 3: inputs for the asset or liability that
are not based on observable market data
(unobservable inputs).
3. Significant accounting
policies
The accounting policies set out below have been
applied consistently during the period presented
in these consolidated financial statements, and
have been applied consistently by all entities in the
Group, except for the adoption of new accounting
standards (see Note 3(t)).
(a) Basis of consolidation
(i) Business combinations
The Group accounts for business combinations using
the acquisition method when control is transferred
to the Group. The consideration transferred in
the acquisition is generally measured at fair
value, as are the identifiable net assets acquired.
Any goodwill that arises is tested annually for
impairment. Any gain on a bargain purchase is
recognised in profit or loss immediately. Transaction
costs are expensed as incurred, except those related
to the issue of debt or equity securities.
The consideration transferred does not include
amounts related to the settlement of pre-exiting
relationships. Such amounts are generally
recognised in profit or loss.
Any contingent consideration is measured at fair
value at the date of acquisition, with subsequent
Subsidiaries are entities controlled by the Group. The
Group controls an entity when it is exposed to, or
has rights to, variable returns from its involvement
with the entity and has the ability to affect those
returns through its power over the entity. The
financial statements of subsidiaries are included
in the consolidated financial statements from the
date on which control commences until the date on
which control ceases.
(iii) Transactions eliminated on consolidation
Intra-group balances and transactions, and any
unrealised income and expenses arising from intra-
group transactions, are eliminated in preparing the
consolidated financial statements.
(b) Foreign currency
Foreign currency transactions
Transactions in foreign currencies are translated
to the functional currency of the Group (Australian
dollars) at exchange rates at the dates of the
transactions. Monetary assets and liabilities
denominated in foreign currencies are translated to
the functional currency at the exchange rate at the
reporting date.
Foreign currency differences arising on retranslation
are recognised in profit or loss.
(c) Financial instruments
(i) Recognition and initial measurement
Trade receivables and debt securities issued are
initially recognised when they are originated. All
other financial assets and financial liabilities
are initially recognised when the Group becomes
a party to the contractual provisions of the
instrument.
A financial asset (unless it is a trade receivable
without a significant financing component) or
financial liability is initially measured at fair
value plus, for an item not at fair value through
profit and loss (FVTPL), transaction costs that are
directly attributable to its acquisition or issue. A
trade receivable without a significant financing
component is initially measured at the transaction
price.
(ii) Classification and subsequent measurement
The Group classifies its financial instruments in the
following measurement categories: at amortised
cost, at fair value through profit and loss (FVTPL)
81
IVE Group LimitedAnnual Report 2020 Notes to the consolidated financial statements – continued
and at fair value through other comprehensive
income (FVOCI).
Financial liabilities – Classification, subsequent
measurement and gains and losses
Financial assets are not reclassified subsequent to
their initial recognition unless the Group changes
its business model for managing financial assets,
in which case all affected financial assets are
reclassified on the first day of the first reporting
period following the change in the business model.
A financial asset is measured at amortised cost if
it meets both of the following conditions and is not
designated as at FVTPL:
> It is held within a business model whose objective
is to hold assets to collect contractual cash
flows; and
> Its contractual terms give rise on a specified
dates to cash flow that are solely payments of
principal and interest on the principal amount
outstanding.
A debt investment is measured at FVOCI if it
meets both of the following conditions and is not
designated as at FVTPL:
> It is held within a business model whose objective
is achieved by both collecting contractual cash
flows and selling financial assets; and
> Its contractual terms give rise on a specified
dates to cash flow that are solely payments of
principal and interest on the principal amount
outstanding.
On initial recognition of an equity investment that
is not held for trading, the Group may irrevocably
elect to present subsequent changes in the
investment’s fair value in OCI. This election is made
on an investment-by-investment basis.
All financial assets not classified as measured at
amortised cost or FVOCI as described above are
measured at FVTPL. This includes all derivative
financial assets. On initial recognition, the Group
may irrevocably designate a financial asset that
otherwise meets the requirements to be measured
at amortised cost or at FVOCI as at FVTPL if doing
so eliminates or significantly reduces an accounting
mismatch that would otherwise arise.
Financial assets at amortised costs
These assets are subsequently measured at
amortised cost using the effective interest method.
The amortised cost is reduced by impairment losses.
Interest income, foreign exchange gains and losses
and impairment are recognised in profit or loss. Any
gain or loss on derecognition is recognised in profit
or loss.
82
Financial liabilities are classified as measured
at amortised cost or FVTPL. A financial liability
is classified as at FVTPL if it is classified as held-
for-trading, it is a derivative or it is designated
as such on initial recognition. Financial liabilities
at FVTPL are measured at fair value and net
gains and losses, including any interest expense,
are recognised in profit and loss. Other financial
liabilities are subsequently measured at amortised
cost using the effective interest method. Interest
expense and foreign exchange gains and losses
are recognised in profit or loss. Any gain or loss on
derecognition is also recognised in profit or loss.
(iii) Derecognition
Financial assets
The Group derecognises a financial asset when
the contractual rights to the cash flows from the
financial asset expire, or it transfers the rights to
receive the contractual cash flows in a transaction
in which substantially all of the risks and rewards
of ownership of the financial asset are transferred
or in which the Group neither transfers nor retains
substantially all of the risks and rewards of
ownership and it does not retain control of the
financial asset.
The Group enters into transactions whereby
it transfers assets recognised in its statement
of financial position but retains either all or
substantially all of the risks and rewards of the
transferred assets. In these cases, the transferred
assets are not derecognised. In these cases, the
transferred assets are not derecognised.
Financial liabilities
The Group derecognises a financial liability when its
contractual obligations are discharged or cancelled
or expire. The Group also derecognises a financial
liability when its terms are modified and the cash
flows of the modified liability are substantially
different, in which case a new financial liability
based on the modified terms is recognised at fair
value.
On derecognition of a financial liability, the
difference between the carrying amount
extinguished and the consideration paid (including
any non-cash assets transferred or liabilities
assumed) is recognised in profit or loss.
(iv) Offsetting
Financial asset and financial liabilities are offset
and the net amount presented in the statement of
financial position when, and only when the Group
currently has a legally enforceable right to set off
the amounts and it intends either to settle them on
a net basis or to realise the asset and settle the
liability simultaneously.
(v) Derivative financial instruments and hedge
accounting
The Group holds derivative financial instruments
to hedge its foreign currency and interest rate risk
exposures. Embedded derivatives are separated
from the host contract and accounted for
separately if the host contract is not a financial
asset and certain criteria are met.
Derivatives are initially measured at fair value.
Subsequent to initial recognition, derivatives are
measured at fair value, and changes therein are
generally recognised in profit or loss.
The Group designates certain derivatives as
hedging instruments to hedge the variability in cash
flows associated with highly probable forecast
transactions arising from changes in foreign
exchange rates and interest rates.
At inception of designated hedging relationships,
the Group documents the risk management
objective and strategy for undertaking the
hedge. The Group also documents the economic
relationship between the hedged item and the
hedging instrument, including whether the changes
in cash flows of the hedged item and hedging
instrument are expected to offset each other.
Cash flow hedges
When a derivative is designated as a cash flow
hedging instrument, the effective portion of changes
in the fair value of the derivative is recognised in
OCI and accumulated in the hedging reserve. The
effective portion of changes in the fair value of the
derivative that is recognised in OCI is limited to the
cumulative change in fair value of the hedged item,
determined on a present value basis, from inception
of the hedge. Any ineffective portion of changes
in the fair value of the derivative is recognised
immediately in profit or loss.
The Group designates only the change in fair
value of the spot element of forward exchange
contracts as the hedging instrument in cash flow
hedging relationships. The change in fair value of
the forward element of forward exchange contracts
(‘forward points’) is separately accounted for as a
cost of hedging and recognised in a costs of hedging
reserve within equity.
When the hedged forecast transaction
subsequently results in the recognition of a non-
financial item such as inventory, the amount
accumulated in the hedging reserve and the cost of
hedging reserve is included directly in the initial cost
of the non-financial item when it is recognised.
For all other hedged forecast transactions, the
amount accumulated in the hedging reserve and
the cost of hedging reserve is reclassified to profit or
loss in the same period or periods during which the
hedged expected future cash flows affect profit or
loss.
If the hedge no longer meets the criteria for
hedge accounting or the hedging instrument is
sold, expires, is terminated or is exercised, then
hedge accounting is discontinued prospectively.
When hedge accounting for cash flow hedges
is discontinued, the amount that has been
accumulated in the hedging reserve remains in
equity until, for a hedge of a transaction resulting
in the recognition of a non-financial item, it is
included in the non-financial item’s cost on its
initial recognition or, for other cash flow hedges, it
is reclassified to profit or loss in the same period or
periods as the hedged expected future cash flows
affect profit or loss.
If the hedged future cash flows are no longer
expected to occur, then the amounts that have been
accumulated in the hedging reserve and the cost
of hedging reserve are immediately reclassified to
profit or loss.
(d) Share capital
Ordinary shares
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue
of ordinary shares are recognised as a deduction
from equity, net of any tax effects.
(e) Property, plant and equipment
(i) Recognition and measurement
Items of property, plant and equipment are
measured at cost less accumulated depreciation
and accumulated impairment losses.
Cost includes expenditure that is directly
attributable to the acquisition of the asset.
Purchased software that is integral to the
functionality of the related equipment is capitalised
as part of that equipment.
When parts of an item of property, plant and
equipment have different useful lives, they are
accounted for as separate items of property, plant
and equipment.
Any gains and losses on disposal of an item of
property, plant and equipment (calculated as the
83
IVE Group LimitedAnnual Report 2020 Notes to the consolidated financial statements – continued
difference between the net proceeds from disposal
and the carrying amount of the item) are recognised
in profit or loss.
(ii) Subsequent costs
Subsequent expenditure is capitalised only when
it is probable that the future economic benefits
associated with the expenditure will flow to the
Group. Ongoing repairs and maintenance are
expensed as incurred.
(iii) Depreciation
Items of property, plant and equipment are
depreciated from the date that they are installed
and are ready for use, or in respect of internally
constructed assets, from the date that the asset is
completed and ready for use.
Depreciation is calculated to write off the cost of
property, plant and equipment less their estimated
residual values using the straight-line basis
over their estimated useful lives. Depreciation is
generally recognised in profit or loss, unless the
amount is included in the carrying amount of
another asset. Leased assets are depreciated over
the shorter of the lease term and their useful lives
unless it is reasonably certain that the Group will
obtain ownership by the end of the lease term.
The estimated useful lives for the current year of
significant items of property, plant and equipment
are as follows:
> Leasehold improvements
shorter of lease term
and life of asset
> plant and equipment
3 - 20 years
> fixtures and fittings
5 - 10 years
Depreciation methods, useful lives and residual
values are reviewed at each reporting date and
adjusted if appropriate.
(f) Intangible assets and goodwill
(i) Goodwill
Goodwill arising on the acquisition of subsidiaries
is measured at cost less accumulated impairment
losses.
(ii) Other intangible assets
Intangible assets that are acquired by the Group
and have finite useful lives are measured at cost
less accumulated amortisation and accumulated
impairment losses.
(iii) Subsequent expenditure
Subsequent expenditure is capitalised only when
it increases the future economic benefits embodied
84
in the specific asset to which it relates. All other
expenditure, including expenditure on internally
generated goodwill and brands, is recognised in
profit or loss as incurred.
(iv) Amortisation
Amortisation is calculated to write off the cost
of intangible assets less their estimated residual
values using the straight-line method over their
estimated useful lives, and is generally recognised
in profit or loss. Goodwill is not amortised.
The estimated useful lives are as follows:
> computer software
3 years
> customer relationships
5 – 10 years
Amortisation methods, useful lives and residual
values are reviewed at each reporting date and
adjusted if appropriate.
(g) Inventories
Inventories are measured at the lower of cost and
net realisable value. The cost of inventories is
based on the first-in, first-out principle. In the case
of manufactured inventories and work in progress,
cost includes an appropriate share of production
overheads based on normal operating capacity.
(h) Impairment
(i) Non-derivative financial assets
The Group recognizes loss allowances for expected
credit loss (ECL) on financial assets measured at
amortised costs.
The Group measures loss allowance at an amount
equal to lifetime ECL.
Loss allowances for trade receivables are always
measured at an amount equal to lifetime ECLs.
When determining whether the credit risk of a
financial asset has increased significantly since
initial recognition and when estimating ECLs, the
Group considers reasonable and supportable
information that is relevant and available without
undue cost or effort. This includes both quantitative
and qualitative information and analysis, based on
the Group’s historical experience and informed credit
assessment including forward-looking information.
The Group assumes that the credit risk on a
financial asset has increased significantly if it is
more than 90 days past due.
The Group considers a financial asset to be in
default when the debtor is unlikely to pay its credit
obligations to the Group in full, without recourse by
the Group to actions such as realizing security (if
any is held).
Lifetime ECLs are the ECLs that result from all
possible default events over the expected life of a
financial instrument.
The maximum period considered when estimating
ECLs is the maximum contractual period over which
the Group is exposed to credit risk.
Measurement of ECLs
ECLs are a probability-weighted estimate of credit
losses. Credit losses are measured as the present
values of all cash shortfalls (i.e. the difference
between the cash flows due to the entity in
accordance with the contract and the cash flows
that the Group expects to receive).
ECLs are discounted at the effective interest rate of
the financial asset.
Credit-impaired financial assets
At each reporting date, the Group assesses whether
financial assets carried at amortised cost are
credit-impaired. A financial asset is ‘credit-impaired’
when one or more events that have a detrimental
impact on the estimated future cash flows of the
financial assets have occurred.
Evidence that a financial asset is credit-impaired
includes the following observable data:
> A breach of contract such as a default or being
more than 90 days past due;
> It is probable that the debtor will enter
bankruptcy or other financial reorganization.
Presentation of allowance for ECL in the statement
of financial position
Loss allowances for financial assets measured
at amortised cost are deducted from the gross
carrying amount of the assets.
Write-off
The gross carrying amount of a financial asset
is written off when the Group has no reasonable
expectation of recovering a financial asset in its
entirety or a portion thereof. The Group individually
makes an assessment with respect to the timing
and amount of write-off based on whether there is
a reasonable expectation of recovery. The Group
expects no significant recovery from the amount
written off. However, financial assets that are
written off could still be subject to enforcement
activities in order to comply with the Group’s
procedures for recovery of amounts due.
(ii) Non-financial assets
The carrying amounts of the Group’s non-financial
assets, other than inventories and deferred tax
assets, are reviewed at each reporting date to
determine whether there is any indication of
impairment. If any such indication exists, then the
asset’s recoverable amount is estimated. Goodwill is
tested annually for impairment.
For impairment testing, assets are grouped together
into the smallest group of assets that generates
cash inflows from continuing use that are largely
independent of the cash inflows of other assets or
cash-generating unit (CGU). Goodwill arising from
a business combination is allocated to CGUs or
groups of CGUs that are expected to benefit from
the synergies of the combination.
The recoverable amount of an asset or CGU is the
greater of its value in use and its fair value less
costs to sell. In assessing value in use, the estimated
future cash flows are discounted to their present
value using a post-tax discount rate that reflects
current market assessments of the time value of
money and the risks specific to the asset.
An impairment loss is recognised if the carrying
amount of an asset or CGU exceeds its estimated
recoverable amount.
Impairment losses are recognised in profit or loss.
Impairment losses recognised in respect of CGUs are
allocated first to reduce the carrying amount of any
goodwill allocated to the CGU (group of CGUs), and
then to reduce the carrying amounts of the other
assets in the CGU (group of CGUs) on a pro rata
basis.
An impairment loss in respect of goodwill is not
reversed. For other assets, an impairment loss is
reversed only to the extent that the asset’s carrying
amount does not exceed the carrying amount that
would have been determined, net of depreciation
or amortisation, if no impairment loss had been
recognised.
(i) Employee benefits
(i) Defined contribution plans
A defined contribution plan is a post-employment
benefit plan under which an entity pays fixed
contributions into a separate entity and will have
no legal or constructive obligation to pay further
amounts. Obligations for contributions to defined
contribution pension plans are recognised as an
employee benefit expense in profit or loss in the
periods during which services are rendered by
employees.
85
IVE Group LimitedAnnual Report 2020 Notes to the consolidated financial statements – continued
(ii) Other long-term employee benefits
(ii) Make good provision
(i) As a lessee
The Group’s net obligation in respect of long-
term employee benefits is the amount of future
benefit that employees have earned in return for
their service in the current and prior periods. That
benefit is discounted to determine its present value.
Remeasurements are recognised in profit or loss in
the period in which they arise.
(iii) Short-term employee benefits
Short-term employee benefits are expensed as the
related service is provided. A liability is recognised
for the amount expected to be paid if the Group has
a present legal or constructive obligation to pay
this amount as a result of past service provided by
the employee and the obligation can be estimated
reliably.
(iv) Share-based payment transactions
The grant-date fair value of equity-settled share-
based payment awards granted to employees
is generally recognised as an expense, with a
corresponding increase in equity, over the vesting
period of the awards. The amount recognised as
an expense is adjusted to reflect the number of
awards for which the related service and non-
market performance conditions are expected to be
met, such that the amount ultimately recognised
is based on the number of awards that meet the
related service and non-market performance
conditions at the vesting date. For share-based
payment awards with non-vesting conditions, the
grant-date fair value of the share-based payment
is measured to reflect such conditions and there is
no true-up for differences between expected and
actual outcomes.
(j) Provisions
A provision is recognised if, as a result of a past
event, the Group has a present legal or constructive
obligation that can be estimated reliably, and it is
probable that an outflow of economic benefits will
be required to settle the obligation. Provisions are
determined by discounting the expected future cash
flows at a pre-tax rate that reflects current market
assessments of the time value of money and the
risks specific to the liability. The unwinding of the
discount is recognised as finance cost.
(i) Restructuring
A provision for restructuring is recognised when
the Group has approved a detailed and formal
restructuring plan, and the restructuring either has
commenced or has been announced publicly. Future
operating losses are not provided for.
86
A make good provision is recognised when the
Group enters into a lease contract that requires the
property to be returned to the lessor in its original
condition. The provision is based on the expected
future cost of the refurbishment discounted to
reflect current market assessments.
(k) Revenue from contracts with customers
Revenue is measured based on the consideration
specified in a contract with a customer. The Group
recognises revenue over-time, or at a point in time.
Recognising of revenue over-time
The Group is involved in a range of services relating
to print, communications, creative and digital
services, supply chain optimisation, inventory
management, warehousing and logistics.
Revenue is recognised on the rendering of services
in proportion to the stage of completion of the
transaction at the reporting date. The stage of
completion is assessed based on surveys of work
performed.
Recognising of revenue at a point in time
The Group recognises revenue of when it transfers
control over a good or service to a customer.
Customers obtain control when the goods are
delivered to and have been accepted. Invoices are
generated at that point in time. Invoices are usually
payable within 30 days.
(l) Leases
The Group has applied AASB 16 using the modified
retrospective approach, under which the cumulative
effect of initial application is recognised in
retained earnings at 1 July 2019. Accordingly, the
comparative information presented for 2019 has
not been restated – i.e. it is presented, as previously
reported, under AASB 117 and related interpretations.
The details of the changes in accounting policies are
disclosed below.
Policy applicable from 1 July 2019
At inception of a contract, the Group assesses
whether a contract is, or contains, a lease. A
contract is, or contains, a lease if the contracts
conveys the right to control the use of an identified
asset for a period of time in exchange for
consideration. To assess whether a contract conveys
the right to control the use of an identified asset,
the Group uses the definition of a lease in AASB 16.
This policy is applied to contracts entered into, or
after 1 July 2019.
At commencement or on modification of a contract
that contains a lease component, the Group
allocates the consideration in the contracts to each
lease component on the basis of its relative stand-
alone prices.
The Group recognises a right-of-use asset and
lease liability at the lease commencement date.
The right-of-use asset is initially measured at cost,
which comprises the initial amount of the lease
liability adjusted for any lease payments made at
or before the commencement date, plus any initial
direct costs incurred and an estimate of costs to
dismantle and remove the underlying asset or to
restore the underlying asset or the site on which it is
located, less any lease incentives received.
The right-of-use asset is subsequently depreciated
using the straight-line method from the
commencement date to the end of the lease
term, unless the lease transfers ownership of the
underlying asset to the Group by the end of the
lease term or the cost of the right-of-use asset
reflects that the Group will exercise a purchase
option. In that case, the underlying asset, which is
determined on the same basis as those of property
and equipment. In addition, the right-of-use asset is
periodically reduced by impairment losses, if any,
and adjusted for certain remeasurements of the
lease liability.
The lease liability is initially measured at the
present value of the lease payments that are
not paid at the commencement date, discounted
using interest rate implicit in the lease or, if that
rate cannot be readily determined, the Group’s
incremental borrowing rate. Generally, the Group
uses its incremental borrowing rate as the discount
rate.
The Group determines it’s incremental borrowing
rate by obtaining interest rates from external
financing sources.
Lease payments included in the measurement of the
lease liability comprise the following:
> fixed payments, including in-substance fixed
payments;
> variable lease payments that depend on an
index or a rate, initially measured using the index
or rate as at the commencement date;
> amounts expected to be payable under a
residual value guarantee; and
> the exercise price under a purchase option that
the Group is reasonably certain to exercise,
lease payments in an optional renewal period
if the Group is reasonably certain to exercise
an extension option, and penalties for early
termination of a lease unless the Group is
reasonably certain not to terminate early.
The lease liability is measured at amortised cost
using the effective interest method. It is remeasured
when there is a change in future lease payments
arising from a change in an index or rate, if there
is a change in the Group’s estimate of the amount
expected to be payable under a residual value
guarantee, if the Group’s changes its assessment
of whether it will exercise a purchase, extension
or termination option or if there is a revised in-
substance fixed lease payment.
When the lease liability is remeasured in this way,
a corresponding adjustment is made to the carrying
amount of the right-of-use asset, or is recorded in
profit or loss if the carrying amount of the right-of-
use asset has been reduced to zero.
The Group presents separately right-of-use assets
that do not meet the definition of investment
property, and lease liabilities in statement of
financial position.
Short-term leases and leases of low-value assets
The Group has elected not recognize right-of-use
assets and liabilities for leases of low-value assets
and short-term leases, including IT equipment. The
Group recognises lease payments associated with
these leases as an expense on a straight-line basis
over the lease term.
(ii) As a lessor
At inception or on modification of a contract that
contains a lease component, the Group allocates
the consideration in the contract to each lease
component on the basis of their relative stand alone
prices.
When the Group acts as a lessor, it determines a
lease inception whether such lease is a finance
lease or an operating lease.
To classify each lease, the Group makes an
overall assessment of whether the lease transfers
substantially all of the risks and rewards incidental
to ownership of the underlying asset. If this is the
case, then the lease is a finance lease; if not, then
it is an operating lease. As part of this assessment,
the Group considers certain indicators such as
whether the lease is for the major part of the
economic life of the asset.
When the Group is an intermediate lessor, it
accounts for its interests in the head lease and
the sub-lease separately. It assesses the lease
87
IVE Group LimitedAnnual Report 2020 Notes to the consolidated financial statements – continued
classification of a sub-lease with reference to the
right-of-use asset arising from the head lease, not
with reference to the underlying asset. If a head
lease is a short-term lease to which the Group
applies the exemption described above, then it
classifies the sub-lease as an operating lease.
If an arrangement contains lease and non-lease
components, then the Group applies AASB 15 to
allocate the consideration in the contract.
Generally, the accounting policies applicable to
the Group as a lessor in the comparative period
were not different from AASB 16 except for the
classification of the sub-lease.
Policy applicable before 1 January 2019
For contracts entered before 1 July 2019, the Group
determined whether the arrangement was or
contained a lease based on the assessment of
whether:
> fulfilment of the arrangement was dependent
was dependent on the use of a specific asset or
assets; and
> the arrangement had conveyed a right to use the
asset. An arrangement conveyed the right to use
the asset if one of the following was met:
— the purchaser had the ability or right
to operate the asset while obtaining or
controlling more than an insignificant amount
of the output;
— the purchaser had the ability or right to control
physical access to the asset while obtaining or
controlling more than an insignificant amount
of the output; or
— fact and circumstances indicated that it was
remote that other parties would take more
than an insignificant amount of the output,
and the price per unit was neither fixed
per unit of output nor equal to the current
market price per unit of output.
Subsequent to intial recognisition, the assets were
accounted for in accordance with the accounting
policy applicable to the asset.
Assets held under other leases were classified as
operating leases and were not recognised in the
Group’s statement of financial position. Payments
made under operating leases were recognised in
profit or loss on a straight-line basis over the lease.
Lease incentives received were recognised as an
integral part of the lease expense, over the term of
the lease.
(ii) As a lessor
When the Group acted as a lessor, it determined at
lease inception whether each lease was a finance
lease or an operating lease.
To classify each lease, the Group made an overall
assessment of whether the lease transferred
substantially all of the risks and rewards incidental
to ownership of the underlying asset. If this was
the case, then the lease was a finance lease; if
not then it was an operating lease. As part of this
assessment, the Group considered certain indicators
such as whether the lease was for the major part of
the economic life of the asset.
(m) Finance income and finance costs
Finance income comprises interest income on funds
invested and foreign exchange gains. Interest
income is recognised as it accrues in profit or loss,
using the effective interest method.
Finance costs comprise interest expense on
borrowings. Borrowing costs that are not directly
attributable to the acquisition, construction or
production of a qualifying asset are recognised in
profit or loss using the effective interest method.
Foreign currency gains and losses are reported on
a net basis as either finance income or finance cost
depending on whether foreign currency movements
are in a net gain or net loss position.
(i) As a lessee
(n) Government grants
The Group recognises a conditional government
grant relating to the JobKeeper Payment scheme
in the consolidated statement of profit or loss as
a credit to wages and salaries when the grant
becomes receivable.
In the comparative period, as a lessee the Group
classified leases that transferred substantially
all the risks and rewards of ownership as finance
leases. When this was the case, the leased assets
were measured initially at an amount equal to the
lower of their fair value and the present value of
minimum lease payment. Minimum lease payments
were payments over the lease term that the lease
was required to make, excluding any contingent
rent.
88
(o) Income tax
Income Tax expense comprises current and deferred
tax. Current and deferred tax are recognised in
profit or loss except to the extent that it relates
to items recognised directly in equity or in other
comprehensive income.
(i) Current tax
Current tax is the expected tax payable or
receivable on the taxable income or loss for the
year, using tax rates enacted or substantively
enacted at the reporting date, and any adjustment
to tax payable in respect of previous years.
(ii) Deferred tax
Deferred tax is recognised in respect of temporary
differences between the carrying amounts of assets
and liabilities for financial reporting purposes and
the amounts used for taxation purposes. Deferred
tax is not recognised for:
> temporary differences on the initial recognition
of assets or liabilities in a transaction that is not
a business combination and that affects neither
accounting nor taxable profit or loss; or
> temporary differences related to investments in
associates to the extent that the Company is
able to control the timing of the reversal of the
temporary differences and it is probable that
they will not reverse in the foreseeable future, and
> taxable temporary differences arising on the
initial recognition of goodwill.
The measurement of deferred tax reflects the tax
consequences that would follow the manner in
which the Group expects, at the end of the reporting
period, to recover or settle the carrying amount of its
assets and liabilities.
Deferred tax is measured at the tax rates that are
expected to be applied to temporary differences
when they reverse, using tax rates enacted or
substantively enacted at the reporting date.
Deferred tax assets and liabilities are offset if there
is a legally enforceable right to offset current tax
liabilities and assets, and they relate to taxes levied
by the same tax authority on the same taxable
entity, or on different tax entities, but they intend
to settle current tax liabilities and assets on a
net basis or their tax assets and liabilities will be
realised simultaneously.
A deferred tax asset is recognised for unused
tax losses, tax credits and deductible temporary
differences, to the extent that it is probable that
future taxable profits will be available against
which they can be utilised. Deferred tax assets are
reviewed at each reporting date and are reduced
to the extent that it is no longer probable that the
related tax benefit will be realised.
(iii) Tax exposures
In determining the amount of current and deferred
tax the Group takes into account the impact of
uncertain tax positions and whether additional
taxes and interest may be due. This assessment
relies on estimates and assumptions and may
involve a series of judgements about future events.
New information may become available that
causes the Group to change its judgement regarding
the adequacy of existing tax liabilities; such
changes to tax liabilities will impact tax expense in
the period that such a determination is made.
(iv) Tax consolidation
IVE Group Limited and it’s wholly owned Australian
controlled entities formed a tax consolidated group
on 16 December 2015. As a consequence, these
entities are taxed as a single entity and the deferred
tax asset and liabilities of these entities are offset
in the consolidated financial statements.
(p) Goods and services tax (GST)
Revenue, expenses and assets are recognised net
of the amount of GST, except where the amount of
GST incurred is not recoverable from the taxation
authority. In these circumstances, the GST is
recognised as part of the cost of acquisition of the
asset or as part of an item of expense. Receivables
and payables are shown inclusive of GST.
The net amount of GST recoverable from, or
payable to, the taxation authority is included as
part of receivables or payables in the statement of
financial position.
Cash flows are presented on a gross basis. The GST
components of cash flows arising from investing or
financing activities, which is recoverable from, or
payable to, the taxation authority is classified as
operating cash flows.
(q) Earnings per share
The Group presents basic and diluted earnings per
share data for its ordinary shares. Basic earnings
per share is calculated by dividing the profit or
loss attributable to ordinary shareholders of
the Company by the weighted average number
of ordinary shares outstanding during the year,
adjusted for own shares held. Diluted earnings
per share is determined by adjusting the profit or
loss attributable to ordinary shareholders and
the weighted average number of ordinary shares
outstanding, adjusted for own shares held, for the
89
IVE Group LimitedAnnual Report 2020 Notes to the consolidated financial statements – continued
effects of all dilutive potential ordinary shares,
which comprise convertible notes and share options
granted to employees.
(r) Segment reporting
Operating segments are reported in a manner
consistent with the internal reporting provided
to the chief operating decision maker. It has been
determined the Board of Directors is the chief
operating decision maker, as they are ultimately
responsible for allocating resources and assessing
performance.
(s) Adoption of new accounting standards
The Group has adopted all new and amended
Australian Accounting Standards and Australian
Accounting Standards Board (AASB) interpretations
that are mandatory for the current reporting
period and relevant to the Group. Other than,
the adoption of AASB 16, these other standards and
interpretations has not resulted in any material
changes to the Group's financial report.
The Group has initially adopted AASB 16 Leases
from 1 July 2019.
AASB 16 Leases
AASB 16 introduced a single, on-balance sheet
accounting model for lessees. As a result, the Group,
as a lessee, has recognised right-of-use assets
representing its rights to use the underlying assets
and lease liabilities representing its obligations to
make lease payments. Lessor accounting remains
similar to previous accounting policies.
The Group has applied AASB 16 using the modified
retrospective approach, under which the cumulative
effect of initial application is recognised in
retained earnings at 1 July 2019. Accordingly,
the comparative information presented for 2019
has not been restated – i.e. it is presented, as
previously reported, under AASB 117 and related
interpretations. The details of the changes in
accounting policies are disclosed below.
Definition of a lease
Previously, the Group determined at contract
inception whether an arrangement was or
contained a lease under Interpretation 4
Determining Whether an Arrangement contains a
Lease. The Group now assesses whether a contract
is or contains, a lease if the contract conveys a right
to control the use of an identified asset for a period
of time in exchange for consideration.
On transition to AASB 16, the Group elected to
apply the practical expedient to grandfather the
assessment of which transactions are leases.
It applied AASB 16 only to contracts that were
previously identified as leases. Contracts that
were not identified as leases under AASB 117 and
Interpretation 4 were not reassessed. Therefore, the
definition of a lease under AASB 16 has been
applied only to contracts entered into or changed
on or after 1 July 2019.
At inception or on modification of a contract that
contains a lease component, the Group allocates
the consideration in the contract to each lease and
non-lease component on the basis of their relative
stand-alone prices.
(i) As a lessee
The Group leases many assets, including properties,
production equipment and IT equipment. As a
lessee, the Group previously classified operating or
finance leases based on its assessment of whether
the lease transferred substantially all of the risks
and rewards of ownership. Under AASB 16, the Group
recognises right-of-use assets and lease liabilities
for most leases – i.e. these leases are on-balance
sheet.
However, the Group has elected not to recognise
right-of use-assets and lease liabilities for some
short-term leases and low value assets (e.g.
IT equipment). The Group recognises the lease
payments associated with these leases as an
expense on a straight-line basis over the lease term.
The Group presents right-of-use assets that do not
meet the definition of investment property in the
statement of financial position. Right-of-use assets
that meet the definition of investment property are
presented within lease receivable.
Significant accounting policies
The Group recognises a right-of-use asset and a
lease liability at the lease commencement date.
The right of use asset is initially measured at cost,
and subsequently at cost less any accumulated
depreciation and impairment losses, and adjusted
for certain remeasurements of the lease liability.
When a right-of-use asset meets the definition of
investment property, it is presented in investment
property. The right-of-use asset is initially measured
at cost, and subsequently measured at fair value, in
accordance with the Group’s accounting policies.
The lease liability is initially measured at the
present value of the lease payments that are not
paid at the commencement date, discounted using
the interest rate implicit in the lease or, if that
rate cannot be readily determined, the Group’s
incremental borrowing rate. Generally, the Group
uses its incremental borrowing rate as the discount.
The Group used the following exemptions and
practical expedients when applying AASB 16 to
leases previously classified as operating leases
under AASB 117.
> Applied the exemption not to recognise right-of-
use assets and liabilities for leases with less than
12 months lease term, or low value.
> Used hindsight when determining the lease term
if the contract contains options to extend or
terminate the lease.
The Group leases a number of items of production
equipment. These leases were classified as finance
leases under AASB 117. For these finance leases, the
carrying amount of the right-of-use asset and the
lease liability at 1 July 2019 were determined at
the carrying amount of the lease asset and lease
liability under AASB 117 immediately before that
date.
(ii) As a lessor
The accounting policies applicable to the Group as
a lessor are not different from those under AASB 117.
However, when the Group is an intermediate lessor
the sub-leases are classified with reference to the
right-of-use asset arising from the head lease, not
with reference to the underlying asset.
The Group is not required to make any adjustments
on transition to AASB 16 for leases in which it acts
as a lessor. However, the Group has applied AASB 15
Revenue from Contracts with Customers to allocate
consideration in the contracts to each lease and
non-lease component.
The Group sub-leases some of its properties. Under
AASB 117, the head lease and sub-lease contracts
were classified as operating leases. On transition to
AASB 16, some of these leases have been classified
as a finance lease, and the investment in the
sub-lease recognised from the head leases are
presented as lease receivables.
The lease liability is subsequently increased by the
interest cost on the lease liability and decreased
by lease payments made. It is remeasured when
there is a change in future lease payment made. It
is remeasured when there is a change in future lease
payments arising from a change in an index or rate,
a change in the estimate of the amount expected to
be payable under a residual value guarantee, or as
appropriate, changes in the assessment of whether
a purchase or extension option is reasonably
certain to be exercised or a termination option is
reasonably certain not to be exercised.
The Group has applied judgement to determine the
lease term for some lease contracts in which it is a
lessee that include renewal options. The assessment
of whether the Group is reasonably certain to
exercise such options impacts the lease term, which
significantly affects the amount of lease liabilities
and right-of-use assets recognised.
Transition
Previously, the Group classified property leases
as operating leases under AASB 117. These include
warehouse and factory facilities. The leases
typically run for a period up to 10 years. Some leases
include an option to renew the lease after the end
of the non-cancellable period. Some leases provide
for additional rent payments that are based on
changes in local price indices.
At transition, for leases classified as operating
leases under AASB 117, lease liabilities were
measured at the present value of the remaining
lease payments, discounted at the Group’s
incremental borrowing rate as at 1 July 2019. Right-
of-use assets are measured at either:
> their carrying amount as if AASB 16 had
been applied since the commencement date,
discounted using the lessee’s incremental
borrowing rate at the date of initial application
– the Group applied this approach to its property
leases; or
> an amount equal to the lease liability, adjusted
by the amount of any prepaid or accrued lease
payments – the Group applied this approach to
all other leases.
90
91
IVE Group LimitedAnnual Report 2020 Notes to the consolidated financial statements – continued
(iii) Impacts on financial statements
Impacts on transition
On transition to AASB 16, the Group recognised additional right-of-use assets and additional lease liabilities,
recognising the difference in retained earnings. Subsequent to 31 December 2019, the Group has restated
certain aspects of it’s AASB 16 transition calculation. The impact on transition is summarised below.
In thousands of AUD
1 July 2019 opening adjustments
Right-of-use assets presented in lease receivable
Property, plant and equipment
Right-of-use assets
Deferred tax asset (net)
Trade and other payables
Lease liabilities
Finance lease liabilities
Provisions
Retained earnings
Reported at 31
December 2019
Adjustment
Reported at 30
June 2020
701
(18,560)
119,940
1,275
5,596
(150,112)
15,733
12,282
13,145
–
(697)
697
3,496
–
–
–
–
(3,496)
701
(19,257)
120,637
4,771
5,596
(150,112)
15,733
12,282
9,649
When measuring lease liabilities for leases that were classified as operating leases, the Group discounted
lease payments using its incremental borrowing rate at 1 July 2019 of between 2.21% and 3.42% depending
on the lease term.
In thousands of AUD
Operating lease commitment at 30 June 2019 as disclosed in the Group’s consolidated
financial statements
Discounted using the incremental borrowing rate at 1 July 2019
Finance lease liabilities recognised as at 30 June 2019
• Recognition of exemption for leases of low-value assets
• Recognition of exemption for leases with less than 12 months of lease term at
transition
• Extension options reasonably certain to be exercised
New leases recognised and other adjustments
Lease liabilities recognised at 1 July 2019
(t) New standards and interpretations not yet adopted
1 July 2019
125,348
(15,521)
15,733
(1,237)
(419)
24,725
1,483
150,112
4. Revenue
The Group’s operations and main revenue streams are those described in Note 1. The tables below provide
information on the Group’s revenue and contract balances derived from contracts with customers.
(a) Disaggregation of revenue
In thousands of AUD
Products transferred at a point in time
Services transferred over time
(b) Contract balances
In thousands of AUD
Receivables, which are included in ‘Trade and other
receivables’
Contract assets
Contract liabilities
5. Other income
In thousands of AUD
Other income
6. Personnel expenses
In thousands of AUD
Wages and salaries
Contributions to defined contribution plans
Share-based payment expense
2020
576,659
114,879
691,538
2019
654,189
69,408
723,597
2020
98,552
521
5,805
2020
168
168
2020
158,273
13,096
112
171,481
2019
113,306
47
6,734
2019
1,383
1,383
2019
183,281
12,894
96
196,271
The Group has credited to wages and salaries $16,887 thousand relating to the JobKeeper Payment scheme.
Refer Note 3(n).
There are no new or amended standards and interpretations that are expected to have a significant impact
on the Group’s consolidated financial statements.
7. Expenses
Included in the consolidated statement of profit or loss and other comprehensive income:
In thousands of AUD
Depreciation and amortisation
Impairment of goodwill
Acquisition costs
Restructuring costs
Note
15
2020
45,612
40,000
3,570
8,697
2019
22,711
–
500
2,598
92
93
IVE Group LimitedAnnual Report 2020 Notes to the consolidated financial statements – continued
8. Finance income and finance costs
Recognised deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the following:
In thousands of AUD
Interest income
Net foreign exchange gain
Finance income
Interest expense
Derivative net change in fair value
Net foreign exchange losses
Finance costs
Net finance costs
9. Taxes
In thousands of AUD
Current tax expense
Current year
Changes in estimates related to prior years
Deferred tax expense
Origination and reversal of temporary differences
Total tax expense
Profit (loss) before tax
Tax using the Company’s domestic tax rate of 30%
(Non-assessable income)/non-deductible expenses – (net)
Previously unrecognised deductible temporary differences
Changes in estimates related to prior years
Other items (net)
2020
102
47
149
(10,812)
–
–
(10,812)
(10,663)
2020
9,034
255
9,289
2,143
11,432
(8,757)
(2,627)
13,085
(255)
255
974
11,432
2019
191
–
191
(9,764)
(174)
(97)
(10,035)
(9,844)
2019
9,072
(17)
9,055
4,464
13,519
44,823
13,447
(147)
17
(17)
219
13,519
Assets
Liabilities
Net
In thousands of AUD
Property, plant and equipment
2020
1,353
2019
3,221
Right-of-use-assets
Inventories
Intangible assets
Lease liabilities
Employee benefits
Provisions
Other items
Tax assets/(liabilities)
Set off of tax
Net deferred tax assets
–
–
–
38,442
8,040
2,338
1,712
51,885
(36,590)
15,295
–
–
–
–
7,919
5,386
3,459
19,985
(6,449)
13,536
2020
–
(29,146)
(1,510)
(5,934)
–
–
–
–
2019
–
–
(1,527)
(4,922)
–
–
–
–
2020
1,353
(29,146)
(1,510)
(5,934)
38,442
8,040
2,338
1,712
2019
3,221
–
(1,527)
(4,922)
–
7,919
5,386
3,459
(36,590)
(6,449)
15,295
13,536
36,590
6,449
–
–
–
–
15,295
13,536
Movement in temporary differences during the year
2020
In thousands of AUD
Property, plant and
equipment
Right-of-use-assets
Inventories
Intangible assets
Lease liabilities
Employee benefits
Provisions
Other items
Balance
1 July 2019
restated
Initial
application
of AASB16
Acquisition
through
business
Combination
Recognised
in equity
3,221
–
–
–
(1,527)
(4,922)
–
7,919
5,386
3,459
13,536
(30,414)
(4,873)
–
–
40,314
–
(3,684)
(1,445)
4,771
–
(2,242)
4,790
973
412
–
(940)
–
–
–
–
–
–
–
71
71
Recognised
in profit or
loss
Balance
30 June
2020
(1,868)
1,353
6,141
17
1,230
(6,662)
(852)
224
(373)
(2,143)
(29,146)
(1,510)
(5,934)
38,442
8,040
2,338
1,712
15,295
2019
In thousands of AUD
Property, plant and equipment
Inventories
Intangible assets
Employee benefits
Provisions
Other items
Balance
1 July 2018
restated
Acquisition
through
business
Combination
4,011
(532)
(6,037)
9,108
5,289
5,697
17,536
–
–
–
–
–
–
–
Recognised in
equity
Recognised in
profit or loss
Balance
30 June 2019
–
–
–
–
–
464
464
(790)
(995)
1,115
(1,189)
97
(2,702)
(4,464)
3,221
(1,527)
(4,922)
7,919
5,386
3,459
13,536
94
95
IVE Group LimitedAnnual Report 2020
Notes to the consolidated financial statements – continued
10. Cash and cash equivalents
11. Trade and other receivables
In thousands of AUD
Bank balances
Petty cash
Cash and cash equivalents in the statement of cash flows
Reconciliation of cash flows from operating activities
In thousands of AUD
Profit (loss) from continuing operations
Non-cash items
Depreciation, amortisation and impairment
Impairment of goodwill
Share based payment expense
Contingent consideration reduced
Derivative net change in fair value
Interest expense
Decrease in allowance for impairment on trade receivables
Restructuring costs
Income tax expense
Cash items
Net gain/(loss) on disposal of property, plant and equipment
Change in trade and other receivables
Change in inventories
Change in current assets
Change in prepayment
Change in trade and other payables
Change in provisions and employee benefits
Cash generated from operating activities
Income tax paid
Net cash from operating activities
2020
51,633
7
51,640
2020
(18,398)
45,612
40,000
112
–
–
659
–
727
11,432
(683)
79,461
24,875
9,792
1,382
1,381
(23,239)
(4,632)
89,020
(8,896)
80,124
2019
31,491
10
31,501
2019
33,028
22,711
–
96
(1,350)
174
2,026
(59)
232
13,519
84
70,461
3,979
(18,901)
1,324
(517)
2,541
(1,452)
57,435
(7,477)
49,958
In thousands of AUD
Current
Trade receivables
Allowance for impairment
Other receivables
Lease receivable
12. Inventories
In thousands of AUD
Finished goods
Work in progress
Raw materials
Allowance for inventory obsolescence
2020
2019
98,552
(2,220)
96,332
6,925
333
103,590
2020
3,377
8,748
45,102
57,227
(960)
56,267
113,306
(1,814)
111,492
2,094
–
113,586
2019
3,404
9,677
53,723
66,804
(788)
66,016
During the year, raw materials, consumables and changes in finished goods and work in progress recognised
as cost of sales amounted to $364,727 thousand (2019: $376,963 thousand).
During 2020 financial year an analysis of aged inventory was performed which resulted in an increase to the
provision of $172 thousand.
96
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IVE Group LimitedAnnual Report 2020
Notes to the consolidated financial statements – continued
13. Property, plant and equipment
In thousands of AUD
Cost
Balance at 1 July 2018
Additions
Disposals
Balance at 30 June 2019
Balance at 1 July 2019
Initial application of AASB 16
Adjusted balance 1 July 2019
Acquisitions through business combination
Additions
Disposals
Balance at 30 June 2020
Depreciation and impairment losses
Balance at 1 July 2018
Depreciation for the year
Disposals
Balance at 30 June 2019
Balance at 1 July 2019
Initial application of AASB 16
Adjusted balance 1 July 2019
Depreciation for the year
Disposals
Balance at 30 June 2020
Carrying amounts
At 1 July 2019 adjusted
At 30 June 2020
Leasehold
improvements
Plant and
equipment
Fixtures and
fittings
14,596
3,977
(97)
18,476
18,476
(1,186)
17,290
756
1,925
–
19,971
3,483
1,839
(97)
5,225
5,225
(228)
4,997
1,915
–
6,912
12,293
13,059
155,214
24,574
(311)
179,477
179,477
(31,609)
147,868
973
4,455
(1,988)
151,308
43,649
14,803
(159)
58,293
58,293
(13,311)
44,982
12,519
(1,645)
55,856
103,582
95,452
1,608
48
(37)
1,619
1,619
–
1,619
200
392
–
2,211
605
206
(35)
776
776
–
776
153
–
929
843
1,282
Total
171,418
28,599
(445)
199,572
199,572
(32,795)
166,777
1,929
6,772
(1,988)
173,490
47,737
16,848
(291)
64,294
64,294
(13,539)
50,755
14,587
(1,645)
63,697
116,718
109,793
Leased plant and machinery (classified as finance lease under AASB 117)
The Group leases production equipment under a number of finance lease agreements. Some leases provide
the Group with the option to purchase the equipment at a beneficial price. At 30 June 2019 the net carrying
amount of leased assets was $20,901 thousand.
On the introduction of AASB 16, these leases have been reclassified to Right-of-use-assets.
Security
At 30 June 2020 the carrying amount of total assets less the written down value of finance leased assets
were held as security for bank facilities.
14. Leases
A. Leases as lessee
The Group leases warehouses and factory facilities.
The leases typically run up to a period of 10 years,
with an option to renew the lease after that date.
Lease payments are renegotiated periodically
to reflect market rentals. Some leases provide
for additional rent payments that are based on
changes in local price indices.
The warehouse and factory leases were entered into
many years ago as combined leases of land and
buildings. Previously, these leases were classified as
operating leases under AASB 117.
One of the Group’s properties has been sub-let. The
lease and sub-lease will expire in 2021.
The Group leases production equipment under a
number of leases, which were classified as finance
leases under AASB 117.
In thousands of AUD
Balance at 1 July 2019
Depreciation charge for the year
Acquisitions through business combination
Additions to right-of-use assets
Disposals of right-of-use assets
Balance at 30 June 2020
The Group leases IT equipment with contract terms
of one to three years. These leases are short term
and/or leases of low-value items. The Group has
elected not to recognise right-of-use assets and
lease liabilities for these leases.
Information about leases for which the Group is a
lease is presented below.
(i) Right-of-use assets
The Group presents right-of-use assets that do not
meet the definition of investment property in the
statement of financial position. Right-of-use assets
that meet the definition of investment property
are presented within lease receivable. The carrying
amounts of right-of-use assets are as below.
Property, plant and equipment
Property
93,725
(17,801)
16,293
544
(879)
91,882
Production
equipment*
26,912
(6,897)
–
3,651
–
22,666
Total
120,637
(24,698)
16,293
4,195
(879)
115,548
*Includes amounts in plant and equipment re-classed to right-of-use assets as at 1 July 2019.
(ii) Amounts recognised in profit or loss
(iii) Amounts recognised in statement of cash flows
In thousands of AUD
2020 – Leases under AASB 16
Interest on lease liabilities
Income from sub-leasing right-of-use
assets credited within ‘expenses’
Expenses relating to short-term leases
Expenses relating to leases of low-
value assets, excluding short-term
leases of low-value assets
In thousands of AUD
2019 – Operating leases under AASB 117
Lease expense
Sub-lease income
2020
In thousands of AUD
Total cash outflow for leases
2020
32,014
5,042
120
207
819
2019
25,795
48
98
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IVE Group LimitedAnnual Report 2020 Notes to the consolidated financial statements – continued
(iv) Extension options
(ii) Operating lease
Some property leases contain extension options
exercisable before the end of the non-cancellable
contract period. Where practicable, the Group seeks
to include extension options in new leases to provide
operational flexibility. The extension options held
are exercisable only by the Group and not by the
lessors. The Group assesses at lease commencement
date whether it is reasonably certain to exercise the
extension options. The Group reassesses whether it is
reasonably certain to exercise the options if there is
significant event or changes in circumstances within
its control.
The Group has classified some sub-leased property
as operating leases, because they do not transfer
substantially all of the risks and rewards incidental
to the ownership of the assets.
Rental income recognised by the Group during the
year was $120 thousand (2019: $48 thousand).
The following table sets out a maturity analysis of
lease payments, showing the undiscounted lease
payments to be received after the reporting date.
In thousands of AUD
2020 – Operating leases under AASB 16
Less than one year
Between one to five years
More than five years
Total
In thousands of AUD
2019 – Operating leases under AASB 117
Less than one year
Between one to five years
More than five years
Total
134
241
–
375
120
363
12
495
B. Leases as lessor
The Group leases out some its leased properties.
All leases are classified as operating leases
from a lessor perspective with the exception of
a sub-lease, which the Group has classified as a
finance sub-lease.
(i) Finance lease
During the year, the Group recognised interest
income on lease receivables of $333 thousand
(2019: nil).
The following table sets out the maturity analysis
of lease receivables, showing the undiscounted
lease payments to be received after the reporting
date. Under AASB 117, the Group did not have any
finance leases as a lessor.
In thousands of AUD
Less than one year
Total undiscounted lease receivable
Unearned finance income
Net investment in the lease
2020
333
333
–
333
15. Intangible assets and goodwill
In thousands of AUD
Note
Goodwill
Computer
software
Customer
relationships
143,617
–
143,617
143,617
13,061
–
156,678
–
–
–
–
–
(40,000)
(40,000)
11,113
749
11,862
11,862
808
3,617
16,287
6,195
2,160
8,355
8,355
2,245
–
10,600
Total
183,346
749
184,095
184,095
21,522
3,617
28,616
–
28,616
28,616
7,653
–
36,269
209,234
8,410
3,718
12,128
12,128
4,098
–
16,226
14,605
5,878
20,483
20,483
6,343
(40,000)
(13,174)
Cost
Balance at 1 July 2018
Other additions
Balance at 30 June 2019
Balance at 1 July 2019
Acquisitions through business combination 23
Other additions (or adjustments)
Balance at 30 June 2020
Amortisation and impairment losses
Balance at 1 July 2018
Amortisation for the year
Balance at 30 June 2019
Balance at 1 July 2019
Amortisation for the year
Impairment
Balance at 30 June 2020
Carrying amounts
At 1 July 2019
At 30 June 2020
143,617
116,678
3,507
5,687
16,488
20,043
163,612
142,408
For the year ended 30 June 2020, an impairment of goodwill has been recognised in the Franklin WEB CGU of
$35,000, and Distribution CGU of $5,000 (2019 nil). See below for further details.
Impairment testing for cash-generating units containing goodwill
The Group completes impairment testing for nine CGU’s/groups of CGU’s. The carrying amount of any goodwill
summarised by operating division is set out below:
In thousands of AUD
Production (Franklin WEB CGU)
Production & Distribution (group of CGUs)
Data-Driven Communications (group of CGUs)
2020
29,141
39,047
48,490
2019
64,141
33,298
46,178
116,678
143,617
*The Group has realigned its grouping of CGUs in line with business reorganisation and brand simplification during the year.
Goodwill impairment test is performed by applying value in use calculations. The calculations for all CGU’s
use cash flow projections based on budgeted EBITDA approved by the Board. A post-tax WACC rate of 8.56%
to 11.5% (depending on the size and nature of the CGU) has been used with 1% to 2% growth allowance (apart
from Franklin WEB and Distribution below) in the 5 year cash flow projections and terminal growth. Whilst the
near-term future economic consequences of COVID-19 remain uncertain, the experience to date of the impacts of
COVID-19 on FY20 has been taken into consideration in the preparation of the projected cash flows for the FY21
budget and the business plans for FY22 to terminal value.
100
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IVE Group LimitedAnnual Report 2020
further possible impacts from COVID-19. These have
been probability weighted as follows:
16. Trade and other payables
Notes to the consolidated financial statements – continued
Aside from the below, there are no other reasonable
possible changes in assumptions that would give
rise to impairment.
Production & Distribution
For CGU’s/groups of CGU’s where impairment risk is
identified further work was completed to consider
alternate scenarios on a probability weighted basis.
COVID-19 impacted all parts of the business, some
greater than others. The Franklin WEB (‘FW’) and
Distribution CGU’s were more heavily impacted
due to clients temporarily suspending catalogue
programs. The impacts of COVID-19 on FY20 EBITDA
cash flows for the FW and Distribution CGU’s are
forecast to continue into FY21. The FY22 through
to terminal year cash flow projections assume a
return to pre COVID-19 levels allowing for a subdued
economic environment.
Due to the prevailing uncertainty the budget for
these CGU’s has been used as a base, with a
further two low case scenarios being developed,
the mid and low case. A probability of occurrence
for each scenario based on the estimated medium-
term impact of COVID-19 was then applied. This
probability was used to calculate a weighted
average VIU for each CGU.
Franklin WEB – The Base case incorporates the
budget presented to the board and positive
assumptions relating to future benefits of paper
price decreases and ensuing margin recovery from
FY22 to terminal value. An additional two low case
scenarios have been developed allowing for further
15% and 30% reductions to the base case reflecting
Base case 25%
Mid case 50%
Low Case 25%
Distribution – Consistent with FW, the base case
incorporated the budget presented to the board
and positive assumptions on cost savings initiatives
from FY22 to terminal value. An additional two low
case scenarios have been developed allowing for
further 15% and 30% reductions to the base case
reflecting further possible impacts from COVID-19.
These have then been probability weighted to the
mid and low case a result of Distribution being
recently acquired as follows:
Base case 10%
Mid case 50%
Low Case 40%
This probability was used to calculate a weighted
average VIU for each CGU.
Based on the modeling outlined above, the
impairment testing performed on these CGUs
determined that the carrying amount of their
assets was higher than it’s recoverable amount
through value in use. An impairment loss was
recognised, in respect of the Franklin WEB CGU of
$35,000 thousand, with a further $5,000 thousand
recognised in respect of Distribution and included in
‘other expenses’. The impairment loss amount has
been fully allocated to the CGUs goodwill.
The key assumptions used in the estimation of value
in use for these CGUs were as follows:
In percent
2020
2019
Post-tax WACC rate
Franklin WEB 8.56% / Distribution 11.5%
Franklin WEB 9.95%
Terminal growth rate
Franklin WEB 1% / Distribution 1%
Franklin WEB 2%
Following the impairment loss of these CGUs, the recoverable amount was equal to the carrying amount of
$129,662 thousand. Any adverse movements in a key assumption would lead to further impairment.
In thousands of AUD
Current
Trade payables
Accrued expenses
Forward exchange contracts used for hedging
Interest rate swaps
17. Loans and borrowings
In thousands of AUD
Current
Bank loan
Finance lease liabilities
Equipment finance
Non-current
Bank loan
Finance lease liabilities
Equipment finance
Bank loan
2020
2019
59,264
24,205
559
–
72,010
28,772
–
175
84,028
100,957
2020
2019
–
–
3,102
3,102
159,095
–
10,760
169,855
–
3,147
3,045
6,192
141,042
12,586
13,721
167,349
During the financial year, the Group refinanced it’s bank loan. As at 30 June 2020, the amended Syndicated
Facilities Agreement has a carrying amount of $159,095 thousand and face value of $160,000 thousand
(2019: carrying amount of $141,042 thousand and face value of $140,000 thousand). These facilities have an
interest rate of BBSY plus a margin, and mature on 5 April 2023. The Group was in compliance with all loan
covenants as at 30 June 2020. In April 2020, due to the uncertain impacts on current economic activity due to
COVID-19, the Group obtained a waiver relating to the net leverage ratio requirement at 30 June 2020 and
31 December 2020.
Finance lease liabilities*
Finance lease liabilities of the Group are payable as follows:
In thousands of AUD
Less than one year
Between one and five years
More than five years
Future minmum lease
payment
2019
3,936
13,539
390
17,865
Interest
2019
789
1,264
79
2,132
Present value of minmum
lease payments
2019
3,147
12,275
311
15,733
*The Group has provided the split between the principal and interest components of minimum lease payments
under AASB 117. However, there is no specific requirement under AASB 16 to provide this disclosure.
102
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IVE Group LimitedAnnual Report 2020 Notes to the consolidated financial statements – continued
18. Employee benefits
In thousands of AUD
Current
Liability for long service leave
Liability for annual leave
Non-current
Liability for long service leave
19. Provisions
In thousands of AUD
Balance at 1 July 2019
Initial application of AASB 16
Adjusted balance 1 July 2019
Provisions made during the year
Provisions reversed during the year
Balance at 30 June 2020
Current
Non-current
2020
2019
During the year ended 30 June 2020, the company granted Performance Share Rights (Rights) under the Equity
Incentive Plan (EIP). The Rights are an entitlement to receive fully paid ordinary IVE Group Limited Shares on a
one-for-one basis. Further details on the Rights are described below.
20. Share-based payments
8,150
8,846
16,996
6,700
6,700
Acquired lease
liability
11,654
(11,654)
–
–
–
–
–
–
–
8,463
10,419
18,882
6,182
6,182
Total
15,586
(12,282)
3,304
1,407
(143)
4,568
993
3,575
4,568
Restructuring
Make good
628
(628)
–
147
–
147
147
–
147
3,304
–
3,304
1,260
(143)
4,421
846
3,575
4,421
Type of arrangement
Senior Leadership Team Award
Date of grant
Number granted
Contractual life
Vesting conditions
26 November 2019*
880,000
3 years and 2 months
The Rights are subject to the following Performance Conditions: sixty
percent of the Rights are referenced against achieving Earnings Per Share
Target (EPS), and forty percent are referenced against achieving Relative
Shareholder Return (TSR) target. The performance period is 1 July 2019 to
30 June 2022 inclusive. The vesting date is expected to be on or soon after
the approval of IVE’s 2022 Annual Financial Report.
Weighted average fair value
$1.36
Valuation methodology
The EPS target was calculated using a risk-neutral assumption, whereas
the TSR target has been valued using a Monte Carlo simulation approach.
Expected dividend
Holders of performance share rights are not entitled to receive dividends
prior to vesting.
Other key valuation assumptions
Share price at valuation
date
Expected volatility
Risk free interest rate
Dividend yield
$2.05
19.1%
0.98%
8.64%
*Share rights issued to Directors required shareholder approval. This occurred at the Group’s 2019 Annual General Meeting.
Total expense relating to Share-based payments has been disclosed in note 6 of this consolidated financial
statements.
On 2 September 2019, the Group issued shares under the 2017 Equity Incentive Plan (refer note 21 – Capital).
The exercise price per share at the time of issue was nil. The fair value per share at grant date was $1.21. The
total value of shares issued was $34 thousand.
104
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IVE Group LimitedAnnual Report 2020 22. Earnings per share
In dollars
Basic earnings (loss) per share
Diluted earnings (loss) per share
Basic earnings (loss) per share – continuing operations
Diluted earnings (loss) per share – continuing operations
2020
(0.14)
(0.14)
(0.12)
(0.12)
2019
0.21
0.21
0.22
0.22
In thousands of AUD
Earnings
Profit (loss) after income tax attributable to owners of the company used in
calculating basic and diluted earnings per share
(20,189)
31,304
Profit (loss) after income tax attributable to owners of the company used in
calculating basic and diluted earnings per share – continuing operations
(18,398)
33,028
Weighted average number of ordinary shares
Weighted average number of ordinary shares used in calculating basic
earnings per share
Weighted average number of ordinary shares used in calculating diluted
earnings per share
148,202
148,160
148,635
148,638
There has been no material overall impact from the adoption of AASB 16 on the Group’s earnings per share.
Notes to the consolidated financial statements – continued
21. Capital
Issued and paid up capital
In thousands of AUD
148,207,285 (June 2019: 148,179,157) ordinary shares fully paid
2020
156,502
2019
156,468
Movement in ordinary share capital
Date
1-Jul-19
4-Oct-18
Details
Opening balance
Issue of shares under the Equity
Incentive Plan
30-Jun-19
Closing balance
1-Jul-19
2-Sep-19
Opening balance
Issue of shares under the Equity
Incentive Plan
Number of shares
Issue price
Total $’000
148,103,655
75,502
148,179,157
148,179,157
28,128
$1.98
$1.21
156,318
150
156,468
156,468
34
156,502
30-Jun-20
Closing balance
148,207,285
Dividends
On 23 March 2020, the Group announced the cancellation of the H1 FY20 interim dividend (8.6 cents per share
– $12,700 thousand in total). The Board has decided to suspend the final dividend for FY20 given the ongoing
economic impact of COVID-19, and to continue strengthening the balance sheet.
The Board intends to resume dividend payments consistent with the existing dividend policy commencing the
H1 FY21 interim dividend.
The following dividends were declared and paid during the year ended 30 June 2020:
2020
Final 2019 ordinary
Total amount
Cents per share
Total amount $’000
Date of payment
7.7
11,412
11,412
24 October 2019
On 24 October 2019 a dividend of 7.7 cents per share (100% franked) was declared and paid by the directors.
The dividend was paid out of opening retained profits and profits earned up to that date.
The following dividends were declared and paid during the year ended 30 June 2019:
2019
Final 2018 ordinary
Interim 2019 ordinary
Total amount
Cents per share
Total amount $’000
Date of payment
7.5
8.6
11,108
12,743
23,851
25 October 2018
18 April 2019
Dividend franking account
In thousands of AUD
Amount of franking credits available to shareholders
of IVE Group Limited for subsequent financial years
2020
8,839
2019
4,902
The ability to utilise the franking credits is dependent upon the ability to declare dividends.
106
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IVE Group LimitedAnnual Report 2020 Notes to the consolidated financial statements – continued
23. Acquisitions
On 1 January 2020, the Group acquired Salmat Marketing Solutions business and Reach Media NZ Limited
(the catalogue distribution business of Salmat Limited in Australia and New Zealand, respectively) for a
consideration of $25,385 thousand (plus working capital adjustment).
The following summarises the major classes of consideration transferred, and the recognised amounts of
assets acquired and liabilities assumed at the acquisition date:
In thousands of AUD
Consideration transferred
Cash
Completion cash adjustment*
Deferred consideration
Identifiable assets acquired and liabilities assumed
Cash and cash equivalents
Trade and other receivables
Inventories
Current tax receivable
Prepayments
Property, plant and equipment
Right-of-use-asset
Intangible asset (customer relationship and software)
Deferred tax assets/(liabilities)
Trade and other payables
Lease liabilities
Employee benefits
Provisions
Goodwill on acquisition
25,000
610
385
25,995
452
15,265
43
9
1,959
1,929
16,293
8,461
(944)
(9,713)
(16,293)
(3,481)
(1,046)
12,934
13,061
*The completion cash adjustment includes working capital and balance date adjustments. These adjustments are made in the
ordinary course of a transaction to reflect the difference between normalised expectations around balance sheet items at the
time of signing and actual balances on transaction completion.
Management have measured the assets and
liabilities acquired at fair value with the remainder of
the purchase consideration being allocated to good-
will. The acquisition accounting is still on a pro visional
basis. If new information obtained within one year
from the acquisition date about facts and circum-
stances that existed at the acquisition date identifies
adjustments to the above amounts, or any additional
provisions that existed at the acquisition date, then
the accounting for the acquisition will be revised.
The goodwill is attributable to the future
profitability of the acquisitions and the synergies
expected to arise within the Group. None of the
goodwill recognised is expected to be deductible for
tax purposes.
For the six months ended 30 June 2020, the acquired
businesses contributed revenue of $49,979 thousand,
but a loss before tax of $4,770 thousand partly due
to restructure costs.
If these acquisitions had occurred from the
beginning of the reporting period the combined
Group revenue would have been estimated at
$770,908 thousand, and loss before tax of $4,387
thousand from continuing operations.
Acquisition-related costs totaling $3,329 thousand
for all acquisitions has been included in Other
Expenses in the Group’s consolidated statement of
profit or loss and other comprehensive income.
24. Operating segments
The Group has identified one operating segment
(whole of business) based on the internal reports
that are reviewed and used by the Board (Chief
Operating Decision Maker or ‘CODM’) in assessing
performance and in determining the allocation of
resources. The Board reviews the internal reports on
a monthly basis.
The key measure of performance used by the CODM
to assess performance is earnings before interest,
tax, depreciation and amortisation (EBITDA).
A reconciliation of the reportable segment’s EBITDA
to profit before income tax expense is shown below.
Profit and loss, total assets and liabilities for the
reportable segment are consistent with the primary
statements included in this consolidated interim
financial report.
In thousands of AUD
EBITDA
Depreciation, amortisation and impairment
Net finance costs
Profit (loss) before income tax from continuing operations
2020
89,309
(85,612)
(10,663)
(6,966)
2019
79,102
(22,711)
(9,844)
46,547
25. Financial risk management and financial instruments
Overview
The Group has exposure to the following risks from
its use of financial instruments:
a.
b.
c.
credit risk
liquidity risk
market risk
This note presents information about the Group’s
exposure to each of the above risks, the Group’s
objectives, policies and processes for measuring
and managing risk, and the Group’s management
of capital. Further quantitative disclosures are
included throughout these consolidated financial
statements.
Risk management framework
The Company’s board of directors has overall
responsibility for the establishment and oversight
of the Group’s risk management framework. The
CFO is responsible for developing and monitoring
the Group’s risk management policies. He reports
regularly to the Board of Directors on its activities.
The Group’s risk management policies are
established to identify and analyse the risks faced
by the Group, to set appropriate risk limits and
controls, and to monitor risks and adherence to
limits. Risk management policies and systems are
reviewed regularly to reflect changes in market
conditions and the Group activities. The Group,
through its training and management standards
and procedures, aims to maintain a disciplined
and constructive control environment in which all
employees understand their roles and obligations.
The Group Audit Committee oversees how
management monitors compliance with the Group’s
risk management policies and procedures, and
reviews the adequacy of the risk management
framework in relation to the risks faced by the
Group.
Credit risk
Credit risk is the risk of financial loss to the Group if
a customer or counterparty to a financial instrument
fails to meet its contractual obligations, and
arises principally from the Group’s receivables from
customers and investments in debt securities.
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IVE Group LimitedAnnual Report 2020 Notes to the consolidated financial statements – continued
Exposure to credit risk
Liquidity risk
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to
credit risk at the reporting date was:
In thousands of AUD
Cash and cash equivalents
Trade and other receivables
Trade receivables
Note
10
11
Carrying amounts
2020
51,640
103,590
155,230
2019
31,501
113,586
145,087
The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer.
However, management also considers the factors that may influence the credit risk of its customer base,
including the default risk associated the industry under the current economic environment. Additional
allowances have been made for this uncertainty.
The Group has no significant concentrations of credit risk. The Group has policies in place to ensure that sales
of services are made to customers with an appropriate credit history based on enquiries through the Group’s
Finance department. Ongoing customer credit performance is monitored on a regular basis.
The aging of the trade and other receivables at the end of the reporting period that were not impaired was as
follows:
In thousands of AUD
Neither past due nor impaired
Past due 1-30 days
Past due 31-90 days
Past due 91 days and over
Carrying amounts
2020
58,711
29,566
8,527
9,006
105,810
2019
65,691
34,586
8,948
6,175
115,400
The movement in the allowance for impairment in respect of receivables during the year was as follows:
Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with
its financial liabilities that are settled by delivering cash or another financial asset. The Group’s approach
to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its
liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or
risking damage to the Group’s reputation.
The following are the remaining contractual maturities of financial liabilities at the reporting date. The
amounts are gross and undiscounted, and include estimated interest payments:
In thousands of AUD
30 June 2020
Non-derivative financial liabilities
Trade and other payable
Lease liabilities
Equipment finance
Bank loans
Derivative financial liabilities
Forward exchange contracts used
for hedging
In thousands of AUD
30 June 2019
Non-derivative financial liabilities
Contractual cash flows
Carrying
amount
Total
12 months or
less
1-5 years
More than 5
years
83,469
142,427
13,862
159,095
398,853
83,469
160,560
14,753
172,917
431,699
83,469
34,343
3,332
3,441
124,585
–
104,164
11,421
169,476
285,061
–
22,053
–
–
22,053
559
559
559
559
559
559
–
–
–
–
Contractual cash flows
Carrying
amount
Total
12 months or
less
1-5 years
More than 5
years
In thousands of AUD
Balance at beginning of the year
Initial application of AASB 9
Assumed in a business combination in current year
Impairment loss recognised
Amounts written off
Balance at end of year
2020
1,814
–
151
1,247
(992)
2,220
2019
677
884
–
1,034
(781)
1,814
Finance lease liabilities
Equipment finance
Bank loans
Derivative financial liabilities
Interest rate swaps used for hedging
15,733
16,766
141,042
274,323
175
175
17,865
17,952
160,921
297,520
175
175
3,936
3,332
5,055
113,105
175
175
13,539
14,620
155,866
184,025
–
–
Carrying amounts
Trade and other payable
100,782
100,782
100,782
–
–
390
–
–
390
–
–
Market risk
Market risk is the risk that changes in market prices,
such as foreign exchange rates and interest rates
will affect the Group’s income or the value of its
holdings of financial instruments. The objective
of market risk management is to manage and
control market risk exposures within acceptable
parameters, while optimising the return.
110
111
IVE Group LimitedAnnual Report 2020 Notes to the consolidated financial statements – continued
Currency risk
The Group is exposed to currency risk to the
extent that there is a mismatch between the
currencies in which purchases are denominated
and the respective functional currencies of Group
entities. The functional currency of the Group is the
Australian dollar (AUD). The currencies in which
these transactions are primarily denominated are
Euro, US dollars and AUD.
During the year, 9% (2019: 6%) of total group
purchases were made in foreign currencies. The
Group has used forward exchange contracts to
Exposure to currency risk
hedge its currency risk, most with a maturity of
less than one year from the reporting date. These
forward exchange contracts has been designated
as a cash flow hedge, and have a fair value of $6
thousand at the reporting date (2019: nil). The Group
has performed effectiveness testing and recognised
the full fair value amount net of deferred tax of $4
thousand in other comprehensive income (2019: nil).
Based on the results of the test no in-effectiveness
has been recognised in the profit or loss.
The summary quantitative data about the Group’s exposure to currency risk as reported to the management
of the Group is as follows:
In thousands of AUD
Euro
USD
Euro
USD
As at 30 June 2020
As at 30 June 2019
Equipment finance loan
Next three months forecast purchases
Forward exchange contracts
Net exposure
8,820
1,346
(10,166)
–
–
1
(1)
–
10,758
6,675
(17,433)
–
–
150
(150)
–
Sensitivity analysis
Interest rate risk
The impact of exchange rate movements on profit
is subject to other variables including movement
in market prices. The impact of exchange rate
movements on profit and loss is not material.
The Group refinanced it’s bank loan. The interest
rate swap contracts used to hedge the previous
bank loan have matured. The Group recognised $140
thousand in the profit or loss (2019: $123 thousand in
other comprehensive income).
112
Exposure to interest risk
At the reporting date the interest rate profile of the Group’s interest-bearing financial instruments was:
In thousands of AUD
Fixed rate instruments
Financial liabilities – leases liabilities (2019: finance lease liabilities)
Financial liabilities - equipment finance
Effect of interest rate swaps – notional amount
Variable rate instruments
Financial assets – bank balances
Financial liabilities – bank loans
Effect of interest rate swaps – notional amount
Carrying amount
2020
2019
(142,427)
(13,862)
–
(156,289)
51,633
(160,000)
–
(108,367)
(15,733)
(16,766)
(36,625)
(69,124)
31,491
(142,000)
36,625
(73,884)
Fair value sensitivity analysis for fixed rate instruments
The Group does account for any fixed rate financial assets and liabilities at fair value through profit or loss.
Cash flow sensitivity analysis for variable rate instruments
A change of 10 basis points in interest rates at the reporting date would have increased (decreased) equity
and profit or loss by $108 thousand (2019: $74 thousand). This analysis assumes that all other variables, in
particular foreign currency rates, remain constant. The analysis is performed on the same basis as 2019.
Measurement of fair values
The table below gives information on the valuation technique and unobservable inputs of financial assets or
liabilities categorised as a Level 2 or Level 3 in the fair value hierarchy.
Type
Valuation technique
Forward exchange
contracts
The fair value is determined using quoted
forward exchange rates and present value
of estimated future cash flow based on
observable yield curves.
Significant
unobservable
inputs
Relationship between
the fair value and
unobservable inputs
Not applicable
Not applicable
Reconciliation of Level 3 Contingent consideration fair value
The following table shows reconciliation of Contingent consideration from the opening balance to the closing
balance:
In thousands of AUD
Balance at 1 July
Assumed in a business combination in current year
Contingent consideration settled during the year
Contingent consideration reduced
Balance at 30 June
2020
–
–
–
–
–
2019
5,500
–
(4,150)
(1,350)
–
113
IVE Group LimitedAnnual Report 2020
Notes to the consolidated financial statements – continued
Fair values versus carrying amounts
As at the reporting date, the carrying value of other financial assets and liabilities as at the end of the
financial year are considered to approximate their fair value.
Capital management
The primary objective of the Group’s capital management is to maintain a strong capital base through cash
flow management in order to sustain future development of the business and maximise shareholder value.
There were no changes in the Group’s approach to capital management during the year. The Group is subject
to externally imposed capital requirements (being financial loan covenants – refer to note 17).
26. Capital commitments
As at 30 June 2020, the Group has no commitment to purchase plant and equipment (2019: GBP585 thousand).
27. Related parties
Key management personnel compensation
Key management personnel compensation comprised the following:
In AUD
Short-term employee benefits
Post-employee benefits
Other long-term benefits
Share-based payments
2020
2,619,352
120,488
342,756
–
2019
3,391,262
138,621
52,238
75,817
3,082,596
3,657,938
In AUD
Transaction value year
ended 30 June 2020
Transaction value year
ended 30 June 2019
Caxton Property Developments Pty Ltd – sales
–
7
Paul Selig (director of the Company), holds positions in Caxton Property Developments Pty Ltd that results in
him having control or significant influence over the financial or operating policies of this entity.
During the year ending 30 June 2019, the Group sold goods and services to Caxton Property Developments Pty
Ltd.
The terms and conditions of the transactions above were no more favourable than those available, or which
might reasonably be expected to be available, on similar transactions to other third parties on an arm’s
length basis.
28. Group entities
Ultimate parent entity
IVE Group Limited
Controlled entities
Caxton Print Group Holdings Pty Limited
Caxton Print Group Pty Limited
IVE Group Australia Pty Limited
IVE Group Victoria Pty Limited
Task 2 Pty Limited
Pareto Fundraising Pty Limited
Pareto Phone Pty Limited
James Bennett & Associates Pty Limited
IVE Employment (Australia) Pty Limited
IVE Employment (Victoria) Pty Limited
Taverners No. 13 Pty Limited
AIW Printing (Aust) Pty Limited
AIW Printing Unit Trust
IVE Group Asia Limited
Guangzhou IVE Trading Company Limited
IVE Singapore Pte Limited
SEMA Holdings Pty Ltd
SEMA Infrastructure Pty Ltd
SEMA Operations Pty Ltd
John W Gage & Co Pty Ltd
IVE Distribution Pty Ltd
Lasoo Pty Ltd
Reach Media New Zealand Limited
Ownership interest
2020 %
2019 %
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
100
100
100
100
100
100
100
100
100
100
100
100
100
–
–
–
114
115
IVE Group LimitedAnnual Report 2020 Notes to the consolidated financial statements – continued
29. Parent entity disclosures
As at, and throughout, the financial year ending 30 June 2020 the parent entity of the Group was IVE Group
Limited.
In thousands of AUD
Result of parent entity
Profit/(loss) for the year
Other comprehensive income
Total comprehensive income for the year
Financial position of parent entity at year/period end
Current assets
Total assets
Current liabilities
Total liabilities
Total equity of the parent entity comprising of:
Share capital
Other equity reserve
Accumulated losses (net of dividend paid)
Total equity
2020
2019
(0.4)
–
(0.4)
31
65,504
104
104
287,781
(146,662)
(75,719)
65,400
–
–
–
3
76,896
83
83
287,781
(146,662)
(64,306)
76,813
IVE Group Limited was incorporated on 10 June 2015, but did not undertake any trading activities until its listing (IPO)
on the Australian Stock Exchange (ASX) on 16 December 2015 where it also contemporaneously acquired Caxton
Print Group Holdings Pty Ltd (CPGH).
An internal restructure took place resulting in IVE Group Limited becoming the holding company of CPGH. The
Directors elected to account for the restructure as a capital re-organisation rather than a business combination.
In the Directors’ judgement, the continuation of the existing accounting values is consistent with the accounting
that would have occurred if the assets and liabilities had already been in a structure suitable to IPO and most
appropriately reflects the substance of the internal restructure. As such, the consolidated financial statements
of the new IVE Group have been presented as a continuation of the pre existing accounting values of assets and
liabilities in CPGH’s financial statements.
Accordingly, the other equity reserve represents the difference between the fair value of the share capital at the
date of the IPO and historical book values of the assets and liabilities of the Group.
30. Subsequent events
Aside from the event below, there have been no other events subsequent to balance date which would have a
material effect on the Group’s consolidated financial statements at 30 June 2020.
On 11 August 2020, Coles Group Limited informed the Group that it would reduce catalogue printing. This will
affect the Group’s revenue with an estimated reduction of between $35,000 – $40,000 thousand.
31. Auditors’ remuneration
In AUD
Audit services
Auditors of the Company – KPMG
Audit and review of financial reports
Other assurance
Other services
Auditors of the Company – KPMG
Taxation services
Transaction services
IT services
2020
2019
403,220
–
403,220
52,867
681,400
–
734,267
353,720
6,000
394,213
86,500
–
70,000
156,500
32. Deed of cross guarantee
Pursuant to ASIC Corporations (Wholly owned
Companies) Instrument 2016/785 the wholly-owned
subsidiaries listed below are relieved from the
Corporations Act 2001 requirements for preparation,
audit and lodgement of financial reports, and
directors’ reports.
It is a condition of the Instrument that the Company
and each of the subsidiaries enter into a Deed of
Cross Guarantee. The effect of the Deed is that the
Company guarantees to each creditor payment in
full of any debt in the event of winding up of any
of the subsidiaries under certain provisions of the
Corporations Act 2001. If a winding up occurs under
other provisions of the Act, the Company will only
be liable in the event that after six months any
creditor has not been paid in full. The subsidiaries
have also given similar guarantees in the event that
the Company is wound up.
The Company and its subsidiaries amended its
Deed of Cross Guarantee on 25 February 2020. The
subsidiaries subject to the Deed are:
a. Caxton Print Group Holdings Pty Limited
b.
IVE Group Australia Pty Limited
c.
IVE Group Victoria Pty Limited
d. Caxton Print Group Pty Limited
e. Task 2 Pty Limited
f. Pareto Fundraising Pty Limited
g. Pareto Phone Pty Limited
h. James Bennett & Associates Pty Limited
i.
j.
IVE Employment (Australia) Pty Limited
IVE Employment (Victoria) Pty Limited
k. Taverners No. 13 Pty Limited
l. AIW Printing (Aust) Pty Limited
m. SEMA Holdings Pty Limited
n. SEMA Infrastructure Pty Limited
o. SEMA Operations Pty Limited
p. John W. Gage & Co Pty Limited
q.
IVE Distribution Pty Limited
A consolidated statement of profit or loss and other
comprehensive income and consolidated statement
of financial position, comprising the Company and
controlled entities which are a party to the Deed,
after eliminating all transactions between parties
to the Deed of Cross Guarantee, for the year ended
30 June 2020 is set out on pages 76 and 77 of this
financial report.
116
117
IVE Group LimitedAnnual Report 2020
Notes to the consolidated financial statements – continued
33. Discontinued operation
During the year, the Group commenced closing down its loss making Asian operation. Its customers will
continue to be serviced from Australia.
IVE Group Limited
Directors’ Declaration
(i) Results of discontinued operation
In thousands of AUD
Revenue
Cost of sales
Gross profit
Production expenses
Administrative expenses
Results from operating activities
Finance income
Finance costs
Net finance costs
Loss before tax
Income tax expense
Loss from discontinued operations
Basic loss per share
Diluted loss per share
2020
881
(284)
597
(1,219)
(1,185)
(1,807)
16
–
16
(1,791)
–
(1,791)
(0.02)
(0.02)
2019
600
(171)
429
(1,234)
(923)
(1,728)
–
(4)
(1,724)
(1,724)
–
(1,724)
(0.01)
(0.01)
1
In the opinion of the directors of IVE Group Limited (the Company):
(a) the consolidated financial statements and notes, set out on pages 76 to 118, are in accordance with
the Corporations Act 2001, including:
(i)
giving a true and fair view of the Group's financial position as at 30 June 2020 and of its
performance for the financial year ended on that date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and
(b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when
they become due and payable.
2
There are reasonable grounds to believe that the Company and the group entities identified in Note 28
will be able to meet any obligations or liabilities to which they are or may become subject to by virtue of
the Deed of Cross Guarantee between the Company and those group entities (refer Note 32) pursuant to
ASIC Corporations (Wholly owned Companies) Instrument 2016/785.
3
The directors draw attention to Note 2 to the consolidated financial statements, which includes a
statement of compliance with International Financial Reporting Standards.
Signed in accordance with a resolution of directors.
The loss from the discontinued operation of $1,791 thousand (2019: loss of $1,724 thousand) is attributable
entirely to the owners of the Company.
Geoff Selig
Director
(i) Cash flows from (used in) discontinued operation
In thousands of AUD
Net cash used in operating activities
2020
(1,177)
2019
(2,536)
Dated at Sydney this 25th day of August 2020
118
119
IVE Group LimitedAnnual Report 2020 120
121
IVE Group LimitedAnnual Report 202091 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.Liability limited by a scheme approved under Professional Standards Legislation. Independent Auditor’s Report To the shareholders of IVE Group Limited Report on the audit of the Financial Report Opinion We have audited the Financial Report of IVE Group Limited (the Company). In our opinion, the accompanying Financial Report of the Company is in accordance with the Corporations Act 2001, including: •giving a true and fair view of the Group’s financial position as at 30 June 2020 and of its financial performance for the year ended on that date; and •complying with Australian Accounting Standards and the Corporations Regulations 2001. The Financial Report comprises: •Consolidated Statements of financial position as at 30 June 2020. •Consolidated Statements of profit or loss and other comprehensive income Consolidated statements of changes in equity, and Consolidated statements of cash flows for the year then ended. •Notes including a summary of significant accounting policies. •Directors’ Declaration. The Group consists of the Company and the entities it controlled at the year-end or from time to time during the financial year. Basis for opinion We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the Financial Report section of our report. We are independent of the Group in accordance with the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of the Financial Report in Australia. We have fulfilled our other ethical responsibilities in accordance with the Code. 91 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.Liability limited by a scheme approved under Professional Standards Legislation. Independent Auditor’s Report To the shareholders of IVE Group Limited Report on the audit of the Financial Report Opinion We have audited the Financial Report of IVE Group Limited (the Company). In our opinion, the accompanying Financial Report of the Company is in accordance with the Corporations Act 2001, including: •giving a true and fair view of the Group’s financial position as at 30 June 2020 and of its financial performance for the year ended on that date; and •complying with Australian Accounting Standards and the Corporations Regulations 2001. The Financial Report comprises: •Consolidated Statements of financial position as at 30 June 2020. •Consolidated Statements of profit or loss and other comprehensive income Consolidated statements of changes in equity, and Consolidated statements of cash flows for the year then ended. •Notes including a summary of significant accounting policies. •Directors’ Declaration. The Group consists of the Company and the entities it controlled at the year-end or from time to time during the financial year. Basis for opinion We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the Financial Report section of our report. We are independent of the Group in accordance with the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of the Financial Report in Australia. We have fulfilled our other ethical responsibilities in accordance with the Code. 92 Key Audit Matters Key Audit Matters are those matters that, in our professional judgement, were of most significance in our audit of the Financial Report of the current period. This matter was addressed in the context of our audit of the Financial Report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on this matter. Assessment of carrying value of goodwill Refer to Note 15 ‘Intangible assets and goodwill’ to the Financial Report (Goodwill: $116.7m) The key audit matter How the matter was addressed in our audit A key audit matter for us was the Group’s annual testing of goodwill for impairment, given the size of the balance (being 19% of total assets) and the significantly higher estimation uncertainty continuing from the business disruption impact of the COVID-19 global pandemic. Certain conditions impacting the Group increased the judgement applied by us when evaluating the evidence available. We focussed on the significant forward-looking assumptions the Group applied in their value in use models, including: •assessment of the Cash Generating Units (CGUs). The Group restructured part of the business during the year and acquired the distribution business of Salmat Limited including Reach Media NZ, necessitating our consideration of the Group’s determination of CGUs, based on the smallest group of assets that generate largely independent cash inflows; •forecast operating cash flows, growth rates and terminal growth rates – the Group has experienced significant business disruption, as a result of COVID-19 in addition to continuing competitive market conditions and the pace of technological change and digital disruption in the printing industry. This impacted the Group through a reduction in the demand for products and services in addition to some project cancellations and deferrals. These conditions and the uncertainty of their Our procedures included: •we considered the Group’s determination of their CGUs based on our understanding of the Group’s business impact of Salmat and Reach Media acquisition, and how independent cash inflows were generated, against the requirements of the accounting standards; •we analysed the impact of the restructure of the business and the Group’s internal reporting to assess their monitoring and management of activities, and the consistency of the allocation of goodwill to CGUs; •we considered the appropriateness and application of the value in use method applied by the Group to perform the annual test of goodwill for impairment against the requirements of the accounting standards; •we assessed the integrity of the value in use models used, including the accuracy of the underlying calculations and formulas; •we met with management to understand the impact of COVID-19 to the Group and impact of government response programs to the FY20 results; •we compared the forecast cash flows and capital expenditure contained in the value in use models to revised forecasts reflecting the Group’s COVID-19 expected recovery rate approved by the Board; •we assessed the accuracy of previous Group 122
123
IVE Group LimitedAnnual Report 202093 continuation increase the possibility of goodwill being impaired, plus the risk of inaccurate forecasts or a significantly wider range of possible outcomes for us to consider. We focused on the expected rate of recovery for the Group, what the Group considers as their future business model, and continued access to government relief/stimulus measures when assessing the feasibility of the Group’s revised COVID-19 forecast cashflows; •assessment of the discount rates. These are complicated in nature and vary according to the conditions and environment the specific CGU is subject to from time to time; •level of disclosure of the key assumptions used in the Group’s valuation models. The Group uses complex models to perform their annual testing of goodwill for impairment. The models are largely manually developed, use adjusted historical performance, and a range of internal and external sources as inputs to the assumptions. The Group have not always met prior forecasts, raising our concern for reliability of current forecasts. Complex modelling using forward-looking assumptions tends to be prone to greater risk for potential bias, error and inconsistent application. These conditions necessitate additional scrutiny by us, in particular to address the objectivity of sources used for assumptions, and their consistent application. Given the nature of these judgments, we involved our valuation specialists and senior staff with experience in the industry and the Group’s business in assessing this key audit matter. forecasts to inform our evaluation of forecasts incorporated in the models; •we assessed the Group’s underlying methodology and documentation for the allocation of corporate costs to the forecast cash flows contained in the value in use model, for consistency with our understanding of the business and the criteria in the accounting standards; •we considered the sensitivity of the models by varying key assumptions, such as expected rate of recovery for the Group, cost saving initiatives, forecast growth rates, terminal growth rates and discount rates, within a reasonably possible range. We considered the interdependencies of key assumptions when performing the sensitivity analysis and what the Group consider to be reasonably possible. We did this to identify those CGUs at higher risk of impairment and those assumptions at higher risk of bias or inconsistency in application and to focus our further procedures; •we met with management to understand changes in the Group’s plans resulting from COVID-19, and potential future impacts to the Group; •we challenged the Group’s significant forecast cash flow and growth assumptions in light of the expected continuation of unprecedented uncertainty of business disruption and impacts of the COVID-19 global pandemic in addition to continued competitive market conditions and digital disruption. We compared forecast growth rates and terminal growth rates to authoritative published studies of industry trends and expectations, and considered differences for the Group’s operations. We assessed key assumptions such as expected rate of recovery for the group and cost savings initiatives. We used our knowledge of the Group, business and customers, and our industry experience. We sourced authoritative and credible inputs from our specialists and market advisors; •we checked the consistency of the growth rates to the Group’s revised plans and our experience regarding the feasibility of these in 94 the printing industry and the COVID-19 economic environment in which they operate; •we assessed the impact of technology and market changes on the Group’s key assumptions, specifically the continued market for catalogues and other printed materials as a marketing and communications tool, for indicators of bias and inconsistent application, using our industry knowledge and information published by reputable sources; •working with our valuation specialists we independently developed a discount rate range considered comparable using publicly available market data for comparable entities, adjusted by risk factors specific to the Group and the industry it operates in; •we assessed the disclosures in the financial report using our understanding of the issue obtained from our testing and against the requirements of the accounting standards. Other Information Other Information is financial and non-financial information in IVE Group Limited’s annual reporting which is provided in addition to the Financial Report and the Auditor’s Report. The Directors are responsible for the Other Information. The Other Information we obtained prior to the date of this Auditor’s Report was the Appendix 4E, Operating and Financial Review, Director’s Report, Remuneration Report and the IVE Group Ltd FY20 Results Presentation. The Chairman’s Report and Chief Executive Officer’s Report are expected to be made available to us after the date of the Auditor’s Report. Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not express an audit opinion or any form of assurance conclusion thereon, with the exception of the Remuneration Report and our related assurance opinion. In connection with our audit of the Financial Report, our responsibility is to read the Other Information. In doing so, we consider whether the Other Information is materially inconsistent with the Financial Report or our knowledge obtained in the audit, or otherwise appears to be materially misstated. We are required to report if we conclude that there is a material misstatement of this Other Information, and based on the work we have performed on the Other Information that we obtained prior to the date of this Auditor’s Report we have nothing to report. 124
125
IVE Group LimitedAnnual Report 202095 Responsibilities of the Directors for the Financial Report The Directors are responsible for: •preparing the Financial Report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001. •implementing necessary internal control to enable the preparation of a Financial Report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. •assessing the Group and Company’s. This includes disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless they either intend to liquidate the Group ability to continue as a going concern and whether the use of the going concern basis of accounting is appropriate or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities for the audit of the Financial Report Our objective is: •to obtain reasonable assurance about whether the Financial Report as a whole is free from material misstatement, whether due to fraud or error; and •to issue an Auditor’s Report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error. They are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the Financial Report. A further description of our responsibilities for the audit of the Financial Report is located at the Auditing and Assurance Standards Board website at: http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf This description forms part of our Auditor’s Report. 96 Report on the Remuneration ReportOpinion In our opinion, the Remuneration Report of IVE Group Limited for the year ended 30 June 2020, complies with Section 300A of the Corporations Act 2001. Directors’ responsibilities The Directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with Section 300A of the Corporations Act 2001. Our responsibilities We have audited the Remuneration Report included in pages 54 to 71 of the Directors’ report for the year ended 30 June 2020. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. KPM_INI_01 KPMG John Wigglesworth Partner Sydney 25 August 2020 ASX additional information
Additional information required by the Australian Securities Exchange (ASX) and not disclosed elsewhere in
the Annual Report is set out below. The shareholder information below is as at 24 July 2020.
IVE Group Limited shares are traded on the ASX under the code ‘IGL’.
Share registry
Registered office
Principal Place of Business
Link Market Services
Level 12, 680 George Street
Sydney NSW 2000
Phone: +61 1300 554 474
Level 3, 35 Clarence Street
Sydney NSW 2000
Phone: +61 2 8020 4400
Building B, 350-374 Parramatta
Road
Homebush NSW 2140
Phone: +61 2 8020 4400
Phone: +61 1300 554 474
Substantial shareholders of ordinary shares (as reported to the ASX)*
Name
Caxton Print Holdings Pty Ltd as trustee for the Selig Family Trust**
Anthony Young
Ryan Young
Mitsubishi UFJ Financial Group, Inc.
Number of
shares held
11,210,231
8,990,160
7,411,946
7,544,225
%
8.02%
6.1%
5.0%
5.09%
* The above table includes a correction removing COPIA Investment Partners, who ceased to be a substantial holder in
September 2017.
** The above disclosure is presented in accordance with ASX Listing Rule 4.10. As at the date of this Annual Report, Caxton Print
Holdings Pty Ltd as trustee for the Selig Family Trust, holds a total of 12,860,231 fully paid ordinary shares (8.68%)
Distribution of shareholders and shareholdings – ordinary shares
There are 148,207,285 ordinary shares on issue held by 4,002 shareholders.
Range
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and Over
Total
Ordinary
Shares
324,770
3,855,710
5,665,483
38,659,769
99,701,553
%
0.22
2.60
3.82
26.08
67.27
Number
of holders
537
1,316
695
1,322
132
%
13.42
32.88
17.37
33.03
3.30
Unmarketable parcels
The number of shareholders holding less than a marketable parcel of ordinary shares is 242 for 72,546 shares,
based on IVE’s closing share price of $0.86, on 24 July 2020.
Twenty largest shareholders
Rank Name
1
2
3
4
5
6
7
8
8
9
10
11
12
13
14
15
16
17
18
19
20
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
CAXTON PRINT HOLDINGS PTY LTD*
CITICORP NOMINEES PTY LIMITED
STRATEGIC VALUE PTY LTD
NATIONAL NOMINEES LIMITED
RYLELAGE PTY LTD
MR STEPHEN CRAIG JERMYN
SCJ PTY LTD
TAVERNERS J PTY LTD
STRATEGIC VALUE PTY LIMITED
CAXTON PRINT HOLDINGS PTY LTD*
EXLDATA PTY LTD
BNP PARIBAS NOMINEES PTY LTD HUB24 CUSTODIAL SERV LTD
DOROTHY PRODUCTIONS PTY LTD
JOHN BARNES FOUNDATION LIMITED
MOKSA PTY LTD
BNP PARIBAS NOMS PTY LTD
UBS NOMINEES PTY LTD
TOGO JOST PTY LTD
LINDWAY INVESTMENTS PTY LIMITED
Number of
Shares
14,295,355
11,550,959
11,210,231
11,001,332
4,495,816
4,046,597
3,639,436
3,000,000
3,000,000
2,176,829
1,980,392
1,650,000
1,625,546
1,174,511
681,995
666,890
615,850
599,171
576,704
502,700
493,474
Total
78,983,788
Balance of register
69,223,497
Grand total
148,207,285
%
9.65
7.79
7.56
7.42
3.03
2.73
2.46
2.02
2.02
1.47
1.34
1.11
1.10
0.79
0.46
0.45
0.42
0.40
0.39
0.34
0.33
53.29
46.71
100.00
148,207,285
100.00
4,002
100.00
* As at the date of this Annual Report, Caxton Print Holdings Pty Ltd as trustee for the Selig Family Trust, holds a total of 12,860,231
Distribution of performance right holders and holdings
There are 1,335,244 unlisted performance share rights on issue that have been issued under an employee
share plan. These are held by 6 employees.
Performance
Share Rights
–
–
–
51,470
1,283,774
1,335,244
%
–
–
–
3.85
96.15
100.00
Number
of holders
–
–
–
1
5
6
%
–
–
–
16.67
83.33
100.00
Range
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and Over
Total
126
fully paid ordinary shares (8.68%)
On-Market Buy Back
There is no current on-market buy back.
Voting Rights
The voting rights attached to ordinary shares are set out below:
On a show of hands every member present at a meeting in person or by proxy shall have one vote, and upon a
poll, one vote for each fully paid share held.
Holders of performance rights do not have voting rights on the performance rights held by them.
Voluntary escrow
There were no ordinary shares held in a voluntary escrow arrangement as at 24 July 2020.
Stock Exchange Listing
IVE Group securities are only listed on the ASX.
127
IVE Group LimitedAnnual Report 2020
Corporate governance statement
The Board is responsible for the overall corporate
governance of IVE Group Limited, including adopting
appropriate policies and procedures designed to
ensure that the IVE Group is properly managed to
protect and enhance Shareholder interests.
The Board monitors the operational and financial
position and performance of IVE and oversees its
business strategy, including approving the strategic
goals of IVE. The Board is committed to maximising
performance, generating appropriate levels of
Shareholder value and financial return, and
sustaining the growth and success of IVE.
In conducting business with these objectives, the
Board is committed to ensuring that IVE is properly
managed to protect and enhance Shareholder
interests, and that IVE, its Directors, officers and
employees operate in an appropriate environment
of corporate governance. Accordingly, the Board
has created a framework for managing IVE,
including adopting relevant internal controls, risk
management processes and corporate governance
policies and practices, which it believes are
appropriate for IVE’s business and that are designed
to promote the responsible management and
conduct of IVE.
Details of IVE’s key governance policies and
the charters for the Board and each of its
committees are available on IVE’s website at
http://investors.ivegroup.com.au/Investor-
Centre/?page=corporate-governance.
The Corporate Governance Statement reports
against the 3rd edition of the ASX Corporate
Governance Council’s
Principles and Recommendations (ASX Principles)
and the practices detailed in the Corporate
Governance Statement are current as at 25 August
2020. It has been approved by the Board and is
available on the IVE website under Investors at
http://investors.ivegroup.com.au/investor-
centre/?page=corporate-governance. IVE
Group has undertaken a review of its corporate
governance policies, charters and practices to bring
the Company into compliance with the 4th edition
ASX Principles which will be reported against for the
first time in 2021.
128
IVE Group Limited www.ivegroup.com.au