ANNUAL REPORTJumbo Interactive Limited 2
JUMBO INTERACTIVE LTD ANNUAL REPORT 2017
JUMBO INTERACTIVE LTD ANNUAL REPORT 2017
3
With a stronger
alignment with Tatts,
Jumbo can push
ahead with its plans
for continued growth.
Table of Contents
4
6
8
10
12
18
20
22
35
36
42
43
44
46
47
79
80
84
86
Introduction
Highlights
Letter from the Chairman
Letter from the CEO
Review of Operations
Leadership Team
Financial Report
Directors’ Report
Auditor’s Independence Declaration
Corporate Governance Statement
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
Directors’ Declaration
Independent Auditor’s Report
Shareholder Information
Company Information
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JUMBO INTERACTIVE LTD ANNUAL REPORT 2017
Introduction
Jumbo has built an
industry-leading internet
lottery business that has
clearly hit the mark with a
younger tech-savvy consumer.
From the 5-star rated OzLotteries App to the innovative
social media campaigns, Jumbo has clearly been
able to deliver a customer experience that younger
demographics have been looking for. Lotteries have had
wide appeal for decades providing entertainment to
millions as well as raising valuable funds for worthwhile
causes. Jumbo focuses on bringing all the essential
elements of lotteries together with the latest Internet
technologies to create a sustainable business for the
long term.
The momentum that Jumbo has built over the
last decade is set to continue with new long term
agreements and a stronger alignment with Tatts, the
official lottery license holder in Australia. This sets the
stage for new possibilities for Jumbo with an expanded
product portfolio and a closer working relationship with
the lottery industry.
JUMBO INTERACTIVE LTD ANNUAL REPORT 2017
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6
JUMBO INTERACTIVE LTD ANNUAL REPORT 2017
Highlights
A 21% increase in Net Profit
After Tax was the result
of a greater focus on the
Australian business.
7 year Total Transaction Value
Number of large Jackpots
101
22
76
21
200
150
100
50
0
153
145
128
110
107
38
36
34
45
31
FY 11
FY 12
FY 13
FY 14
FY 15
FY 16
FY 17
JUMBO INTERACTIVE LTD ANNUAL REPORT 2017
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Revenue
(continuing operations)
12 MONTHS TO 30 JUNE 2017
$32.4m
5% decrease
over the previous year
Number of
Large Jackpots
OZLOTTO/ POWERBALL JACKPOTS OF
$15MILLION OR MORE, 12 MONTHS TO 30 JUNE 2017
31
31% decrease
over 12 months
Net Profit After Tax
(total operations)
12 MONTHS TO 30 JUNE 2017
Net Profit After Tax
(continuing operations)
12 MONTHS TO 30 JUNE 2017
$5.64m
21% increase
over 12 months
$7.60m
4% increase
over 12 months
Dividends Declared
FULLY FRANKED DIVIDENDS FOR THE
12 MONTHS TO 30 JUNE 2017
8.5c
21% increase
over the previous year
Share Price
AS AT 30 JUNE 2017
$2.66
105% increase
over 12 months
Letter from the ChairmanDear ShareholderThe financial year, ended 30th June 2017, focused locally both on the growth of the lottery business and expanding the Australian Charity lottery supply. This has proved to be rewarding with the growth of sales (on a like-for-like basis) in both sectors, despite a year of lower lottery jackpots. This growth has once again allowed your Board to revise its dividend policy.In addition, Management successfully concluded a further five year contract with Tatts Lotteries with part of this agreement allowing Tatts to become a shareholder in the Company by issuing 15% of the issued capital to them and the grant of 3,474,492 options exercisable within twelve months of the date of issue. As a result of the increase in cash reserves, your Board agreed to distribute, by way of a special dividend, a further 15 cents per share to all shareholders. This I am pleased to say is the 18th dividend distributed to Shareholders since the dividend policy was first introduced.The net assets as at 30th June 2017 have increased to $42,900,000 hence the rationale to make a special dividend payment. However, the Company remains committed to explore growth opportunities to ensure the continued improvement in profit performance.In closing I would like to acknowledge that the year’s success of the Company would not have been possible if our staff, led by Mr. Mike Veverka, the founder and CEO, had not continued their dedication to their respective areas of expertise.I would like to thank the Board and our Management team for their ongoing dedication and to those shareholders who continue to support us and who are now seeing the results of this.I and the Board look forward to answering any questions you may have at our Annual General Meeting which is scheduled to be held on the 25th October 2017.Yours Truly David K Barwick Chairman8 JUMBO INTERACTIVE LTD ANNUAL REPORT 2017 JUMBO INTERACTIVE LTD ANNUAL REPORT 2017
9
Management
successfully
concluded a further
five year contract with
Tatts Lotteries with
part of this agreement
allowing Tatts to
become a shareholder
in the Company.
Letter from the CEOWith new long term agreements and a stronger alignment with Tatts, Jumbo can push ahead with its plans for continued growth. Jumbo has built up significant momentum by delivering exactly what the tech-savvy consumer is looking for. The new long term agreements with Tatts allows this momentum to continue and challenges the Jumbo team to think further into the future. Being awarded a 5 star rating for the OzLotteries App was a major achievement last year and now the challenge is to keep it. Financially we delivered a 21% increase in Net Profit After Tax to $5.64 million after it was decided to exit the German market. This business was contributing a loss of approximately $2 million per year with little hope of improvement. Refocusing attention onto the Australian business has come at the right time just as the new Tatts agreements have been finalised and the charity business is gaining momentum. The natural fluctuation in the number of major jackpots resulted in 2017 seeing a lower than normal number of jackpots $15 million and over. This 31% decline was the main reason for the 5% decline in ticket sales and revenue. However an analysis of sales at the same jackpot level shows a steady increase in ticket sales demonstrating sustainable growth. I wish to thank the entire talented Jumbo team for their dedication and look forward to the year ahead. Mike Veverka CEO and Founder10 JUMBO INTERACTIVE LTD ANNUAL REPORT 2017 JUMBO INTERACTIVE LTD ANNUAL REPORT 2017
11
With new long
term agreements
and a stronger
alignment with
Tatts, Jumbo
can push ahead
with its plans for
continued growth.
12
JUMBO INTERACTIVE LTD ANNUAL REPORT 2017
Reviewof Operations
JUMBO INTERACTIVE LTD ANNUAL REPORT 2017
13
Financial Performance
The random occurrence of major jackpots available to
making their mark. The number of Facebook followers
has increased again from 114,500 to 134,000 over the past
lottery players are an important driver of sales and FY17
year.
A fun and innovative “Lotto Face” campaign was run
on Instagram inviting players to post their “I just won the
lottery” face. This campaign brought in over 1,700 new
followers on Instagram. Twitter is currently being used for
timely jackpot promotions and lotto results and currently
has over 1,500 followers.
A majority of Jumbo’s customers interact with social
media through their mobile devices with double the
interactions through mobile versus desktop. This affirms
Jumbo’s efforts on continual improvements to the
OzLotteries app.
Charity Lotteries
To compliment the well known national lotteries available
on OzLotteries, Jumbo has added Charity Lotteries that
have significant customer appeal. Most importantly these
extra sales do not come at the expense of national lottery
sales as customers are choosing to add extra games
while purchasing the national games. This is evident in the
average customer annual spend KPI which has increased
from $322 to $348 over the past 12 months.
Sales of Charity lotteries have more than tripled to $3.8
million over the past 12 months due to better product
integration into the website and app as well as portfolio
expansion. The Mater Prize Home has been added in the
past year bringing the total number of charities to five. The
games now include the Mater Prize Home, Surf Life Saving
Lotteries, Endeavour Foundation, Act for Kids and the
Prince of Wales Hospital Foundation.
Interestingly, Charity lotteries have been most successful
with the younger demographic enhancing OzLotteries
reputation as the lottery app for the younger generation.
Germany Closure
During FY17, Jumbo closed the loss-making German
business to focus on the Australian business. The German
business contributed an after tax loss of $2.0 million to the
FY17 results. No significant expenses are expected in the
year ahead.
The international lottery industry still has significant
growth potential however Jumbo is taking a more
conservative approach to evaluating those opportunities.
saw 31% fewer major Jackpots than the previous year.
This resulted in only a 5% decline in ticket sales (TTV)
to $145 million and revenue to $32.4 million, however
Net Profit After Tax increased 21% to $5.64 million. This
resulted in only a 5% decline in ticket sales (TTV) to $145
million and revenue to $32.4 million, however Net Profit
After Tax increased 21% to $5.64 million primarily due
to the closure of the loss-making German business.
Excluding the effects of this closure, the Net Profit After
Tax from continuing operations increased 4% to $7.6
million demonstrating growth despite lower Jackpots.
EBITDA (earnings before interest, tax, depreciation and
amortisation) also increased 3% to $14.1 million for the
same reason.
Continued Mobile App and Social Media
Improvements
With customer behaviour continuing to trend towards
mobile, efforts were made to continually improve the
OzLotteries App. The current version of the app enjoys a 5
star rating by iTunes, with glowing customer feedback.
All products including the new Charity games are now
available for purchase natively in the App. In previous
years some games where sold via a “frame” method which
was quick to implement but slowed down the experience.
Customers are regularly interviewed for feedback on
their purchase experience and the feedback is used to
improve the app. As a result of this process, the purchase
conversion rate has increased 20% over the year and the
iOS App Store Rating has increased from 1.9 to 5 stars.
Jumbo is also driving social media to enhance the overall
players experience as well as building the OzLotteries
brand. Facebook continues to be the dominate social
media platform however Instagram and Twitter are also
Extended contracts with the
Tatts Group - New Possibilities
In May 2017, Jumbo expanded its decade-long commercial
relationship with Tatts Group Limited (ASX:TTS), with a long
term extension and expansion of its existing lottery reseller
agreements. The relationship was further strengthened by
Tatts subscribing for a substantial shareholding in Jumbo.
This sets the stage for new possibilities for Jumbo with
an expanded product portfolio and a closer working
relationship with the official Australian lottery license
holder. Jumbo has begun the process of including the
popular “Set for Life” game in its game portfolio available
to players.
All current reseller agreements (NSW, Victoria, South
Australia, Northern Territory and Fiji) have been extended
for five years and then continue on a 12-month rolling basis
beyond 2022.
Jumbo growth at 17% CAGR over 7 yearsJumbo’s flagship website www.ozlotteries.com has delivered a consistent 17% compound annual growth rate over 7 years, absorbing the natural fluctuations in jackpots. This has been underpinned by a growing customer database and a trend in consumer behaviour towards mobile purchases. To ensure sales are not on a declining trend, sales are analysed on a like-for-like basis at specific jackpot levels over a number of years. This analysis shows a steady increase in sales further confirming the general growth trend.TTV$OZ Lotto TTV per $15m DrawFY14FY15FY16FY17TTV$Powerball TTV per $15m DrawFY14FY15FY16FY17TTV$TTV from Jackpots less than $15m DrawFY14FY15FY16FY17FY 2016FY 2017HY1HY2HY1HY2TTV ($ million)79.972.669.375.2Large Jackpots24211516This trend in steadily growing sales can also be seen when comparing half years as summarised in the following table.14 JUMBO INTERACTIVE LTD ANNUAL REPORT 2017 JUMBO INTERACTIVE LTD ANNUAL REPORT 2017
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6 New
Millionaires
OzLotteries customers were also big winners last
year with 6 new millionaires including one very happy
customer who won $20 million from their Autoplay entry.
In total, 209,786 customers won $76 million playing
through OzLotteries.
Autoplay the key to a $20 million win!
5 years ago, an OzLotteries customer set up Autoplay to
keep playing his favourite numbers each week. Then he
forgot about it, until one day in August 2016, he received
a call from Mike Veverka, Jumbo’s CEO. Mike told him he
had just won $20 million in OzLotto..
At first the bemused customer thought it was a prank
because he didn’t remember buying a ticket. However
Mike reminded him that the winning game was actually
an Autoplay he set up 5 years earlier. At that point the
penny really did drop for one very excited OzLotteries
customer!
Top 10 Winners
1
$20 million
from OZ Lotto, August 2016.
6 $1.0 million
from Wednesday Lotto, May 2017.
2 $10.1 million
from Powerball, March 2017.
7 $674,350
from Saturday Lotto, November 2016.
3 $2.6 million
from Saturday Lotto, May 2017.
8 $519,011
from Saturday Lotto, March 2017.
4 $1.3 million
from Saturday Lotto, July 2016.
9 $271,813
from Saturday Lotto, April 2017.
5 $1.0 million
from Monday Lotto, May 2017.
10 $200,000
from Mega Jackpot Lottery, October 2016.
$10,100,000.00$2,600,000.00$20,000,000.00 16
JUMBO INTERACTIVE LTD ANNUAL REPORT 2017
Mobile App
Improvements
With customer behaviour continuing to
method which was quick to implement
trend towards mobile, efforts were made
but slowed down the experience.
to continually improve the OzLotteries
App. The current version of the app
enjoys a 5 star rating by iTunes, with
glowing customer feedback.
Customers are regularly interviewed for
feedback on their purchase experience,
and the feedback is used to improve
the app. As a result of this process, the
All products, including the new Charity
purchase conversion rate has increased
games, are now available for purchase
20% over the year and the iOS App Store
natively in the App. In previous years,
Rating has increased from 1.9 to 5 stars.
some games where sold via a “frame”
Social Media
Improvements
Jumbo is also driving social media to
A majority of Jumbo’s customers
enhance the overall player experience
interact with social media through
as well as building the OzLotteries
their mobile devices with double
brand. Facebook continues to be the
the interactions through mobile
dominant social media platform, with
versus desktop. This
Instagram and Twitter also making
affirms Jumbo’s
their mark. The number of Facebook
efforts on continual
followers has again increased from
improvements to the
114,500 to 134,000 over the past year.
OzLotteries app.
A fun and innovative “Lotto Face”
campaign was run on Instagram
inviting players to post their “I just
won the lottery” face. This campaign
brought in over 1,700 new followers on
Instagram. Twitter is currently being
used for timely jackpot promotions
and lotto results and currently has over
1,500 followers.
135,659
Total Page Likes
JUMBO INTERACTIVE LTD ANNUAL REPORT 2017
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Key Performance
Indicators
CPL—
Cost Per Lead
Average Spend per
Online Customer
$17.09
Up from $15.13 due to fewer jackpots.
$348.40
Up from $335.27 due to the product mix
between the 3 main products as well as a
positive contribution from charity games.
New Online
Accounts
161kDown from 206K due to fewer jackpots
Active Online
Customers
354k
Down from 376K due to fewer jackpots
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JUMBO INTERACTIVE LTD ANNUAL REPORT 2017
Leadership
Team
Jumbo has a stable
leadership team that
has amassed unique
digital experience
in the world lottery
industry.
Mike Veverka
David Barwick
Chief Executive Officer & Executive
Chairman and Non-Executive Director
Director (BEng (Hons))
David Barwick has over 40 years experience
Mike Veverka is CEO and founder of Jumbo
in the management and administration
Interactive. He has a proven track record
of publicly listed companies in Australia
in business and computing, establishing
and North America. During this period
several successful startups to meet new
David has held the positions of Chairman,
consumer demands for online products.
Managing Director or President of over 30
His entrepreneurial flair and ambition for
public companies with strengths in strategic
innovation were displayed at the age of
planning, restructuring and financing
fifteen when he created and sold his first
entities.
software package to Hewlett Packard. Mike
worked as a design engineer and computer
programmer before founding ‘Squirrel
Software Technologies’ that provided
some of Australia’s first internet services
and e-commerce software. As founder
and leader, Mike plays a pivotal role in the
growth strategy, innovation and promotion
of Jumbo.
JUMBO INTERACTIVE LTD ANNUAL REPORT 2017
19
an Associate Diploma in Banking, and
successful Australian OzLotteries.com
a Graduate Diploma of Advanced
website to other markets and ensuring
Corporate Governance. He is a Fellow
capabilities for customer purchases on any
of the Governance Institite of Australia
device demands that websites continually
and a Fellow of the Institute of Chartered
evolve as new mobile and computer
Secretaries and Administrators (UK). David
products are released to market with
brings a wealth of commercial expertise to
unprecedented frequency.
Jumbo Interactive as Chief Financial Officer.
Bill Lyne
Non-Executive Director and Company
Secretary (BCom, CA, FCIS, FGIA, FAICD,
FFIN)
Bill Lyne is the Principal of Australian
Company Secretary Service that provides
secretarial, corporate compliance and
governance services to public company
clients in a wide range of industries. Prior to
Brad Board
this, Bill was Company Secretary and CFO
of First Australian Building Society, having
previously spent many years in credit and
lending positions in merchant banking.
Bill holds a Bachelor of Commerce and
is a Chartered Accountant. He is a Fellow
of the Institute of Chartered Secretaries &
Administrators (UK), Governance Institute
of Australia, and the Australian Institute of
Company Directors. He is also a fellow of
and has life membership with the Financial
Services Institute of Australasia.
Chief Operating Officer
Having joined Jumbo in 2001 Brad has
been actively involved in Jumbo’s evolution
and growth into the leading digital lottery
business it is today. Brad has significant
lottery and ecommerce experience and
ensures that the brand, digital experiences
and service offerings provided by Jumbo
effectively engage and satisfy it’s
2,000,000+ customers in Australia and
Internationally. In addition to responsibility
for Jumbo’s marketing and product strategy
he ensures various departments and
subsidiaries are interacting efficiently with
each other and in accordance with Jumbo’s
overall strategic goals.
Brian J. Roberts
President, North America (DipEC Cert(OM))
Brian has extensive experience in lotteries
and gaming, software development and
production and is a recognised creative
innovator. His experience in the lottery and
gaming industry spans over 40 years with
senior roles including Director of Creative
Content Development at GTECH, COO
and Senior Vice President of Marketing at
On-Point Technology Systems, President
of LotoMark and Vice President of Lottery
Operations at International Totalizator
and Lottery Systems. Brian has developed,
implemented and managed gaming
systems across many international
jurisdictions. He holds over twenty issued
and pending gaming industry USA patents.
David Todd
Chief Financial Officer (MBA,
GradDipACG, CAIB(SA), BCom, FGIA, FCIS)
David has extensive capabilities in business
administration with strengths in credit risk
Xavier Bergade
management and international business.
His experience in financial management
spans 25 years in the banking industries of
South Africa, New Zealand and Australia,
and small cap and SME environments.
David holds a Bachelor of Commerce,
a Master of Business Administration,
Chief Technology Officer
As Chief Technology Officer, Xavier ensures
that Jumbo’s technology services are
continually improving and innovating while
remaining secure for customer transactions.
He is responsible for the adaptation of the
20
JUMBO INTERACTIVE LTD ANNUAL REPORT 2017
Financial
Report
JUMBO INTERACTIVE LTD ANNUAL REPORT 2017
21
FY 2017 in Review
Financial Headlines
$’000
Continuing operations
TTV
Revenue
Revenue margin
NPBT
NPAT
Discontinued operations
NPAT – overall operations
EBITDA
EBIT
Cash at bank
Net assets
Net tangible assets
Share price at year end (cps)
Dividends paid per share (cps)
Total shareholder return (%)
Earnings Per Share (cps)
Return of capital employed (%) – overall operations
Shares on issue (million)
Market capitalisation (million)
EBIT margin (%)
FY2017
145,322
32,429
22.3%
11,068
7,597
(1,957)
5,640
14,094
10,463
43,320
42,900
30,484
266.0
8.5
111.2%
12.6
13.1%
50.7
134.8
32.3%
FY2016
153,302
34,083
22.2%
10,717
7,323
(2,653)
4,670
13,717
10,073
25,306
24,696
12,949
130.0
3.5
57.1%
10.6
18.9%
44.1
57.3
29.6%
Variance %
(5.2%)
(4.9%)
0.1ppt
3.3%
3.7%
(26.3)
20.8%
2.7%
3.9%
69.5%
73.7%
135.4%
104.6%
142.9%
54.1ppt
18.9%
(5.8ppt)
15.0%
135.3%
2.7ppt
Highlights
The lower large jackpot activity has seen a reduction in Total
FY2018 outlook
— TTV based on current market conditions is higher growth 10
Transaction Value and Revenue, but a continued focus on costs
to 15% vs FY2016 with ‘normalisation’ of jackpot activity for
has resulted in an increase in Net Profit After Tax for Continuing
traditional draw lotteries and growth from the burgeoning charity
operations. Discontinuing the operation in Germany contributed to
lotteries
the increase in Net Profit After Tax of Overall operations.
— Revenue margin expected to be unchanged vs FY2016 –
approximately 22.0 to 23.0%
— EBIT margin target 33.0% driven by continued improvement in
efficiencies and focus on cost management
5 year Total Transaction Value and average large jackpots
200
150
100
s
n
o
i
l
l
i
m
$
50
0
109.8
106.9
153.3
145.3
128.5
29.2
25.7
25.3
28.8
24.2
FY13
FY14
FY15
FY16
FY17
— Revenue $32.4 million – 5% decrease
— Net Profit After Tax – Continuing operations $7.597 million –
4%increase
— Net Profit After Tax – Overall operations $5.640 million – 21%
increase
— Dividends paid 8.50 cents (fully franked) – 143% increase
— Share Price $2.66 – 105% increase
— Total Shareholder Return 111.2% -54.1ppt increase
22
JUMBO INTERACTIVE LTD ANNUAL REPORT 2017
Directors’ Report
The Directors of Jumbo Interactive Limited (Company), present
Australian Listed Company Directorships held in the past three
years: None.
their report on the consolidated entity (Group), consisting of Jumbo
Interactive Limited and the entities it controlled at the end of, and
Interest in shares and options: 9,601,027 ordinary shares and
400,000 options over ordinary shares in Jumbo Interactive Limited.
during, the financial year ended 30 June 2017.
Board of Directors
The following persons were Directors of the Company during the
Bill Lyne
Experience: Appointed as a board member on 30 October 2009.
Bill Lyne is the principal of Australian Company Secretary Service,
whole of the financial year and up to the date of this report, unless
providing company secretarial, compliance and governance
otherwise stated:
David K Barwick
Chairman, Independent Non-Executive Director
Mike Veverka
Managing Director and Chief Executive Officer
Bill Lyne
Independent Non-Executive Director
services to public companies. He is currently company secretary of
four other publicly listed companies, is a former secretary and/or
director of a number of other listed companies, and has a wealth of
experience in corporate governance principles and practices.
Bill is a fellow of Governance Institute Australia and has been a
presenter at GIA courses in company secretarial practice.
Qualifications: Bachelor of Commerce; Chartered Accountant.
Details of the experience, qualification and special responsibilities,
Special responsibilities: Chair of the Audit and Risk Management
Committee; member of the Nomination and Remuneration
and other Directorships of listed companies, in respect of each of
Committee; and Company Secretary.
the Directors as at the date of this Directors’ Report are set out in the
pages as follows:
David K Barwick
Experience: Appointed as a Board member on 30 August 2006 and
Chairman on 7 November 2007. David Barwick is an accountant
by profession with over 40 years experience in the management
and administration of publicly listed companies both in Australia
and North America. During this period David has held the position
of Chairman, Managing Director or President of over 30 public
companies covering a broad range of activities.
Australian Listed Company Directorships held in the past three
years: None.
Interest in shares and options: None.
Company Secretary
Mr Bill Lyne was appointed Company Secretary 14 October 2006.
Refer to the information on Directors for details of experience and
qualifications.
Special responsibilities: Chairman (Non-Executive); Chair of the
Nomination and Remuneration Committee; and member of the
Principal Activities
The principal activity of the Group during the financial year was the
Audit and Risk Management Committee.
retail of lottery tickets through the internet and mobile devices sold
Australian Listed Company Directorships held in the past three
years: Metallica Minerals Limited – Non-Executive Director and
Chairman (from 11 March 2004 to 30 June 2015),
both in Australia and eligible overseas jurisdictions.
There were no significant changes in the nature of the Group’s
principal activities that occurred during the financial year.
Interest in shares and options: None.
Mike Veverka
Experience: Mike Veverka has been Chief Executive Officer and
Director of Jumbo Interactive Limited since the restructuring of
the Company 8 September 1999. Mike was instrumental in the
development of the e-commerce software that is the foundation
to the various Jumbo operations. Mike was the original founder of
subsidiary Benon Technologies Pty Ltd in 1995 when development
of the software began.
Mike also established a leading Internet Service Provider in
Queensland which operated successfully for three years before
being sold. Mike is regarded as a pioneer in the Australian internet
industry with many successful internet endeavours to his name. Mike
graduated with an Honours degree in engineering in 1987.
Qualifications: Bachelor of Engineering (Hons).
Special responsibilities: Chief Executive Officer.
Review of operations
A review of the Group’s operations for the financial year and the
results of those operations, are contained in the Operating and
Financial Review as set out on pages 26 to 28 of this report.
Dividends
A fully franked final dividend of 5.0 cents per fully paid ordinary
share for the year ended 30 June 2016 was paid on 23 September
2016, and a fully franked interim dividend of 3.5 cents per fully paid
ordinary share for the year ended 30 June 2017 was paid on 24
March 2017.
A fully franked special dividend of 15.0 cents per fully paid ordinary
was paid on 8 August 2017.
On 24 August 2017, the Directors have declared to pay a fully franked
final dividend for the financial year ended 30 June 2017 of 5.0 cents
per fully paid ordinary share (2016: 5.0 cents per fully paid ordinary
share), to be paid on 24 September 2017.
JUMBO INTERACTIVE LTD ANNUAL REPORT 2017
23
Further details of dividends provided for or paid are set out in note 14
— Victoria (Fij)i - five years to 1 May 2022 and continuing thereafter
to the Consolidated Financial Statements on page 63.
with termination by either party giving 12 months written notice
State of Affairs
Changes in the state of affairs is set out on page 28 and forms part
of the Directors’ Report for the financial year ended 30 June 2017.
Events since the end of the financial year
Apart from the (i) issue if 3,474.493 options to Tatts, (ii) payment
of a fully franked special dividend of 15 cents per ordinary share
($7,691,140), (iii) exercise of 600,000 options ($1,050,000), and (iv)
final dividend declared, as at the date of this Directors’ Report, the
directors are not aware of any matter or circumstance that has
The Company’s long, strong relationship with Tatts has been
strengthened with the investment by Tatts in the Company, and the
Company can now confidently implement its medium to long term
plans to grow the business in Australia. The domestic internet lottery
market is estimated to be approximately 14% of the total domestic
lottery market compared to overseas lottery markets which have
recorded strong growth such as the more mature markets of UK and
Finland where internet market shares are estimated to have reached
approximately 21% and 48% respectively. Based on this, there is still
good growth potential in the domestic market.
arisen that has significantly affected, or may significantly affect, the
The Company started selling Charity lottery tickets in July 2015
operations of the Company in the financial years subsequent to 30
and has increased the number of charities from four to five during
June 2017.
the year, and sales increased by 230%. This initiative is expected to
Likely developments, key business strategies and future
prospects
Following the renewal of the lottery agreements with Tatts
and the investment by Tatts in the Company in May 2017, and
discontinuation of the Germany operation in March 2017, the
Company is well placed to concentrate on and grow its core
domestic lottery market in Australia while respecting responsible
gaming commitments and the needs of all industry stakeholders,
including other lottery channels.
show good growth in FY2018.
Operations in Germany were discontinued in March 2017 due to
adverse market conditions, and the subsequent ceasing of the
losses will have a positive impact on the Company’s profits in future.
Investment in the Company’s core intellectual property will continue
for FY2018 with continuing benefits expected in future years. These
new products and technologies are designed to take advantage
of the trend towards social media and interactive gaming which is
expected to have the Company well placed in the lottery market.
The following lottery agreements are held with the Tatts Group:
— Victoria - five years to 1 May 2022 and continuing thereafter with
Environmental regulation
The Group’s operations are not regulated by any significant
termination by either party giving 12 months written notice;
environmental regulation under a law of the Commonwealth or of a
State or Territory.
— New South Wales - five years to 1 May 2022 and continuing
thereafter with termination by either party giving 12 months
written notice
— South Australia - five years to 1 May 2022 and continuing
thereafter with termination by either party giving 12 months
written notice:
— Northern Territory - five years to 1 May 2022 and continuing
thereafter with termination by either party giving 12 months
written notice; and
Directors’ meetings
The number of meetings of the Board of Directors (including board
committees) held during the year ended 30 June 2017 and the
number of meetings attended by each Director is set out in the table
below:
Meetings table
Board
Audit and Risk Management Committee
Nomination and Remuneration Committee
Director
Eligible to attend
Attended
Eligible to attend
Attended
Eligible to attend
Attended
David Barwick
Mike Veverka
Bill Lyne
15
15
15
15
15
15
8
-
8
8
-
8
3
-
3
3
-
3
24
JUMBO INTERACTIVE LTD ANNUAL REPORT 2017
Share options
Unissued ordinary shares of the Company under options at the date
Non-audit services
During the financial year, the Company’s auditor BDO Audit Pty Ltd,
of this report are as follows:
or their related practices (herein also referred to BDO), performed
Exercise price
Number
other services in addition to its audit responsibilities.
Date options
granted
Expiry date
of shares
under option
3 September 2013
3 September 2018
6 November 2013
6 November 2018
18 November 2015
18 November 2020
2 February 2017
2 February 2022
13 July 2017
13 July 2018
$4.00
$4.00
$1.75
$2.25
$2.37
1,400,000
400,000
1,500,000
200,000
3,474,492
6,974,492
On the advice of the Audit and Risk Management Committee, the
Directors are satisfied that the provision of non-audit services,
during the year, by the auditor (or by another person or firm on
behalf of the auditor), is compatible with the general standard of
independence for auditors imposed by the Corporations Act 2001.
On the advice of the Audit and Risk Management Committee,
the Directors are satisfied that the provision of non-audit services
by the auditor, as set out above, did not compromise the auditor
independence requirements of the Corporations Act 2001 for the
The holders of these options do not have any rights under the
following reasons:
options to participate in any share issue of the Company or of any
other entity.
— all non-audit services have been reviewed by the Audit and Risk
Management Committee to ensure that they do not impact the
During or since the financial year ended 30 June 2017, the following
integrity and objectivity of the auditor; and
ordinary shares of Jumbo Interactive Limited were issued on the
— none of the non-audit services undermine the general principles
exercise of options granted.
relating to auditor independence as set out in APES 110 Code of
Date options granted
Issue price of share
shares issued
18 November 2015
14 January 2016
$1.75
$1.75
100,000
500,000
Details of the amounts paid to BDO for non-audit services
throughout the year are set out below:
Number of
Ethics for Professional Accountants.
No amounts are unpaid on these shares.
Consolidated
2017
$
2016
$
During or since the financial year ended 30 June 2017, no options
Taxation services
were granted by Jumbo Interactive Limited to Directors and key
management personnel, including the five most highly remunerated
officers, of the Group as part of their remuneration.
Tax compliance services - tax returns
40,000
53,377
Transfer pricing
Other tax advice
-
-
22,000
3,690
On 2 February 2017, the following options were issued to a contractor
Total taxation services
40,000
79,067
based in Australia as payment for services being provided (see note
24 for details):
Name
Roland Fuhrmann
Number of options
Number of ordinary
granted
shares under option
Total other services
Other services
Accounting advice
Accounting services
2,800
6,000
8,800
2,535
20,000
22,535
200,000
200,000
200,000
200,000
Total fees for non-audit services
48,800
103,602
Indemnifying officers or auditor
During the financial year, the Company paid a premium in respect
of a contract insuring directors, secretaries and executive officers of
the Company and its controlled entities against a liability incurred
as director, secretary or executive officer to the extent permitted
by the Corporations Act 2001. The contract of insurance prohibits
disclosure of the nature of the liability and the amount of the
premium.
The Company has not otherwise, during or since the end of the
financial year, except to the extent permitted by law, indemnified
CEO and CFO declaration
The Chief Executive Officer (CEO) and Chief Financial Officer (CFO)
have provided a written declaration to the Board in accordance with
section 295A of the Corporations Act 2001.
With regards to the financial records and systems of risk
management and internal compliance in this written declaration,
the Board received assurance from the CEO and CFO that the
declaration was founded on a sound system of risk management
and internal control, and that the system was operating effectively in
all material respects in relation to the reporting of financial risks.
or agreed to indemnify an officer of the Company or any of its
controlled entities against a liability incurred as such an officer.
Proceedings against the Company
No person has applied to the Court under section 237 of
No indemnity has been provided to, or insurance paid on behalf of,
the auditor of the Group.
the Corporations Act 2001 for leave to bring proceedings on behalf
of the Company, or to intervene in any proceedings to which the
Company is a party, for the purpose of taking responsibility on behalf of the Company for all or part of those proceedings.No proceedings have been brought or intervened in on behalf of the Company with leave of the Court under section 237 of the Corporations Act 2001.Remuneration ReportThe Remuneration Report is set out on pages 29 to 34, and forms part of the Directors’ Report for the financial year ended 30 June 2017.Rounding of amountsThe company satisfies the requirements of ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191 issued by the Australian Securities and Investments Commission in relation to rounding of amounts in the directors’ report and the financial statements to the nearest thousand dollars. Amounts have been rounded off in the directors’ report and financial statements in accordance with that Legislative Instrument.Auditor’s Independence DeclarationA copy of the Auditor’s Independence Declaration, as required under section 307C of the Corporations Act 2001, is set out on page 35.This Directors’ Report is made in accordance with a resolution of the Directors of the Company. David K Barwick Chairman Brisbane 24 August 2017JUMBO INTERACTIVE LTD ANNUAL REPORT 2017 25 26
JUMBO INTERACTIVE LTD ANNUAL REPORT 2017
Operating and Financial Review
Consolidated results of continuing operations
The Company reports revenue on a net revenue inflow basis where it considers that it acts more as an Agent than as a Principal such as with
the sale of lottery tickets. The gross amount received for the sale of goods and rendering of services is advised as Total Transaction Value
(“TTV”) for information purposes. Refer to note 2 for details.
Continuing operations
TTV
Revenue
Cost of sales
Gross profit
Other income
Expenses
NPBT
Income tax Expense
NPAT continuing operations
Discontinued operations
NPAT overall operations
EBITDA
EBIT
FY2017
145,322
32,429
(2,465)
29,964
1,064
(19,960)
11,068
(3,471)
7,597
(1,957)
5,640
14,094
10,463
FY2016
153,302
34,083
(2,803)
31,280
1,197
(21,760)
10,717
(3,394)
7,323
(2,653)
4,670
13,717
10,073
Variance %
(5.2%)
(4.9%)
(12.1%)
(4.2%)
(11.1%)
(8.3%)
3.3%
2.3%
3.7%
(26.3%)
20.8%
2.7%
3.9%
Although there was a decrease in TTV and Revenue due mainly to
through its marketing activities and a lower proportion through
the lower level of large jackpot activity, the Company was successful
affiliates - the margin decreased by 0.1ppt to 1.7% from 1.8%.
in increasing Profit over the same period last year. Large jackpot
activity is an important driver of sales and can randomly fluctuate
over time. During the financial year, the number of large jackpots
was 31 (2016:45) and aggregate value $750 million (2016: $1,295
million). This is 31% lower in number and 42% lower in aggregate
value compared to the previous period. With ongoing losses in
Germany due to unfavourable market conditions, the business was
scaled down in November 2016 and subsequently discontinued in
March 2017 (see note 6 for details). The overall increase in net profit
after tax resulted from (i) a focus on the management of costs and (ii)
discontinuing the operation in Germany.
The Company continues to invest in the three main pillars that
support the ongoing growth of the Company with $4,448,000 (2016:
$4,795,000) on its proprietary software platform (intangible assets),
$3,566,000 (2016: $4,486,000) in marketing activities primarily to
acquire new and retain existing customers, and $7,178,000 (2016:
$6,972,000) on employees who provide the software development
and marketing skills, customer support services, and management.
Comparative analysis
Compared to FY2016:
TTV decreased $7,980,000 or 5.2%, principally due to:
— $7,980,000 or 5.2% decrease in Australia Lotteries mainly as a
result of decreased large jackpot activity.
Revenue decreased $1,654,000 or 4.9% due mainly to:
— $1,653,000 or 4.9% decrease in Australia Lotteries as a result of
the decreased TTV. The 0.30ppt lower decrease compare to the
TTV decrease is due to an edge higher margin of 22.3% (2016:
22.2%) which is affected by product mix.
Cost of sales decreased by $338,000 or 12.1% mainly due to
— a higher proportion of the TTV for Australia Lotteries being
Other income, being mainly interest on cash at bank, decreased by
$133,000 or 11.1% largely as a result of:
— $38,000 or 6.0% decrease in interest on cash for Australia
Lotteries through lower average interest rates; and
— $95,000 or 48.5% decrease in other income mainly from a
decrease in expense recoveries.
NPBT of continuing operations increased $351,000 or 3.3% to
$11,068,000, principally due to:
— $27,000 or 0.2% decrease in Australia Lotteries profits due
to decreased TTV and Revenue and containing costs which
decreased by 7.3%;
— an increase of $14,000 or 3.6% in All Other Segment profits from
decreased expenses; and
— $364,000 or 17.8% decrease in Corporate expenses mainly as
a result of no impairment to investments or share of associate
company losses.
Australia Lotteries NPBT decreased 0.2% or $27,000 due to:
— decreased TTV by 5.2% or $7,980,000 and Revenue and other
income by 5.1% or $1,745,000 resulting mainly from decreased
large jackpot activity;
— reduced cost of sales by 12.1% or $338,000; and
— reduced costs by 7.3% or $1,380,000 largely due to lower
marketing expenses $887,000 and merchant fees $246,000
resulting from lower large jackpot activity.
With no meaningful opportunities foreseeable in Mexico, activity
was minimal during the financial year and the NLBT of $32,000 for
FY2017 (2016: NLBT $45,000) is included in the Australia Lotteries
segment.
JUMBO INTERACTIVE LTD ANNUAL REPORT 2017
27
All Other Segments NPBT increased 3.6% or $14,000 due to:
spent by active online customers divided by the number of active
— reduced costs by 3.3% or $15,000
online customers in a given period.
The number of large jackpots is a significant driver of sales. The
The following table summarizes the Marketing KPI’s:
sales trend over the last three financial year periods in the context of
such jackpots in Australia is summarised in the following table:
www.ozlotteries.com and mobile apps
FY 2017
FY 2016
Number of new online accounts
160,698
206,858
Large jackpot activity
FY 2017
FY 2016
FY 2015
CPL
$17.09
$15.13
TTV continuing operations
$145.3 m
$153.3 m
$128.5 m
Number of active online customers
354,113
375,988
Reported Revenue continuing
operations
$32.4 m
$34.1 m
$29.1 m
Average spend per active online customer
$348.40
$335.27
OzLotto/Powerball
Number of jackpots1
31
45
34
active online customers are due mainly to the decrease in large
The 22.3% decrease in new online accounts and 5.8% decrease in
Average Div 1 jackpot1
$24.2 m
$28.8 m
$25.3 m
jackpot activity (31% decrease in number and 42% decrease in
Peak Div 1 jackpot2
$55 m
$70 m
$70 m
Aggregate Div 1 jackpots2
$750 m
$1.295 m
$860 m
1Ozlotto/Powerball Division 1 jackpots of $15 million or more
2during the financial year period
The lower level of large jackpot activity in the current financial year
has led to lower TTV and revenue. The focus on cost management
has resulted in a decrease in expenses of 8.3%. The combination
aggregate value). The 3.9% increase in average spend is largely
due to an increase in charity lottery sales and marketing initiatives.
The 13.0% increase in CPL is mostly due to trying other marketing
channels to acquire customers.
With no meaningful opportunities in the foreseeable future
in Mexico, activity is minimal and this segment ceased being
reportable during the 2016 financial year.
of lower TTV and revenue and cost reduction has resulted in an
The net loss before tax for Mexico was $32,000 (2016: loss $45,000)
increase in profits.
and is included in the Australia segment.
(b) All Other Segments
This segment consists of the sale of non-lottery products and
services. TTV and Revenue and other income decreased to
$843,000 (2016: $844,000) and net profit before tax increased to
$407,000 (2016: $392,000), due to lower expenses.
(c) Corporate
The net loss reduced 17.8% or $364,000 to NLBT $1,679,000 (2016:
NLBT $2,043,000) mainly due to no impairments in investments or
share of associate company losses.
Segment review
(a) Online Lottery Segment
With the operation in Germany discontinued March 2017, this
segment now consist of Australia and Mexico, and Mexico’s results
are included in those of Australia due to the minimal activity and no
meaningful opportunities in the foreseeable future.
Australia
Improvements continue to be made to online marketing and player
experience, but the lower level of large jackpot activity, which was
31% lower in number and 42% lower in aggregate value compared
to FY2016, contributed significantly to a 5.0% decrease in revenue to
$31,586,000 (2016: $33,239,000). Other income reduced by $92,000
or 9.7%. Net profit before tax decreased by 0.2% to $12,340,000
(2016: $12,367,000) due to the lower jackpot activity notwithstanding
a reduction in expenses of 7.3%.
TTV for the financial year decreased by 5.2% to $144,479,000 (2016:
$152,459,000),
Jumbo invests extensively in online marketing to grow and activate
the customer database whom transact via its website (www.
ozlotteries.com) and associated mobile apps (iOS & Android).
The following key performance indicators (KPIs) are used to track the
effectiveness of these campaigns:
1. CPL: Cost per Lead (new online accounts) defined as total cost
to acquire these new accounts divided by the number of new
accounts in a given period. New accounts potentially become
active customers after the account has been established.
2. Number of Active Online Customers defined as customers who
have spent money on tickets in a given period.
3. Average spend per active online customer defined as the total
28
JUMBO INTERACTIVE LTD ANNUAL REPORT 2017
(d) Summary of results
The annual comparison of results of the Company for the past five years is summarised below:
Revenue/profits ($’000)
TTV – continuing operations
Revenue – continuing operations
NPAT – overall operations
NPAT – continuing operations
NPAT – discontinued operations
EBITDA – continuing operations
EBIT – continuing operations
Assets
Cash at bank1 ($’000)
Net assets ($’000)
Net tangible assets ($’000)
Return on capital employed (%) – overall operations
Return on capital employed (%) – continuing operations
Return on capital employed (%) – discontinued opera-
tions
FY2017
145,322
32,429
5,640
7,597
(1,957)
14,094
10,463
FY2017
43,320
42,900
30,484
13.1
17.7
(4.6)
FY2016
153,302
34,083
4,670
7,323
(2,653)
13,717
10,073
FY2016
25,306
24,696
12,949
18.9
29.6
(10.7)
FY2015
128,464
29,076
663
4,274
(3,611)
8,314
5,433
FY2015
23,778
21,681
11,639
3.1
19.7
(16.6)
FY2014
106,872
24,792
3,251
4,366
(1,115)
7,720
5,498
FY2014
25,366
22,107
14,107
14.7
19.7
(5.0)
FY2013
109,766
25,871
3,458
3,464
(6)
7,367
5,085
FY2013
24,461
22,341
15,641
15.2
15.5
(0.3)
1includes cash held under term deposit and customer account balances payable (refer note 7: Cash and Cash Equivalents and Note 11: Trade and Other Payables
for details)
Share price
Earnings per share (cps)
Dividends paid per share (cps)
Share price at financial year end (cps)
Total shareholder return (%)
Shares on issue (million)
Market capitalisation ($’million)
FY2017
FY2016
FY2015
FY2014
FY2013
12.6
8.5
266.0
111.2
50.7
134.8
10.6
3.5
130.0
57.1
44.1
57.3
1.5
3.0
85.0
(32.3)
44.2
37.6
7.4
3.0
130.0
(11.3)
43.9
57.1
7.9
3.5
150.0
46.2
43.6
65.3
Financial position
The net assets of the Group have increased by $18,204,000 from 30
June 2016 to $42,900,000.
The Group’s working capital, being current assets less current
liabilities, has increased from $12,719,000 in 2016 to $30,444,000
in 2017 mainly as a result of increased cash and cash equivalents.
(a) Increase in contributed equity of $15,665,000 resulting from:
– Issue of 6,609,686 shares as a result of an issue to Tatts
at $2.37 per share (see note 15 for details)
$15,665,000 of this increase came from share issues.
(b) Increase in cash of $18,014,000 resulting from:
Non-current assets increased by $527,000 to $12,823,000 due
mainly to the investment in the new software code of www.
– Cash raised from the issue of contributed equity in (a)
ozlotteries.com.
above
– Other activities (see Cash Flow Statement for details)
The Directors believe the Group is in a sound financial position to
expand and grow its current operations.
Significant changes in State of Affairs
Significant changes in the state of affairs of the Group for the
financial year were as follows:
(c) Increase in non-current assets of $527,000 resulting from:
– investment in website development costs net of amor-
tisation (see note 10 for details)
– Changes in other non-current assets (see notes 4, 9, 10
and 22 for details)
$’000
15,665
15,665
$’000
15,665
2,349
18,014
$’000
891
(364)
527
JUMBO INTERACTIVE LTD ANNUAL REPORT 2017
29
Remuneration Report – audited
policy is designed to attract the highest calibre of KMP and reward
them for performance that results in long term growth in shareholder
wealth.
Page
Refer below for further details of performance based remuneration.
Contents
Section Contents
1
2
3
4
5
6
7
8
9
10
11
12
Remuneration Report Introduction
Remuneration Framework
Directors and Executives
Cash bonuses
Options and rights
Equity instruments issued to KMP
Options granted
Value of options
Equity instruments held by KMP
Loans to KMP
Other transactions and balances
Employment contracts
29
29
30
32
32
32
32
32
33
33
34
34
1. Remuneration Report Introduction
This report details the nature and amount of remuneration for each
Key Management Person (KMP), including each director of Jumbo
Interactive Limited.
The Remuneration Report for the year ended 30 June 2017 is set out
per the above Contents. The information in the Report has been
audited.
2. Policy Framework
The Remuneration Policy of Jumbo has been designed to align
director and KMP objectives with shareholder and business
objectives by providing a remuneration component and offering
specific incentives based on key performance areas affecting the
Group’s financial results. The Board believes the Remuneration
Policy to be appropriate and effective in its ability to attract and
retain the best directors and KMP to run and manage the Group, and
drives and reflects the creation of shareholder value.
The Board’s policy for determining the nature and amount of
remuneration for Board members and KMP of the Group is as
follows:
KMP are also entitled to participate in the employee share option
arrangements.
The directors and KMP receive a superannuation guarantee
contribution required by the government, which is currently 9.50%
and do not receive any other retirement benefits. Some individuals,
however, may choose to sacrifice part of their salary to increase
payments towards superannuation.
All remuneration paid to directors and KMP is valued at the cost to
the Company and expensed. Options are valued using the Black-
Scholes Binomial and Monte Carlo Simulation methodologies.
The mix of total potential remuneration for FY2017 for KMP is as
follows:
Fixed remuneration - 100%
Short term incentive cash bonuses - 60% to 66.66% of fixed
remuneration.
Fixed compensation
Fixed compensation consists of a base salary as well as employer
contributions to superannuation funds. Compensation levels are
reviewed annually by the Board through a process that considers
individual and overall performance of the Group, and with reference
to other KMP of comparable companies. If considered necessary,
external consultants provide analysis and advice to ensure the
directors’ and KMP compensation is competitive in the market
place. Refer to Note 8: Executive Service Agreements of this Report
for details of KMP fixed remuneration.
Performance linked compensation
Performance linked compensation includes short term incentives
only and is designed to reward KMP for superior performance. The
short term incentive (STI) is an “at risk” bonus provided in the form of
cash. The Group does not have long term incentives (LTI) such as the
issue of ordinary shares or the grant of options over ordinary shares
as a part of performance linked compensation due to the relatively
small market capitalisation of the Company, the concentrated
— The Remuneration Policy, setting the terms and conditions for
shareholding of the Company which could become further
the directors and KMP, was developed by the Nomination and
concentrated under such a scheme, and the desire of the Board to
Remuneration Committee and approved by the Board.
limit shareholding dilution to as low a level as possible. The Board
— All KMP receive a base salary (which is based on factors such as
did not exercise any discretion on the payment of bonuses.
individual performance skills, level of responsibilities, experience
and length of service), superannuation, options (by invitation) and
performance incentives.
Non-Executive Directors
The Board policy is to remunerate non-executive Directors at
— Performance incentives are generally only paid once
market rates for comparable companies for time, commitment
predetermined key performance measures have been met.
and responsibilities. The Board determines payments to the non-
— The Board reviews KMP packages annually by reference to the
executive Directors and reviews their remuneration annually based
Group’s performance, executive performance and comparable
on market practice, duties and accountability. Independent external
information from industry sectors and other listed companies in
advice is sought when required. The maximum aggregate amount
similar industries.
of fees that can be paid to non-executive directors is subject to
approval by shareholders at the Annual General Meeting. The
The performance of KMP is measured against criteria agreed
total compensation for all non-executive Directors, last voted upon
annually with each KMP and is based predominantly on the Group’s
by shareholders at the 2009 AGM, is not to exceed $250,000 per
profits and shareholder value. All bonuses and incentives must be
linked to predetermined performance criteria. Any changes must
annum and is set with reference to other non-executive Directors of
comparable companies. Fees for non-executive Directors are not
be justified by reference to measurable performance criteria. The
linked to the performance of the Group.
30
JUMBO INTERACTIVE LTD ANNUAL REPORT 2017
Fees are paid as follows and comprise cash and statutory
In determining whether or not a financial KPI has been achieved, the
superannuation:
Company bases the assessment on audited figures.
Chairman of the Board
Non-Executive Directors
Membership of Audit and Risk Manage-
ment Committee and Nomination and
Remuneration Committee
Chairman of Audit and Risk Management
Committee and Nomination and Remuner-
ation Committee
$84,315
$60,225
Performance conditions linked to remuneration
The Group seeks to emphasise reward incentives for results and
continued commitment to the Group through the provision of various
No additional fees
“at risk” cash bonus reward schemes.
No additional fees
Short term incentive bonus
Incentive payments are based on the achievement of financial
targets of profit, return on equity and total shareholder return and
non-financial targets of strategic benefit such as signing of lottery
Performance Based Remuneration
As part of the KMP remuneration package there is a performance
agreements both domestically and internationally. Payments
of incentives for the 2017 financial year result were based on the
based component, consisting of key performance indicators (KPI).
Group’s overall financial performance (with some KPIs being
The intention of this program is to facilitate goal congruence
achieved).
between executives with that of the business and shareholders.
These KPI are set annually, with a certain level of consultation with
KMP to ensure buy-in. The KPI target areas the Board believes
hold greater potential for group expansion and profit, covering
both financial and non-financial as well as short and long-term
Long term incentive bonus
Options are issued to KMP as part of their remuneration at the
discretion of the Board. These options are not issued based upon
performance criteria, but are issued to increase goal congruence
goals. The level set for each KPI is based on a combination of an
between KMP, directors and shareholders.
improvement on the previous year results, increased shareholder
value and market sector standards (Consumer Discretionary Sector
– ASX code: XDJ). Performance in relation to the KPI is assessed
annually by the Board, with bonuses being awarded depending
on the level of achievement compared to the KPI target. Following
the assessment, the KPIs are reviewed by the Board in light of the
Company Performance, Shareholder Wealth, and Directors’ and
KMP Remuneration
The following table shows the total transaction value and profit/
(loss) for the last five years for the listed entity, as well as the share
price at the end of the respective financial years. Analysis of the
desired and actual outcomes, and their efficacy is assessed in
figures show:
relation to the Group’s goals and shareholder wealth before the KPI
are set for the following year.
$’000
TTV continuing operations
Net profit after tax – continuing operations
Net profit after tax – overall operations
Share price at year end (cps)
Dividends paid per share (cps)
Total shareholder return (%)
Earnings per share (cps)
Return of capital employed (%)
Market capitalisation
FY 2017
FY 2016
FY 2015
FY 2014
FY 2013
$145,322
$153,302
$128,404
$106,872
$109,766
$7,597
$5,640
266.0
8.5
111.2%
12.6
13.1%
$7,323
$4,670
130.0
3.5
57.1%
10.6
18.9%
$5,433
$663
85.0
3.0
(32.3%)
1.5
3.1%
$5,498
$3,250
130.0
3.0
(11.3%)
7.4
14.7%
$5,085
$3,458
150.0
3.5
46.2%
7.9
15.2%
$134,793
$57,284
$37,572
$57,073
$65,329
3. Directors and Executives
Directors and executives
The KMP of the Group (being those whose remuneration must be
Name
Position held
disclosed in the Report) includes the Non-Executive Directors and
those Executives who have the authority and responsibility for
planning, directly and controlling the activities of Jumbo.
Non-Executive Directors
David K Barwick
The Non-Executive Directors and Executives that were the KMP of
the Group during the financial year are identified as follows:
Bill Lyne
Executive KMP
Mike Veverka
David Todd
Chairman, Independent Non-Executive
Director
Independent Non-Executive Director
Director and Chief Executive Officer
Chief Financial Officer
Xavier Bergade
Chief Technical Officer
Brad Board
Kate Waters
Chief Operating Officer
Head of HR and Lottery Opera-
tions-Australia (resigned 1 August 2016)
JUMBO INTERACTIVE LTD ANNUAL REPORT 2017
31
Details of Remuneration
Details of compensation of KMP of Jumbo are set out below:
2017
Short term employee benefits
benefits
Long term benefits
payments
Post
employment
Share based
Cash salary,
fees and an-
Non-mone-
Superannu-
Long service
Termination
Proportion
of remuner-
ation that is
performance
nual leave Cash bonus
tary benefits
ation
leave
benefits
Options1
Total
based
Directors
David Barwick
Mike Veverka
Bill Lyne
Bill Lyne – as Company
Secretary
Other KMP
David Todd
Xavier Bergade
Brad Board
Kate Waters2
$
77,000
$
-
488,069
173,580
55,000
24,100
237,507
237,507
237,507
21,382
-
-
86,790
86,790
73,920
-
Total KMP remuneration
1,378,072
421,080
$
$
7,315
25,000
5,225
-
29,949
29,949
28,726
9,706
$
-
6,835
-
-
3,795
3,795
3,795
$
-
-
-
-
-
-
-
$
-
44,277
-
-
$
84,315
737,761
60,225
24,100
20,421
20,421
20,421
378,462
378,462
364,369
233
174,538
756
206,615
%
-
23.5
-
-
22.9
22.9
20.3
-
135,870
18,453
174,538
106,296
2,234,309
1 includes share based payments over the remaining term on those options exercised, if any, during the financial year
2 Kate Waters ceased being a member of KMP 1 August 2016
2016
Short term employee benefits
benefits
Long term benefits
payments
Post
employment
Share based
Cash salary,
fees and an-
Non-mone-
Superannu-
Long service
Termination
Proportion
of remuner-
ation that is
performance
nual leave Cash bonus
tary benefits
ation
leave
benefits
Options1
Total
based
Directors
David Barwick
Mike Veverka
Bill Lyne
Bill Lyne – as Company
Secretary
Other KMP
David Todd
Xavier Bergade
Brad Board
Kate Waters2
$
77,000
$
-
399,952
99,660
54,583
26,921
226,753
241,463
224,185
163,041
-
-
49,830
49,830
54,780
-
Total KMP remuneration
1,413,898
254,100
$
$
$
-
16,070
-
-
6,226
1,938
4,630
6,290
7,315
32,422
5,185
-
25,301
25,301
27,628
15,675
138,827
35,154
$
-
-
-
-
-
-
-
-
-
$
-
$
84,315
%
-
39,982
588,086
16.9
-
-
59,768
26,921
18,236
18,236
18,236
326,346
336,768
329,459
8,813
193,819
103,503
1,945,482
-
-
15.3
14.8
16.6
-
1 includes share based payments over the remaining term on those options exercised, if any, during the financial year
2 Kate Waters ceased being a member of KMP 1 August 2016
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
32
JUMBO INTERACTIVE LTD ANNUAL REPORT 2017
4. Cash bonuses
No cash bonuses were paid at the discretion of the Nomination and
Performance measures apply to all participants with slightly
difference individual weightings
Remuneration Committee.
Key management personnel are entitled to a short-term cash
forfeited or available for vesting in later years is outlined below:
Details of these short-term incentives recognised as remuneration,
incentive as ‘at risk’ remuneration based on performance criteria
described in section (a) to this Remuneration Report. These were
paid out on 24 August 2017.
Name
Maximum Potential
Awarded and included in remuneration
Forfeited in year
Financial Non-financial
Total
Financial Non-financial1
Total
Financial Non-financial
$
$
$
Mike Veverka
158,400
105,600
264,000
David Todd
Xavier Bergade
Brad Board
79,200
79,200
79,200
52,800
52,800
52,800
132,000
132,000
132,000
$
112,860
56,430
56,430
43,560
$
60,720
30,360
30,360
30,360
$
173,580
86,790
86,790
73,920
$
45,540
22,770
22,770
35,640
$
44,880
22,440
22,440
22,440
Total
$
90,420
45,210
45,210
58,080
1includes available for vesting in later years
Mike Veverka
$2,640
David Todd
Xavier Bergade
Brad Board
$1,320
$1,320
$1,320
5. Options and rights granted as remuneration
Options are issued to key management personnel as part of their
remuneration at the discretion of the Board. The options are not
6. Equity instruments issued on exercise of remuneration
options
No equity instruments were issued during the period to key
necessarily issued based upon performance criteria, but are
management personnel as a result of options exercised that had
issued to selected executives of the Company and its subsidiaries
previously been granted as compensation.
to increase goal congruence between executives, directors and
shareholders.
Options will vest in key management personnel when the share
price equals the exercise price, as measured by the five trading
day moving volume weighted average price, and on condition
that they are currently employed by the Jumbo Interactive Limited
Group at the time of vesting. If the key management person leaves
before their options vest, then the options will lapse immediately. In
the event of retirement or retrenchment, the options will lapse one
month after the event and if deceased, the options will lapse three
months after the event.
No options and rights were granted to key management personnel
as compensation during the reporting period
7. Options granted as part of remuneration that lapsed
during the period
No options previously granted to key management personnel as
part of remuneration lapsed during the period.
8. Value of options to key management personnel
There were no options granted, exercised and lapsed during the
year to key management personnel.
JUMBO INTERACTIVE LTD ANNUAL REPORT 2017
33
9. Equity instruments held by key management personnel
Options and rights holdings
On exercise, each option and right will result in the issue of one ordinary share in Jumbo Interactive Limited.
Key management personnel include close family members and entities over which the key management person or their close family
members have direct or indirect control, joint control or significant influence.
Details of options and rights over ordinary shares of Jumbo Interactive Limited, held indirectly or beneficially by key management personnel
are as follows:
Balance at 1
Granted as
Exercised
Other
Balance
Vested at 30
Total vested
Total vested
July 2016
remunera-
during the
changes
at 30 June
June 2017
and exercis-
and unexer-
Mike Veverka
David Todd
900,000
750,000
Xavier Bergade
750,000
Brad Board
750,000
3,150,000
tion during
the year
-
-
-
-
-
year
during the
2017
able at 30
cisable at 30
June 2017
June 2017
-
-
-
-
-
year
-
-
-
-
-
900,000
500,000
500,000
750,000
750,000
750,000
400,000
400,000
400,000
400,000
400,000
400,000
3,150,000
1,700,000
1,700,000
-
-
-
-
-
Shareholdings
Details of ordinary shares in Jumbo Interactive Limited held directly, indirectly or beneficially by key management personnel and their related
parties are as follows:
FY2017
Mike Veverka
David Todd
Xavier Bergade
Granted as
Issued on exercise
Balance at
1 July 2016
remuneration
during the year
of options
during the year
Other changes
during the year
Balance at
30 June 2017
9,101,027
20,000
150,000
9,271,027
-
-
-
-
-
-
-
-
-
-
-
-
9,101,027
20,000
150,000
9,271,027
10. Loans to key management personnel
Aggregate loans to key management persons and their related parties are as follows:
Balance at 1 July
Loans advanced
Interest charged
Interest received
Balance at 30
Number in group
2016
$
100,000
$
-
$
7,236
$
(7,236)
$
100,000
1
June 2017
at end of year
Total
On 7 March 2016, Jumbo Interactive Ltd made a loan to KMP Brad
No write-downs have been made during the financial year against
Board for an amount of $100,000. The loan bears interest at the
this loan and no allowances are considered necessary at the end of
Commonwealth Bank of Australia’s Home Loan Standard Variable
the reporting period.
Rate, 5.22% p.a. as at the end of the reporting period, plus a margin
of 2.00% p.a., payable monthly in arrears. The capital balance is
repayable by 7 March 2018.
The loan outstanding at the end of the current year is unsecured
(with insurance cover over the life of the borrower) and repayable by
7 March 2018.
Key management personnel include close family members and
entities over which the key management person or their close family
members have direct or indirect control, joint control or significant
influence.
34
JUMBO INTERACTIVE LTD ANNUAL REPORT 2017
11. Other transactions and balances
Other related party transactions
Consolidated Group
2017
$
2016
$
Transactions between related parties are on normal commercial terms and conditions no more
favourable than those available to other parties unless otherwise stated.
i.
Elegant Properties Pty Ltd and Rosch Realty Pty Ltd are solely owned by Mr Mike Rosch, the father
of Mr Mike Veverka, the CEO and executive director of the Company. Elegant Properties Pty Ltd
rented an office from the Group and provided services during the financial year and Rosch Realty
Pty Ltd provided an agent service during the previous financial year.
Office rent received
Services paid
Amounts owing to Group at year end
7,211
-
1,573
6,600
14,097
1,210
ii. Mrs Julie Rosch, the mother of Mr Mike Veverka, the CEO and Executive Director of the Company, is
engaged as a full time employee within the Group.
Salary and superannuation
82,441
82,125
12. Employment contracts of directors and KMP
The employment conditions of non-executive directors are
formalised by letters of appointment and KMP are formalised in
contracts of employment.
The employment contracts stipulate a range of terms and
KMP
Mike Veverka
David Todd
Duration of
service
agreement
Ongoing
Ongoing
Fixed
remuneration at
end of FY20171
Notice
period2
$396,000
12 months
$220,000
6 months
conditions. These contracts do not fix the amount of remuneration
Xavier Bergade
Ongoing
$220,000
6 months
increases from year to year. Remuneration levels are reviewed
generally each year by the Nomination and Remuneration
Committee to align with job responsibilities and market salary
expectations. The Company may terminate an employment
contract without cause by providing generally four weeks written
Brad Board
Ongoing
$220,000
6 months
1fixed remuneration excludes a superannuation component, currently 9.5%
2any termination payment (notice and severance) will be subject to compliance
with all relevant legislation and will not exceed 12 months
notice or making payment in lieu of notice, based on the individual’s
END OF AUDITED REMUNERATION REPORT
annual salary component.
The notice period for the Chief Executive Officer is fifty two (52)
weeks. A termination payment may or may not be applicable
dependent on the particular circumstances. Termination payments
are generally not payable on resignation or dismissal for serious
misconduct. In the instance of serious misconduct the Company
can terminate employment at any time. Any options not exercised
before or on the date of termination will lapse.
The policy of the Company is that service contracts are generally
unlimited in term.
Unless otherwise stated, service agreements do not provide for
pre-determined compensation values or the manner of payment.
Compensation is determined in accordance with the general
remuneration policy outlined above. The manner of payment is
determined on a case by case basis.
JUMBO INTERACTIVE LTD ANNUAL REPORT 2017
JUMBO INTERACTIVE LTD ANNUAL REPORT 2017
40
35
Tel: +61 7 3237 5999
Fax: +61 7 3221 9227
www.bdo.com.au
Level 10, 12 Creek St
Brisbane QLD 4000
GPO Box 457 Brisbane QLD 4001
Australia
DECLARATION OF INDEPENDENCE BY K L COLYER TO THE DIRECTORS OF JUMBO INTERACTIVE
LIMITED
As lead auditor of Jumbo Interactive Limited for the year ended 30 June 2017, I declare that, to the
best of my knowledge and belief, there have been:
1. No contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
2. No contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Jumbo Interactive Limited and the entities it controlled during the
period.
K L Colyer
Director
BDO Audit Pty Ltd
Brisbane, 24 August 2017
BDO Audit Pty Ltd ABN 33 134 022 870 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050
110 275, an Australian company limited by guarantee. BDO Audit Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited
by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional
Standards Legislation, other than for the acts or omissions of financial services licensees.
36
JUMBO INTERACTIVE LTD ANNUAL REPORT 2017
Corporate Governance Statement
Group
Introduction
This statement summarises the corporate governance practices
that have generally applied in Jumbo Interactive Limited (the
Company) throughout the reporting period except where otherwise
stated. It is structured along the same lines as the ASX Corporate
Governance Council’s Principles and Recommendations,
with sections dealing in turn with each of the Council’s
corporate governance Principles and addressing the Council’s
Recommendations. This statement and the charters, codes and
policies referred to herein are posted on the Company’s website
www.jumbointeractive.com and shareholders and other interested
readers are welcome to refer to them. The Board will keep its
corporate governance practices under review.
1. Lay solid foundations for management and oversight
The Council’s first Principle states that companies should “establish
and disclose the respective roles and responsibilities of its board
and management and how their performance is monitored and
evaluated.” Jumbo has adopted a formal Board Charter that sets
out the functions reserved to the Board and those delegated to the
Chief Executive Officer. This enables the Board to provide strategic
guidance for the Company and effective oversight of management.
Jumbo ensures that appropriate checks are undertaken before it
appoints a person, or puts forward to shareholders a new candidate
for election, as a director. Information about a candidate standing
for election or re-election as a director is provided to shareholders
to enable them to make an informed decision on whether or not to
elect or re-elect the candidate.
Diversity
Objective
2017 Result
Outcome
No.
%
Women on
the board
Women
in senior
executive
positions
To have at least
one woman on
the Board
Maintain at
least the current
number (one) of
women
Women
employees in
the Group
Achieve the
percentage of
woman in excess
of 40%
Total employees in the Group
-
1
47
117
-
Not achieved
20.0
Achieved
40.2
Achieved
100.0
The Board has now developed the following objectives regarding
gender diversity and aims to achieve these objectives over the next
five years to 2017 as director and senior positions become vacant
and appropriately qualified candidates become available:
Group
Diversity
2017 Actual
2022 Objective
Women on the board
Women in senior
executive positions
Women employees
in the Group
Total employees in the
Group
No.
-
1
47
117
%
-
20.0
40.2
100.0
To have at least one
woman on the Board
Maintain at least the
current number (one) of
women
Achieve the percentage
of woman in excess of 45%
Jumbo provides new Directors with a letter on appointment which
details the terms and conditions of their appointment, provides clear
Senior executive positions are defined as those reporting directly to
guidance on what input is required by them, and includes materials
the CEO (i.e. CEO – 1).
to assist with induction into the Company.
The Company has a similar approach for all senior executives
whereby they are provided with a formal letter of appointment
setting out their terms of office, duties, rights and responsibilities
as well as a detailed job description. The Board has delegated
responsibilities and authorities to the CEO and other executives
to enable management to conduct the Company’s day to day
activities. Matters which exceed defined authority limits require
Board approval.
The Company Secretary is accountable directly to the Board,
through the Chair, on all matters to do with the proper functioning of
the Board.
The Company realises the benefits that can arise to the
organisation from diversity in the workplace covering gender,
age, ethnicity and cultural background and in various other areas.
So, the Board has established a Diversity Policy which details
the Company’s approach to promoting a corporate culture that
embraces diversity when selecting and appointing its employees
and Directors.
A Workplace Gender Equality Report 2015-16 has been lodged with
the Workplace Gender Equality Agency and is accessible on the
Company’s website.
The Board is also responsible for the performance of the Company’s
executives, which is reviewed against appropriate measures and the
performance of the Company as a whole, and through an annual
appraisal process.
Performance of the Board, its committees and individual directors
is on an annual self-assessment and peer-assessment basis which
is reviewed against appropriate measures and performance of the
Company as a whole.
The Board, its committees, individual directors and its senior
executives’ performance evaluations have been carried out
during the relevant reporting period in accordance with the
abovementioned processes.
2. Structure the Board to add value
In its second Principle the Council states that companies should
“have a board of an appropriate size, composition, skills and
This Diversity Policy outlines requirements for the Board to develop
commitment to enable it to discharge its duties effectively.” Jumbo’s
measurable objectives for achieving diversity, and annually assess
Board is so structured, and its Directors effectively discharge their
both the objectives and the progress in achieving these objectives.
responsibilities and duties for the benefit of shareholders.
Objectives were developed in 2012 for achievement over five years
to 2017, and the outome is as follows:
JUMBO INTERACTIVE LTD ANNUAL REPORT 2017
37
The Board presently comprises only two Non-Executive Directors
process has yet been established for individual Directors given the
(David Barwick, Chairman, having served seven years since being
small size of the Board.
Details of Committee meeting attendances are set out in the
Directors’ Report section of the Company’s annual report. Minutes
of all meetings are provided to the Board and its Chair reports to the
Board after each Committee meeting.
The Company also complies with the Recommendations for
Directors in relation to independent professional advice, information
access and contact with the Company Secretary.
The Directors may seek external professional advice at the expense
of the Company on matters relating to their role as Directors
of Jumbo. However, they must first request approval from the
Chairman, which must not be unreasonably withheld. If withheld
then it becomes a matter for the whole Board.
appointed 1 November 2007 and Bill Lyne, also the Company
Secretary, having served five years since being appointed 30
October 2009) and the Chief Executive Officer (Mike Veverka).
Fundamental requirements for Jumbo Directors are a deep
understanding of business management and financial markets
and such experience, complemented where possible with industry
knowledge, are desirable attributes for Board membership. All
Board members meet the fundamental requirements, and bring a
diverse range of skills and backgrounds. Additionally, Mr Veverka
has had a very long involvement in key sections of the Company and
brings considerable relevant expertise and knowledge to the Board.
A matrix of skills and diversity that the Board currently has or is
looking to achieve in its membership is detailed in Table 1 below.
The rating scale used for level of importance and recruitment
priority is High (3), Medium (2) and Low (1).
The Board formally meets monthly throughout the year, and
informally at least every six to eight weeks to address issues that
may arise outside of the monthly meetings.
The qualifications, experience and relevant expertise of each Board
member and their terms in office are set out in the Directors’ Report
section of the Company’s Annual Report. All Directors, apart from
the CEO, are subject to re-election by rotation at least every three
years at the Company’s annual general meeting.
The Board’s view is that an independent Director is a non-executive
Director who does not have a relationship affecting independence
on the basis set out in the Council’s guidelines and meets materiality
thresholds agreed by the Board as equating to payments to them or
related parties of 5% of the Company’s annual revenue. The Board
considers that David Barwick, notwithstanding that he has now
served in the position of director for 10 years, and Bill Lyne all meet
this criterion. On the other hand, Mike Veverka is considered to not
be independent because he is a substantial shareholder in Jumbo
(i.e. holds more than 5% as defined in Section 9 of the Corporations
Act) and is an executive officer of the Company.
Consequently, the current structure meets the Council’s
recommendation that the majority of the Board should be
independent, and the Board also considers the current composition
is appropriate given the Company’s and the Directors’ backgrounds
and the current and foreseeable structure and size of the Company.
The Jumbo Board has established a Nomination and Remuneration
Committee which operates under a Board approved Nomination
and Remuneration Committee Charter. In accordance with the
Council’s Recommendations the Nomination and Remuneration
Committee Charter requires it to have three Non-Executive
Directors, with a majority being independent.. However, at the
present time it has only two members, being the Non-Executive
Directors, David Barwick (as the Chair) and Bill Lyne, both of whom
have relevant experience and appropriate technical expertise. The
qualifications of the Committee and meeting attendances are set
out in the Directors’ Report section of the Company’s annual report.
The performance of the Board, its Committees and the Directors is
reviewed periodically by the Committee. The Committee’s principal
evaluation benchmark is the Company’s financial performance
compared to similar organisations and the industry in which it
operates; but other than that no formalised annual evaluation
38
JUMBO INTERACTIVE LTD ANNUAL REPORT 2017
Table 1 – Skills Matrix
Skills and Experience
Corporate governance
Strategic planning
International
Gaming/ lotteries industry
Risk management
Financial management
Technology/IT
Digital or social media
Leadership
Legal
Stakeholder relationships
Demographic background
Gender
Male
Female
Age
25-40
41-55
56-70
Ethnicity
Aboriginal or Torres Straits Islander
Asian
White/Caucasian
Level of Importance
Current Board Representation
Recruitment Priority
3
3
2
3
3
2
2
2
3
2
2
2
2
1
2
3
2
2
2
3
3
2
3
3
3
2
2
3
2
3
3
0
0
1
2
0
0
3
1
1
2
1
1
1
2
2
1
1
1
1
2
1
2
1
2
2
1
The Company Secretary attends all Board and committee
those persons may generally deal in securities during stated ‘trading
meetings, is responsible for monitoring adherence to Board policy
windows’ and at other times provided they obtain the prior consent
and procedures, and is accountable on governance matters.
of the Board Chairman (or, in the case of the Chairman himself, from
3. Act ethically and responsibly
In Principle 3 the Council states that companies should “act ethically
and responsibly”. To this end, Jumbo has formally adopted a
Code of Conduct covering its Directors, officers and employees.
The Code is based on respect for the law and acting accordingly,
dealing with conflicts of interest appropriately, and ethical matters
such as acting with integrity, exercising due care and diligence in
fulfilling duties, acting in the best interests of the Company and
respecting the confidentiality of all sensitive corporate information.
If a Director or officer becomes aware of unlawful or unethical
behaviour by anyone in the Company then he is obliged under the
Code to report such activities to the Chairman.
the Chair of the Audit Committee).
The Board will ensure that restrictions on dealings in securities are
strictly enforced.
4. Safeguard integrity in corporate reporting
The Council states that companies should “have formal and rigorous
processes that independently verify and safeguard the integrity of
their corporate reporting.” Jumbo has an established Audit and Risk
Management Committee which operates under an Audit and Risk
Management Committee Charter. The role of this Committee is
to ensure the truthful and factual presentation of the Company’s
financial position and to monitor and review on behalf of the Board
the effectiveness of the Company’s control environment, reporting
The Board has also approved a Whistleblower Policy pursuant to
which employees who have genuine suspicions about improper
practices and responsibilities in the areas of accounting, risk
management and compliance. To assist this process, as required
conduct feel safe to report it without fear of reprisal.
by Section 295A of the Corporations Act, the CEO and the Chief
In addition, Directors recognise the legal obligations relevant to
their role and the reasonable expectations of shareholders, other
stakeholders and the wider financial community.
Jumbo also has a documented Share Trading Policy for Directors,
key management personnel and other staff and consultants. The
policy prohibits Directors and other persons from dealing in the
Company’s securities during stated ‘closed’ and ‘prohibited’ periods
and whilst in possession of price sensitive information. Otherwise,
Financial Officer must declare to the Board in writing that, in their
opinion, the Company’s financial reports are complete and present
a true and fair view, in all material respects, of the financial condition
and operational results of the Company, are in accordance with
relevant accounting standards, and that their opinion has been
formed on the basis of a sound system of risk management and
internal control which is operating effectively.
The Committee’s Charter includes information on procedures for
the selection and appointment of the external auditor and rotation
JUMBO INTERACTIVE LTD ANNUAL REPORT 2017
39
of the engagement audit partner. The external auditor is required to
operations, and provide explanatory background and technical
attend the Company’s annual general meeting and be available to
information.
answer shareholder questions about the conduct of the audit and
the preparation and content of the audit report.
In accordance with the Council’s Recommendations the Audit
and Risk Management Committee’s Charter requires it to have
three non-executive Directors, with a majority being independent.
However, currently it has only two members, being the non-executive
Directors, Bill Lyne (as Chair) and David Barwick, both of whom
have strong finance and accounting backgrounds, experience
and appropriate technical expertise. The qualifications of the
Committee and meeting attendances are set out in the Directors’
Report section of the Company’s annual report.
Minutes of all Committee meetings are provided to the Board and
its Chair also reports to the Board after each Committee meeting.
5. Make timely and balanced disclosure
In this Principle the Council states that companies should “make
timely and balanced disclosure of material matters concerning the
company that a reasonable person would expect to have a material
effect on the price or value of its securities.” Jumbo is committed to
the promotion of investor confidence by ensuring that trading in the
Company’s securities takes place in an informed market. Also to
assist compliance with continuous disclosure requirements under
the ASX Listing Rules, the Company has a Continuous Disclosure
Policy in place to ensure that material price sensitive information is
identified, reviewed by management and disclosed to the ASX and
7. Recognise and manage risk
In this Principle the Council states that companies should
“establish a sound risk management framework and periodically
review the effectiveness of that framework”. Jumbo maintains
documented policies for identifying, assessing and monitoring risk,
summarised in a Risk Management Policy. Through the Audit and
Risk Management Committee, as noted under Principle 4 above,
the Company monitors key business and financial risks, taking
into consideration their likelihood and impact, and reviews and
appraises risk control measures.
The Company does not have a separate internal audit function
due to its relatively small size and less complex financial and
organisational structures. The CEO and senior executives have
operational responsibility for risk management through Board
approved guidelines. Some of these measures include formal
authority limits for management to operate within, policies on
treasury-related risk management, an information technology plan
and a business continuity plan. The CEO reports to the Board on
any departures from policy or matters of concern that might be seen
as or become material business risks. Periodic reviews evaluate
and continually improve the effectiveness of risk management and
internal control processes.
In addition, the CEO and CFO are required to state in writing
annually to the Board that to the best of their knowledge the
published on the Company’s website in a timely manner. The CEO is
integrity of the Company’s risk management, internal control and
accountable for compliance with this policy.
compliance systems are sound and such systems are operating
In addition, all changes in Directors’ interests in the Company’s
securities are promptly reported to the ASX in compliance with
Section 205G of the Corporations Act and the ASX Listing Rules.
The Company’s Annual Report is also used to keep investors
informed, particularly in its review of operations and activities.
6. Respect the rights of shareholders
In Principle 6 the Council states that companies should “respect
the rights of shareholders by providing them with appropriate
information and facilities to allow them to exercise those rights
effectively”. Jumbo supports its desire to provide shareholders
with adequate information about the Company and its activities
through a published Communications Policy. It is also committed
to electronic communications through its website, www.
jumbointeractive.com, which provides access to all recent ASX
efficiently and effectively in all material respects in relation to
financial reporting risks.
8. Remunerate fairly and responsibly
The Council’s final Principle states that companies should “pay
director remuneration sufficient to attract and retain high quality
directors and design executive remuneration to attract, retain and
motivate high quality senior executives and align their interests
with the creation of value for shareholders”. To this end the Board
has established during the year a Nomination and Remuneration
Committee, as noted above under Principle 2.
The Board considers that the Committee members are sufficiently
qualified to consider and decide on remuneration matters. However,
external professional advice may be sought from experienced
consultants where appropriate to assist in their deliberations.
announcements, shareholder updates, boardroom broadcasts,
Non-executive Directors’ remuneration is reviewed periodically with
notices of meetings, explanatory memoranda, annual reports and
reference to comparable businesses and the trend in Directors’
key contact details, as well as comprehensive information about the
fees generally, with the object of ensuring maximum stakeholder
Company and its products and operations. Shareholders and other
benefit from the retention of an effective Board. Shareholders, at
interested parties may sign up to receive email notification of all
the Company’s AGM, determine any increase in the aggregate
ASX releases and other important announcements.
fees payable to non-executive Directors, but it is those Directors
Company general meetings also represent a good opportunity for
shareholders to meet with, and ask questions of, the Board of Jumbo
and all shareholders are notified of such meetings and encouraged
to attend.
As part of the Company’s management of investor relations the
CEO does, at times, also undertake briefings with investors and
analysts to assist their understanding of the Company and its
who decide amongst themselves the split of such remuneration.
The current maximum annual aggregate remuneration which can
be paid to all non-executive Directors is $250,000, last approved
by shareholders in October 2009. In the past, shareholders have
at times approved share option incentives for the non-executive
Directors. The current non-executive Directors do not hold shares
or options in the Company as they believe that this maintains their
independence.
40
JUMBO INTERACTIVE LTD ANNUAL REPORT 2017
The CEO’s remuneration is based on a fixed amount and may
include short term incentives (calculated on audited figures)
linked to the Company’s financial performance and share options
provided as long term incentives. The base amount is designed
to attract and retain an appropriately qualified and experienced
CEO, and any incentive element is to reward him for his contribution
towards the Company’s success.
Other senior executives are offered remuneration packages
necessary to attract and retain appropriately qualified key
personnel as well as being commensurate with the skill and
attention required to manage an organisation of the size and scope
of the Jumbo Group as it is today and taking into account its plans
and forecasts into the future. In addition, the Company has an
Employee Option Plan in place and from time to time has granted
options to deserving staff as a reward for performance. However,
the Board prohibits transactions by executives which might limit the
economic risk of participating in unvested entitlements under any
equity-based remuneration scheme.
Further information about the Jumbo remuneration policy, along
with details of all emoluments of Directors and key management
personnel can be found in the Remuneration Report section of the
Directors’ Report in the Company’s Annual Report. There are no
separate retirement benefits for non-executive Directors, other than
statutory superannuation.
Approved by the Board – 24 August 2017
JUMBO INTERACTIVE LTD ANNUAL REPORT 2017
41
Financial Report
For the year ended 30 June 2017
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 financial statements
About this report
Key events and transactions for the reporting period
Page 42
Page 43
Page 44
Page 46
Page 47
Page 47
Results for the year
Operating assets and
Capital and financial
Group structure
Other information
Unrecognised items
Page 48
liabilities
Page 55
risk management
Page 62
Page 67
Page 70
Page 77
Note 1: Segment infor-
mation
Note 7: Cash and cash
equivalents
Note 13: Capital risk
management
Note 18: Controlled
subsidiaries
Note 2: Revenue and
other income
Note 8: Trade and other
receivables
Note 14: Dividends
Note 19: Parent disclo-
sures
Note 3: Expenses
Note 9: Property, plant
and equipment
Note 15: Equity and
reserves
Note 4: Income tax
Note 10: Intangible
assets
Note 16: Borrowings
Note 5: Earnings per
share
Note 11: Trade and other
payables
Note 17: Financial risk
management
Note 6: Discontinued
operations
Note 12: Provisions
Note 20: Investments
accounted for using the
Equity Method
Note 21: Availa-
ble-for-sale financial
assets (non-current)
Note 27: Contingencies
Note 28: Commitments
Note 22: Related party
transactions
Note 29: Events after the
reporting date
Note 23: Key Man-
agement Personnel
compensation
Note 24: Share-based
payments
Note 25: Remuneration
of auditors
Note 26: Summary of
other significant ac-
counting policies
Signed reports
Directors’ declaration
Independent auditor’s report
ASX information
Shareholder information
Company Information
Page 79
Page 80
Page 84
Page 86
42
JUMBO INTERACTIVE LTD ANNUAL REPORT 2017
Jumbo Interactive Limited and its Controlled Subsidiaries
Consolidated Statement Of Profit Or Loss And Other
Comprehensive Income
For the year ended 30 June 2017
Revenue from continuing operations
Cost of sales
Gross profit
Other revenue/income
Distribution expenses
Marketing costs
Occupancy expenses
Administrative expenses
Impairment of investment
Finance costs
Share of losses of associates/joint ventures accounted for using the equity method
Profit/(loss) before income tax expense
Income tax expense
Profit/(loss) after income tax from continuing operations
Profit/(loss) from discontinued operations
Profit/(loss) after income tax expense for the year attributable to the owners of Jumbo Interactive
Limited
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Foreign currency translation
Reclassification of foreign exchange differences on loss of control of subsidiary
Other comprehensive income for the year, net of tax
Total comprehensive income for the year attributable to the owners of Jumbo Interactive Limited
Earnings Per Share (cents per share)
From continuing and discontinued operations
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
From continuing operations
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
From discontinued operations
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
Note
2
3
2
3
4
6
5
5
5
5
5
5
2017
$’000
32,429
(2,465)
29,964
1,064
(24)
(3,566)
(959)
(15,405)
-
(6)
-
11,068
(3,471)
7,597
(1,957)
2016
$’000
34,083
(2,803)
31,280
1,197
(34)
(4,486)
(879)
(15,728)
(454)
(6)
(173)
10,717
(3,394)
7,323
(2,653)
5,640
4,670
(68)
563
495
6,135
¢
12.6
12.3
16.9
16.5
(4.3)
(4.2)
(102)
-
(102)
4,568
¢
10.6
10.6
16.6
16.6
(6.0)
(6.0)
The above Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the
accompanying notes.
JUMBO INTERACTIVE LTD ANNUAL REPORT 2017
43
Jumbo Interactive Limited and its Controlled Subsidiaries
Consolidated Statement Of Financial Position
As at 30 June 2017
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Inventories
TOTAL CURRENT ASSETS
NON-CURRENT ASSETS
Receivables
Property, plant and equipment
Intangible assets
Deferred tax assets
TOTAL NON-CURRENT ASSETS
TOTAL ASSETS
CURRENT LIABILITIES
Trade and other payables
Current tax liabilities
Employee benefit obligations
TOTAL CURRENT LIABILITIES
NON-CURRENT LIABILITIES
Employee benefit obligations
Make good provision
Deferred tax liabilities
TOTAL NON-CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
EQUITY
Contributed equity
Accumulated losses
Profits Appropriation Reserve
Reserves
TOTAL EQUITY
Note
2017
$’000
2016
$’000
7
8
22
9
10
4
11
4
12
12
4
15
43,320
25,306
548
62
568
62
43,930
25,936
-
341
11,574
908
12,823
56,753
100
401
10,719
1,076
12,296
38,232
13,009
12,239
184
293
13,486
277
24
66
367
13,853
42,900
45,492
(17,399)
15,745
(938)
42,900
697
281
13,217
271
-
48
319
13,536
24,696
29,827
(17,399)
13,850
(1,582)
24,696
The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes.
44
JUMBO INTERACTIVE LTD ANNUAL REPORT 2017
Jumbo Interactive Limited and its Controlled Subsidiaries
Consolidated Statement Of Changes In Equity
For the year ended 30 June 2017
Contributed equity
CONSOLIDATED GROUP
Balance at 1 July 2015
Total comprehensive income for the year
Profit/(loss) for the year
Other comprehensive income
Total comprehensive income for the year
Transactions with owners in their capacity as owners
Issue of shares
Dividends paid
Share-based payments
Total transactions with owners in their capacity as owners
Balance at 30 June 2016
Total comprehensive income for the year
Profit/(loss) for the year
Other comprehensive income
Total comprehensive income for the year
Transactions with owners in their capacity as owners
Issue of shares
Dividends paid
Share-based payments
Total transactions with owners in their capacity as owners
Balance at 30 June 2017
$’000
29,970
-
-
-
(143)
-
-
(143)
29,827
-
-
-
15,665
-
-
15,665
45,492
Accumulated
Profits appropriation
losses
$’000
(17,399)
-
-
-
-
-
-
-
(17,399)
-
-
-
-
-
-
-
(17,399)
reserve
$’000
10,724
4,670
-
4,670
-
(1,544)
-
(1,544)
13,850
5,640
-
5,640
-
(3,745)
-
(3,745)
15,745
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes
Share-based
payments reserve
Foreign currency
translation reserve
Total equity
$’000
777
134
134
911
-
-
-
-
-
-
-
-
-
-
149
149
1,060
Available-for-sale
financial asset
reserve
$’000
(2,302)
(2,302)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$’000
(89)
(102)
(102)
-
-
-
-
-
-
-
-
-
-
(191)
495
495
304
(2,302)
$’000
21,681
4,670
(102)
4,568
(143)
(1,544)
134
(1,553)
24,696
5,640
495
6,135
15,665
(3,745)
149
12,069
42,900
JUMBO INTERACTIVE LTD ANNUAL REPORT 2017
45
Jumbo Interactive Limited and its Controlled Subsidiaries
Consolidated Statement Of Changes In Equity
For the year ended 30 June 2017
CONSOLIDATED GROUP
Balance at 1 July 2015
Total comprehensive income for the year
Profit/(loss) for the year
Other comprehensive income
Total comprehensive income for the year
Transactions with owners in their capacity as owners
Issue of shares
Dividends paid
Share-based payments
Balance at 30 June 2016
Total transactions with owners in their capacity as owners
Total comprehensive income for the year
Profit/(loss) for the year
Other comprehensive income
Total comprehensive income for the year
Transactions with owners in their capacity as owners
Issue of shares
Dividends paid
Share-based payments
Balance at 30 June 2017
Total transactions with owners in their capacity as owners
$’000
29,970
(143)
(143)
29,827
-
-
-
-
-
-
-
-
-
-
15,665
15,665
45,492
losses
$’000
(17,399)
(17,399)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(17,399)
reserve
$’000
10,724
4,670
4,670
-
-
-
-
-
-
(1,544)
(1,544)
13,850
5,640
5,640
(3,745)
(3,745)
15,745
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes
Contributed equity
Accumulated
Profits appropriation
Share-based
payments reserve
Foreign currency
translation reserve
$’000
777
-
-
-
-
-
134
134
911
-
-
-
-
-
149
149
1,060
$’000
(89)
-
(102)
(102)
-
-
-
-
(191)
-
495
495
-
-
-
-
304
Available-for-sale
financial asset
reserve
$’000
(2,302)
-
-
-
-
-
-
-
(2,302)
-
-
-
-
-
-
-
(2,302)
Total equity
$’000
21,681
4,670
(102)
4,568
(143)
(1,544)
134
(1,553)
24,696
5,640
495
6,135
15,665
(3,745)
149
12,069
42,900
46
JUMBO INTERACTIVE LTD ANNUAL REPORT 2017
Jumbo Interactive Limited and its Controlled Subsidiaries
Consolidated Statement Of Cash Flows
For the year ended 30 June 2017
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers
Payments to suppliers and employees
Interest received
Interest and other costs of finance paid
Income tax paid
Net cash inflows/(outflows) from operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for investments
Loan to related party
Payments for property, plant and equipment
Payments for intangibles
Payment on loss of control of foreign subsidiary
Proceeds from sale of property, plant and equipment
Net cash inflows/(outflows) from investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of shares
Payments for share buybacks
Dividends paid
Net cash inflows/(outflows) from financing activities
Net increase/(decrease) in cash and cash equivalents
Net foreign exchange differences
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Note
7
6
15
15
14
7
2017
$’000
35,888
(21,781)
564
(6)
(3,799)
10,866
-
-
(162)
(4,448)
(159)
-
(4,769)
15,665
-
(3,745)
11,920
18,017
(3)
25,306
43,320
2016
$’000
37,220
(24,976)
611
(6)
(4,502)
8,347
(84)
(100)
(164)
(4,791)
-
8
(5,131)
-
(143)
(1,544)
(1,687)
1,529
(1)
23,778
25,306
The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.
JUMBO INTERACTIVE LTD ANNUAL REPORT 2017
47
Jumbo Interactive Limited and its
Subsidiaries
Notes To The Consolidated
Financial Statements
For the year ended 30 June 2017
About this report
Jumbo Interactive Limited is a company limited by shares,
Significant and other accounting policies that summarise the
measurement basis used and are relevant to an understanding of
the financial statements are provided throughout the notes of the
financial statements.
SIGNIFICANT JUDGEMENTS AND ESTIMATES
In the process of applying the Group’s accounting policies,
management has made a number of judgements and applied
incorporated and domiciled in Australia, whose shares are publicly
estimates of future events. Judgements and estimates which
traded on the Australian Securities Exchange (ASX: JIN), and is a for-
are material to the consolidated financial statements include:
profit entity for the purposes of preparing the financial statements.
The consolidated financial statements are for the consolidated
entity consisting of Jumbo Interactive Limited (the Company) and its
subsidiaries and together are referred to as the Group or Jumbo.
Estimated useful life of website development
costs
The consolidated financial statements were approved for issue in
Goodwill and other intangible assets
Note Page
10
10
58
58
accordance with a resolution by the Directors on 24 August 2017. The
In addition, in preparing the financial statements, the notes
Directors have the power to amend and reissue the consolidated
to the financial statements were ordered such that the most
financial statements.
The consolidated financial statements are general purpose
financial statements which:
— Have been prepared in accordance with the Corporations Act
2001, Australian Accountings Standards and Interpretations
issued by the Australian Accounting Standards Board (AASB)
and International Financial reporting Standards (IFRS) issued by
relevant information was presented earlier in the notes and that
the disclosures that management deemed to be immaterial
were excluded from the notes to the financial statements. The
determination of the relevance and materiality of disclosures
involved significant judgement.
Key events and transactions for reporting period
The financial position and performance of the Group was
the International Financial Standards Board
particularly affected by the following events and transactions during
— Have been prepared under the historical cost convention
the reporting period:
— Are presented in Australian dollars (A$), with all amounts in
the financial report being rounded off in accordance with the
1. The lower level of large jackpot activity (see Directors’ Report for
requirements of ASIC Corporations (Rounding in Financial/
details);
Directors’ Reports) Instrument 2016/191 issued by the Australian
2. The share issue to Tatts and resultant increase in cash (see
Securities and Investments Commission to the nearest thousand
Directors’ Report for details); and
dollars, unless otherwise indicated
3. Discontinuing the operation in Germany (see note 6 for details).
— Where necessary, comparative information has been restated to
conform with changes in presentation, in the current year
— Adopts all new and amended Accounting Standards and
Interpretations issued by the AASB that are relevant to the
operations of the Group effective for reporting periods beginning
on or after 1 July 2016
The notes to the financial statements
The notes include financial information which is required to
understand the consolidated financial statements and is material
and relevant to the operations, financial position and performance
of the Group. Information is considered material and relevant if, for
example:
— The amount in question is significant because of its size or nature
— It is important for understanding the results of the Group
— It helps explain the impact of significant changes in the Group’s
business – for example, acquisitions and impairment write downs
— It relates to an aspect of the Group’s operations that is important
to its future performance
48
JUMBO INTERACTIVE LTD ANNUAL REPORT 2017
Results for the year
IN THIS SECTION
Results for the year provides segment information and a breakdown of individual line items in the consolidated statement of profit or loss
and other comprehensive income that the Directors consider most relevant, including a summary of the accounting policies, relevant to
understanding these line items.
Note 1: Segment information
Note 2: Revenue and other income
Note 3: Expenses
Note 4: Income tax
Note 5: Earnings per share
Note 6: Discontinued operations
Page 49
Page 50
Page 51
Page 51
Page 52
Page 53
JUMBO INTERACTIVE LTD ANNUAL REPORT 2017
49
Note 1: Segment information
international jurisdictions, and internet database management/
marketing. The dormant Mexico Internet Lotteries business is also
Jumbo determines and presents operating segments on a product
included due to its similar characteristics.
and a geographic basis as this is how the results are reported
internally to the Board (chief operating decision maker) and how the
business is managed. The Board assesses the performance of the
Group based on the net profit before tax (NPBT). Comparatives for
2016 are stated on this basis.
During the 2017 financial year, the Internet Lotteries Germany
segment was reclassified as a discontinued operation – refer note 6
for details.
(a) Description of segments
The following summary describes the operations in each of the
Group’s reportable segments:
Internet Lotteries Australia
Retail of Australian lottery tickets sold in Australia and eligible
Other
Business activities which are not reportable in terms of AASB
8, which are currently the online sale of an internally developed
proprietary payroll software system.
Corporate
Corporate costs include costs in respect of the Directors, CEO,
CFO, corporate advertising, promotion and marketing, corporate
investment and finance, tax, audit, risk, governance, and strategic
projects.
(b) Segment information
The segment information provided to the Board is as follows:
2017
External revenue
Internal revenue
Total revenue
Cost of Sales
Gross Profit
Other revenue/income from external customers
Distribution expenses
Marketing costs
Occupancy expenses
Administrative expenses
Finance costs
NPBT continuing operations
Income tax expense
NPAT continuing operations
Discontinued operations
NPAT overall operations (per P&L)
Interest revenue
Depreciation and amortisation
Impairment of assets
Foreign exchange gain/(loss)
Internet
Lotteries
Australia
$’000
31,586
-
31,586
(2,465)
29,121
857
(24)
(3,458)
(939)
(13,217)
-
12,340
470
(3,513)
(62)
263
Other
$’000
843
-
843
-
843
-
-
(85)
(20)
(331)
-
407
-
(118)
-
-
Corporate
Eliminations
operations
Total
continuing
$’000
$’000
-
-
-
-
-
207
-
(23)
-
(1,857)
(6)
(1,679)
135
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$’000
32,429
32,429
(2,465)
29,964
1,064
(24)
(3,566)
(959)
(15,405)
(6)
11,068
(3,471)
7,597
(1,957)
5,640
605
(3,631)
(62)
263
50
2016
External revenue
Internal revenue
Total revenue
Cost of Sales
Gross Profit
Other revenue/income from external customers
Distribution expenses
Marketing costs
Occupancy expenses
Administrative expenses
Impairment of investment
Finance costs
Share of losses of associate companies
NPBT continuing operations
Income tax expense
NPAT continuing operations
Discontinued operations
NPAT overall operations (per P&L)
Interest revenue
Depreciation and amortisation
Foreign exchange gain/(loss)
Impairment of investments
Share of losses of associate company
Internet Lotteries
Australia
$’000
33,239
-
33,239
(2,803)
30,436
949
(34)
(4,345)
(865)
(13,774)
-
-
-
Other
$’000
844
-
844
-
844
-
-
(75)
(14)
(362)
-
-
-
12,367
393
496
(3,493)
247
-
-
-
(151)
-
-
-
JUMBO INTERACTIVE LTD ANNUAL REPORT 2017
Corporate
Eliminations
operations
Total continuing
$’000
$’000
-
-
-
-
-
248
-
(66)
-
(1,592)
(454)
(6)
(173)
(2,043)
148
-
20
(454)
(173)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$’000
34,083
34,083
(2,803)
31,280
1,197
(34)
(4,486)
(879)
(15,728)
(454)
(6)
(173)
10,717
(3,394)
7,323
(2,653)
4,670
644
(3,644)
267
(454)
(173)
(c) Other segment information
Geographical information
The entity is domiciled in Australia. The amount of its revenue from
external customers in Australia is $28,965,000 (2016: $30,997,000),
and the total revenue from external customers in other countries
is $4,528,000 (2016: $4,283,000). Revenues of $1,834,000 (2016:
$1,910,000) are from external customers in Fiji. Segment revenues
From continuing operations
Sales revenue
– Revenue from sale of goods
are allocated based on the country in which the customer is located.
– Revenue from rendering of services
Non-current assets in Australia are $11,890,000 (2016: $11,120,000).
Non-current assets in other countries are (i) Germany $nil (2016:
$29,000), and (ii) Fiji $24,000 (2016: $36,000).
The geographical non-current assets above are exclusive of,
where applicable, financial instruments, deferred tax assets, post-
employment benefits assets, and rights under insurance contracts.
Other revenue/income
– Interest
– Cash
– Other income
– Foreign exchange gains
– Export market development grants
No single external customer derives more than 10% of total revenues.
– Other
Note 2: Revenue and other income
The Company reports revenue from the sale of lottery tickets and
related services on a net revenue inflow basis where it considers that
it acts more as an Agent than as a Principal such as with the sale of
lottery tickets. The gross amount received for the sale of goods and
rendering of services is advised as Total Transaction Value (“TTV”)
for information purposes.
Consolidated Group
2017
$’000
2,510
29,919
32,429
2016
$’000
2,575
31,508
34,083
605
644
263
111
85
1,064
267
120
166
1,197
33,493
35,280
JUMBO INTERACTIVE LTD ANNUAL REPORT 2017
51
From discontinued operations (note 6)
Sales revenue
– Revenue from rendering of services
Other revenue/income
– Other income
– Other
Consolidated Group
2017
$’000
2016
$’000
138
138
177
177
315
258
258
38
38
296
Recognition and measurement
Revenue is recognised at the fair value of consideration received or
receivable. Amounts disclosed as revenue are net of returns, trade
allowances and duties and taxes paid.
The following specific recognition criteria must also be met before
revenue is recognised:
Sale of Goods
Cost of sales
– Sale of goods
– Rendering of services
Administration expenses
Consolidated
2017
$’000
1,152
1,313
2016
$’000
1,201
1,602
Depreciation of non-current assets
– Plant and equipment
149
145
Amortisation of non-current assets
– Leasehold improvements
– Intangibles
Other expenses
41
3,441
66
3,433
– Employee benefit expense
6,468
6,074
– Defined contribution superannuation
expense
Occupancy expenses
– Operating lease rentals minimum lease
payments
Impairment of assets – domain names
824
898
959
62
879
-
Revenue from sale of goods is recognised when the significant
risks and rewards of ownership have passed to the buyer and can
be reliably measured. Risks and rewards are considered passed to
buyer when goods have been delivered to the customer.
Note 4: Income tax
Liabilities
Rendering of Services
Revenue is recognised when the service is provided.
CURRENT
Income tax expense
Interest
Revenue is recognised as interest accrues using the effective
interest method. The effective interest method uses the effective
(a) Income tax expense
interest rate which is the rate that exactly discounts the estimated
future cash receipts over the expected life of the financial asset.
Dividends
Dividends are recognised as revenue when the Group’s right to
The components of tax expense comprise:
receive payment is established. Dividends received in the entity’s
– Current tax
separate financial statements that are paid out of pre-acquisition
– Deferred tax
profits of a subsidiary, associate or joint venture are recognised as
revenue when the entity’s right to receive payment is established.
– Under/over provision deferred tax previous
years
Consolidated
2017
2016
Note
$’000
$’000
184
697
Consolidated
2017
2016
Note
$’000
$’000
3,284
4(b)
186
-
-
1
3,771
(348)
(8)
(32)
11
Government grants
The export market development grant from the government is
recognised at its fair value when there is reasonable assurance
that the grant will be received and the Group will comply with any
attached conditions.
Note 3: Expenses
Profit from continuing operations before income tax includes the
following specific expenses:
– Under/over provision tax prior years
– Current tax overseas operations
Total income tax expense/(benefit) in profit
and loss
3,471
3,394
Reconciliation
Profit before income tax expense
9,111
8,064
– Tax at the Australian tax rate 30%
(2016:30%)
– Income tax effect of overseas tax rates
– Share options expensed during year
– Other
– Under/over provision tax prior years
Total income tax expense in profit or loss
attributable to continuing operations
2,733
2,419
338
44
356
-
818
40
149
(32)
3,471
3,394
52
JUMBO INTERACTIVE LTD ANNUAL REPORT 2017
(b) Deferred tax
the tax rates expected to apply when the assets are recovered or
liabilities settled, based on those tax rates which are enacted or
Deferred tax liabilities
Opening
Charged to
Closing
substantively enacted for each jurisdiction. Exceptions are made
Deferred tax liabilities comprise
temporary difference recog-
nised in the profit and loss as
follows:
Property, plant and equipment
– Depreciation
Accruals
Other
Balance at 30 June 2016
Property, plant and equipment
– Depreciation
Accruals
Other
Balance as at 30 June 2017
balance
Profit or Loss
Balance
for certain temporary differences arising on initial recognition of
$000
$000
$000
an asset or a liability if they arose in a transaction, other than a
business combination, that at the time of the transaction did not
affect either accounting profit or taxable profit.
5
-
32
37
1
24
23
48
(4)
24
(9)
11
(1)
42
(23)
18
Deferred tax assets are only recognised for deductible temporary
differences if it is probable that future taxable amounts will be
available to utilise those temporary differences and losses.
Deferred tax assets and liabilities are not recognised for temporary
differences between the carrying amount and tax bases of
investments in subsidiaries and associates where the parent
entity is able to control the timing of the reversal of the temporary
differences and it is probable that the differences will not reverse in
the foreseeable future.
Current and deferred tax balances relating to amounts recognised
directly in other comprehensive income are also recognised directly
in other comprehensive income.
1
24
23
48
-
66
-
66
Deferred tax assets
Opening
Charged to
Closing
balance
Profit or Loss
Balance
$000
$000
$000
Deferred tax assets comprise
temporary difference recog-
nised in the profit and loss as
follows:
Property, plant and equipment
– Depreciation
– Amortisation
Accruals
Provisions
Other
Balance at 30 June 2016
Property, plant and equipment
– Depreciation
– Amortisation
Accruals
Provisions
Other
93
206
74
320
24
717
124
370
179
387
16
31
164
105
67
(8)
359
(5)
(211)
23
29
(4)
Balance as at 30 June 2017
1,076
(168)
124
370
179
387
16
1,076
119
159
202
416
12
908
Recognition and measurement
Current taxes
The income tax expense for the period is the tax payable on the
current period’s taxable income based on the national income tax
rate for each jurisdiction adjusted by changes in deferred tax assets
Tax consolidation
Jumbo Interactive Limited and its wholly owned Australian
controlled subsidiaries are part of a tax consolidated group under
Australian taxation law since 1 July 2006. Jumbo Interactive Limited
is the head entity in the tax consolidated group. Entities within the
tax consolidation group have entered into a tax funding agreement
‘(TFA’) and tax sharing deed (‘TSD’) with the head entity. Under the
terms of the TFA, Jumbo Interactive Limited and each of the entities
in the tax consolidation group have agreed to pay (or receive) a tax
equivalent payment to (or from) the head entity, based on the current
tax liability or current tax asset of the entity.
Note 5: Earnings per share (EPS)
(a) Basic earnings per share
Basic EPS is calculated by dividing the profit attributable to owners
of the Company by the weighted average number of ordinary shares
outstanding.
(b) Diluted earnings per share
Diluted EPS is calculated by dividing the profit attributable to
owners of the Company by the weighted average number of
ordinary shares outstanding after adjusted for the effects of dilutive
potential ordinary shares
(c) Profit after tax attributable to owners of the Company used as
numerator
Consolidated
2017
$’000
7,597
(1,957)
2016
$’000
7,323
(2,653)
5,640
4,670
and liabilities attributable to temporary differences between the
Profit from continuing operations
tax base of assets and liabilities and their carrying amounts in the
consolidated financial statements.
Deferred taxes
Deferred tax assets and liabilities are recognised for all temporary
differences, between carrying amounts of assets and liabilities
for financial reporting purposes and their respective tax bases, at
Profit from discontinued operation
Profit attributable to the owners of the
Company
JUMBO INTERACTIVE LTD ANNUAL REPORT 2017
53
(d) Weighted average number of shares used as denominator
Consolidated
2017
2016
Number
Number
Revenue
Expenses
Weighted average number of ordinary
shares used as the denominator in calculat-
ing basic EPS
44,954,344
44,119,040
Adjustments for calculation of diluted EPS:
— options
980,179
-
Weighted average number of ordinary
shares used as the denominator in calculat-
ing diluted EPS
45,934,523
44,119,040
1,800,000 options were not included in the number of weighted
average number of ordinary shares used to calculate diluted
Loss before income tax
Income tax (expense)/benefit
Loss after income tax
Loss on loss of control of subsidiary in volun-
tary administration
Reclassification of foreign currency translation
reserves to the income statement1
Loss on loss of control before income tax
Income tax (expense)/benefit
earnings per share because they are currently out-of-the-money.
Loss on loss of control after income tax
2017
2016
$’000
$’000
315
296
(1,467)
(2,949)
(1,152)
(2,653)
-
-
(1,152)
(2,653)
(242)
(563)
(805)
-
(805)
-
-
-
-
-
Note 6: Discontinued operations
Loss for the year from discontinued operation
(1,957)
(2,653)
On 3 November 2016, Jumbo Interactive Limited announced its
intention to scale down Jumbo Interactive GmbH, its Internet
lotteries German business segment, due to adverse market
conditions and, as disclosed in the 2016 Half Year Report, on 5th
December 2016 the sale of lottery tickets ceased. The business was
subsequently placed into voluntary administration (VA) on 31 March
2017 and is reported as a discontinued operation as Jumbo no
longer has control. The purpose of the VA is to facilitate the orderly
closure and wind-up of the business in compliance with German
Legal requirements.
Financial information relating to the discontinued operation for the
nine month period to the date of voluntary administration and the
year ended 30 June 2016 is set out below.
Profit attributable to owners of the parent
entity relates to:
Profit/(loss) from continuing operations
Profit/(loss) from discontinued operations
7,597
(1,957)
5,640
7,323
(2,653)
4,670
1Foreign currency loss relates to the historical foreign currency
translation reserve in respect of Jumbo’s investment in Germany,
reclassified to the income statement on loss of control through
voluntary administration.
Net cash inflow/(outflow) from operating activ-
ities
2017
2016
$’000
$’000
(1,353)
(2,786)
Net cash inflow/(outflow) from investing activities
(88)
(15)
Net cash inflow/(outflow) from financing activ-
ities
-
-
Net cash increase/(decrease) in cash generated
from discontinued operations
(1,441)
(2,801)
Details of the voluntary administration of Jumbo Interactive GmbH
Cash paid to administrator on loss of control
Total cash lost on loss of control
Carrying amount of net assets over which control was lost
Loss on loss of control of subsidiary before income tax
Income tax benefit
Loss on loss of control of subsidiary after income tax
2017
$’000
159
159
83
242
-
242
The carrying amounts of the assets and liabilities as at the date of
voluntary administration (31 March 2017) were:
54
JUMBO INTERACTIVE LTD ANNUAL REPORT 2017
Note 6: Discontinued operations (cont)
Property, plant and equipment
Intangible assets
Trade and other receivables
Total assets
Trade and other payables
Total liabilities
Net assets
31 March 2017
$’000
19
64
87
170
(87)
(87)
83
JUMBO INTERACTIVE LTD ANNUAL REPORT 2017
55
Operating assets and liabilities
IN THIS SECTION
Operating assets and liabilities provides information about the
working capital of the Group and major balance sheet items,
including the accounting policies, judgements and estimates
relevant to understanding these items.
Note 7: Cash and cash equivalents
Note 8: Trade and other receivables
Note 9: Property, plant and equipment
Note 10: Intangible assets
Note 11: Trade and other payables
Note 12: Employee benefit obligations
Page 56
Page 56
Page 57
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Page 60
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56
JUMBO INTERACTIVE LTD ANNUAL REPORT 2017
Note 7: Cash and cash equivalents
Consolidated
2017
2016
Note
$’000
$’000
(a) Cash and cash equivalents
Total cash and cash equivalents
43,320
25,306
Included in the above balance:
General account balances
35,825
18,251
Online lottery customer account bal-
ances
Consolidated
2017
2016
$’000
$’000
(b) Reconciliation of Cash Flow from Operations
with Profit after Income Tax
Profit/(loss) for the year after income tax
5,640
4,670
Non-cash flows
Amortisation
Depreciation
Derecognition of subsidiary
Share of losses of associate company accounted
for using the equity method
11
7,495
7,055
43,320
25,306
Capitalised other revenue from associate com-
pany
Online lottery customer account balances are deposits and prize
winnings earmarked for payment to customers on demand.
Recognition and measurement
Cash and cash equivalents includes cash on hand, and deposits
held ‘at call’ and with original maturities of three months or less, with
financial institutions.
Impairment losses on investment
Share option expense
Other
Changes in operating assets and liabilities, net of
the effects of purchase and disposal of subsidi-
aries
Decrease/(increase) in trade receivables
Decrease/(increase) in other receivables
Decrease/(increase) in inventories
Decrease/(increase) in DTA
Decrease/(increase) in foreign exchange reserve
Increase/(decrease) in trade payables
Increase/(decrease) in other payables
Increase/(decrease) in other provisions
Increase/(decrease) in DTL
Increase/(decrease) in provision for income tax
3,504
3,501
160
242
-
(114)
-
149
186
26
94
-
168
495
9
708
95
18
(514)
167
-
173
(111)
454
134
(113)
(18)
(56)
1
(359)
-
(165)
665
154
11
(761)
Cash flow from operations
10,866
8,347
(c) Non-Cash Financing and Investing Activities
Capitalised interest at 7.00% p.a. on Promissory
Note issued by associate company (note 20)
Capitalised dividend on Series A Preferred Stock
issued by associate company (note 21)
41
73
33
78
Note 8: Trade and other receivables
Consolidated
2017
2016
Note
$’000
$’000
CURRENT
Trade receivables
Allowance for doubtful debts
Loans to key management personnel
22
Other receivables
Prepayments
95
-
95
100
170
183
548
121
-
121
-
271
176
568
All receivables that are neither past due nor impaired are with long
standing clients who have a good credit history with the Group.
JUMBO INTERACTIVE LTD ANNUAL REPORT 2017
57
Total
$’000
486
164
(20)
146
-
-
(66)
(233)
-
80
80
62
-
(41)
-
101
4
401
401
162
(20)
(201)
(1)
341
340
164
(20)
(167)
4
321
321
100
(20)
(160)
(1)
240
Past due but not impaired
These trade receivables relate to a few customers for whom there is
no recent history of default. The aging of past due but not impaired
trade receivables are as follows:
Movements in Carrying Amounts
Plant and
Leasehold Im-
equipment
provements
Consolidated Group
$’000
$’000
Up to one month
One month to two months
Two months to three months
Over three months
Consolidated
2016
2017
2016
$’000
$’000
-
-
17
-
17
-
-
6
70
76
Balance at the beginning
of year
Additions
Disposals
Depreciation/amortisa-
tion expense
Effects of movements in
foreign exchange
Carrying amount at the
end of year
As at 30 June 2017 the Group had current trade receivables of $0
2017
Balance at the beginning
of year
Additions
Disposals
Depreciation/amortisa-
tion expense
Effects of movements in
foreign exchange
Carrying amount at the
end of year
(2016: $0) that were impaired
Recognition and measurement
Trade receivables are recognised at original invoice amounts less
an allowance for uncollectible amounts, and have repayment terms
between seven and thirty days.
Collectability of trade receivables is assessed on an ongoing
basis. Debts which are known to be uncollectible are written off.
An allowance is made for doubtful debts where there is objective
evidence that the Group will not be able to collect all amounts due
according to the original terms. Objective evidence of impairment
includes financial difficulties of the debtor, default payments or
debts more than 90 days overdue. On confirmation that the trade
receivable will not be collectible the gross carrying value of the
asset is written off against the associated provision.
From time to time, the Group elects to renegotiate the terms of trade
receivables due from customers with which it has previously had a
good trading history. Such renegotiations will lead to changes in
the timing of payments rather than changes to the amounts owed
and are not, in the view of the Directors, sufficient to require the
derecognition of the original instrument.
Recognition and measurement
(i) Initial recognition and measurement
Property, plant and equipment
Property, plant and equipment is stated at historical cost, including
costs directly attributable to bringing the asset to the location and
condition necessary for it to be capable of operating in the manner
intended by management, less depreciation and any impairments.
(ii) Subsequent costs
Improvements to leasehold property are recognised as a separate
asset.
Note 9: Property, plant and equipment
All repairs and maintenance are charged to the profit or loss during
Plant and equipment–at cost
Accumulated depreciation
Leasehold improvements–at cost
Accumulated amortisation
Total property, plant and equipment
Consolidated
2017
2016
$’000
$’000
1,416
1,424
(1,176)
(1,103)
the reporting period in which they occur.
(iii) Depreciation and amortisation
Property, plant and equipment are depreciated or amortised from
the date of acquisition, or, in respect of internally generated assets,
from the time an asset is held ready for use.
240
542
(441)
101
341
321
481
Plant and equipment are depreciated using the straight-line
method to allocate their costs, net of their residual values, over their
(401)
estimated useful lives.
80
401
Leasehold improvements are amortised over the shorter of either
the unexpired term of the lease or the estimated useful life of the
improvements.
The depreciation and amortisation rates used during the year were
based on the following range of useful lives:
58
JUMBO INTERACTIVE LTD ANNUAL REPORT 2017
Plant and equipment
Leasehold improvements
Two to five years
Up to six years
The depreciation and amortisation rates are reviewed annually and
adjusted if appropriate. An asset’s carrying amount is written down
to its recoverable amount if the asset’s carrying value is greater than
its estimated recoverable amount.
(iv) Derecognition
An item of property, plant or equipment is derecognised when it is
disposed of or no future economic benefits are expected from its
use or disposal.
Gains and losses on disposal are calculated as the difference
between the net disposal proceeds and the asset’s carrying
value, and are included in profit or loss in the year that the item is
derecognised.
Note 10: Intangible assets
Goodwill
Accumulated impairment losses
Net carrying value
Intellectual property
Accumulated impairments loss
Net carrying value
Website development costs
Accumulated amortisation
Net carrying value
Software costs
Accumulated amortisation
Net carrying value
Domain names – cost
Accumulated impairment losses
Net carrying value
Other
Accumulated amortisation
Net carrying value
Total intangibles
Consolidated
2017
2016
$’000
$’000
3,687
(855)
2,832
53
(23)
30
3,687
(855)
2,832
53
(23)
30
22,957
18,635
(15,114)
(11,684)
7,843
133
(133)
-
910
(62)
848
63
(42)
21
6,951
142
(138)
4
902
-
902
39
(39)
-
11,574
10,719
SIGNIFICANT JUDGEMENTS AND ESTIMATES
Impairment assessment of goodwill and domain names
A key judgement by management with regards to the
Internet Lotteries Australia segment CGU is that the reseller
agreements with the Tatts Group will continue. The key
assumptions used for value-in-use calculations are discussed
further in note 10(b). Goodwill is tested for impairment half
yearly.
Impairments assessment of other intangible assets
The Group considers half yearly whether there have been any
indicators of impairment and then tests whether non-current
assets have incurred any impairment in accordance with the
accounting policy.
Estimated useful life of website development costs
Management estimates the useful of intangible assets-
website development costs based on the expected period of
time over which economic benefits from the use of the asset
will be derived. Management reviews useful life assumptions
on an annual basis having given consideration to variables
including historical and forecast usage rates, technological
advancements and changes in legal and economic conditions.
The amortisation period relating to the website developments
costs is five years from 1 July 2015 and three years prior to that.
Domain names
Domain names have an indefinite useful life because:
— There is no time limit on the expected usage of the domain
names;
— Licence renewal is automatic on payment of the renewal
fee without satisfaction of further renewal conditions;
— The cost is not significant when compared with future
economic benefits expected to flow from renewal. As such,
the useful life can include the renewal period; and
— Since there is no limit on the number of times the licence
can be renewed this leads to the assessment of “indefinite”
useful life.
This assessment has been based on:
— Technical, technological, commercial and other types of
obsolescence;
— The stability of the industry in which the asset operates
and changes in the market demand for the products and/or
services output from the asset;
— The level of maintenance expenditure required to obtain the
expected future economic benefits from the asset and the
entity’s ability and intention to reach such a level; and
— The period of control over the asset and legal or similar
limits on the use of the asset.
JUMBO INTERACTIVE LTD ANNUAL REPORT 2017
59
(a) Movements in carrying values
Consolidated Group
Goodwill
property
costs
Software
names
$’000
$’000
$’000
$’000
$’000
Other
$’000
Total
$’000
Intellectual
development
Domain
Website
2016
Balance at the beginning of the year
2,832
30
Additions acquired
Additions internally developed
Amortisation charge
Effects of movements in foreign exchange
Closing value at 30 June 2016
2017
Balance at the beginning of the year
Additions acquired
Additions internally developed
Disposals on derecognition of subsidiary
Impairments
Amortisation charge
Effects of movements in foreign exchange
Amortisation on derecignition of subsidiary
-
-
-
-
2,832
2,832
-
-
-
-
-
-
-
-
-
-
-
30
30
-
-
-
-
-
-
-
5,604
-
4,795
(3,433)
(15)
6,951
6,951
-
4,330
-
-
(3,430)
(8)
-
Closing value at 30 June 2017
2,832
30
7,843
6
-
-
(2)
-
4
4
-
-
(9)
-
(1)
-
6
-
890
12
-
-
-
902
902
8
-
-
(62)
-
-
-
848
-
-
-
-
-
-
-
110
-
(85)
-
(24)
-
20
21
9,362
12
4,795
(3,435)
(15)
10,719
10,719
118
4,330
(94)
(62)
(3,455)
(8)
26
11,574
(b) Impairment testing of Cash-Generating Units containing
intangible assets would still exceed the carrying amount. Should
goodwill or intangible assets with indefinite useful lives
Goodwill and domain names have been allocated to the
the lottery reseller agreements be cancelled or not be extended
for further periods when they expire, an impairment loss would be
Australian Internet Lottery cash-generating unit which is an
recognised up to the maximum carrying value of $11,298,000.
operating segment.
The recoverable amount of the cash-generating unit is based on
a value-in-use calculation using a discounted cash flow model
based on a one year projection approved by management and
extrapolated over a five year period using a steady rate, together
with a terminal value. The growth rate used in these projections
does not exceed the historical growth rate of the relative cash-
generating unit.
Key assumptions used for value-in-use calculation of the CGU are
as follows:
— Annual growth rate of 3% (2016: 3%);
— Terminal growth rate of 3% (2016: 3%);
— Discount rate of 17% being the calculated weighted average cost
of capital based on the capital asset pricing model (2016: 17%);
and
Recognition and measurement
Goodwill
Goodwill represents the excess of the cost of the business
combination over the Group’s share of the net fair value of
the identifiable assets, liabilities and contingent liabilities acquired.
Goodwill is not amortised but is measured at cost less any
accumulated impairment losses. Goodwill is tested for impairment
annually, or more frequently if events or changes in circumstances
indicate that the carrying value may be impaired. Gains and losses
on the disposal of an entity include the carrying amount of goodwill
relating to the entity sold.
Goodwill acquired is allocated to each of the cash-generating units
expected to benefit from the combination’s synergies. Impairment
is determined by assessing the recoverable amount of the cash-
generating unit to which the goodwill relates. Impairment losses on
— Reseller agreements will be renewed as and when they expire.
goodwill cannot be reversed.
Management determined projections based on past performance
Intellectual Property
and its expectations for the future. The growth rate used is
Acquired intellectual property is stated at cost, and is measured at
consistent with those used in industry reports. The discount rate
cost less any accumulated impairment losses. Intellectual property
used is pre-tax and is specific to the relevant segment in which the
is considered to have an indefinite useful life and is not amortised.
unit operates.
The carrying value of intellectual property is tested for impairment
annually, or more frequently if events or changes in circumstances
Internet Lotteries Australia CGU is estimated to be $80,576,000
indicate that the carrying value may be impaired. Impairment losses
which exceeds the carrying amount of goodwill, domain names and
are recognised in profit or loss. Any reversal of impairment losses of
other intangible assets by $69,278,000. If a discount rate of 20%
intellectual property is recognised in profit or loss.
and growth rate of 0% was used instead of 17% and 3% respectively,
the recoverable amount of goodwill, domain names and other
60
JUMBO INTERACTIVE LTD ANNUAL REPORT 2017
Website Developments Costs
unpaid. These amounts are unsecured and have seven to 30 day
Expenditure during the research phase of a project is recognised as
payment terms.
an expense when incurred. Development costs are capitalised only
when technical feasibility studies identify that the project will deliver
future economic benefits and these benefits can be measured
reliably.
Development costs have a finite life and are amortised on a
straight-line basis matched to the future economic benefits over the
useful life of the project of three years up to 30 June 2015 and five
years from 1 July 2015.
Domain Names
Acquired domain names are stated at cost and are considered to
have indefinite useful lives and are not amortised. The useful life is
assessed annually to determine whether events or circumstances
continue to support an indefinite useful life assessment. The
carrying value of domain names is tested semi-annually at each
reporting date for impairment.
Impairment of assets
Assets are tested for impairment at the end of each reporting period
or whenever events or changes in circumstances indicate that the
carrying amount may not be recovered.
An impairment loss is recognised for the amount by which the
asset’s carrying amount exceeds its recoverable amount. For the
purposes of assessing impairment, assets are grouped at the lowest
levels for which there are separately identifiable cash flows which
are largely independent of the cash flows from other assets or
groups of assets (CGUs).
The recoverable amount is the greater of the asset’s fair value
less costs to sell and value-in-use. In assessing value-in-use, the
(i) Employee benefits
Liabilities for wages and salaries, including non-monetary benefits,
annual leave and accumulating sick leave expected to be settled
within 12 months of the end of the reporting period are recognised
in other liabilities in respect of employees’ services rendered up
to the end of the reporting period and are measured at amounts
expected to be paid when the liabilities are settled. Liabilities for
non-accumulating sick leave are recognised when leave is taken
and measured at the actual rates paid or payable.
(ii) Superannuation
Employees have defined contribution superannuation funds.
Contributions are recognised as expenses as they become payable.
Prepaid contributions are recognised as an asset to the extent that a
cash refund or a reduction in future payments is available.
(iii) Termination benefits
Termination benefits are payable when employment is terminated
before the retirement date, or when an employee accepts voluntary
redundancy in exchange for these benefits. The Group recognises
termination benefits as an expense and a liability on the earlier of
when the Group:
— Can no longer withdraw the offer and the benefits; and
— Recognises costs for restructuring under AASB 137 Provisions,
Contingent Liabilities and Contingent Assets and which involves
the payment of termination benefits.
Benefits falling due more than 12 months after the end of the
reporting period are discounted to present value.
estimated cash flows are discounted to their present value using a
Note 12: Employee benefit obligations
pre-tax discount rate that reflects market assessments of the time
value of money and the specific risks of the asset.
Impairment losses are recognised in the profit or loss. Non-financial
assets other than goodwill that incur impairment are reviewed for
possible reversal of impairment at each reporting period.
Note 11: Trade and other payables
CURRENT
Long service leave
NON-CURRENT
Consolidated
Long service leave
2017
2016
Note
$’000
13,009
$’000
12,239
Total trade and other payables
Included in the above:
Trade creditors
GST payable
Sundry creditors and accrued expenses
Employee benefits
Customer funds payable
7
1,029
378
3,312
795
5,514
7,495
1,020
266
3,156
742
5,184
7,055
13,009
12,239
Balance at the beginning of the year
Provisions made during the year
Balance at the end of the year
Consolidated
2017
2016
$’000
$’000
293
281
277
570
271
552
Make good pro-
vision
$’000
-
24
24
Recognition and measurement
Trade and other payables represent liabilities for goods and
Recognition and measurement
(i) Long service leave
Liabilities for long service leave are not expected to be settled
wholly within 12 months after the end of the reporting period. They
services provided to the Group prior to the year end and which are
are recognised as part of the provision for employee benefits and
JUMBO INTERACTIVE LTD ANNUAL REPORT 2017
61
measured as the present value of expected future payments to
be made in respect of services provided by employees to the end
of the reporting period. Consideration is given to expected future
salaries and wages levels, experience of employee departures and
periods of service. Expected future payments are discounted using
corporate bond rates at the end of the reporting period with terms
to maturity and currency that match, as closely as possible, the
estimated future cash outflows.
62
JUMBO INTERACTIVE LTD ANNUAL REPORT 2017
Capital and financial risk
management
IN THIS SECTION
Capital and financial risk management provides information about
the capital management practices of the Group and shareholder
returns for the year, discusses the Group’s exposure to various
financial risks, explains how these affect the Group’s financial
position and performance and what the Group does to manage
these risks.
Note 13: Capital risk management
Note 14: Dividends
Note 15: Equity and reserves
Note 16: Borrowings
Note 17: Financial risk management
Page 63
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JUMBO INTERACTIVE LTD ANNUAL REPORT 2017
63
Note 13: Capital risk management
(b) Dividends not recognised at the end of the reporting period
Total borrowings
Less: cash and cash equivalents
Net debt
Total equity
Total capital
Gearing ratio
Consolidated
2017
2016
Note
$’000
$000
16
7
-
-
(35,825)
(18,251)
-
-
15
45,492
24,696
Consolidated
2017
2016
$’000
$’000
Special fully franked dividend of 15.0 (2016:nil)
cent per share franked at the tax rate of 30%
was declared by the directors on 12 July 2017
and paid on 8 August 2017
7,691
-
In addition to the above dividends, since year
45,492
24,696
end the Directors have recommended the
0%
0%
payment of a final 2017 fully franked ordi-
The Group’s objective is to maintain a strong capital base so as to
nary dividend of 5.0 (2016: 5.0) cent per share
franked at the rate of 30% (2016: 30%). The
aggregate amount of the proposed dividend
maintain investor, creditor and market confidence and sustain future
expected to be paid on 22 September 2017, but
development of the business.
not recognised as a liability at year end, is:
2,564
2,203
The Group monitors its capital structure by reference to its gearing
ratio. This ratio is calculated as total net debt divided by total
(c) Franked dividends
capital. Net debt is calculated by as total borrowings less cash and
cash equivalents (up to a minimum of zero). Total capital is net debt
plus total equity. There were no changes in the Group’s approach to
capital management during the year.
Consolidated
2017
2016
$’000
$’000
Note 14: Dividends
(a) Ordinary shares
Final fully franked ordinary dividend of 5.0
(2015: 1.5) cent per share franked at the tax rate
of 30% (2015: 30%)
Interim fully franked ordinary dividend of 3.5
(2016: 2.0) cent per share franked at the tax rate
The franked portions of dividends paid and
recommended after 30 June 2017 will be franked
out of existing franking credits or out of franking
credits arising from the payment of income tax in
Consolidated
the year ending 30 June 2017.
2017
2016
Franking credits available for subsequent finan-
$’000
$’000
cial years based on a tax rate of 30% (2016: 30%):
12,173
9,981
2,203
881
as at the reporting date adjusted for:
The above amounts represent the balance of the franking account
of 30% (2016: 30%)
Total dividends paid or provided for
1,542
3,745
663
1,544
Dividends paid in cash or satisfied by the issue
of shares under the dividend reinvestment plan
during the years ended 30 June 2017 and 30
June 2016 were as follows:
Paid in cash
Satisfied by issue of shares
3,745
1,544
-
-
3,745
1,544
(i) Franking credits that will arise from the payment of the amount of
the provision for income tax, and
(ii) Franking debits that will arise from the payment of dividends
recognised as a liability at the reporting date.
The impact on the franking account of the dividends paid and
recommended by the directors since the end of the reporting period,
but not recognised as a liability at the reporting date, will be a
reduction in the franking account of $4,395,000 (2016: $944,000).
Note 15: Equity and reserves
(a) Contributed equity
Issued shares
Consolidated
Consolidated
2017
2017
2016
2016
Shares
$’000
Shares
$’000
Ordinary shares –
fully paid
50,674,265
45,492
44,064,579
29,827
64
JUMBO INTERACTIVE LTD ANNUAL REPORT 2017
Movements in ordinary share capital
Details
Opening balance 1 July 2015
On-market share buyback
Balance 30 June 2016
Opening balance 1 July 2016
Off-market share issue to Tatts
Consolidated
Shares
44,202,560
(137,981)
44,064,579
44,064,579
6,609,686
$’000
29,970
(143)
29,827
29,827
15,665
Balance 30 June 2017
50,674,265
45,492
Available-for-sale financial asset reserve
The available-for-sale financial asset reserve comprises changes in
the fair value of available-for-sale investments which are recognised
in other comprehensive income including when investments are sold
or reclassified.
Note 16: Borrowings
(a) Facilities with Banks
Consolidated
2017
2016
Note
$’000
$’000
550
300
550
300
(426)
(295)
129
(405)
(295)
150
Issued capital represents the amount of consideration received for
securities issued or paid for securities bought back by Jumbo.
Costs directly attributable to the issue of new shares or options are
deducted from the consideration received, net of income taxes.
(b) Ordinary shares
Credit facility
Bank guarantees
Commercial card
Facilities utilised
Ordinary shares have no par value and the company does not have
Bank guarantees
27
a limited amount of authorised share capital.
Ordinary shareholders are entitled to participate in dividends and
the proceeds on winding up of the Company in proportion to the
number of and amounts paid on the shares held. Every ordinary
shareholder present at a meeting in person or by proxy is entitled to
one vote on a show of hands and upon a poll each share is entitled
to one vote.
(c) Options
Commercial credit card
Amount available
The facilities are provided by Australia and New Zealand Banking
Group Limited subject to general and specific terms and conditions
being set and met periodically.
There were no outstanding interest bearing liabilities for the
financial year ended 2017 (2016: nil).
(i) Details of the employee option plan, including details of options
issued, exercised and lapsed during the financial year and options
(b) Assets pledged as security
outstanding at the end of the financial year are set out in note 24:
The bank facilities are secured by a fixed and floating charge over
Share-Based Payments.
(ii) For information relating to share options issued to third parties
during the financial year, refer to note 24: Share-Based Payments.
all the assets of the Group.
(c) Defaults and breaches
There have been no defaults or breaches during the financial year
ended 30 June 2017.
(d) Reserves
Nature and purpose of reserves
Note 17: Financial risk management
Profits appropriation reserve
The profits appropriation reserve records accumulated profits
The Group has exposure to a variety of financial risks including
available for distribution at the Directors’ discretion. In June 2010,
market risk (foreign exchange risk and interest rate risk), credit
there was a change in the test for payment of dividends from a ‘profit
risk and liquidity risk. Risk management is performed by a central
test’ to ‘solvency test’ (s254T Corporations Act 2001), and the profits
Treasury function on behalf of the Group under Treasury Policies
appropriation reserve was established to ensure the accumulated
approved by the Board annually. Speculative activities are strictly
losses up until then were ‘ring-fenced’ and that future profits were
prohibited. Compliance with the Treasury Policies is monitored on
available for distribution, in particular for dividend payments.
an ongoing basis through regular reporting to the Board.
Share-based payments reserve
The share-based payments reserve records items recognised as
(a) Market risk
Market risk is the risk that adverse movements in foreign exchange
expenses on the fair value of share-based remuneration provided to
and interest rates will affect the Group’s financial performance
employees. This reserve can be reclassified as retained earnings if
or the value of its holdings of financial instruments. The Group
options lapse.
Foreign currency translation reserve
The foreign currency translation reserve records the foreign
measures market risk using cash flow at risk. The objective of risk
management is to manage the market risks inherent in the business
to protect profitability and return on assets.
exchange differences arising on translation of investments in foreign
(i) Foreign exchange risk
controlled subsidiaries. Amounts are reclassified to profit or loss
when an entity is disposed of.
Exposure to foreign exchange risk
Foreign exchange risk arises from commercial transactions
(transactional risks) and recognised assets and liabilities
JUMBO INTERACTIVE LTD ANNUAL REPORT 2017
65
(translational risks) that are denominated in or related to a currency
(b) Credit Risk
that is not in the Group’s functional currency. The Group’s foreign
Credit risk is the risk of financial loss to the Group if a customer or
exchange risk relates largely to the Fiji Dollar (FJ$). The foreign
counterparty to a financial instrument fails to meet its contractual
exchange risk to the Euro (€) has ceased with the discontinued
obligations. Credit risk arises principally from cash and cash
operation in Germany (see note 6 for details).
equivalents and trade and other receivables.
Risk management
Treasury monitor the Group’s exposure regularly and utilise the spot
market to buy and sell specified amounts of foreign currency to
manage this risk. Transactional risks are managed predominantly
within the Group’s pricing policies through the regular review of
prices in foreign currency.
The maximum exposure to credit risk, excluding the value of any
collateral or other security, at the end of the reporting period
to recognised financial assets, is the carrying amount, net of
any provisions for impairment of those assets, as disclosed in
the statement of financial position and notes to the financial
statements. Assets are pledged as security as detailed in note 16(b).
Sensitivity on foreign exchange risk
Any movement in foreign exchange rates would not be significant to
the Group.
(ii) Interest rate risk
Exposure to interest rate risk
The Group’s has interest bearing assets and therefore its income
and operating cash flows are subject to changes in market interest
rates.
Credit risk is managed on a Group basis through the Board
approved Treasury Policies and is reviewed regularly by the Board.
The Board monitors credit risk by actively assessing the rating
quality and liquidity of counter parties:
— Surplus funds are only invested with banks and financial
institutions with a Standard and Poor’s rating of no less than A
and to a limited amount at any one financial institution:
— All potential customers are rated for credit worthiness taking into
account their size, market position and financial standing, and
At the reporting date, the Group has exposure to the following
the risk is measured using debtor aging analysis; and
interest rates:
— Customers that do not meet the Group’s strict credit policies may
only purchase in cash or using recognised credit cards.
Consolidated
2017
2016
(c) Liquidity risk
Rate1
%
$’000
1.93
43,320
43,320
Rate1
%
2.85
$’000
19,294
19,294
Liquidity risk is the risk that the Group will encounter difficulties in
meeting the obligations associated with its financial liabilities. The
Group manages liquidity risk by monitoring forecast cash flows and
ensuring that adequate cash balances are maintained to meet its
liabilities when due.
The following table summarises the contractual timing of
undiscounted cash flows of financial instruments:
Deposits
Net exposure to
interest rate risk
1weighted average interest rate
Risk management
The Group manages cash flow interest rate risk by using term
deposits with banks for various periods. The weighted average
maturity of outstanding term deposits is approximately 20 days
(2016: 33 days). Term deposits currently in place cover approximately
84% (2016: 79%) of the total cash and cash equivalent balances.
Sensitivity on market risks
The following table summarises the gain/(loss) impact of a 200
basis points (bps) interest rate change on net profit and equity
before tax, with all other variables remaining constant, as at 30 June
2017:
Consolidated
Effect on profit
Effect on equity
(before tax)
(before tax)
2017
2016
2017
2016
866
506
866
506
(866)
(506)
(866)
(506)
200 bps movement in
interest rates
200 bps increase in
interest rates
200 bps decrease in
interest rates
2017
Financial
assets
Cash and
cash equiva-
lents
Trade and
other receiv-
ables
Financial
liabilities
Trade and
other paya-
bles
Between 6
Total
Less than
months and
Between 1
Over 5
carrying
6 months
1 year
and 5 years
years
amount
$’000
$’000
$’000
$’000
$’000
43,320
-
448
43,768
100
100
13,009
13,009
-
-
-
-
-
-
-
-
-
-
-
-
43,320
548
43,868
13,009
13,009
66
JUMBO INTERACTIVE LTD ANNUAL REPORT 2017
Between 6
Total
Less than
months and
Between 1
Over 5
carrying
6 months
1 year
and 5 years
years
amount
$’000
$’000
$’000
$’000
$’000
25,306
-
568
25,874
100
100
12,239
12,239
-
-
-
-
-
-
-
-
-
-
-
-
25,306
668
25,974
12,239
12,239
2016
Financial
assets
Cash and
cash equiva-
lents
Trade and
other receiv-
ables
Financial
liabilities
Trade and
other paya-
bles
(d) Fair value hierarchy
The fair value of cash, cash equivalents and non-interest bearing
financial assets and liabilities approximates their carrying value due
to their short term maturity.
The fair value of financial instruments that are not traded in an
active market (for example, unlisted investments) are determined
using valuation techniques. The valuation techniques maximise the
use of observable market data where possible and rely as little as
possible on entity specific estimates.
The Group measures and recognises the following assets and
liabilities at Fair Value through Other Comprehensive Income on a
recurring basis:
— Available-for-sale financial assets
The fair value of unlisted equity securities is estimated by
discounting the estimated future cash flows at the estimated
weighted average cost of capital.
AASB 13 Fair Value Measurement requires disclosure of fair value
measurements by level in the fair value measurement hierarchy as
follows:
— Level 1 - the instrument has quoted prices (unadjusted) in active
markets for identical assets or liabilities
— Level 2 - a valuation technique is used using inputs other than
quoted prices within Level 1 that are observable for the financial
instrument, either directly (i.e. as prices), or indirectly (i.e. derived
from prices)
— Level 3 - a valuation technique is used using inputs that are not
observable based on observable market data (unobservable
inputs).
The carry values of loans to key management personnel at variable
interest rate approximates its fair value.
JUMBO INTERACTIVE LTD ANNUAL REPORT 2017
67
Group structure
IN THIS SECTION
Group structure provides information about particular subsidiaries
and associates and how changes have affected the financial
position and performance of the Group.
Note 18: Controlled subsidiaries
Note 19: Parent disclosures
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68
JUMBO INTERACTIVE LTD ANNUAL REPORT 2017
Note 18: Controlled subsidiaries
The Group’s subsidiaries that were controlled during the year and
When the Group ceases to have control, joint control or significant
influence, any retained interest in the entity is remeasured to its fair
prior years are set out below:
Percentage
Ownership
Country of Incor-
2017
2016
poration
%
%
Direct subsidiaries of the ultimate
parent entity Jumbo Interactive
Limited:
Benon Technologies Pty Ltd
TMS Global Services Pty Ltd
Jumbo Ventures Pty Ltd1
Intellitron Pty Ltd
Jumbo Lotteries Pty Ltd
Jumbo Interactive Asia Pty Ltd
Australia
Australia
Australia
Australia
Australia
Australia
Cook Islands Tattslotto Pty Ltd
Cook Islands
Jumbo Interactivo de Mexico SA
de CV
Jumbo Interactive GmbH2
Mexico
Germany
1the company was de-registered 17 August 2016
100
100
-
100
100
100
1
100
-
100
100
100
100
100
100
1
100
100
2the company was placed in voluntary administration 31 March 2017
value with the change in carrying amount recognised in the profit
or loss. This fair value becomes the initial carrying value for the
purposes of subsequently accounting for the retained interest as
an associate, joint venture or –available-for-sale financial asset. In
addition, any amount previously recognised in other comprehensive
income in respect of that entity, are accounted for as if the Group
had directly disposed of the relative assets or liabilities. This may
mean that amounts previously recognised in other comprehensive
income are reclassified to profit or loss.
If the ownership interest in an associate or a joint venture is reduced,
but significant influence or control is retained, only a proportionate
share of the amounts previously recognised in other comprehensive
income are reclassified to profit or loss, where appropriate.
Note 19: Parent disclosures
The parent and ultimate parent entity within the Group is Jumbo
Interactive Limited.
(a) Summary financial information
The individual financial statements for the parent entity show the
following aggregated amounts as follows:
Subsidiaries of TMS Global Ser-
vices Pty Ltd:
TMS Global Services (NSW) Pty
Ltd
Australia
TMS Global Services (VIC) Pty Ltd
Australia
TMS Fiji Limited
TMS Fiji On-Line Limited
Fiji
Fiji
TMS Global Services (PNG)
Limited
Papua New
Guinea
Cook Islands Tattslotto Pty Ltd
Cook Islands
Jumbo Lotteries USA Limited3
United States of
America
100
100
100
100
100
99
-
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
100
100
100
100
100
99
Issued capital
2017
$’000
17,471
24,164
41,635
641
7,046
7,687
33,948
45,492
2016
$’000
4,001
9,822
13,823
1,043
10,218
11,261
2,562
29,970
100
Retained earnings/(accumulated losses)
(26,037)
(26,037)
Profits appropriation reserve
Jumbo Lotteries North America,
Inc.
United States of
America
100
100
Other reserves
3the company was de-registered 27 February 2017
Total shareholders’ equity
Principles of consolidation
The consolidated financial statements comprise the financial
statements of Jumbo Interactive Limited and its subsidiaries at 30
June each year (‘the Group’). Subsidiaries are entities over which
the Group has control. The Group has control over an entity when
the Group is exposed to, or has rights to, variable returns from its
involvement with the entity, and has the ability to use its power to
affect those returns. Subsidiaries are consolidated from the date on
which control is transferred to the Group and are deconsolidated
from the date on which control ceases.
All intercompany balances and transactions, including unrealised
profits arising from intragroup transactions have been eliminated.
Unrealised losses are also eliminated unless the transaction
provides evidence of the impairment of the asset transferred.
Changes in ownership interests
Profit for the year
Total comprehensive income for the year
(b) Guarantees
The parent entity has provided guarantees to third parties in relation
to the obligations of controlled entities in respect to banking
facilities. The guarantees are for the terms of the facilities per note
16: Borrowings, and are ongoing.
The parent entity has also provided a guarantee in favour of
Tattersalls in respect of payment obligations of a subsidiary
company in terms of the Agent reseller agreements, between its
subsidiary and the favouree.
(c) Contractual commitments
15,736
(1,243)
33,948
19,317
19,317
164
(1,392)
2,562
925
925
JUMBO INTERACTIVE LTD ANNUAL REPORT 2017
69
There were no contractual commitments for the acquisition of
property, plant and equipment entered into by the parent entity at
30 June 2017 (2016: $0).
(d) Contingent liabilities
The parent entity has no contingent liabilities other than the
guarantees referred to above.
Recognition and measurement
The financial information for the parent entity, Jumbo Interactive
Limited, has been prepared on the same basis as the consolidated
financial statements, except as set out below:
(i) Investments in subsidiaries and associates
Investments in subsidiaries and associates are accounted for
at cost in the financial statements of Jumbo Interactive Limited.
Dividends received from associates are recognised in the parent
entity’s income statement, rather than being deducted from the
carrying amount of these investments.
(ii) Tax consolidation
Jumbo Interactive Limited and its wholly owned subsidiaries have
implemented the tax consolidation legislation for the whole of the
financial year. Refer to note 4 for details.
70
JUMBO INTERACTIVE LTD ANNUAL REPORT 2017
Other information
IN THIS SECTION
Other information provides information on other items which require
disclosure to comply with Australian Accounting Standards and
other regulatory pronouncements however are not consider critical
in understanding the financial performance or position of the Group.
Note 20: Investments accounted for using the Equity Method
Note 21: Available-for-sale financial assets (non-current)
Note 22: Related party transactions
Note 23: Key Management Personnel compensation
Note 24: Share-based payments
Note 25: Remuneration of auditors
Note 26: Summary of other significant accounting policies
Page 71
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JUMBO INTERACTIVE LTD ANNUAL REPORT 2017
71
Note 20: Investments accounted for using the Equity
Method
Interest in
Associate –
Lotto Points
Place of busi-
Plus Inc.,
ness/ Country of
USA
Incorporation
2017
2016
2017
2016
%
%
$’000
$’000
Unlisted shares
Lotto Points
Plus Inc
New York, USA
30.9
34.8
Net investment in associate company
-
-
-
-
SIGNIFICANT JUDGEMENTS
A key judgement by management is the uncertainty of future
economic benefits of both Sorteo Games Inc and Lottery
Rewards Inc
Recognition and measurement
Non-current assets are classified as held-for-sale if their carrying
amount will be recovered principally through a sale transaction,
rather than through continuing use. After initial recognition at cost,
they are measured at fair value with gains and losses recognised
in other comprehensive income (available-for-sale investments
reserve), until the investment is disposed of, at which time the
cumulative gain or loss previously recognised in the available-for-
sale reserve may be transferred within equity.
Lotto Plus Inc is an investment company, with its only investment
being a 21.9% shareholding (non-voting) in Lottery Rewards Inc., USA
Note 22: Related party transactions
(see note 21(b) for details).
Recognition and measurement
Associates are entities over which the Group has significant
influence but not control or joint control. Associates are accounted
for in the parent entity financial statements at cost and the
consolidated financial statements using the equity method
of accounting. Under the equity method of accounting, the
Group’s share of post-acquisition profits or losses of associates
is recognised in consolidated profit or loss and the Group’s share
of post-acquisition other comprehensive income of associates
is recognised in consolidated other comprehensive income. The
cumulative post-acquisition movements are adjusted against
the carrying amount of the investment. Dividends received from
associates are recognised in the parent entity’s profit or loss,
Parent entity
Jumbo Interactive Limited is the parent entity.
Subsidiaries
Interests in subsidiaries are set out in note 18.
Key management personnel
Disclosures relating to key management personnel are set out in
note 23 and the remuneration report in the directors’ report.
Transactions with related parties
All transactions between related parties are on normal commercial
terms and conditions at market rates and no more favourable than
those available to other parties unless otherwise stated.
while they reduce the carrying amount of the investment in the
The following transactions occurred with related parties:
consolidated financial statements.
When the Group’s share of post-acquisition losses in an associate
exceeds its interest in the associate (including any long-term
interests that form part of the Group’s net investment in the
associates), the Group does not recognise further losses unless
it has obligations to, or has made payments, on behalf of the
associate.
The financial statements of the associates are used to apply the
equity method. The end of the reporting period of the associates
and the parent are identical and both use consistent accounting
policies.
Note 21: Available-for-sale financial assets (non-current)
Unlisted securities comprise investments in:
(a) Sorteo Games Inc., USA. The Company owns 7% of the issued
share capital of Sorteo Games Inc. Shares in Sorteo Games Inc
are carried at fair value of $nil (2016: $nil).
(b) Lottery Rewards Inc., USA. The Company owns 7.0% of the issued
share capital of Lottery Rewards Inc – 0.2% directly and 6.8%
indirectly (through Lotto Points Plus Inc – see note 20 for details).
Shares in Lottery Rewards Inc are carried at fair value of $nil
(2016: n/a).
Elegant Properties Pty Ltd and Rosch Realty
Pty Ltd are solely owned by Mr Mike Rosch,
the father of Mr Mike Veverka, the CEO and
executive director of the Company. Elegant
Properties Pty Ltd rented an office from the
Group and provided services during the finan-
cial year and Rosch Realty Pty Ltd provided
an agent service during the previous financial
year.
Office rent received
Services paid
Consolidated
2017
$
2016
$
7,211
6,600
-
14,097
Consolidated
2017
$
2016
$
Mrs Julie Rosch, the mother of Mr Mike Vever-
ka, the CEO and Executive Director of the
Company, is engaged as a full time employee
within the Group.
Salary and superannuation
82,441
82,125
72
JUMBO INTERACTIVE LTD ANNUAL REPORT 2017
Receivables from related parties
The following balances are outstanding at the reporting date in
Employee option plan
The Jumbo Interactive Limited Employee Option Plan was ratified
relation to transactions with related parties:
at the annual general meeting held on 28 October 2008. Employees
are invited to participate in the scheme from time to time. Options
Consolidated
vest when the volume weighted average share price over five
2017
$
2016
$
consecutive trading days equals the exercise price and provided
the staff member is still employed by the Group. When issued on
exercise of options, the shares carry full dividend and voting rights.
Trade receivables from Elegant Properties Pty
Ltd (director-related entity of Mike Veverka)
1,573
1,210
Options granted carry no dividend or voting rights.
Loans to/from related parties
Advances to – key management
personnel
Consolidated
2017
2016
$
$
Third party options
Options have been issued to an Australian based contractor as
part of the remuneration for their services to incentivise them
to procure a commercially acceptable transaction in Australia.
Options vest when the volume weighted average share price over
five consecutive trading days equals the exercise price and provided
an acceptable transaction has been brought to the Company with
100,000
100,000
terms and conditions acceptable to the Company by 31 December
2017 failing which the options will lapse.
On 7 March 2016, Jumbo Interactive Ltd made a loan to KMP Brad
Fair value of options granted
Board for an amount of $100,000. The loan bears interest at the
Commonwealth Bank of Australia’s Home Loan Standard Variable
Rate, 5.22% p.a. as at the end of the reporting period, plus a margin
of 2.00% p.a., payable monthly in arrears. The capital balance is
repayable by 7 March 2018.
The loan outstanding at the end of the current year is unsecured
(with insurance cover over the life of the borrower) and repayable by
7 March 2018.
Employees
There were no options granted during the 2017 financial year.
The weighted average fair value of options granted during the
2016 financial year was 5.9 cents. The fair value at grant date
was determined by an independent valuer using the Monte Carlo
Simulation option pricing model that takes into account the share
price at grant date, exercise price, expected volatility, option life,
expected dividends, and the risk free rate. The inputs used for the
Monte Carlo Simulation option pricing model for options granted
Interest charged and received during the year was $7,236 (2016: nil).
during the year ended 30 June 2016 were as follows:
Options are granted for no consideration, have a five year life, and are
exercisable when the five day volume weighted average price equals
the exercise price
Grant date
14 Jan 2016 18 Nov 2015
2016
Share price at grant date
Exercise price
Expected volatility
Expected dividend yield
Risk free rate
$0.975
$1.75
$0.98
$1.75
48.399%
48.087%
3.08%
2.12%
3.06%
2.35%
Note 23: Key Management Personnel compensation
Consolidated
2017
$
2016
$
Short term employee benefits
1,799,152
1,667,998
Post employment benefits
Other long term benefits
Termination benefits
Share based payments
135,870
138,826
18,453
35,154
174,538
-
106,296
103,503
2,234,309
1,945,482
Further information regarding the identity of key management
personnel and their compensation can be found in the Audited
Remuneration Report contained in the Directors’ Report.
Note 24: Share-based payments
Share-based payment expenses
recognised during the financial year
Consolidated
2017
$
2016
$
Options issued under employee option plan
130,989
133,890
Options issued to third parties for services
received
17,863
-
148,852
133,890
JUMBO INTERACTIVE LTD ANNUAL REPORT 2017
73
Third parties
The weighted average fair value of options granted during the
year was 2.0 cents (there were no options granted during the 2016
financial year). The fair value at grant date was determined by an
independent valuer using the Monte Carlo Simulation option pricing
model that takes into account the share price at grant date, exercise
price, expected volatility, option life, expected dividends, and the
risk free rate. The inputs used for the Monte Carlo Simulation option
pricing model for options granted during the year ended 30 June
2017 were as follows:
Grant date
Share price at grant date
Exercise price
Expected volatility
Expected dividend yield
Risk free rate
2017
2 Feb 2017
$1.650
$2.250
56.950%
4.24%
2.20%
Expected volatility was determined based on the historic volatility
(based on the remaining life of the option), adjusted for any
expected changes to future volatility based on publicly available
information.
Details of options outstanding during the financial year are as
follows:
2017
Grant date
price
Expiry date
year
ing the year
year
ing the year
year
end of year
end of year
Exercise
beginning of
Granted dur-
ed during the
Exercised dur-
during the
Balance at
Exercisable at
Balance at
Lapsed/ Forfeit-
Expired
KMP and staff options
3 Sep 2013
6 Nov 2013
18 Nov 2015
14 Jan 2016
Third party options
$4.00
$4.00
$1.75
$1.75
3 Sep 2018
1,800,000
6 Nov 2018
400,000
18 Nov 2020
1,700,000
14 Jan 2021
500,000
-
-
-
-
2 Feb 2017
$2.25
2 Feb 2022
-
200,000
(400,000)
-
(100,000)
-
-
4,400,000
200,000
(500,000)
-
-
-
-
-
-
-
-
-
-
-
-
1,400,000
400,000
1,600,000
500,000
200,000
4,100,000
-
-
-
-
-
2016
Grant date
price
Expiry date
year
ing the year
year
ing the year
year
end of year
end of year
Exercise
beginning of
Granted dur-
ed during the
Exercised dur-
during the
Balance at
Exercisable at
Balance at
Lapsed/ Forfeit-
Expired
KMP and staff options
3 Sep 2013
6 Nov 2013
18 Nov 2015
14 Jan 2016
$4.00
$4.00
$1.75
$1.75
3 Sep 2018
2,100,000
6 Nov 2018
400,000
-
-
18 Nov 2020
14 Jan 2021
-
-
1,700,000
500,000
(300,000)
-
-
-
2,500,000
2,200,000
(300,000)
-
-
-
-
-
-
-
-
-
-
1,800,000
400,000
1,700,000
500,000
4,400,000
-
-
-
-
-
The weighted average exercise price for the year ended 30 June 2017 was $2.78 (2016: $3.18).
The weighted average remaining contractual life of share options outstanding at 30 June 2017 was 2 years 6 months (2016: 3 year 4 months).
74
JUMBO INTERACTIVE LTD ANNUAL REPORT 2017
Recognition and measurement
The fair value of options granted to Directors, employees and
Note 25: Remuneration of auditors
consultants is recognised as an expense with a corresponding
During the year the following fees were paid or payable for services
increase in equity (share based payments reserve). The fair value
provided by the auditor of the parent entity and its related practices:
is measured at grant date and recognised over the period during
which the employees or consultants become unconditionally
entitled to the options. Fair value is determined by an independent
valuer using the Black-Scholes, Bi-nomial, and Monte Carlo
Simulation option pricing models as appropriate. In determining
fair value, no account is taken of any performance conditions other
Audit services
than those related to the share price of Jumbo Interactive Limited
(“market conditions”). The cumulative expense recognised between
grant date and vesting date is adjusted to reflect the Directors’ best
estimate of the number of options that will ultimately vest because
of internal conditions of the options, such as the employees having
to remain with the Group until vesting date, or such that employees
are required to meet internal sales targets. No expense is recognised
for options that do not ultimately vest because internal conditions
were not met. An expense is still recognised for options that do not
ultimately vest because a market condition was not met.
Consolidated
2017
2016
$
$
132,408
94,946
132,408
94,946
Amounts paid/payable to BDO for audit or
review of the financial statements for the
entity or any entity in the Group
Taxation services
Amounts paid/payable to BDO for taxation
services for the entity or any entity in the
Group:
Review of income tax return
40,000
55,377
Where the terms of options are modified, the expense continues to
Transfer pricing consulting
be recognised from grant date to vesting date as if the terms had
Other taxation advice
never been changed. In addition, at the date of the modification,
a further expense is recognised for any increase in fair value of the
transaction as a result of the change.
Other services
Where options are cancelled, they are treated as if vesting occurred
on cancellation and any unrecognised expenses are taken
Amounts paid/payable to BDO for other ser-
vices for the entity or any entity in the Group:
immediately to profit or loss. However, if new options are substituted
Accounting advice
for the cancelled options and designated as a replacement on grant
Export grant services
date, the combined impact of the cancellation and replacement
options are treated as if they were a modification.
-
-
22,000
3,690
40,000
81,067
2,800
2,535
6,000
20,000
8,800
22,535
181,208
200,548
Note 26: Summary of other significant accounting policies
Other significant accounting policies adopted in the preparation
of these consolidated financial statements are set out in relevant
sections of the notes below. These policies have been consistently
applied to all the years presented, unless otherwise stated. Where
necessary, comparative information has been restated to conform
with changes in presentation in the current year.
(a) Basis of preparation
(i) New, revised or amended Accounting Standards and
Interpretations adopted
AASB 2015-2 Amendments to Australian Accounting Standards –
Disclosure Initiative: Amendments to AASB 101
This standard requires ‘decluttering’ of financial statements which
means only notes that are deemed material are included and are
grouped by operating activity, and only significant accounting
policies are disclosed.
(ii) New Accounting Standards and Interpretations not yet
adopted
AASB 15 Revenue from Contracts with Customers
This standard and its consequential amendments are currently
applicable to annual reporting periods beginning on or after 1
January 2018. This standard requires recognised revenue to depict
JUMBO INTERACTIVE LTD ANNUAL REPORT 2017
75
the transfer of promised goods or services to customers in an
Goodwill and fair value adjustments arising on the acquisition of a
amount that reflects the consideration to which the entity expects
foreign entity are treated as assets and liabilities of the foreign entity
to be entitled in exchange for these goods or services. This means
and translated at the closing rate.
that revenue will be recognised when control of goods or services
is transferred, rather than on transfer of risks and rewards as is
(c) Financial instruments
currently the case under AASB 18 Revenue. The adoption of this
(i) Non-derivative financial assets
standard is not expected to materially affect future periods.
The Group initially recognises financial assets on the trade date at
AASB 16 Leases
This standard and its consequential amendments are currently
applicable to annual reporting periods beginning on or after 1
January 2019. This standard requires lessees to capitalise all leases
on the balance sheet (subject to limited exception) and there is
no longer a requirement to classify leases as either operating or
financial leases. This means that on commencement date of the
lease, lessees need to measure a right-of-use asset and a lease
liability. The initial adoption of this standard will impact on the
financial statements at 30 June 2020. The Group’s management has
yet to assess the impact of this amendment.
(b) Foreign currency transactions
(i) Functional and presentation currency
Items included in the financial statements of each of the Group’s
entities are measured using the currency of the primary economic
environment in which the entity operates (the functional currency).
The consolidated financial statements are presented in Australian
dollars, which is the Company’s functional and presentation
currency.
(ii) Transactions and balances
Foreign currency transactions are translated into the functional
currency using the exchange rates ruling at the dates of the
transactions. Foreign exchange gains and losses resulting from the
settlement of such transactions and from the translation at year
end exchange rates of monetary assets and liabilities denominated
in foreign currencies are recognised in profit or loss, except when
attributable to part of the net investment in a foreign operation.
Foreign exchange gains and losses are presented in profit or loss on
a net basis within other income or other expenses, unless they relate
to borrowings, in which case they are presented as a part of finance
costs.
Non-monetary items measured at fair value in a foreign currency are
translated using the exchange rates at the date when fair value was
measured.
The functional currency of the overseas subsidiaries is measured
using the currency of the primary economic environment in which
that entity operates. At the end of the reporting period, the assets
and liabilities of these overseas subsidiaries are translated into the
presentation currency of the Company at the closing rate at the end
of the reporting period and income and expenses are translated
at the average exchange rates for the year. All resulting exchange
differences are recognised in other comprehensive income as a
separate component of equity (foreign currency translation reserve).
On disposal of a foreign entity, the cumulative exchange differences
recognised in foreign currency translation reserves relating to that
particular foreign operation is recognised in profit or loss.
which the Group becomes a party to the contractual provisions of
the instrument. Financial assets are derecognised when the rights
to receive cash flows from the financial assets have expired or have
been transferred and the Group has transferred substantially all the
risks and rewards of ownership.
Financial assets are initially recognised at fair value. If the financial
asset is not subsequently accounted for at fair value through profit
or loss, then the initial measurement includes transaction costs that
are directly attributable to the asset’s acquisition or origination.
On initial recognition, the Group classifies its financial assets as
subsequently measured at either amortised cost or fair value,
depending on its business model for managing the financial assets
and the contractual cash flow characteristics of the financial assets.
Refer to notes 20 and 21 for further details.
(ii) Financial assets measured at amortisation cost
A financial asset is subsequently measured at amortised cost, using
effective interest method and net of any impairment, if:
— The asset is held within the business model whose objective is to
hold assets in order to collect contractual cash flows
— The contractual terms of the financial asset give rise, on
specified dates, to cash flows that are solely payments of
principal and interest
The Group assesses at each reporting date whether there is
objective evidence that a financial asset (or group of financial
assets) is impaired.
Refer to notes 7 and 8 for further details.
(iii) Non-derivative liabilities
The Group initially recognises loans on the date when they
originated. Other financial liabilities are initially recognised on the
trade date. The Group derecognises a financial liability when its
contractual obligations are discharged or cancelled or expire.
Non-derivative financial liabilities are initially recognised at fair
value less any directly attributable transaction costs. Subsequent to
initial recognition, these liabilities are measured at amortised cost
using the effective interest rate method.
Refer to note 11 for further detail
(d) Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of GST, unless
the amount of GST incurred is not recoverable from the Australian
Taxation Office (ATO), in which case the GST is recognised as part
of the cost of acquisition of the asset or as part of the expense item.
76
JUMBO INTERACTIVE LTD ANNUAL REPORT 2017
Receivables and payables are stated with the amount of GST
receivable or payable included. The net amount of GST recoverable
from, or payable to, the ATO is included as part of receivables or
payables in the consolidated statement of financial position.
Cash flows are included in the consolidated statement of cash
flows on a gross basis and the GST component of cash flows arising
from investing and financing activities, which is recoverable from, or
payable to, the ATO, are classified as operating cash flows.
Commitments and contingencies are disclosed net of the amount of
GST recoverable from, or payable to, the ATO.
JUMBO INTERACTIVE LTD ANNUAL REPORT 2017
77
Unrecognised items
IN THIS SECTION
Unrecognised items provide information about items that are not
recognised in the consolidated financial statements but could
potentially have a significant impact on the Group’s financial
position and performance.
Note 27: Contingencies
Note 28: Commitments
Note 29: Events after the reporting date
Page 78
Page 78
Page 78
78
JUMBO INTERACTIVE LTD ANNUAL REPORT 2017
Note 27: Contingencies
Note 29: Events after the reporting date
Contingencies relate to the outcome of future events and may result
Apart from the (i) issue if 3,474.493 options to Tatts, (ii) payment
in an asset or liability, however due to current uncertainty do not
of a fully franked special dividend of 15 cents per ordinary share
qualify for recognition.
($7,691,140), (iii) exercise of 600,000 options ($1,050,000), and (iv)
final dividend declared, as at the date of this Directors’ Report, the
Estimates of the potential financial effect of contingent
directors are not aware of any matter or circumstance that has
liabilities that may become payable:
Consolidated
2017
2016
arisen that has significantly affected, or may significantly affect, the
operations of the Company in the financial years subsequent to 30
June 2017.
$’000
$’000
The above items are not recognised in the financial statements 30
Guarantees provided by the Group’s bankers
426
405
June 2017.
The Group’s bankers have provided guarantees to third parties in
relation to premises leased by Group companies. These guarantees
have no expiry term and are payable on demand, and are secured
by a fixed and floating charge over the Group’s assets.
Note 28: Commitments
Operating lease commitments
Consolidated
2017
2016
$’000
$’000
Non-cancellable operating leases contracted
for but not capitalised in the consolidated
financial statements
Payable
Not later than one year
914
1,059
Later than one year but not later than five
years
1,803
2,717
2,234
3,293
The property leases are non-cancellable leases for occupied
premises at various locations ranging from month-to-month to
six year terms, with rent payable monthly in advance. Options to
renew leases at the end of the term range from terms of one to six
years. Rent and outgoings are paid on a monthly basis with periodic
pricing reviews.
Recognition and measurement
Leased property
Leases in which a significant portion of the risks and rewards of
ownership are not transferred to the Group as lessee are classified
as operating leases and payments (net of incentives received from
the lessor) are charged to profit or loss on a straight-line basis over
the period of the lease.
Make good
The Group is required under terms of certain leases to restore the
leased premises at the end of the lease to its original condition. A
provision has been recognised for the present value of the estimated
expenditure required to demolish any leasehold improvements at
the end of the lease. These costs have been capitalised as part of
the cost of leasehold improvements and are amortised over the
shorter of the term of the lease or the useful life of the assets.
Directors’ DeclarationThe Directors of the Company declare that:1. The consolidated financial statements, comprising the Consolidated Statement of Profit or Loss and Other Comprehensive Income, Consolidated Statement of Financial Position, Consolidated Statement of Changes in Equity and Consolidated Statement of Cash Flows, and accompanying notes, are in accordance with the Corporations Act 2001 and:(a) comply with Australian Accounting Standards and the Corporations Regulations 2001; and(b) give a true and fair view of the consolidated entity’s financial position as at 30 June 2017 and of its performance for the year ended on that date.2. The Company has included in the notes to the consolidated financial statements an explicit and unreserved statement of compliance with International Financial Reporting Standards.3. In the Directors’ opinion, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.4. The remuneration disclosures included in pages 29 to 34 of the Directors’ report (as part of the audited Remuneration Report), for the year ended 30 June 2017, comply with section 300A of the Corporations Act 2001.5. The Directors have been given the declarations by the Chief Executive Officer and Chief Financial Officer required by section 295A.This declaration is made in accordance with a resolution of the Directors.David K BarwickChairmanBrisbane24 August 2017JUMBO INTERACTIVE LTD ANNUAL REPORT 2017 79 80
JUMBO INTERACTIVE LTD ANNUAL REPORT 2017
Tel: +61 7 3237 5999
Fax: +61 7 3221 9227
www.bdo.com.au
Tel: +61 7 3237 5999
Fax: +61 7 3221 9227
www.bdo.com.au
Level 10, 12 Creek St
Brisbane QLD 4000
GPO Box 457 Brisbane QLD 4001
Australia
Level 10, 12 Creek St
Brisbane QLD 4000
GPO Box 457 Brisbane QLD 4001
Australia
INDEPENDENT AUDITOR'S REPORT
INDEPENDENT AUDITOR'S REPORT
To the members of Jumbo Interactive Limited
To the members of Jumbo Interactive Limited
Report on the Audit of the Financial Report
Opinion
Report on the Audit of the Financial Report
We have audited the financial report of Jumbo Interactive Limited (the Company) and its subsidiaries
Opinion
(the Group), which comprises the consolidated statement of financial position as at 30 June 2017, the
consolidated statement of profit or loss and other comprehensive income, the consolidated statement
We have audited the financial report of Jumbo Interactive Limited (the Company) and its subsidiaries
of changes in equity and the consolidated statement of cash flows for the year then ended, and notes
(the Group), which comprises the consolidated statement of financial position as at 30 June 2017, the
to the financial report, including a summary of significant accounting policies and the directors’
consolidated statement of profit or loss and other comprehensive income, the consolidated statement
declaration.
of changes in equity and the consolidated statement of cash flows for the year then ended, and notes
to the financial report, including a summary of significant accounting policies and the directors’
In our opinion the accompanying financial report of the Group, is in accordance with the Corporations
declaration.
Act 2001, including:
(i)
Giving a true and fair view of the Group’s financial position as at 30 June 2017 and of its
In our opinion the accompanying financial report of the Group, is in accordance with the Corporations
Act 2001, including:
financial performance for the year ended on that date; and
(i)
(ii)
Giving a true and fair view of the Group’s financial position as at 30 June 2017 and of its
Complying with Australian Accounting Standards and the Corporations Regulations 2001.
financial performance for the year ended on that date; and
Basis for opinion
(ii)
Complying with Australian Accounting Standards and the Corporations Regulations 2001.
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
Basis for opinion
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
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s
those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial
APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the
Report section of our report. We are independent of the Group in accordance with the Corporations
financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance
Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s
with the Code.
APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the
financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance
We confirm that the independence declaration required by the Corporations Act 2001, which has been
given to the directors of the Company, would be in the same terms if given to the directors as at the
with the Code.
time of this auditor’s report.
We confirm that the independence declaration required by the Corporations Act 2001, which has been
given to the directors of the Company, would be in the same terms if given to the directors as at the
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
time of this auditor’s report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
BDO Audit Pty Ltd ABN 33 134 022 870 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050
110 275, an Australian company limited by guarantee. BDO Audit Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited
by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional
Standards Legislation, other than for the acts or omissions of financial services licensees.
BDO Audit Pty Ltd ABN 33 134 022 870 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050
110 275, an Australian company limited by guarantee. BDO Audit Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited
by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional
Standards Legislation, other than for the acts or omissions of financial services licensees.
JUMBO INTERACTIVE LTD ANNUAL REPORT 2017
81
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
Key audit matters
our audit of the financial report of the current period. These matters were addressed in the context of
our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide
Key audit matters are those matters that, in our professional judgement, were of most significance in
a separate opinion on these matters.
our audit of the financial report of the current period. These matters were addressed in the context of
our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide
Impairment assessment of Goodwill and Other Intangible Assets
a separate opinion on these matters.
Key audit matter
How the matter was addressed in our audit
Impairment assessment of Goodwill and Other Intangible Assets
The Group’s disclosures in respect to intangible
Key audit matter
assets, including the impairment assessments of
goodwill and other intangible assets are included in
The Group’s disclosures in respect to intangible
Note 10.
assets, including the impairment assessments of
goodwill and other intangible assets are included in
The Group carries intangible assets of $11.574
Note 10.
million as at 30 June 2017. The carrying value of
intangible assets represent a significant asset of the
The Group carries intangible assets of $11.574
Group.
million as at 30 June 2017. The carrying value of
The Group is required to annually test the amount of
intangible assets represent a significant asset of the
goodwill and indefinite useful life intangible assets
Group.
for impairment and assess other intangible assets for
The Group is required to annually test the amount of
impairment indicators. This annual impairment test
goodwill and indefinite useful life intangible assets
was significant to our audit because the goodwill and
for impairment and assess other intangible assets for
intangible assets balance is material to the financial
impairment indicators. This annual impairment test
statements and because management’s assessment
was significant to our audit because the goodwill and
process is complex, highly judgmental and includes
intangible assets balance is material to the financial
estimates and assumptions relating to expected
statements and because management’s assessment
future market or economic conditions.
process is complex, highly judgmental and includes
estimates and assumptions relating to expected
future market or economic conditions.
Our procedures included, amongst others:
How the matter was addressed in our audit
•
Evaluating management’s determination of the
Our procedures included, amongst others:
Group’s Cash Generating Units ("CGU's") to
•
•
•
•
•
•
•
•
•
ensure they are appropriate, including being at a
Evaluating management’s determination of the
level no higher than the operating segments of
Group’s Cash Generating Units ("CGU's") to
the entity
ensure they are appropriate, including being at a
Evaluating management’s process regarding the
level no higher than the operating segments of
valuation of the Group’s goodwill and other
the entity
intangible assets
Evaluating management’s process regarding the
Assessing the Group’s assumptions and estimates
valuation of the Group’s goodwill and other
relating to forecast revenue, costs, capital
intangible assets
expenditure, discount rates and the life of
Assessing the Group’s assumptions and estimates
reseller agreements used to determine the
relating to forecast revenue, costs, capital
recoverable value of its assets
expenditure, discount rates and the life of
Assessing the historical accuracy of forecasting
reseller agreements used to determine the
of the Group by comparing the current year
recoverable value of its assets
actual results with FY16 figures included in prior
Assessing the historical accuracy of forecasting
year forecasts to consider whether any forecasts
of the Group by comparing the current year
included assumptions, that with hindsight, had
actual results with FY16 figures included in prior
been optimistic
year forecasts to consider whether any forecasts
Challenging key assumptions by performing
included assumptions, that with hindsight, had
sensitivity analysis on the growth rates and
been optimistic
discount rate assumptions used.
Challenging key assumptions by performing
sensitivity analysis on the growth rates and
discount rate assumptions used.
Other information
The directors are responsible for the other information. The other information comprises the
information in the Group’s annual report for the year ended 30 June 2017, but does not include the
Other information
financial report and the auditor’s report thereon.
The directors are responsible for the other information. The other information comprises the
information in the Group’s annual report for the year ended 30 June 2017, but does not include the
Our opinion on the financial report does not cover the other information and we do not express any
form of assurance conclusion thereon.
financial report and the auditor’s report thereon.
Our opinion on the financial report does not cover the other information and we do not express any
form of assurance conclusion thereon.
BDO Audit Pty Ltd ABN 33 134 022 870 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050
110 275, an Australian company limited by guarantee. BDO Audit Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited
by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional
Standards Legislation, other than for the acts or omissions of financial services licensees.
BDO Audit Pty Ltd ABN 33 134 022 870 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050
110 275, an Australian company limited by guarantee. BDO Audit Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited
by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional
Standards Legislation, other than for the acts or omissions of financial services licensees.
82
JUMBO INTERACTIVE LTD ANNUAL REPORT 2017
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit or otherwise appears to be materially misstated.
Key audit matters
If, based on the work we have performed, we conclude that there is a material misstatement of this
Key audit matters are those matters that, in our professional judgement, were of most significance in
other information, we are required to report that fact. We have nothing to report in this regard.
our audit of the financial report of the current period. These matters were addressed in the context of
our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide
Responsibilities of the directors for the Financial Report
a separate opinion on these matters.
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
Impairment assessment of Goodwill and Other Intangible Assets
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
How the matter was addressed in our audit
Key audit matter
The Group’s disclosures in respect to intangible
Our procedures included, amongst others:
assets, including the impairment assessments of
goodwill and other intangible assets are included in
In preparing the financial report, the directors are responsible for assessing the ability of the group to
Evaluating management’s determination of the
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or has no realistic alternative but to do so.
Group’s Cash Generating Units ("CGU's") to
ensure they are appropriate, including being at a
Note 10.
•
The Group carries intangible assets of $11.574
level no higher than the operating segments of
Auditor’s responsibilities for the audit of the Financial Report
million as at 30 June 2017. The carrying value of
the entity
•
Group.
intangible assets represent a significant asset of the
The Group is required to annually test the amount of
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
Assessing the Group’s assumptions and estimates
audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
expenditure, discount rates and the life of
if, individually or in the aggregate, they could reasonably be expected to influence the economic
reseller agreements used to determine the
decisions of users taken on the basis of this financial report.
for impairment and assess other intangible assets for
impairment indicators. This annual impairment test
goodwill and indefinite useful life intangible assets
valuation of the Group’s goodwill and other
relating to forecast revenue, costs, capital
Evaluating management’s process regarding the
intangible assets
was significant to our audit because the goodwill and
•
intangible assets balance is material to the financial
statements and because management’s assessment
A further description of our responsibilities for the audit of the financial report is located at the
Auditing and Assurance Standards Board website (http://www.auasb.gov.au/Home.aspx) at:
http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf
process is complex, highly judgmental and includes
of the Group by comparing the current year
Assessing the historical accuracy of forecasting
•
actual results with FY16 figures included in prior
recoverable value of its assets
estimates and assumptions relating to expected
This description forms part of our auditor’s report.
future market or economic conditions.
Report on the Remuneration Report
Opinion on the Remuneration Report
year forecasts to consider whether any forecasts
included assumptions, that with hindsight, had
been optimistic
•
Challenging key assumptions by performing
sensitivity analysis on the growth rates and
discount rate assumptions used.
We have audited the Remuneration Report included on pages 29 to 34 of the directors’ report for the
year ended 30 June 2017.
Other information
In our opinion, the Remuneration Report of Jumbo Interactive Limited, for the year ended 30 June
2017, complies with section 300A of the Corporations Act 2001.
The directors are responsible for the other information. The other information comprises the
information in the Group’s annual report for the year ended 30 June 2017, but does not include the
financial report and the auditor’s report thereon.
Our opinion on the financial report does not cover the other information and we do not express any
form of assurance conclusion thereon.
BDO Audit Pty Ltd ABN 33 134 022 870 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050
110 275, an Australian company limited by guarantee. BDO Audit Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited
by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional
Standards Legislation, other than for the acts or omissions of financial services licensees.
BDO Audit Pty Ltd ABN 33 134 022 870 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050
110 275, an Australian company limited by guarantee. BDO Audit Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited
by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional
Standards Legislation, other than for the acts or omissions of financial services licensees.
JUMBO INTERACTIVE LTD ANNUAL REPORT 2017
83
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
Key audit matters
Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility
is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with
Key audit matters are those matters that, in our professional judgement, were of most significance in
Australian Auditing Standards.
our audit of the financial report of the current period. These matters were addressed in the context of
our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide
a separate opinion on these matters.
BDO Audit Pty Ltd
Impairment assessment of Goodwill and Other Intangible Assets
Key audit matter
How the matter was addressed in our audit
K L Colyer
The Group’s disclosures in respect to intangible
Director
assets, including the impairment assessments of
goodwill and other intangible assets are included in
Note 10.
Brisbane, 24 August 2017
Our procedures included, amongst others:
•
Evaluating management’s determination of the
Group’s Cash Generating Units ("CGU's") to
ensure they are appropriate, including being at a
The Group carries intangible assets of $11.574
level no higher than the operating segments of
million as at 30 June 2017. The carrying value of
the entity
intangible assets represent a significant asset of the
•
Evaluating management’s process regarding the
Group.
The Group is required to annually test the amount of
goodwill and indefinite useful life intangible assets
for impairment and assess other intangible assets for
impairment indicators. This annual impairment test
was significant to our audit because the goodwill and
intangible assets balance is material to the financial
statements and because management’s assessment
process is complex, highly judgmental and includes
estimates and assumptions relating to expected
future market or economic conditions.
valuation of the Group’s goodwill and other
intangible assets
•
Assessing the Group’s assumptions and estimates
relating to forecast revenue, costs, capital
expenditure, discount rates and the life of
reseller agreements used to determine the
recoverable value of its assets
•
Assessing the historical accuracy of forecasting
of the Group by comparing the current year
actual results with FY16 figures included in prior
year forecasts to consider whether any forecasts
included assumptions, that with hindsight, had
been optimistic
•
Challenging key assumptions by performing
sensitivity analysis on the growth rates and
discount rate assumptions used.
Other information
The directors are responsible for the other information. The other information comprises the
information in the Group’s annual report for the year ended 30 June 2017, but does not include the
financial report and the auditor’s report thereon.
Our opinion on the financial report does not cover the other information and we do not express any
form of assurance conclusion thereon.
BDO Audit Pty Ltd ABN 33 134 022 870 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050
110 275, an Australian company limited by guarantee. BDO Audit Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited
by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional
Standards Legislation, other than for the acts or omissions of financial services licensees.
BDO Audit Pty Ltd ABN 33 134 022 870 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050
110 275, an Australian company limited by guarantee. BDO Audit Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited
by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional
Standards Legislation, other than for the acts or omissions of financial services licensees.
84
JUMBO INTERACTIVE LTD ANNUAL REPORT 2017
Shareholder Information
The Company has 51,274,265 ordinary shares on issue, each fully paid. There are 2,011 holders of these ordinary shares as at 31 July 2017.
Shares are quoted on the Australian Securities Exchange under the code JIN and on the German Stock Exchange.
In addition, there are an aggregate total 6,974,492 options over ordinary shares on issue but not quoted on the Australian Securities
Exchange.
(a) The range of fully paid ordinary shares as at 31 July 2017
Range
Total Holders
Units
% of issued capital
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 – and over
Total
(b) Unmarketable parcels
582
854
291
239
45
2,011
306,896
2,380,135
2,287,679
6,035,660
40,263,895
51,274,265
Minimum $500.00 parcel at $2.76 per unit
Minimum parcel size
182
Holders
81
0.60
4.64
4.46
11.77
78.53
100.0
Units
2,309
The number of shareholders holding less than the marketable parcel of shares is 81 (shares 2,309)
(c) Substantial holders of 5% or more fully paid ordinary shares as at 31 July 20171:
Name
Vesteon Pty Ltd and associates
Forager Funds Management Pty Ltd
Notice date
Ordinary Shares
Percentage Held
12 May 2017
15 May 2017
9,101,027
4,299,289
17.8
8.5
1 as disclosed in substantial shareholder notices received by the Company
(d) Voting rights
The voting rights attached to each class of equity security are as follows:
Ordinary shares
— Each ordinary share is entitled to one vote when a poll is called, otherwise each member present at a meeting or by proxy has one vote on
a show of hands.
Options
— Optionholders have no voting rights until their options are exercised.
(e) Top 20 holders of fully paid ordinary shares as at 31 July 2017
JUMBO INTERACTIVE LTD ANNUAL REPORT 2017
85
Name
Units
% of Units
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
VESTEON PTY LTD
JP MORGAN NOMINEES AUSTRALIA LIMITED
TATTS ONLINE PTY LTD
CITICORP NOMINEES PTY LIMITED
BNP PARIBAS NOMS PTY LTD
NATIONAL NOMINEES LIMITED
RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LTD
MR BARNABY COLMAN CADDICK
BNP PARIBAS NOMINEES PTY LTD
MR MIKE VEVERKA
BOND STREET CUSTODIANS LIMITED
WARAWONG PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
MR JOHN WILDE + MRS ELIZABETH WILDE
MR CRAIG KUHN
WESTOR ASSET MANAGEMENT PTY LTD
CS FOURTH NOMINEES PTY LIMITED
MR JOHN ROSAIA
DOG FUNDS PTY LTD
20.
ROUND ETERNAL INVESTMENTS PTY LTD
Total Top 20 shareholders of ordinary fully paid shares
Total remaining holders balance
(f) Unquoted securities as at 31 July 2017
Options over Unissued Shares
8,912,915
7,412,579
6,609,686
2,628,539
1,973,694
1,591,870
1,100,000
1,081,000
740,952
688,112
659,435
550,000
470,472
447,996
390,000
284,258
235,290
221,000
220,000
210,000
36,427,798
14,846,467
17.38
14.46
12.89
5.13
3.85
3.10
2.15
2.11
1.45
1.34
1.29
1.07
0.92
0.87
0.75
0.55
0.46
0.43
0.43
0.41
71.04
28.96
A total of 3,500,000 options are on issue to employees and third parties for services rendered and 3,474,492 to Tatts Online Pty Ltd as part of
a share issue transaction.
Exercise price
Expiry date
Number on issue
Number of holders
$4.00
$4.00
$1.75
$2.25
$2.37
3 September 2018
6 November 2018
18 November 2020
2 February 2022
13 July 2018
1,400,000
400,000
1,500,000
200,000
3,474,492
5
1
8
1
1
(g) On-market buy-back
There is no current on-market buy-back in effect.
86
JUMBO INTERACTIVE LTD ANNUAL REPORT 2017
Company Information
Jumbo Interactive Limited
ABN 66 009 189 128
www.jumbointeractive.com
Directors
David K Barwick (Non-Executive Chairman)
Bill Lyne (Non-Executive Director)
Mike Veverka (Executive Director and Chief Executive Officer)
Chief Financial Officer
David Todd
Company Secretary
Bill Lyne
Registered Office
Level 1
601 Coronation Drive
Toowong, QLD 4066
Telephone: 07 3831 3705
Facsimile: 07 3369 7844
Auditors
BDO Audit Pty Ltd
Level 10
12 Creek Street
Brisbane, QLD 4000
Share Registrar
Computershare Investor Services Pty Ltd
117 Victoria Street
West End, QLD 4101
Telephone: 07 3237 5999
Facsimile: 07 3221 9227
Jumbo Interactive Limited
Level 1, 601 Coronation Drive
PO Box 824
Toowong, Queensland, 4066
Australia
+61 7 3831 3705
www.jumbointeractive.com