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Berkshire Hills BancorpAnnual Report 2014
KNOW THE
FEELING
Financial Highlights
for the year ended 30 June 2014
“In a year that saw some of our best financial results ever,
we significantly grew our core business and successfully
transitioned into a diversified retail financial services player.”
NET PROFIT AFTER TAX (NPAT)
TOTAL GROUP LOAN BOOK
HOUSING LOAN APPROVALS
Net profit after tax on a cash
basis was
18.7 million
up 18.6% on FY13.
Total group loan book (i.e.
residential and commercial loans
written by Mortgage Choice was
up 4.6% at $47.4 billion.
$12.2 billion
in housing loan approvals were
generated by the Group, up on
$10.4 billion in FY13.
TOTAL DIVIDENDS
NPAT
SETTLEMENTS
A final fully franked dividend of
15.5 cents
per share for FY14.
NPAT on cash basis including sale
of Loankit was
Mortgage Choice settlements
were $10.4 billion
$20.1 million
up 27.1% on FY13.
up 18.1%
on FY13.
EARNINGS PER SHARE
NPAT
TOTAL GROUP REVENUE
On an IFRS basis:
earnings per share stood at
16.0 CENTS
compared to 15.2 cents in FY13.
NPAT on an IFRS basis was
$18.5 million
Total group revenue on a
IFRS basis was
$178.5 million
up 14.8% on FY13.
Contents
Mortgage Choice Limited ABN 57 009 161 979
Back cover
Corporate directory
05 Directors’ report
29
Corporate governance
statement
Financial report
Independent auditor’s
report to the members
36
88
Chairman’s Report
for the year ended 30 June 2014
Mortgage Choice has delivered an
exceptionally strong, above target fi nancial
result this year, growing our settlements,
approvals, franchise numbers and profi t.
We are pleased to pay a total dividend to
shareholders for the year of 15.5 cents
per share.
On behalf of the Board, I am delighted to announce that
Mortgage Choice has enjoyed another incredibly strong year,
delivering strong results across the board including a lift in
settlements, franchisee numbers and overall profi t.
Financial results for the year to 30 June 2014 showed a net
cash profi t after tax of $18.7 million – up 18.6% on the 2013
fi nancial year. Better yet, our total housing loan approvals
reached $12.2 billion – up 18.6 per cent on FY13. In addition,
the total loan book for the group grew by 4.6% to reach $47.4
billion.
Mortgage Choice’s core mortgage broking business performed
incredibly well over the last 12 months, with settlements
surging 18.1 per cent on the previous year to hit $10.4 billion.
In addition, we also signifi cantly increased our franchise
footprint, taking our number of broking franchises to 405.
All in all, it was a very successful year for both our core
mortgage broking business and Mortgage Choice as a whole.
Our fi nancial planning business continues to grow and
strengthen. In June, we appointed our 30th adviser and are
well on track to achieve our target of 60 advisers by June
2015, with 33 advisers in place as of August 2014.
When we launched Mortgage Choice Financial Planning,
we modeled the new arm of the business on our successful
mortgage broking franchise formula and, given that we have
enjoyed incredible growth in this business over the last 12
months, it is clear this is a business model that works.
The www.helpmechoose.com.au business made a profi table
contribution to the Group this year and is growing in line with
expectations. Further, this business continues to add to the
diversity of the Group, which forms a key part of our current
business strategy.
Mortgage Choice’s social responsibility program has far
exceeded company expectations and I am pleased to report
that since our corporate charity partner was announced in
October 2011, our customers, franchise network, staff , lender
partners and suppliers have raised in excess of $340,000 in
support of Ronald McDonald House Charities. This fi nancial
contribution is in addition to the many hours volunteered by
the group to help seriously ill children and their families.
Michael Russell, the executive team and the broader
Mortgage Choice team remain as committed as ever to our
three year ACT (Acquire market share, Cross-sell, Transition
the business) strategy. Now in our third and fi nal year of
the strategy, the team is well down the road of successfully
transitioning the business into a fully fl edged fi nancial
services business and will continue this successful transition
over the months ahead.
At Mortgage Choice we believe in helping all Australians
live a life of abundance – to have a great standard of living
as well as a great standard of life. We believe Australians
deserve access to real, relevant and aff ordable advice from a
professional they can trust. We’ve been providing that advice
on home loans for over 22 years and we can now say, hand
on heart, that we can help all Australians with much more -
including fi nancial planning advice.
We are building a sustainable Mortgage Choice by focusing on
what matters most to our customers – honest, trustworthy
advice and amazing customer service.
We want Mortgage Choice to become a one-stop shop for our
customers. We want to be able to help our customers with
all of their fi nancial needs and become their trusted partner
throughout their entire fi nancial lifecycle.
We will do this by delivering a broad range of tailored
fi nancial solutions that are right for their unique
circumstances, off ering our customers true choice as well as
transparent and trustworthy advice.
PETER RITCHIE
Chairman
Chairman’s Report
3
Chief Executive Officer’s
Overview
for the year ended 30 June 2014
We are transitioning the business into a
diversifi ed fi nancial services player to help
all of our customers at every stage of their
fi nancial lifecycle.
What a year it has been. The 2014 fi nancial year had its ups and
downs. The Federal Government’s self-labeled “tough budget”
had consumers reeling, negatively impacting confi dence.
At the end of the fi nancial year, data from the Westpac
Melbourne Institute of Consumer Sentiment found confi dence
was sitting approximately 10 per cent below the 2013 average.
This drop in confi dence negatively impacted the labour
markets, causing the unemployment rate to hit its highest
level in 10 years.
But while consumer confi dence remains slightly below long
term averages and the unemployment rate has risen over the
past 12 months, there is also plenty of good news coming out
of the Australian economy.
In August 2013, the Reserve Bank of Australia took the
necessary steps to stimulate the local economy, cutting the
offi cial cash rate to the historically low level of 2.5 per cent.
Since that time, the cash rate has been left untouched, which
has allowed business sentiment and property values to
improve.
According to National Australia Bank’s business surveys,
business confi dence improved over the second half of the year
and while conditions are still soft, they are now much better
than they were at the beginning of the 2014 fi nancial year.
Further, property prices continue to climb albeit at a more
sustainable rate, with dwelling values across the combined
capital cities surging 10.1 per cent over the 2014 fi nancial year.
Sydney and Melbourne led the charge, with the capital cities
recording dwelling value growth of 15.4 per cent and 9.4 per
cent respectively throughout the 2014 fi nancial year.
Of course, it is not just values that are enjoying sustainable
growth, auction clearance rates have remained strong
throughout the entire year and there has been a steady
increase in housing fi nance commitments which has led to a
spike in home loan approvals.
At Mortgage Choice, we have had a great year, with
settlements up 18.1% and approvals up 17.3% year on year.
Better yet, our productivity levels have improved. As a result,
Mortgage Choice is the most productive mortgage broker
amongst our peers – a fact we are very proud of.
On top of home loan successes, our new fi nancial planning
business has also achieved some signifi cant milestones.
In June this year, we announced the appointment of our 30th
fi nancial adviser – highlighting the ongoing strength and
growth of our diversifi ed business. We are now well on track to
4
Chief Executive Offi cer’s Overview
meet our target of 60 advisers by June 2015.
The ongoing growth of our diversifi ed business falls perfectly
into our three year strategic plan – ACT.
When we fi rst launched ACT it had three central ingredients:
Acquire profi table market share in home loans, Cross-sell
home loan customers into our fi nancial planning business, and
Transition the business into a broader fi nancial services and
wealth solutions business.
Now in the third and fi nal year of ACT, we are focused on
consolidating the momentum we have generated over the last
two years across all areas of the business, including diversifi ed
income and fi nancial planning, to make sure we hit our growth
targets and successfully transition the brand into a fully
fl edged fi nancial services powerhouse.
It gives me great pleasure to say we are already half way
there, having established a very unique and new generational
fi nancial advice business under our own AFSL.
Today, our customers are able to access clear and transparent
advice that is both aff ordable and relevant. Moving forward,
we will continue to successfully transition the business so
that we not only off er a full suite of fi nancial services, but
our customers know to use Mortgage Choice for all of their
fi nancial needs.
As part of our transition into a fully fl edged fi nancial services
powerhouse, we decided it was prudent to refresh and
reposition our brand to refl ect our new business direction,
growth and focus.
Many of you may have already noticed our fresh new logo
which forms just part of our overall new brand strategy and
further highlights our transition into a diversifi ed fi nancial
services business.
While we have enjoyed a very strong and successful year,
thanks to the ongoing concerted eff orts of our wonderful
franchise owners, their staff and our corporate staff , I know
we can build on this base over the coming 12 months.
I am excited about the year
ahead and know that great
things await Mortgage
Choice. Everything we
do has the customer at
the centre and we will do
whatever it takes to build
long term relationships with
our customers and provide
them with the solutions,
knowledge and choices they
need to be able to make
informed fi nancial decisions.
MICHAEL RUSSELL
Chief Executive Offi cer
Directors’ Report
for the year ended 30 June 2014
Your Directors present their report on the consolidated entity consisting of Mortgage Choice Limited (“the Company”) and the
entities it controlled at the end of, or during, the year ended 30 June 2014, hereafter referred to as “Mortgage Choice”, “the
Mortgage Choice Group” or “the Group”.
Directors
The following persons were Directors of Mortgage Choice Limited during the whole of the fi nancial year and up to the date of this
report:
P D Ritchie
S J Clancy
P G Higgins
R G Higgins
S C Jermyn
D E Ralston
Principal activities
During the year the principal continuing activity of the Mortgage Choice Group was mortgage broking. This activity involves:
•
•
•
the provision of assistance in determining the borrowing capacities of prospective borrowers;
the assessment, at the request of those borrowers, of a wide range of home loan or other products;
and the submission of loan applications on behalf of prospective borrowers.
Dividends
Dividends paid or payable to members during the fi nancial year are as follows:
A fi nal ordinary dividend of $8.640 million (7.0 cents per fully paid share) was declared out of profi ts of the Company for the year
ended 30 June 2013 on 22 August 2013 and paid on 16 September 2013.
An interim ordinary dividend of $9.284 million (7.5 cents per fully paid share) was declared out of profi ts of the Company for the
half-year ended 31 December 2013 on 26 February 2014 and paid on 24 March 2014.
A fi nal ordinary dividend of $9.910 million (8.0 cents per fully paid share) was declared out of profi ts of the Company for the year
ended 30 June 2014 on 21 August 2014 to be paid on 15 September 2014.
Review of Operations
In a year that saw some of our best fi nancial results ever, we signifi cantly grew our core business and successfully transitioned
into a diversifi ed retail fi nancial services player. In this rapidly growing and changing environment, we also maintained high
customer satisfaction and franchisee engagement and laid strong foundations for long-term business success and sustainability.
Best financial results ever
We have embraced the opportunities that this year’s strong market presented us to deliver some of our best fi nancial results to
date across the business. Highlights include a strong growth in underlying statutory revenue and profi t, record loan settlements,
our highest cash result to date and a new high annual dividend of 15.5 cents.
We achieved one of our best underlying statutory results, before the recognition of balance sheet revaluation adjustments to the
valuation of the loan book. Underlying statutory revenue and profi t before tax from continuing operations compared to last year
was up 17 per cent on revenue and 23 per cent on profi t before tax.
Directors’ Report
5
DIRECTORS’ REPORT continued
for the year ended 30 June 2014
Underlying Statutory Results
Continuing operations
Operating revenue
Underlying operating revenue
Adjustment to valuation of loan book receivable
Total operating revenue
Profit before tax
Underlying result before tax
Adjustment to valuation to net loan book receivable
Total profit before tax
2014
$’000
2013
$’000
175,055
149,516
3,409
5,883
178,464
155,399
28,434
(1,638)
26,796
23,068
4,325
27,393
However, the realignment of valuation assumptions to reflect changing economic factors resulted in a negative valuation
adjustment at the end of the year. Increased run-off was experienced across the industry due in part to customers paying more
off their principle in the low interest rate environment. A second factor was the high number of customers who refinanced or
upgraded their homes, contributing to Mortgage Choice’s record growth in loan settlements. Increased settlement volumes also
led to higher commission payments to Mortgage Choice franchisees, which affected our net margin. The combination of these
factors resulted in a write down of 1 per cent of the ending value of the Company’s loan book.
The Market and our Settlements reached new levels
The market for home loans was buoyant this past year. We achieved the highest settlement figures ever, settling $10.370 million in
loans in FY14, 18.1 per cent more than last year.
Settlements trend
“We achieved the highest
settlement figures ever,
settling $10.370 million in
loans in FY14, 18.1 per cent
more than last year.”
$m
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6 month average settlements ($m)
Upfront bank commission rates increased to an average of 63.3bp for the year, up from 60.8bp, reflecting the increased
competition amongst mortgage providers. This naturally provided a boost to Mortgage Choice revenues as well as the entire
mortgage broking industry. And this wasn’t the only pleasing news for the industry as a whole. According to data from the
Mortgage and Finance Association of Australia, broker market share climbed from an average of 44 per cent in FY13 to 50 per cent
by the end of the June 2014 quarter.
Mortgage Choice residential loan book ($000)
7
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Directors’ Report
0
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2001 2002
2003
2004
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Financial year
Mortgage Choice TSR compared to S&P/ASX 200 index return
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350%
300%
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150%
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2009
2010
2011
2012
2013
2014
Mortgage Choice
S&P /ASX 200
$m
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DIRECTORS’ REPORT continued
for the year ended 30 June 2014
y
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Mortgage Choice residential loan book ($000)
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“The residential loan book,
excluding the LoanKit
business, grew 4.6 per cent
during the year from $45
billion to $47 billion.”
,
2
5
4
9
3
8
6
,
2001 2002
2003
2004
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Financial year
Mortgage Choice’s loan book continued to keep pace with the boost in settlements and in spite of the increased rate of run-off.
The residential loan book, excluding the LoanKit business, grew 4.6 per cent during the year from $45 billion to $47 billion.
Growth in Diversified revenues as well as Cash Profits
We experienced strong growth in revenue from diversified sources across Mortgage Choice Financial Planning, Help Me
Choose and the sale of other diversified products through our mortgage brokers. Earnings from these business lines grew by
approximately 71 per cent from $7.7 million last year to $13.2 million this year. This equates to a 40 per cent increase in their
contribution to the overall business – from 5 per cent to 7 per cent of total revenues.
Mortgage Choice TSR compared to S&P/ASX 200 index return
In addition, we recognised our highest ever cash profit results, increasing by 18 per cent from $15.8 million last year to $18.7 million
before the sale of the LoanKit business and a 27 per cent increase including LoanKit. Given the strong financial returns we enjoyed
this year, we have again achieved attractive earnings per share, which is reflected in the increase in our dividend from 13 cents to
15.5 cents or 19 per cent increase.
400%
350%
300%
250%
200%
Core business grew significantly while maintaining engagement
150%
100%
50%
000
Maintaining customer satisfaction and franchisee engagement has been a strong focus this year. It was particularly gratifying to
see franchisees engage in our growth strategy, and not only hire more loan writers and increase productivity, but also actively
engage in adding financial planning to their businesses.
In response to the buoyant market conditions, we increased our franchise numbers from 395 to 405. We worked closely
with existing franchisees to help them see the benefits of growing their core broking businesses. In particular, we supported
franchisees that recruited new loan writers through our Plus One initiative by providing a monthly financial incentive for the first
nine months of the loan writer’s tenure. This initiative led to a net of 27 new loan writers joining in the second half of FY14, bringing
the total from 507 to 534. At the time of writing, our loan writer number had grown again, increasing by 15 and bringing the total
number to 549. We expect further growth in these numbers as additional loan writers are added throughout the end of the year.
2010
2014
2013
2012
2011
Mortgage Choice
S&P /ASX 200
2009
In that context of significant business growth and change, loan writer productivity grew. There was an average increase of 15.5 per cent
or $2.7 million per broker in loans written across the year, from around $17.5 million per broker last year to $20.2 million in FY14.
Diversification process accelerated
Over the past three years, we have invested in diversifying our offering. This year was pivotal in this regard. We helped customers
in more ways than ever before with their asset finance and commercial lending, as well as home, life, and content insurance
needs. We expanded our financial planning franchise network and our investment in the Help Me Choose (HMC) business showed
growth, moving into profit for the first full year.
Financial Planning business is on track
We are pleased to report that our investment in Mortgage Choice Financial Planning is tracking better than initially forecast in
August 2012. We project that we will spend $2.5 million to move this business to profitability, against an original forecast of $3
million and we still forecast to turn a profit on a monthly basis during the next financial year. Our business plan of 60 advisers on
the ground by 30 June 2015 is on target, with 33 in place at time of writing – up from 11 last year.
Directors’ Report
7
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DIRECTORS’ REPORT continued
Mortgage Choice franchisees added another dimension to their business by either investing in a Mortgage Choice Financial
Planning franchise or developing a referral relationship with an adviser located in another franchisee’s office. We have added to
the variety of ways we can best serve each customer while assisting our franchisees to build sustainable businesses for the future
and add to corporate profits.
Help Me Choose is profitable and growing
The Help Me Choose (HMC) business is now profitable and growing in line with expectations. HMC has expanded its call centre
operations to gain the scale needed to operate effectively in this market, taking our numbers from 12 in June last year to 40 at the
time of writing this report. Mortgage Choice is also taking advantage of the larger HMC call centre team to boost our outbound call
centre capacity during seasonally quieter times.
Laid strong operational foundations for future success
We undertook several important initiatives this year to lay the foundations for future success. In particular, we prepared for the
July 2014 roll-out of our new brand and initiated a program to transform our core IT platforms (Project One), and refocused our
attention with the divestment of LoanKit.
Evolved brand reflects the new Mortgage Choice
During the year we prepared to launch our evolved brand strategy, the articulation of our purpose internally and how we will
reflect it externally. We worked from the inside out to create a holistic brand blueprint and began roll-out in July 2014.
The brand blueprint defines our purpose, what we do, why we do it and our customer promise. It reflects our desire to always do
the right thing by our customers and to help them live an abundant life – to achieve a great standard of living as well as a great
standard of life.
The blueprint provides the Mortgage Choice team (staff and franchisees) with a set of service standards to guide them in the
delivery of amazing customer experiences. Each individual team member will go through immersion workshops or sales training
to deepen their understanding of our service standards. The standards will also form part of our new reward and recognition
programs and key performance indicators.
Our customer promise will be demonstrated in everything we do and say. Our visual identity and communications strategy is
being overhauled, starting with the new logo we launched in July.
With the transition of the business well and truly underway, now it is time to transition the brand and communicate to Australians
that we do more than what we are traditionally known for.
Introduction of new broker software platform
We initiated the replacement of our core broker platform with the launch of Project One. Project One will implement an enterprise-
wide, trusted, off-the-shelf CRM platform as well as an industry leading broker front end. They will combine to provide our
franchisees a web-based platform with functionality to improve their processes as well as the customer experience. We have
selected off-the-shelf solutions to reduce the risks and roll-out time. We recognise that large IT projects often deliver late and
short of the mark. To combat this problem, we have included professional project managers and change management specialists
on our team to ensure the integration is completed on time, on budget and in line with our new service standards. Project One is
expected to roll-out in 2016.
Divestment of the LoanKit business
During the year we divested LoanKit to refocus on our remaining business units. On 30 September 2013, Mortgage Choice sold 100
per cent of the issued shares in Beagle Finance Pty Limited, owner of the LoanKit mortgage brokerage aggregation business.
Strategic focus for 2015
All in all, FY14 has been a strong year for our business and pivotal in our transition toward becoming a diversified retail financial
services player. During the next year we will continue to focus our energies on growing the business as a whole – focusing on our
core mortgage broking business as well as our diversified ventures. We will achieve this by growing our franchise, loan writer and
adviser numbers while delivering two foundational projects – the new brand strategy and Project One.
Significant changes in the state of affairs
Except for the matters disclosed in the Review of Operations section of this annual report, there have been no significant changes
in the state of affairs of the Group.
8
Directors’ Report
for the year ended 30 June 2014 DIRECTORS’ REPORT continued
Matters subsequent to the end of the financial year
No matters or circumstances have arisen since 30 June 2014 that have significantly affected, or may significantly affect:
(a) the Group’s operations in future financial years,
(b) the results of those operations in future financial years, or
(c) the Group’s state of affairs in future financial years.
Likely developments and expected results of operations
Information on likely development in the operations of the Group and the expected results of operations have not been included
in this report because the Directors believe it would likely result in unreasonable prejudice to the Group.
Environmental regulation
The Group is not subject to any significant environmental regulation under a law of the Commonwealth or of a State or Territory in
respect of its activities.
Information on Directors
Peter Ritchie AO, Hon.DBus, BCom, FCPA
Independent Non-Executive Chairman
Chairman of nomination and remuneration
committees
Peter is Deputy Chairman of Seven Group Holdings Limited and Chairman of
Reverse Corp Limited. He previously served as Managing Director of McDonald’s
Australia from 1974 to 1995 and as its Chairman from 1995 to 2001. Peter was
a Director of Westpac Banking Corporation from 1993 to 2002 and Solution 6
Holdings from 2000 to 2002. Age 72.
Sean Clancy FAICD
Independent Non-Executive Director
Member of audit and remuneration
committees
Peter Higgins
Non-Executive Director
Member of audit committee
Rodney Higgins
Non-Executive Director
Member of nomination and remuneration
committees
Steve Jermyn FCPA
Independent Non-Executive Director
Chairman of audit committee
With a sales and marketing background across many industries including
banking, fast moving consumer goods, liquor, pharmacy, consumer electronics,
telecommunications and hardware, Sean brings a diverse range of knowledge
and expertise to the Mortgage Choice Board. He is also on the Advisory Board
of the Port Adelaide Football Club and a Director and Chief Executive Officer of
Transfusion Ltd, Chairman and Non-Executive Director of Metropolis Inc. and
Ambassador to Business Events Sydney. Age 54.
Peter is co-founder of Mortgage Choice. He also is a Director of Technology
Company Power & Data Corporation Pty Ltd, trading as Mainlinepower.com.
Having been successfully self-employed for over 30 years, Peter is an investor in
a diverse number of industries covering manufacturing, agriculture, technology,
property and finance. Age 54.
Rodney is co-founder of Mortgage Choice. With a background in residential and
commercial property, sales and leasing, he has been a Director of companies
involved in manufacturing, wholesaling, importing, retailing and finance. Age 59.
Steve joined McDonald’s Australia in 1984 and joined the Board of Directors in
1986. In June 1999, he was appointed Deputy Managing Director. Steve has been
involved in all aspects of the development of the McDonald’s restaurant business
in Australia and brings with him significant experience in the development of new
business and franchising. He retired from McDonald’s Australia in 2005. Steve is
also a Director of Reverse Corp Limited. Age 65.
Deborah Ralston PhD, FAICD, SFFin, FCPA
Independent Non-Executive Director
Member of audit committee and Chairman
of the Mortgage Choice Financial Planning
investment committee
Deborah is Executive Director of the Australian Centre for Financial Studies
and Professor of Finance at Monash University. She was formerly Pro Vice
Chancellor at the University of Canberra and has also been Director of the Centre
for Australian Financial Institutions at the University of Southern Queensland.
Deborah is a former Director of Heritage Building Society. Age 61.
Directors’ Report
9
for the year ended 30 June 2014
DIRECTORS’ REPORT continued
The table below sets out the Directors’ interests at 30 June 2014:
Director
P D Ritchie
S J Clancy
P G Higgins
R G Higgins
S C Jermyn
D E Ralston
Particulars of Directors’ interests in share and options
390,125 ordinary shares
50,000 ordinary shares
652,939 ordinary shares
15,296,215 ordinary shares
2,000,000 ordinary shares
125,000 ordinary shares
Company Secretary
The Company Secretary is Mr David M Hoskins BCom, CPA, CSA. Mr Hoskins was appointed to the position of Company Secretary in
2000. Before joining Mortgage Choice he had experience in a variety of accounting and company secretarial functions, primarily in
the finance and insurance industries.
Meetings of Directors
The numbers of meetings of the Company’s Board of Directors and of each board committee held during the year ended 30 June
2014, and the numbers of meetings attended by each Director were:
Full meetings of Directors
Meetings of committees
P D Ritchie
S J Clancy
P G Higgins
R G Higgins
S C Jermyn
D E Ralston
A
6
6
7
7
7
7
B
7
7
7
7
7
7
A
*
2
3
*
3
3
Audit
Nomination
Remuneration
B
*
3
3
*
3
3
A
–
*
*
–
*
*
B
–
*
*
–
*
*
A
2
2
*
2
*
*
B
2
2
*
2
*
*
A = Number of meetings attended
B = Number of meetings held
* = Not a member of the relevant committee
Retirement, election and continuation in the office of Directors
In accordance with the Constitution, Rodney Higgins and Deborah Ralston retire by rotation and, being eligible, offer themselves
for re-election.
Remuneration report
The Directors are pleased to present the 2014 remuneration report which sets out remuneration information for the Company’s
Non-Executive Directors, Chief Executive Officer and other key management personnel (collectively KMP).
The report contains the following sections:
a) Chairman’s introduction
b) Directors and executive key management personnel disclosed in this report
c) Remuneration governance
d) Remuneration consultants
e) Executive remuneration policy and framework
f) Relationship between remuneration and Mortgage Choice Limited’s performance
g) Non-Executive Director remuneration policy
h) Executive remuneration received during FY14
i) Statutory details of remuneration
j) Service agreements
k) Details of share-based compensation and bonuses
l) Key management personnel equity holdings
10
Directors’ Report
for the year ended 30 June 2014 DIRECTORS’ REPORT continued
A) Chairman’s introduction
As Mortgage Choice continues to evolve, so does our executive remuneration. So, prior to detailing remuneration, this introduction
highlights aspects of our executive remuneration that ensures alignment with shareholder interests, and a refinement applied to
CEO remuneration in FY14.
Base remuneration retains a deferred component, paid in shares. This aligns a part of base remuneration with shareholders, and
encourages executive retention. Since the GFC shares have been provided specifically as a retention payment. However, as the
company has grown and the benefits of this policy in terms of shareholder alignment have become more proven and tested, we
have decided to integrate deferred shares as a permanent part of an executive’s fixed remuneration.
In response to shareholder feedback, we reintroduced a performance contingent long-term incentive (LTI) plan in FY12 following
the tumultuous financial years of FY10 and FY11 in the midst of the GFC. Performance shares vest based on either relative total
shareholder return (TSR) or cash EPS growth performance. The performance range is sufficiently broad to ensure that total
remuneration increases in accord with good performance, and reduces if performance does not meet expectations. This has
served us well and will be retained in its current form.
During FY14, the Board increased the CEO’s remuneration appropriate to the growth in Company value. The increase was both in
base remuneration and incentive opportunity. The increase in base remuneration is received almost entirely as deferred shares.
The payment in deferred shares is consistent with our previous practice, although this year we specifically recognised it as an
integral part of fixed remuneration rather than as a separate element.
The increase in the CEO’s incentive opportunity permitted the introduction of additional LTI tranches specifically focused on a
scorecard measuring success in the operational rollout of our strategy. The value of dividends is only included to the extent that
LTI performance rights vest. Lastly, to ensure that the CEO builds and maintains a sound legacy, there is provision for the LTI to
remain on foot, and be tested at the end of the performance period, in the event he leaves the company in good circumstances
and by mutual agreement.
The remainder of this executive report provides more detail.
B) Directors and executive key management personnel disclosed in this report
Name
Directors
Peter D Ritchie
Sean J Clancy
Peter G Higgins
Rodney G Higgins
Stephen C Jermyn
Deborah E Ralston
Other key management personnel
Michael I Russell
Susan R Mitchell
Neill C Rose-Innes
Andrew J Russell
Melissa J McCarney
Position
Non-Executive Chairman
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Chief Executive Officer
Chief Financial Officer
General Manager, Operations
General Manager, Product and Distribution
General Manager, Group Marketing
Simon C Dehne (to 31 December 2013)
CEO of LoanKit
C) Remuneration Governance
The Board Remuneration Committee has primary responsibility for remuneration governance. The Committee consists of three
Non-Executive Directors – Sean Clancy (independent), Rodney Higgins and Peter Ritchie (independent chair).
The Remuneration Committee makes recommendations to the Board on:
• Non-Executive Director fees;
•
•
remuneration levels of the Chief Executive Officer; and
the over-arching executive remuneration framework and operation of the incentive plan.
Directors’ Report
11
for the year ended 30 June 2014 DIRECTORS’ REPORT continued
The Committee’s objective is to ensure that remuneration policies and structures are fair, attract and retain executives and
directors with the requisite experience and knowledge, and aligned with the long-term interests of the Company. In doing this,
the Remuneration Committee seeks advice from independent remuneration consultants (see below).
The Corporate Governance Statement provides further information on the role of this committee.
D) Remuneration consultants
During the year ending 30 June 2014, the Company’s Remuneration Committee employed the services of Guerdon Associates
to review its existing remuneration policies, provide market data, advise in respect of short-term and long-term incentive plan
design, conduct TSR performance testing, research TSR performance peer constituents, provide independent equity valuation, and
assist with incentive plan documentation and implementation.
Under the terms of the engagement, Guerdon Associates was paid $43,898 for these services. Guerdon Associates was not
engaged to provide any services to management and has confirmed that its services were provided free from undue influence by
members of the Group’s key management personnel.
The following arrangements were made to ensure that the remuneration recommendations were free from undue influence:
• Guerdon Associates was engaged by, and reported directly to, the chair of the Remuneration Committee;
•
•
•
The agreement for the provision of remuneration consulting services was executed by the chair of the Remuneration
Committee under delegated authority of the Board;
The report containing remuneration recommendations was provided by Guerdon Associates directly to the chair of the
Remuneration Committee; and
Guerdon Associates was permitted to speak to management throughout the engagement to understand company processes,
practices and other business issues and obtain management perspectives.
As a consequence, the Board is satisfied that the recommendations were made free from undue influence from any members of
the key management personnel.
E) Executive remuneration policy and framework
In determining executive remuneration, the Board aims to ensure that remuneration practices are:
•
•
•
•
fair and reasonable, enabling the company to attract and retain key skills and experience;
aligned to the company’s strategic and business objectives and the creation of shareholder value;
transparent, and
acceptable to shareholders.
The executive remuneration framework has three components:
• base remuneration including salary, non-cash benefits, superannuation and deferred shares;
•
•
short-term performance incentive (STI), and
long-term incentive (LTI).
The proportions of these components, assuming the maximum incentive components are paid in the remuneration mix, are
tabulated below.
Table 1: Executive KMP remuneration mix
Position
Chief Executive Officer
Other KMP executives
Base remuneration
Maximum STI
Maximum LTI
42%
68%
14%
19%
44%
13%
The remuneration policies described below apply to KMP ‘executives’.
Base remuneration
An executive’s base remuneration comprises a fixed cash salary and superannuation limited to the maximum super contribution
base. Executives have an opportunity to salary sacrifice amounts from their fixed salary towards additional superannuation and
a series of prescribed benefits plus any associated fringe benefits tax. In addition, executives receive deferred shares that are
held in trust and vest in three equal tranches contingent on continued service of 1, 2 and 3 years, respectively. While originally
these deferred shares were a retention incentive in the wake of the GFC, conservative levels of salary, company growth, and
12
Directors’ Report
for the year ended 30 June 2014
DIRECTORS’ REPORT continued
shareholder alignment advantages have permitted them to be retained and integrated into base remuneration.
Base remuneration is reviewed annually against external benchmarks to ensure it remains appropriate relative to the market.
Although base remuneration adjustments may be made after comparison to external benchmarks, or on promotion, there are no
guaranteed base remuneration increases in any executive contracts.
Short-term performance incentives
Prior to any short-term incentive (STI) payment being considered, the Group must achieve its profit gateway for the year. Should
the Group achieve the profit gateway target set by the Board each year, an STI funding pool is made available for allocation during
the annual review. Any amounts awarded as STI are payable in cash following the signing of the annual report each year. Requiring
a minimum profit hurdle to be achieved before any STI payments are made ensures additional reward is available only when value
has been created for shareholders and when this value has been achieved in a manner consistent with the business plan.
Each executive position has a maximum level of STI opportunity. Once the required profit gateway is achieved, STI for individual executives
is primarily based on an assessment of key performance indicators (“KPIs”). KPIs are related to the accountabilities of the position and
its impact on the organisation’s or business unit’s performance. Each executive is accountable for a unique set of KPIs which specify
operational targets for the Company to achieve its annual agreed profit target and business strategy. KPIs include such targets as growth in
the franchise network, volume of settlements, the number of group office leads as well as the completion of assigned projects. These KPIs
are set and assessed annually for the CEO by the Board and for other executives by the CEO. With the exception of the CEO, the executives
may also have additional factors, such as their contribution to the targets of others or the achievement of new initiatives introduced during
the year, as well as the achievement of their KPIs taken into consideration in determining the final level of their STI award.
For executives, the maximum STI opportunity is 52% of cash salary for the CEO and between 25% and 32% of cash salary for
other executives. From time to time, bonuses may be paid outside this structure in relation to special projects or in special
circumstances. No such special bonuses were paid in the period covered by this report.
A summary of the short-term incentive is provided in Table 2, below:
Table 2: Short term incentive plan summary
Eligibility
Performance period
Performance assessment finalised
Payments made
Eligibility requirements for payment
CEO and other KMP executives
1 July 2013 – 30 June 2014
Post audit
31 August
•
In continuous service to 1 July following the end of the financial year unless
terminated in the event of death, disability or redundancy
• Company meets gateway profit requirement
•
Individual meets minimum performance requirements on specified key
performance indicator (KPI) requirements
Financial gate prior to any payment
Agreed profit target
Individual assessment
Financial and operational KPIs
KPIs set by reference to budget and strategic plan
KPIs vary by individual
Payment vehicle
Deferral period
Maximum opportunity as a proportion
of cash salary
Cash
None
CEO: 52%
Other executives: 25% to 32%
Option for discretion?
Yes
In FY14 Mortgage Choice recorded its highest cash profit, significantly exceeding the agreed profit target gateway. As a result, the CEO
achieved his target and received 100% of his STI payment. In consideration of record profits, strong performance against KPIs and the
contribution of the remaining executives to the targets of others, the remaining executives received the maximum STI award this year.
Long-term incentive (LTI)
This section describes the LTI plan in which the CEO and KMP executives have been eligible to participate from FY14.
The LTI plan is a performance contingent payment for achieving specified performance outcomes measured over a three-year
performance period.
Directors’ Report
13
for the year ended 30 June 2014 DIRECTORS’ REPORT continued
Two independent performance measures are used in the LTI plan – total shareholder return (TSR) relative to a comparison group
and cash earnings per share (EPS) growth. Each performance measure determines 50% of the LTI reward.
TSR is the percentage increase in the Company’s share price plus reinvested dividends, expressed as a percentage of the initial
investment, and reflect the increase in value delivered to shareholders over the performance period. The relative TSR comparison
group is comprised of companies within the ASX Financials sector with a market capitalisation between $40 million and $1 billion
as at 31 August 2013, excluding Real Estate Investment Trusts. Consistent with the Company’s remuneration philosophy, the vesting
scale encompasses a performance window that is wider than the performance ranges adopted by other companies, with vesting
beginning at 40th percentile relative TSR performance, and maximum vesting occurring at 90th percentile relative TSR performance.
Cash EPS growth is based on the cash result as presented to the market and stated in the notes of the Company’s audited
statutory accounts and the average number of ordinary shares on issue during the performance period. Cash profits are calculated
by adjusting audited statutory profits for trail commission recognised on a net present value basis and performance shares
expense. Performance requirements are expressed in terms of a compound annual growth (CAGR) requirement. The cash EPS
growth requirement is consistent with our remuneration philosophy and strategic plan, and recognises that growth will be
moderate given the Board’s relatively high dividend payout policy. The threshold to maximum performance range for vesting
of LTI is 2% to 5% cash EPS growth.
The remuneration vesting on attaining threshold performance is 35% of the maximum. This is less than market standards,
reflecting our remuneration philosophy and the Board’s requirement that “cliff” vesting of reward be minimised to reduce the
prospect of excessive risk taking as the threshold performance level for remuneration vesting is approached. Additional LTI vests
on a pro-rata basis as performance increases until 100% is reached at the specified maximum performance level.
Payment is made in performance shares under the Performance Share Plan (PSP), which are granted at the beginning of the
performance period and vest subject to performance assessment and the vesting criteria at the end of the performance period.
Performance shares are held in trust and may be new issue shares or purchased on market. Dividends on unvested performance
shares are distributed to participants. The use of performance shares and dividends is intended to align the interests of executives
with shareholders. The payment of dividends on unvested shares is considered appropriate given that: dividends vary with
profitability, and so enhance executive focus on profit growth; paying dividends is a tax effective form of remuneration, as they
include franking credits; and the overall levels of executive remuneration are conservative.
Executives will forfeit unvested LTI on cessation of employment with the Company unless the cessation results from death,
redundancy, disablement or other exceptional circumstances, in which case, current LTI grants may remain on foot and subject
to testing at the end of the performance period at the discretion of the Board.
Executives are prohibited from entering into any hedging (or risk reduction) arrangements in relation to LTI plan performance
shares or performance rights.
CEO Performance Rights LTI Plan
In addition to the LTI plan elements described above, the CEO is also eligible to receive performance rights under the Share
Rights Plan (SRP) subject to additional three-year performance requirements. FY14 was the first year that these performance
rights were granted. A performance right is a right to one Mortgage Choice share, plus the number of shares that would have
resulted from reinvestment of dividends during the performance period on the shares acquired on vesting of the rights, or these
shares equivalent in cash value at the absolute discretion of the Company. No dividends are paid on unvested rights during the
performance period, or on rights that do not vest. The shares required for the CEO’s performance rights LTI plan might be sourced
on market, from new issue shares, or from shares held by the trustee of the PSP. Treatment on cessation and hedging rules are the
same as for the performance share LTI plan.
The performance conditions for the CEO’s performance rights LTI plan are in the form of a balanced scorecard, with four primary
objectives that directly reflect the operational application of the strategic plan set and approved by the Board. Achievement is
measured against quantitative threshold, target and stretch measures, with a maximum of 25% of the rights vesting in accordance
with performance against each independent requirement on a sliding scale.
The four primary strategic plan objectives focus the CEO on the transition of Mortgage Choice to a retail diversified financial
services provider without sacrificing growth in the core broking business. Diversification objectives include the expansion of the
adviser count in the financial planning network as well as targeted growth in diversified revenue. Objectives also target growth in
profits of the mortgage broking business and the Group as a whole. Actual requirements remain commercially sensitive during the
performance period but will be disclosed in full at the end of the period.
14
Directors’ Report
for the year ended 30 June 2014 DIRECTORS’ REPORT continued
A summary of FY14 LTI plans is shown in Table 3, below:
Table 3: Long term incentive plan summary
Eligibility
Performance period
Frequency of grants
CEO and other KMP executives
1 July in year 1 – 30 June in year 3
Annual
Performance assessment finalised
Post audit
Vesting date
1 September
Eligibility requirements for vesting
1.
In continuous service unless considered a good leaver (i.e. in the event of death,
disability, redundancy or other exceptional circumstances)
Performance requirements
Performance shares (CEO and other KMP executives):
2. Meets minimum performance requirements
1.
TSR relative to ASX Financials companies with a market capitalisation between
$40 million and $1 billion at 31 August 2013, with specific companies in the peer group
being Perpetual Ltd, SFG Australia Ltd, FKP Property Group, Peet Ltd, NIB Holdings
Ltd, Magellan Financial Group Ltd, FlexiGroup Ltd, Cedar Woods Properties Ltd,
BT Investment Management Ltd, Finbar Group Ltd, United Overseas Australia Ltd,
ClearView Wealth Ltd, Austbrokers Holdings Ltd. Euroz Ltd, MyState Ltd, The Trust Co
Ltd, Servcorp Ltd, IMF Australia Ltd, Wide Bay Australia Ltd, Bell Financial Group Ltd,
Forest Place Group Ltd, Sunland Group Ltd, Countplus Ltd, RHG Ltd, Equity Trustees
Ltd, Devine Ltd, K2 Asset Management Holdings Ltd, Hunter Hall International Ltd,
AVJennings Ltd, Payce Consolidated Ltd, HFA Holdings Ltd, Treasury Group Ltd, Phileo
Australia Ltd, Homeloans Ltd, CIC Australia Ltd, Ozgrowth Ltd, ThinkSmart Ltd,
Lifestyle Communities Ltd, InvestorFirst Ltd, Centrepoint Alliance Ltd, ASF Group
Ltd, Plan B Group Holdings. The threshold performance is the 40th percentile, and
maximum performance is the 90th percentile.
2.
Cash EPS growth on a compound annual growth basis with target performance
consistent with strategic plan
For both tranches:
Threshold performance: 35% vests
Maximum: 100% vests
Prorated vesting between threshold and maximum
Performance rights (CEO only):
1.
2.
3.
Growth in financial planning network
Growth in diversified revenues
Profit growth in Mortgage Choice’s core broking business profit
4.
Profit growth for the Group
Each requirement can result in a maximum of 25% of the rights vesting, with target
performance consistent with strategic plan
Performance shares (CEO and other KMP executives) are shares inclusive of dividends, held
in trust.
Performance rights (CEO only) are rights to shares or their cash equivalent, with the
number of shares including shares that would have resulted from dividend reinvestment
during the vesting period.
Performance shares (CEO and other KMP executives)
Value of LTI divided by the volume weighted average price of shares over the 5 days prior
to the grant.
Performance rights (CEO only) number of shares determined by the Remuneration
Committee and the Board
Payment vehicle
Method to determine number of
share or rights to grant
Hedging of unvested shares or rights Not permitted
Maximum opportunity as a
proportion of cash salary
Performance shares: CEO 50%, Other executives 25 to 30%; Performance rights: (CEO only)
number of shares determined by the Remuneration Committee and the Board
Option for Board discretion?
Yes
Directors’ Report
15
for the year ended 30 June 2014 Settlements trend
$m
1,000
950
900
850
800
750
DIRECTORS’ REPORT continued
700
650
600
550
500
2
1
‘
2
1
‘
2
1
‘
2
1
‘
2
1
‘
2
1
‘
3
1
‘
3
1
‘
3
1
‘
3
1
‘
3
1
‘
3
1
‘
3
1
‘
3
1
‘
3
1
‘
3
1
‘
3
1
‘
3
1
‘
l
u
J
Legacy equity grants
Legacy equity grants to executives from prior years that are still outstanding as at the end of the financial year, or that have vested
or partially vested during the financial year, are described in section (k).
y
a
M
y
a
M
v
o
N
v
o
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r
a
M
r
a
M
g
u
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g
u
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e
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c
e
D
p
e
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p
e
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r
p
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r
p
A
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e
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b
e
F
n
u
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u
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t
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c
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a
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J
l
4
1
‘
4
1
‘
4
1
‘
4
1
‘
4
1
‘
4
1
‘
F) Relationship between remuneration and Mortgage Choice Limited’s performance
Payments made under the STI plan are conditional upon the Company achieving a pre-determined profit target. A component
of the grants made under PSP in FY12, FY13 and FY14 is conditional on cash EPS growth. The following table lists Mortgage Choice
Limited’s cash earnings per share (EPS):
Mortgage Choice residential loan book ($000)
Year
2010
2011
2012
2013
2014
Year
2010
2011
2012
2013
2014
7
9
1
,
1
1
0
,
7
4
Cash EPS (cents per share)
6
4
4
,
9
9
2
,
3
4
9
7
8
,
2
6
1
,
1
4
2
4
1
,
6
7
0
9
3
,
5
4
4
,
3
3
0
6
3
,
,
0
7
8
8
6
2
,
3
3
5
6
1
,
1
8
9
4
4
12.4
,
13.3
12.5
12.9
16.2
1
4
4
,
4
4
6
9
2
,
,
0
3
0
6
9
6
,
5
2
A component of grants made under PSP in FY12, FY13 and FY14 is conditional on the total shareholder return (TSR) of the Company
over a three-year period as compared to the TSRs of comparator groups of companies. TSR is the percentage increase in the
Company’s share price plus reinvested dividends and reflects the increase in value delivered to shareholders over the period.
3
1
9
,
3
9
6
,
1
2
The following table shows the Company’s TSR expressed as a percentage of the opening value of the investment for each period:
0
1
3
,
8
8
6
,
7
1
8
8
5
,
6
7
0
,
3
1
7
4
8
,
3
2
5
,
9
,
2
5
4
9
3
8
6
,
2001 2002
2003
2004
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Financial year
TSR
24%
21%
14%
79%
41%
The figure below illustrates and compares the Company’s TSR performance with the ASX 200 index return performance for the
five-year period to 30 June 2014.
Mortgage Choice TSR compared to S&P/ASX 200 index return
n
r
u
t
e
r
r
e
d
l
o
h
e
r
a
h
s
l
a
t
o
T
400%
350%
300%
250%
200%
150%
100%
50%
000
2009
2010
2011
2012
2013
2014
Mortgage Choice
S&P /ASX 200
Source: Guerdon Associates
16
Directors’ Report
for the year ended 30 June 2014
DIRECTORS’ REPORT continued
G) Non-Executive Director remuneration policy
Shareholders set the maximum aggregate remuneration of the Board (excluding the Managing Director and any Executive Director)
at $750,000 at the General Meeting on 5 April 2004.
Fees paid to the Chairman and the Non-Executive Directors take into account the demands made on, and the responsibilities of,
the Directors. The Chairman and other Non-Executive Directors do not receive any short-term cash incentives or share-based
payments; nor do they receive additional payments for representation on Board committees, other than the chairman of the
Mortgage Choice Financial Planning Pty Ltd Investment Committee. Non-Executive Directors do not receive retirement allowances.
Superannuation contributions, as required under the Australian superannuation guarantee legislation, are paid on Non-Executive
Directors’ remuneration and are included in the fees below.
The Board reviews fees periodically.
There have been no changes to fee policy since the last disclosure period.
The policy based Non-Executive Director fee for the year was $75,000. The policy based chairman base fee was $125,000. The
policy based fee for the chair of the Mortgage Choice Financial Planning Pty Ltd Investment committee was $37,500. Mandated
superannuation contributions are in addition to these base board fees.
H) Executive remuneration received during FY14
The table below shows the ’realised remuneration’ that executives received in relation to FY14. These amounts will differ from
the statutory tables beginning on the next page which are prepared in accordance with the Corporations Act and Australian
Accounting Standards, and which, as a general principle, value shares based payments based on the value at the time of grant and
do not reflect actual vesting outcomes.
In the table below, the total cash payments received are made up of base remuneration consisting of cash salary and
superannuation. Deferred shares vesting in FY14 include all deferred shares offered from FY12 onwards that vested during the year.
STI represents cash STI paid in respect of FY14 and the LTI column represents LTI grants from FY10 and FY11 that vested in FY14. Share
based remuneration is stated at the value at the vesting date.
Name
M I Russell, CEO
S R Mitchell
N C Rose-Innes
A J Russell
M J McCarney
S C Dehne *
(from 1/7/13 to 31/12/13)
Cash Salary and
Superannuation
$
580,570
314,913
287,775
287,775
237,775
Base Remuneration
Deferred Shares
vesting FY14
$
366,047
26,690
23,360
22,875
–
STI
STI
$
292,653
95,084
86,400
86,400
55,000
LTI
Past Awards
vesting FY14
$
383,638
108,447
99,486
–
–
Total
Remuneration
$
1,622,909
545,135
497,021
397,050
292,775
109,250
12,195
–
90,843
212,288
*
S C Dehne departed the company due to the sale of the LoanKit business 30 September 2013. As the circumstances of his
departure met the criteria of “special circumstances” under the Performance Share Plan rules, the Board exercised its
discretion and allowed the vesting of his future tenure based shares, the remaining shares were forfeited.
Share based remuneration above is stated at share price at the vesting date. From the date of grant the Mortgage Choice share
price has increased markedly increasing executive remuneration in line with the increase in shareholder value over the period. The
additional remuneration related to the increase in share price from the date of grant to the vesting date is shown below.
Name
M I Russell, CEO
S R Mitchell
N C Rose-Innes
A J Russell
M J McCarney
S C Dehne
(from 1/7/13 to 31/12/13)
Increase in Remuneration from
Share Price Appreciation
$
274,047
65,507
59,510
9,419
–
52,104
Directors’ Report
17
for the year ended 30 June 2014 DIRECTORS’ REPORT continued
Details of remuneration
The following tables detail remuneration received for the 2013 and 2014 financial years by the Directors and other key management
personnel in place during the year ending 30 June 2014.
2014
Name
Short-term benefits
Non-
monetary
benefits
$
STI
$
Cash
salary
$
Post-
employment
benefits
Long-term
benefits
Super-
annuation
$
Long
service
leave
$
Share-based
payments
Termination
benefits
$
Performance
Shares
$
Total
$
Non-Executive Directors
P D Ritchie
Chairman
S J Clancy
P G Higgins
R G Higgins
S C Jermyn
D E Ralston
Chairman of
MCFP Investment
Committee
125,000
75,000
75,000
75,000
75,000
112,500
Other key management personnel:
–
–
–
–
–
–
–
–
–
–
–
–
578,530
294,645
271,196
271,552
227,653
292,653
26,632
95,084
86,400
86,400
55,000
280
20,243
17,574
280
M I Russell, CEO
S R Mitchell
N C Rose-Innes
A J Russell
M J McCarney
S C Dehne *
(from 1/7/13 to
31/12/13)
11,562
6,938
6,938
6,938
6,938
10,406
17,775
17,775
17,775
17,775
17,775
–
–
–
–
–
–
9,209
4,962
6,243
2,823
518
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
136,562
81,938
81,938
81,938
81,938
122,906
741,021
1,665,820
93,133
82,397
72,742
17,331
513,105
484,254
468,866
318,557
(6,285)
105,802
107,825
–
–
8,887
(4,625)
*
S C Dehne departed the company due to the sale of the LoanKit business 30 September 2013. As the circumstances of his
departure met the criteria of “special circumstances” under the Performance Share Plan rules, the Board exercised its
discretion and allowed the vesting of his tenure based shares, the remaining shares were forfeited.
18
Directors’ Report
for the year ended 30 June 2014
DIRECTORS’ REPORT continued
2013
Short-term benefits
Post-
employment
benefits
Long-term
benefits
Share-based
payments
Cash
salary
$
Non-
monetary
benefits
$
STI
$
Super-
annuation
$
Long
service
leave
$
Termination
benefits
$
Performance
Shares
$
Total
$
Name
Non-Executive Directors
P D Ritchie
Chairman
S J Clancy
P G Higgins
R G Higgins
S C Jermyn
D E Ralston
125,000
75,000
75,000
75,000
75,000
75,000
–
–
–
–
–
–
Other key management personnel:
M I Russell, CEO
553,883
286,915
274,561
245,852
261,433
202,108
93,220
81,600
81,600
49,904
S R Mitchell
N C Rose-Innes
A J Russell
S C Dehne
M J McCarney
(from 25/3/13 to
30/6/13)
–
–
–
–
–
–
28,638
15,283
289
14,104
–
11,250
6,750
6,750
6,750
6,750
6,750
16,470
16,470
16,470
16,470
16,470
–
–
–
–
–
–
18,178
10,007
14,458
2,598
4,625
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
136,250
81,750
81,750
81,750
81,750
81,750
277,677
1,181,761
84,751
74,725
48,623
37,029
494,302
433,394
424,829
310,136
–
86,199
60,732
20,000
289
5,178
–
The relative proportions of remuneration that are linked to fixed remuneration and performance based criteria are as follows:
Name
Fixed/ service based remuneration
At risk/performance based remuneration
Salary, super and
fringe benefits Share Based
Total
STI
LTI (Equity
based)
Other key management personnel of Group
M I Russell
S R Mitchell
N C Rose-Innes
A J Russell
M J McCarney
S C Dehne
37%
63%
65%
66%
78%
106%
21%
7%
7%
5%
2%
12%
58%
70%
72%
71%
80%
118%
18%
19%
18%
18%
7%
–
24%
11%
10%
11%
3%
-18%
Total
42%
30%
28%
29%
20%
-18%
Directors’ Report
19
for the year ended 30 June 2014
DIRECTORS’ REPORT continued
I) Details of share-based remuneration
The terms and conditions of each offer of performance shares affecting remuneration in this or future reporting periods are as
follows:
Grant date
9 December 2009
20 September 2010
20 September 2010
16 February 2012
16 February 2012
16 February 2012
16 February 2012
14 September 2012
14 September 2012
14 September 2012
14 September 2012
14 September 2012
23 September 2013
23 September 2013
23 September 2013
23 September 2013
23 September 2013
Vesting date
31 August 2013
3 September 2013
3 September 2014
13 September 2013
12 September 2014
12 September 2014
12 September 2014
13 September 2013
12 September 2014
14 September 2015
14 September 2015
14 September 2015
12 September 2014
14 September 2015
14 September 2016
14 September 2016
14 September 2016
Value per performance
share at grant date*
$1.24
$1.17
$1.19
$1.26
$1.26
$1.26
$0.78
$1.74
$1.74
$1.74
$1.74
$1.08
$2.77
$2.77
$2.77
$2.77
$1.68
Performance
achieved
service based
service based
%
Vested
100%
100%
service based
to be determined
service based
100%
service based
to be determined
to be determined
to be determined
to be determined
to be determined
service based
100%
service based
to be determined
service based
to be determined
to be determined
to be determined
to be determined
to be determined
service based
to be determined
service based
to be determined
service based
to be determined
to be determined
to be determined
to be determined
to be determined
*
The value at grant date calculated in accordance with AASB 2 Share-based Payments of shares granted during the year as
part of remuneration.
The terms and conditions of each offer of share rights affecting remuneration in this or future reporting periods are as follows:
Grant date
24 August 2013
24 August 2013
Vesting date
30 June 2014
30 June 2016
Value per share
right at grant date*
$2.50
$2.50
Performance
achieved
service based
%
Vested
100%
to be determined
to be determined
*
The value at grant date calculated in accordance with AASB 2 Share-based Payments of shares granted during the year as
part of remuneration.
20
Directors’ Report
for the year ended 30 June 2014
DIRECTORS’ REPORT continued
Details of performance shares in the Company provided as remuneration to other key management personnel are set out below.
Further information on the performance shares is set out in note 31 to the financial statements.
Number of
performance shares
granted during the
year
Value of
performance shares
at grant date*
Number of
performance shares
vested during the
year
Number of
performance shares
lapsed during the
year
Value at lapse
date**
Name
Other key management personnel
M I Russell
S R Mitchell
N C Rose-Innes
A J Russell
M J McCarney
S C Dehne
116,570
36,930
33,560
33,560
22,780
–
275,750
87,200
79,244
79,244
53,792
–
193,039
55,607
50,564
9,006
–
23,067
–
–
–
–
–
–
–
–
–
–
59,560
170,937
*
The value at grant date calculated in accordance with AASB 2 Share-based Payments of shares granted during the year as
part of remuneration.
** The value at lapse date of performance shares that lapsed during the year because a vesting condition was not satisfied is
calculated assuming the performance conditions were satisfied.
Details of share rights provided as remuneration to the CEO are set out below. Further information on the share rights is set out in
note 31 to the financial statements.
Name
M I Russell
– initial grant
Number of share
rights granted
during the year
Value of share
rights at grant
date*
Number of share
rights vested
during the year
Number of share
rights lapsed
during the year
Value at lapse
date
375,000
937,500
93,750
–
–
*
The value at grant date calculated in accordance with AASB 2 Share-based Payments of shares granted during the year as
part of remuneration.
The assessed fair value at grant date of performance shares granted to individuals is allocated equally over the period from grant
date to vesting date, and the amount is included in the remuneration tables above. The fair value of market based conditions
at grant date are independently determined using a Monte Carlo simulation model utilising a lattice-based trinomial valuation
method that takes into account the term of the performance shares, the vesting criteria, the exercise price (zero), the expected
price volatility of the underlying share, the expected dividend yield (acknowledging that dividends will be paid to participants
from the date of grant) and the risk free interest rate for the term of the performance shares.
Directors’ Report
21
for the year ended 30 June 2014 DIRECTORS’ REPORT continued
Shares provided on vesting of performance share and share right entitlements
Details of shares issued by the Company as a result of the vesting of performance share entitlements during the year ended 30
June 2014 are set out below:
Name
Other key management personnel
M I Russell
M I Russell
M I Russell
S R Mitchell
S R Mitchell
S R Mitchell
N C Rose-Innes
N C Rose-Innes
N C Rose-Innes
A J Russell
S C Dehne
S C Dehne
S C Dehne
Number of ordinary
shares issued on
vesting of share rights
Value at vesting
date*
Vesting date
31 August 2013
3 September 2013
13 September 2013
31 August 2013
3 September 2013
13 September 2013
31 August 2013
3 September 2013
13 September 2013
13 September 2013
31 August 2013
3 September 2013
13 September 2013
79,750
79,767
33,522
20,816
24,283
10,508
20,684
20,683
9,197
9,006
9,016
9,250
4,801
192,198
191,441
85,146
50,166
58,279
26,690
49,849
49,639
23,360
22,875
21,728
22,200
12,195
*
The value at vesting date of shares that were granted as part of remuneration and vested during the year is the closing
market price on the day of vesting.
Details of shares issued after the reporting date, but before the date of this report, as a result of the vesting of share rights
entitlements during the year ended 30 June 2014 are set out below:
Name
Vesting date
Other key management personnel
Number of ordinary
shares to be issued on
vesting of share rights
Value at vesting
date*
M I Russell
30 June 2014
98,909
280,902
*
The value at vesting date of shares that were granted as part of remuneration and vested during the year is the closing
market price on the day of vesting
Details of remuneration: cash STIs and share based remuneration
For each cash STI and grant of share based remuneration in the tables on pages 18 - 19, the percentage of the available grant that
was paid, or that vested, in the financial year, and the percentage that was forfeited because the person did not meet the service
or performance criteria is set out on the next page. Share based remuneration will not vest if the conditions are not satisfied.
Hence the minimum value of the performance shares and options yet to vest is nil. The maximum value of the share based
remuneration yet to vest has been determined as the amount of the grant date fair value of the underlying shares that is yet to be
expensed.
22
Directors’ Report
for the year ended 30 June 2014 DIRECTORS’ REPORT continued
STI
Share based remuneration
Name
M I Russell
Paid
%
100
Forfeited
%
–
S R Mitchell
100
–
N C Rose-Innes
100
–
A J Russell
100
M J McCarney
100
J) Service agreements
–
–
Financial
Year
granted
2014
2014
2014
2014
2013
2013
2013
2012
2012
2011
2011
2010
2014
2014
2014
2013
2013
2013
2012
2012
2011
2011
2010
2014
2014
2014
2013
2013
2013
2012
2012
2011
2011
2010
2014
2014
2014
2013
2013
2013
2012
2012
2014
2014
2014
Vested
Forfeited
%
–
–
–
100
–
–
100
–
100
–
100
100
–
–
–
–
–
100
–
100
–
100
100
–
–
–
–
–
100
–
100
–
100
100
–
–
–
–
–
100
–
100
–
–
–
%
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Financial years
in which shares
may vest
30/6/2017
30/6/2016
30/6/2015
–
30/6/2016
30/6/2015
–
30/6/2015
–
30/6/2015
–
–
30/6/2017
30/6/2016
30/6/2015
30/6/2016
30/6/2015
–
30/6/2015
–
30/6/2015
–
–
30/6/2017
30/6/2016
30/6/2015
30/6/2016
30/6/2015
–
30/6/2015
–
30/6/2015
–
–
30/6/2017
30/6/2016
30/6/2015
30/6/2016
30/6/2015
–
30/6/2015
–
30/6/2017
30/6/2016
30/6/2015
Minimum total
value of grant
yet to vest
$
Nil
Nil
Nil
–
Nil
Nil
–
Nil
–
Nil
–
–
Nil
Nil
Nil
Nil
Nil
–
Nil
–
Nil
–
–
Nil
Nil
Nil
Nil
Nil
–
Nil
–
Nil
–
–
Nil
Nil
Nil
Nil
Nil
–
Nil
–
Nil
Nil
Nil
Maximum total
value of grant
yet to vest
$
164,449
510,414
5,685
–
95,630
2,994
–
14,769
–
4,309
–
–
52,096
5,217
1,803
30,294
954
–
4,581
–
1,312
–
–
47,344
4,742
1,634
26,524
838
–
4,014
–
1,133
–
–
47,344
4,742
1,634
26,524
838
–
3,849
–
32,131
3,221
1,109
On appointments to the Board after it was listed as a public company, Non–Executive Directors enter into a service agreement
with the Company in the form of a letter of appointment. The letter summarises the Board policies and terms, including
compensation, relevant to the Director.
Remuneration and other terms of employment for the CEO, M I Russell, and other executives are set out in their respective letters
of employment. The employment terms do not prescribe the duration of employment for executives except for the CEO, who has a
set term of employment ending April 2016. The periods of notice required to terminate employment are set out on the next page:
Directors’ Report
23
for the year ended 30 June 2014 DIRECTORS’ REPORT continued
•
•
The employment contract of Mr M I Russell is terminable by either the Company or the executive with six months notice.
The employment contracts of all other key management personnel are terminable by either the Company or the executive
with three months notice.
No provision is made in the contracts for termination payments other than amounts paid in respect of notice of termination.
K) Legacy equity grants vesting in FY14 or outstanding at the end of FY14 and granted prior to FY14
Pre FY12 grants
Shares offered under the Performance Share Plan (PSP) in FY10, and FY11 vest over a four year period, with one third of each grant
vesting two years into the period, one third three years in and the remaining third vesting at year four. The criterion for vesting is
continuous service over the period to the vesting date.
The final third of the shares granted in FY10 vested in September 2013.
One third of the shares granted in FY11 vested in September 2013.
Detailed vesting information is shown for each tranche on page 20.
Post FY11 grants
Shares offered under the Performance Share Plan (PSP) in FY12 and FY13 are divided into three tranches each with its own vesting
criteria. The two largest tranches (which comprise 75% of the year’s grant) vest at the end of a three-year period based on
performance criteria as described below.
Post FY11 grant first tranche
Shares offered under the Performance Share Plan (PSP) in the first post FY11 tranche vest over a three year period with a third
vesting one year into the period, a third two years in and the remaining third vesting at year three. The criterion for vesting is
based on continuous service over the period to the vesting date.
Detailed vesting information is shown for each tranche on page 20.
Post FY11 grant second tranche
The second tranche vests based on achieving a target compound growth in cash EPS. The shares will vest at the end of the three-
year performance period if the Company’s annual growth in cash based EPS on a compounded basis for the three-year period
exceeds 2%, in accordance with the following vesting scale:
Company compound annual growth in Cash EPS
Percentage of EPS based performance shares granted
Below 2%
At 2%
At or above 5%
0%
35%
100%
For compound EPS growth between 2% and 5%, the percentage of EPS-based performance shares to vest will increase from 35% to
100% on a straight line basis.
Post FY11 grant third tranche
The third tranche will vest based on a target TSR performance relative to a comparator group at the end of a three year period.
Should the Company’s TSR for the three year period exceed the 40th percentile of the TSR of the comparator group, shares vest in
accordance with the following vesting scale:
Company performance (TSR percentile ranking)
Percentage of TSR based performance shares granted
Below the 40th percentile
At the 40th percentile
90th percentile or above
0%
25%
100%
For TSR performance between the 40th percentile and the 90th percentile, the TSR-based performance shares will vest on a
straight-line basis.
24
Directors’ Report
for the year ended 30 June 2014
DIRECTORS’ REPORT continued
The Company’s TSR is compared to that of a comparator group comprised of selected listed companies included within ASX
Financials with a market capitalisation of less than $1 billion but more than $40 million at 31 August. The comparator group
excludes property related trusts or companies.
The comparator group for the PSP offers made in FY13 comprises: Perpetual Ltd, SFG Australia Ltd, FKP Property Group, Peet Ltd,
NIB Holdings Ltd/Australia, Magellan Financial Group Ltd, FlexiGroup Ltd/Australia, Cedar Woods Properties Ltd, BT Investment
Management Ltd, Finbar Group Ltd, United Overseas Australia Ltd, ClearView Wealth Ltd, Austbrokers Holdings Ltd, Euroz Ltd,
MyState Ltd, The Trust Co Ltd, Servcorp Ltd, IMF Australia Ltd, Wide Bay Australia Ltd, Bell Financial Group Ltd, Forest Place Group
Ltd, Sunland Group Ltd, Countplus Ltd, RHG Ltd, Equity Trustees Ltd, Devine Ltd, K2 Asset Management Holdings Ltd, Hunter Hall
International Ltd, AVJennings Ltd, Payce Consolidated Ltd, HFA Holdings Ltd, Treasury Group Ltd, Phileo Australia Ltd, Homeloans
Ltd, CIC Australia Ltd, Ozgrowth Ltd, ThinkSmart Ltd, Lifestyle Communities Ltd, InvestorFirst Ltd, Centrepoint Alliance Ltd, ASF
Group Ltd, Plan B Group.
The comparator group for the PSP offers made in FY12 comprises: Flexigroup Ltd, NIB Holdings Ltd, FKP Property Group, BT
Investment Management Ltd, Magellan Financial Group Ltd, Austbrokers Holdings Ltd, United Overseas Australia Ltd, Servcorp Ltd,
Mystate Ltd, Cedar Woods Properties Ltd, Clearview Wealth Ltd, SFG Australia Ltd, Wide Bay Australia Ltd, Peet Ltd, Finbar Group
Ltd, Forest Place Group Ltd, Sunland Group Ltd, IMF Australia Ltd, The Trust Co Ltd, RHG Ltd, Countplus Ltd, Euroz Ltd, Bell Financial
Group Ltd, Equity Trustees Ltd, Devine Ltd, Payce Consolidated Ltd, Treasury Group Ltd, Hunter Hall International Ltd, HFA Holdings
Ltd, AV Jennings Ltd, Homeloans Ltd, K2 Asset Management Holdings Ltd, Phileo Australia Ltd, Villa World Ltd, CIC Australia Ltd,
ASF Group Ltd, Ozgrowth Ltd, Lifestyle Communities Ltd, FSA Group Ltd, Yellow Brick Road Holdings Ltd.
If any of the companies in the comparator group ceases to exist in its original form for any reason other than its liquidation, or
if the Board determines in its discretion that a company should no longer be in the comparator group because of an anomaly,
distortion or other event that is not directly related to the financial performance of that company, that company will cease to form
part of the comparator group.
PSP features applicable to all grants
Shares will be acquired for participants following their acceptance of an offer made under the Plan. The shares will be acquired
by the plan trustee and held on trust for participants until they are withdrawn from the Plan (after they have vested or are
deemed to be vested) or are forfeited, in circumstances outlined below. Shares will be acquired only at times permitted under the
Company’s share trading policy. Shares may be acquired by on-market or off-market purchases, by subscribing for new shares
to be issued by the Company, or through the reallocation of forfeited shares. The method of acquisition for each share allocation
will be determined by the Board. The Company will fund the costs of all share acquisitions under the Plan. Participants will not be
required to make any payment for the acquisition of shares under the Plan.
A Notice of Withdrawal may be lodged by a participant following the earlier of:
•
•
•
•
a date ten years from grant date;
the participant ceasing to be an employee of the Company;
a ‘capital event’ (generally, a successful takeover offer or scheme of arrangement relating to the Company) occurring; or
the date upon which the Board gives its written consent to the lodgement of a Notice of Withdrawal by the participant.
While shares remain subject to the PSP rules, participants will, in general, enjoy the rights attaching to those shares (such as voting
or dividend rights etc.). If a participant resigns from his or her employment with the Company, or otherwise ceases employment
in circumstances not involving “special circumstances”, the participant will be required to forfeit any unvested shares held under
the Plan on the participant’s behalf, unless the Board otherwise determines. Vested shares will be eligible for withdrawal in
accordance with the usual procedure.
If a participant ceases to be employed by the Company or retires from office as a result of special circumstances (including
death, disability, retirement, redundancy, corporate restructure, or any other circumstances determined by the Board), the
Board may in its discretion determine that all or a portion of the participant’s unvested shares are to be treated as vested
shares, notwithstanding the fact that the vesting conditions applicable to the shares have not been met because the applicable
performance period has not expired.
If the Board determines that a participant has acted fraudulently or dishonestly, has committed an act of harassment or
discrimination, is in serious breach of any duty to Mortgage Choice, or, in the Board’s reasonable opinion, has brought Mortgage
Choice into serious disrepute, any shares to which the participant may have become entitled at the end of the performance period,
and any shares held by the participant under the PSP are forfeited by the participant.
L) Key management personnel equity holdings
Performance shares
The number of performance shares held during the financial year by each Director of Mortgage Choice Limited and other key
management personnel of the Group, including their personally related parties, are set out on the next page.
Directors’ Report
25
for the year ended 30 June 2014 DIRECTORS’ REPORT continued
2014
Name
Balance at
the start of
the year
Granted as
compensation
Vested
Forfeited
Balance at
the end of
the year
Unvested
Key management personnel of the Group
M I Russell
S R Mitchell
N C Rose-Innes
A J Russell
M J McCarney
S C Dehne
2013
Name
623,848
189,975
167,627
103,467
–
82,628
116,570
(193,039)
36,930
33,560
33,560
22,780
(55,607)
(50,564)
(9,006)
–
–
–
–
–
–
–
(23,068)
(59,560)
547,379
171,298
150,623
128,021
22,780
–
547,379
171,297
150,624
128,021
22,780
–
Balance at
the start of
the year
Granted as
compensation
Vested
Forfeited
Balance at
the end of
the year
Unvested
Key management personnel of the Group
M I Russell
S R Mitchell
N C Rose-Innes
A J Russell
S C Dehne
610,900
180,333
161,067
55,350
75,883
190,140
60,230
52,730
52,730
27,520
(177,192)
(50,588)
(46,170)
(4,613)
(20,775)
–
–
–
–
–
623,848
189,975
167,627
103,467
82,628
623,848
189,975
167,627
103,467
82,628
Share holdings
The number of shares in the Company held during the financial year by each Director of Mortgage Choice Limited and other key
management personnel of the Group, including their personally related parties, are set out below.
2014
Name
Balance
at the start
of the year
Received during
the year on the
vesting of shares
Other changes
during the year
Balance
at the end
of the year
Directors of Mortgage Choice Limited
P D Ritchie
S J Clancy
P G Higgins
R G Higgins
S C Jermyn
D E Ralston
Key management personnel of the Group
M I Russell
S R Mitchell
N C Rose-Innes
A J Russell
M J McCarney
S C Dehne
350,125
50,000
822,939
15,296,215
2,000,000
125,000
874,916
70,588
90,553
24,613
–
29,792
–
–
–
–
–
–
286,789
55,607
50,564
9,006
–
23,067
40,000
–
(170,000)
–
–
–
(450,000)
(70,588)
(22,000)
(8,619)
–
(52,859)
390,125
50,000
652,939
15,296,215
2,000,000
125,000
617,955
55,607
119,117
25,000
–
–
26
Directors’ Report
for the year ended 30 June 2014 DIRECTORS’ REPORT continued
2013
Name
Balance
at the start
of the year
Received during
the year on the
vesting of shares
Other changes
during the year
Balance
at the end
of the year
Directors of Mortgage Choice Limited
P D Ritchie
S J Clancy
P G Higgins
R G Higgins
S C Jermyn
D E Ralston
Key management personnel of the Group
M I Russell
S R Mitchell
N C Rose-Innes
A J Russell
S C Dehne
350,125
50,000
822,939
15,226,215
2,000,000
100,000
79,750
40,817
54,383
20,000
9,017
–
–
–
–
–
–
177,192
50,588
46,170
4,613
20,775
–
–
–
70,000
–
25,000
617,974
(20,817)
(10,000)
–
–
350,125
50,000
822,939
15,296,215
2,000,000
125,000
874,916
70,588
90,553
24,613
29,792
Shareholdings of Directors and other key management personnel of the Group include those that have been disclosed
under representation made to them by the parties. The Directors and other key management personnel have relied upon
the representations made as they have no control or influence over the financial affairs of the personally related entities to
substantiate the shareholdings declared. Where shareholdings of former staff and their personally related entities have not been
obtained, other changes during the year are assumed to be nil.
Shares under option
There were no unissued ordinary shares of Mortgage Choice Limited under option at the date of this report.
Shares provided on exercise of remuneration options
No options issued to key management personnel were exercised during the year.
Insurance of Directors and Officers
Insurance premiums were paid for the year ended 30 June 2014 in respect of Directors’ and Officers’ liability and legal expenses for
Directors and Officers of the Company and all controlled entities. The insurance contract prohibits disclosure of the premium paid.
The insurance premiums relate to:
• Costs and expenses incurred by relevant Directors and Officers in defending any proceedings; and
•
Other liabilities that may arise from their position, with the exception of conduct involving dishonesty, wrongful acts, or
improper use of information or position to gain personal advantage.
The Company has entered into deeds of access, insurance and indemnity with the Directors, the Chief Executive Officer, the Chief
Financial Officer and Company Secretary. The indemnity is subject to the restrictions prescribed in the Corporations Act. Subject
to the terms of the deed, it also gives each executive a right of access to certain documents and requires the Company to maintain
insurance cover for the executives.
No indemnities were paid to current or former officers or auditors during or since the end of the year.
Proceedings on behalf of the Company
No person has applied to the Court under section 237 of 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.
Non-audit services
The Company may decide to employ the auditor on assignments in addition to their statutory audit duties where the auditor’s
expertise and experience with the Company or Group are important.
Directors’ Report
27
for the year ended 30 June 2014 DIRECTORS’ REPORT continued
for the year ended 30 June 2014
The Board of Directors has considered the position and, in accordance with the advice received from the audit committee, is
satisfi ed that the provision of the non-audit services is compatible with the general standard of independence for auditors
imposed by the Corporations Act 2001. The Directors are satisfi ed that the provision of non-audit services by the auditor, as set
out below, did not compromise the auditor independence requirements of the Corporations Act 2001 as none of the services
undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants.
Details of the amounts paid or payable to the auditor (Deloitte Touche Tohmatsu) for non-audit services provided during the year
are set out below.
Non-audit services – 2014
Audit-related services
Deloitte Touche Tohmatsu Australian fi rm:
Actuarial services
Total remuneration for audit-related services
Taxation services
Deloitte Touche Tohmatsu Australian fi rm:
Other tax services
Total remuneration for taxation services
Total remuneration for non-audit services
Non-audit services – 2013
Taxation services
PricewaterhouseCoopers Australian fi rm:
Tax compliance services
Other tax services
Total remuneration for taxation services
Total remuneration for non-audit services
Consolidated
$
75,000
75,000
1,644
1,644
76,644
23,900
18,800
42,700
42,700
Auditor’s independence declaration
A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 35.
Rounding
The Company is of a kind referred to in Class Order 98/100 issued by the Australian Securities & Investments Commission, relating
to the “rounding off ” of amounts in the Directors’ report. Amounts in the Directors’ report have been rounded off in accordance
with that Class Order to the nearest thousand dollars, or in certain cases, to the nearest dollar.
Auditor
Deloitte Touche Tohmatsu continues in offi ce in accordance with section 327 of the Corporations Act 2001.
This report is made in accordance with a resolution of the Directors.
Peter Ritchie
Director
Sydney
21 August 2014
28
Directors’ Report
Corporate Governance
Statement
for the year ended 30 June 2014
Mortgage Choice Limited has in place corporate governance practices to ensure the Company and the Group are effectively
directed and managed, risks are monitored and assessed and appropriate disclosures are made.
A statement of the Company’s full corporate governance practices is set out below. The Company considers that it complies with
the August 2007 ASX Corporate Governance Principles and Recommendations (including 2010 Amendments to the extent that they
apply to the Company’s financial year ended 30 June 2014).
Principle 1: Lay solid foundations for management and oversight
The Board acts on behalf of shareholders and is accountable to shareholders for the overall direction, management and corporate
governance of the Company.
The Board is responsible for:
• overseeing the Company, including its control and accountability systems;
•
appointing and removing the Chief Executive Officer;
• monitoring the performance of the Chief Executive Officer;
• monitoring senior management’s implementation of strategy, and ensuring appropriate resources are available;
•
reporting to shareholders;
• providing strategic advice to management;
•
approving management’s corporate strategy and performance objectives;
• determining and financing dividend payments;
•
•
•
•
approving and monitoring the progress of major capital expenditure, capital management, acquisitions and divestitures;
approving and monitoring financial and other reporting;
reviewing and ratifying systems of risk management, internal compliance and control, and legal compliance to ensure
appropriate compliance frameworks and controls are in place;
reviewing and overseeing the implementation of the Company’s corporate code of conduct and code of conduct for Directors
and senior executives;
•
approving charters of Board committees;
• monitoring and ensuring compliance with legal and regulatory requirements and ethical standards and policies; and
• monitoring and ensuring compliance with best practice corporate governance requirements.
Responsibility for day-to-day management and administration of the Company is delegated by the Board to the Chief Executive
Officer and the executive team.
Principle 2: Structure the Board to add value
The Board comprises two Non-Executive Directors and four independent Non-Executive Directors including the Peter Ritchie
Chairman, Steve Jermyn and Deborah Ralston, who were appointed as Non-Executive Directors in the period prior to the
Company’s listing on the ASX, and Sean Clancy, who was appointed in May 2009. These individuals bring a long history of public
company, operational and franchising experience with them and assist in overseeing the corporate governance of the Company.
The Board operates in accordance with the broad principles set out in its Charter which is available in the Shareholders section of
the Company’s website at www.MortgageChoice.com.au.
Board size, composition and independence
The Charter states that:
•
•
there must be a minimum of five Directors and a maximum of seven Directors;
the Board must comprise:
–
a majority of independent Non-Executive Directors;
– Directors with an appropriate range of skills, experience and expertise;
Corporate Governance Statement
29
CORPORATE GOVERNANCE STATEMENT continued
for the year ended 30 June 2014
– Directors who can understand and competently deal with current and emerging business issues; and
– Directors who can effectively review and challenge the performance of management and exercise independent judgement;
•
•
the nomination committee is responsible for recommending candidates for appointment to the Board; and
each Director is appointed by a formal letter of appointment setting out the key terms and conditions of their appointment to
ensure that each Director clearly understands the Company’s expectations of him or her.
Directors’ independence
The Board Charter sets out specific principles in relation to Directors’ independence. These state that an independent Non-
Executive Director is one who is independent of management and:
•
•
•
•
•
•
•
is not a substantial shareholder of the Company or an officer of, or otherwise associated directly with, a substantial
shareholder of the Company;
within the last three years has not been employed in an executive capacity by the Company or another Group member, or
been a Director after ceasing to hold any such employment;
within the last three years has not been a principal of a material professional adviser or a material consultant to the Company
or another Group member, or an employee materially associated with the service provided;
is not a material supplier or customer of the Company or other Group member, or an officer of or otherwise associated directly
or indirectly with a material supplier or customer;
has no material contractual relationship with the Company or another Group member other than as a Director of the
Company;
has not served on the Board for a period which could, or could reasonably be perceived to, materially interfere with the
Director’s ability to act in the best interests of the Company; and
is free from any interest in any business or other relationship which could, or could reasonably be perceived to, materially
interfere with the Director’s ability to act in the best interests of the Company.
All Directors are required to complete an independence questionnaire.
Independent professional advice
Board committees and individual Directors may seek independent external professional advice for the purposes of proper
performance of their duties.
Performance assessment
The performance of the Board, the Directors and key executives is reviewed annually. The nomination committee is responsible for
reviewing:
•
•
•
•
the Board’s role;
the processes of the Board and Board committees;
the Board’s performance; and
each Director’s performance before the Director stands for re-election.
The process for performance evaluation of the Board, its committees and individual Directors, and key executives that has been
adopted by the Board is available in the Shareholders section of the Company’s website at www.MortgageChoice.com.au.
A review of the Board was conducted by the Chairman of the nomination committee in concert with the Company Secretary
during the financial year ended 30 June 2014.
Board committees
Mortgage Choice has three Board committees comprising the remuneration committee, the audit committee and the nomination
committee. These committees serve to support the functions of the Board and will make recommendations to Directors on issues
relating to their area of responsibility.
The nomination committee
The objective of the nomination committee is to help the Board achieve its objective of ensuring the Company has a board of an
effective composition, size and commitment to adequately discharge its responsibilities and duties. The nomination committee is
responsible for evaluating the Board’s performance. The nomination committee comprises Peter Ritchie and Rodney Higgins.
The nomination committee charter is available in the Shareholders section of the Company’s website at www.MortgageChoice.com.au.
30
Corporate Governance Statement
CORPORATE GOVERNANCE STATEMENT continued
for the year ended 30 June 2014
Principle 3: Promote ethical and responsible decision making
Codes of conduct
The Company has adopted a corporate code of conduct setting out its legal and other obligations to all legitimate stakeholders
including shareholders, franchisees, employees, customers and the community.
The Company has also adopted a code of conduct for Directors and senior executives setting out required standards of behaviour,
for the benefit of all shareholders. The purpose of this code of conduct is to:
•
•
•
•
articulate the high standards of honesty, integrity, ethical and law-abiding behaviour expected of Directors and senior
executives;
encourage the observance of those standards to protect and promote the interests of shareholders and other stakeholders
(including franchisees, employees, customers, suppliers and creditors);
guide Directors and senior executives as to the practices thought necessary to maintain confidence in the Company’s integrity;
and
set out the responsibility and accountability of Directors and senior executives to report and investigate any reported
violations of this code or unethical or unlawful behaviour.
The Company requires that its Directors and senior executives adhere to a share trading policy that restricts the purchase and sale
of Company securities to three six-week periods following the release of the half-yearly and annual financial results to the market,
and the Annual General Meeting.
Copies of the Corporate Code of Conduct, the Code of Conduct for Directors and Senior Executives and the Share Trading Policy are
available in the Shareholders section of the Company’s website at www.MortgageChoice.com.au.
Diversity policy
The Company believes that embracing diversity in its workforce contributes to the achievement of its corporate objectives and
enhances its reputation. As a result the Company has developed a diversity policy. It enables the Company to:
•
•
recruit the right people from a diverse pool of talented candidates;
make more informed and innovative decisions, drawing on the wide range of ideas, experiences, approaches and perspectives
that employees from diverse backgrounds, and with differing skill sets, bring to their roles; and
• better represent the diversity of all our stakeholders
The Company is committed to achieving the goals of:
(a) providing access to equal opportunities at work based on merit; and
(b) fostering a corporate culture that embraces and values diversity.
We are an equal opportunity employer and welcome people from a diverse set of backgrounds.
Mortgage Choice has historically displayed a commitment to gender diversity through policies that encourage participation by
women in all levels of the business. Examples of these are:
•
•
•
Paid parental leave
Flexible work practices including the promotion of part time female employees to senior roles.
Awareness in all employees of their rights and responsibilities in regards to fairness, equity and respect for all aspects of
diversity.
The diversity policy includes requirements for the Board to establish measurable objectives for achieving gender diversity, and for
the Board to assess annually both the objectives, and the Company’s progress in achieving them.
Corporate Governance Statement
31
CORPORATE GOVERNANCE STATEMENT continued
for the year ended 30 June 2014
Measurable objectives for achieving gender diversity and the progress toward those objectives are as follows:
•
•
•
•
•
Appoint an executive responsible for achieving gender diversity. The Head of Human Resources has assumed responsibility for
this function.
Strive to maintain a fair and balanced level of gender representation in the overall Mortgage Choice workforce. The percentage
of women in the Mortgage Choice workforce currently stands at 53%
Subject to vacancies and circumstances, strive to maintain a fair and balanced level of gender representation in the Senior
Management Team. Currently 43% of the Senior Management Team are women.
Subject to vacancies and circumstances, increase female representation on the Board of Directors. Currently one of the six
Directors on the Board is a woman.
Actively encourage the representation of women in senior executive roles through participation in a Leadership program.
Currently 55% of participants in the Leadership program are women.
A copy of the Diversity Policy is available in the Shareholders section of the Company’s website at www.MortgageChoice.com.au.
Principle 4: Safeguard integrity in financial reporting
The audit committee
The audit committee provides advice and assistance to the Board in fulfilling the Board’s responsibilities relating to:
• financial reporting;
•
the application of accounting policies;
• business policies and practices;
•
•
legal and regulatory compliance; and
internal risk control and management systems.
The audit committee comprises Steve Jermyn (Chairman), Sean Clancy, Peter Higgins and Deborah Ralston. The objective of the
audit committee is to:
• maintain and improve the quality, credibility and objectivity of the financial accountability process; and
• provide a forum for communication between the Board and senior financial and compliance management.
The audit committee charter is available in the Shareholders section of the Company’s website at www.MortgageChoice.com.au.
External auditor
The Company has adopted procedures for the selection and appointment of the external auditor which are available in the
Shareholders section of the Company’s website at www.MortgageChoice.com.au.
The audit committee will regularly review the performance of the external auditor and consider any ongoing appointment.
The external auditor should rotate the senior audit partner and the audit review partner every five years with suitable succession
planning to ensure consistency.
The external auditor should not place itself in a position where its objectivity may be impaired or where a reasonable person
might conclude that its objectivity has been impaired. This requirement also applies to individual members of an audit team. The
credibility and integrity of the financial reporting process is paramount. The Company has adopted guidelines on external auditor
independence. These guidelines help to ensure a consistent approach to the appointment and review of external auditors.
The Company will not give work to the external auditor likely to give rise to a ‘self review threat’ (as defined in Australian
Professional and Ethical Standards APES110, The Institute of Chartered Accountants in Australia and CPA Australia). It is the policy of
the external auditors to provide an annual declaration of their independence to the audit committee.
The external auditor is requested to attend the Annual General Meeting of the Company.
32
Corporate Governance Statement
CORPORATE GOVERNANCE STATEMENT continued
for the year ended 30 June 2014
Principle 5: Make timely and balanced disclosure
Continuous Disclosure
The Company has adopted a market disclosure protocol. The objective of this protocol is to:
•
•
•
ensure the Company immediately discloses information that a reasonable person would expect to have a material effect on
the price of the Company’s securities to ASX in accordance with the ASX Listing Rules and the Corporations Act 2001 (Cth);
ensure officers and employees are aware of the Company’s continuous disclosure obligations; and
establish procedures for:
–
–
–
–
the collection of all potentially price-sensitive information;
assessing if information must be disclosed to ASX under the ASX Listing Rules or the Corporations Act 2001 (Cth);
releasing to ASX information determined to be price-sensitive information and to require disclosure; and
responding to any queries from ASX (particularly queries under Listing Rule 3.1B).
The protocol is carried out through a market disclosure committee comprised of management representatives. The market
disclosure committee is responsible for:
•
•
ensuring compliance with continuous disclosure obligations;
establishing a system to monitor compliance with continuous disclosure obligations and this protocol;
• monitoring regulatory requirements so that this protocol continues to conform with those requirements;
•
monitoring movements in share price and share trading to identify circumstances where a false market may have emerged in
company securities; and
• making decisions about trading halts.
All relevant information provided to ASX will be posted immediately on the Company’s website, www.MortgageChoice.com.au, in
compliance with the continuous disclosure requirements of the Corporations Act 2001 (Cth) and ASX Listing Rules.
Principle 6: Respect the rights of shareholders
Communication to shareholders
The Board aims to ensure that shareholders are informed of all major developments affecting the Company’s state of affairs. The
Board will:
•
•
communicate effectively with shareholders;
give shareholders ready access to balanced and understandable information about the Company and its corporate goals; and
• make it easy for shareholders to participate in general meetings.
Information is communicated to shareholders through ASX announcements, the Company’s annual report, the Annual General
Meeting, half and full year results announcements and the Company’s website, www.MortgageChoice.com.au.
The Board has adopted a communications strategy to facilitate and promote effective communication with shareholders and
encourage participation at general meetings. Arrangements the Company has to promote communication with shareholders are
set out in the Shareholders section of the Company’s website at www.MortgageChoice.com.au.
Principle 7: Recognise and manage risk
The Company has adopted and endorsed a compliance policy. The policy is a commitment to:
• promote a culture of compliance throughout the Company and franchise network;
•
create an understanding of the relevant laws at all levels;
• minimise the possibility of a contravention of the law and manage any legal risk;
•
•
enhance the Company’s corporate image and customer service; and
market, promote and sell the Company’s services in a way that is competitive, ethical, honest and fair, and in compliance with
the law.
Corporate Governance Statement
33
CORPORATE GOVERNANCE STATEMENT continued
for the year ended 30 June 2014
The Company has developed and implemented a compliance program. The aim of the program is to promote a culture of
compliance through a number of measures including staff and franchise network training, compliance procedures, support
systems and the appointment of staff responsible for compliance.
The centrepiece of the program is a web based compliance education and evaluation tool. A self paced system, it covers the
key legislative and regulatory obligations applicable to the business. Each major regulatory area (Trade Practices, Privacy, Equal
Opportunity, Occupational Health and Safety, Technology, Franchising, National Consumer Credit Protection Act) is covered. All
staff and the Board are required to complete all modules and must repeat the program at prescribed intervals. The program has
also been rolled out to the franchise network.
The Company expects its employees, franchisees and representatives to actively support its compliance program. It is each
employee, franchisee and representative’s responsibility to make use of the training systems and support offered by the
Company. Non-compliance with the law or failure to comply with the compliance program will not be tolerated and could result
in disciplinary action.
In order to comply with the Australian standard for risk management, the Company has initiated a corporate risk management
plan.
In fundamental terms, this process involves:
•
•
•
•
analysing all aspects of the business to determine what operational risks are faced, either on a continuous or isolated basis;
having determined these risks, assessing each of them to allocate a rating based upon the likelihood of occurrence and
consequence of occurrence;
determining what control measures are in place to eliminate or reduce the identified risk – this leads to allocating each risk a
rating, all of which is recorded in a risk register; and
executive management then make decisions as to how each risk is to be handled i.e. avoided, managed, transferred or
accepted. The Risk Register is a dynamic document that changes as business operations vary, resulting in new risks.
Management has reported to the Board that risk management and internal control systems effectively manage the Company’s
material business risks.
Corporate Reporting
The Chief Executive Officer and Chief Financial Officer have certified that 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 and are in
accordance with relevant accounting standards.
Principle 8: Remunerate fairly and responsibly
The remuneration committee
The remuneration committee is responsible for determining and reviewing compensation arrangements for the Directors and
senior management team. The remuneration committee comprises Peter Ritchie, Rodney Higgins and Sean Clancy.
The objective of the remuneration committee is to help the Board achieve its objective of ensuring the Company:
•
has coherent remuneration policies and practices to attract and retain executives and Directors who will create value for
shareholders;
• observes those remuneration policies and practices; and
•
fairly and responsibly rewards executives and other employees having regard to the performance of the Company, the
performance of the executive or employee and the general and specific remuneration environment.
Non-Executive Directors are not entitled to retirement benefits with the exception of statutory superannuation.
The remuneration committee charter is available in the Shareholders section of the Company’s website at
www.MortgageChoice.com.au.
34
Corporate Governance Statement
AUDITOR’S INDEPENDENCE DECLARATION
for the year ended 30 June 2014
Deloitte Touche Tohmatsu
A.B.N. 74 490 121 060
Grosvenor Place
225 George Street
Sydney, NSW 2000
PO Box N250 Grosvenor Place
Sydney NSW 1220 Australia
DX 10307SSE
Tel: +61 (0) 2 9322 7000
Fax: +61 (0) 2 9322 7001
www.deloitte.com.au
The Board of Directors
Mortgage Choice Limited
50 Bridge Street
Sydney NSW 2000
21 August 2014
Dear Board Members
Mortgage Choice Limited
In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the
following declaration of independence to the directors of Mortgage Choice Limited.
As lead audit partner for the audit of the financial statements of Mortgage Choice Limited for the
financial year ended 30 June 2014, I declare that to the best of my knowledge and belief, there
have been no contraventions of:
(i)
the auditor independence requirements of the Corporations Act 2001 in relation to
the audit; and
(ii) any applicable code of professional conduct in relation to the audit.
Yours sincerely
DELOITTE TOUCHE TOHMATSU
Philip Hardy
Partner
Chartered Accountants
Liability limited by a scheme approved under Professional Standards Legislation.
Auditor’s Independence Declaration
35
Financial Statements
for the year ended 30 June 2014
Contents
37 Consolidated income statement
38 Consolidated statement of
comprehensive income
39 Consolidated balance sheet
40 Consolidated statement of
changes in equity
41 Consolidated statement of cash
flows
42 Notes to the consolidated financial
statements
87 Directors’ declaration
88
Independent audit report to
members of Mortgage Choice
Limited
These financial statements are the
consolidated financial statements of the
consolidated entity consisting of Mortgage
Choice Limited and its subsidiaries. The
financial statements are presented in the
Australian currency.
Mortgage Choice Limited is a company
limited by shares, incorporated and
domiciled in Australia. Its registered office
and principal place of business is:
Mortgage Choice Limited
Level 10, 100 Pacific Highway
North Sydney NSW 2060
A description of the nature of the
consolidated entity’s operations and
its principal activities is included in the
Directors’ report which is not part of these
financial statements.
The financial statements were authorised
for issue by the Directors on 21 August 2014.
The Company has the power to amend and
reissue the financial statements.
Through the use of the internet, we have
ensured that our corporate reporting is
timely, complete, and available globally
at minimum cost to the Company. All
financial statements and other information
are available in the Shareholders
section of company’s website:
www.MortgageChoice.com.au.
36
Financial Statements
Consolidated
Income Statement
for the year ended 30 June 2014
Revenue
Origination commission
Trailing commission excluding discount unwind
Trailing commission discount unwind
Diversified products commission
Help Me Choose income excluding discount unwind
Help Me Choose income discount unwind
Financial Planning income
Franchise income
Interest
Other income
Direct costs
Origination commission
Trailing commission excluding discount unwind
Trailing commission discount unwind – finance costs
Diversified products commission
Help Me Choose direct costs
Financial Planning commission
Gross profit
Operating Expenses
Sales
Technology
Marketing
Finance
Corporate
Profit before income tax
Income tax expense
Profit for the period from continuing operations
Discontinued operation
Profit/(loss) for the period from discontinued operation
Net profit attributable to the owners of Mortgage Choice Limited
Earnings per share
From continuing and discontinued operations
Basic earnings per share
Diluted earnings per share
From continuing operations
Basic earnings per share
Diluted earnings per share
2014
$’000
2013
$’000
Notes
6
63,014
74,958
23,577
5,691
4,468
119
2,896
1,522
538
1,681
178,464
(45,777)
(47,712)
(14,129)
(4,483)
(1,277)
(2,341)
51,965
66,914
25,586
3,777
3,767
58
113
1,192
533
1,494
155,399
(37,375)
(37,023)
(15,470)
(2,944)
(1,249)
(95)
62,745
61,243
(13,938)
(5,185)
(8,675)
(2,094)
(6,057)
26,796
(8,249)
18,547
(12,983)
(5,344)
(8,060)
(2,009)
(5,454)
27,393
(8,359)
19,034
1,252
(320)
19,799
18,714
Cents
Cents
16.0
16.0
15.0
15.0
15.2
15.2
15.5
15.5
37
7
8
8
9
5
30
30
30
30
The above consolidated income statement should be read in conjunction with the accompanying notes.
Consolidated Income Statement
Consolidated Statement
of Comprehensive Income
for the year ended 30 June 2014
Profit for the year
Other comprehensive income
Total comprehensive income attributable to the
owners of Mortgage Choice Limited
Notes
2014
$’000
2013
$’000
19,799
18,714
–
–
19,799
18,714
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
38
Consolidated Statement of Comprehensive Income
Consolidated
Balance Sheet
for the year ended 30 June 2014
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Total current assets
Non-current assets
Receivables
Property, plant and equipment
Deferred tax assets
Intangible assets
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Current tax liabilities
Provisions
Total current liabilities
Non-current liabilities
Trade and other payables
Deferred tax liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Contributed equity
Reserves
Retained profits
Total equity
Notes
2014
$’000
2013
$’000
10
11
11
12
13
14
15
16
17
18
16
12,445
98,876
111,321
10,953
95,310
106,263
238,244
227,567
907
–
2,349
692
–
2,287
241,500
230,546
352,821
336,809
66,702
2,418
1,103
70,223
63,118
2,017
993
66,128
142,900
36,605
762
134,938
36,085
526
180,267
171,549
250,490
237,677
102,331
99,132
19
20(a)
20(b)
4,604
2,210
95,517
4,018
1,472
93,642
102,331
99,132
The above consolidated balance sheet should be read in conjunction with the accompanying notes.
Consolidated Balance Sheet
39
Consolidated Statement
of Changes in Equity
for the year ended 30 June 2014
Balance at 30 June 2012
Total comprehensive income for the year as
reported in the 2013 financial statements
Transactions with equity holders in their
capacity as owners:
Contributions of equity net of transaction costs
Dividends paid
Employee share options – value of employee
services
Balance at 30 June 2013
Total comprehensive income for the year as
reported in the 2014 financial statements
Transactions with equity holders in their
capacity as owners:
Contributions of equity net of transaction costs
Dividends paid
Employee share options – value of employee
services
Balance at 30 June 2014
Notes
Contributed
equity
$’000
1,558
Reserves
$’000
1,260
Retained
earnings
$’000
Total
$’000
90,801
93,619
–
–
18,714
18,714
19
21
31
19
21
31
2,460
–
–
2,460
4,018
(560)
–
772
212
–
(15,873)
1,900
(15,873)
–
772
(15,873)
(13,201)
1,472
93,642
99,132
–
–
19,799
19,799
586
–
–
586
4,604
(586)
–
1,324
738
2,210
–
–
(17,924)
(17,924)
–
(17,924)
1,324
(16,600)
95,517
102,331
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
40
Consolidated Statement of Changes in Equity
Consolidated Statement
of Cash flows
for the year ended 30 June 2014
Cash flows from operating activities
Receipts from customers (inclusive of goods and services tax)
Payments to suppliers and employees (inclusive of goods and services tax)
180,722
162,405
(154,018)
(139,303)
Notes
2014
$’000
2013
$’000
Income taxes paid
Net cash inflow from operating activities
Cash flows from investing activities
Payments for property, plant, equipment and intangibles
Proceeds from sale of LoanKit net of selling costs
Interest received
Net cash inflow/(outflow) from investing activities
Cash flows from financing activities
Proceeds from sale of shares
Dividends paid to company’s shareholders
Net cash (outflow) from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
29
26,704
(7,612)
19,092
(1,909)
1,695
538
324
–
(17,924)
(17,924)
1,492
10,953
23,102
(7,968)
15,134
(1,406)
–
536
(870)
1,900
(15,873)
(13,973)
291
10,662
Cash and cash equivalents at the end of year
10
12,445
10,953
The above consolidated statement cash flows should be read in conjunction with the accompanying notes.
Consolidated Statement of Cash Flows
41
Notes to the Consolidated
Financial Statements
for the year ended 30 June 2014
Note 1
Summary of significant accounting policies
The principal accounting policies adopted in the preparation of these consolidated financial statements are set out below. These
policies have been consistently applied to all the years presented, unless otherwise stated. The financial statements are for the
consolidated entity consisting of Mortgage Choice Limited and its subsidiaries.
A. Basis of preparation
These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and
Interpretations issued by the Australian Accounting Standards Board and the Corporations Act 2001. The financial statements
comprise the consolidated financial statements for the Group. For the purposes of preparing the consolidated financial
statements, the Company is a for-profit entity.
Compliance with IFRS
The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting
Standards (IFRS) as issued by the International Accounting Standards Board (IASB).
New and amended standards adopted by the Group
In the current year, the Group has applied a number of new and revised AASBs issued by the Australian Accounting Standards
Board (AASB) that are mandatorily effective for an accounting period that begins on or after 1 January 2013.
AASB 2011-4 Amendments to Australian Accounting Standards to Remove Individual Key Management Personnel Disclosure
Requirements. This standard removes the individual key management personnel disclosure requirements in AASB 124 Related
Party Disclosures. As a result the Group only discloses the key management personnel compensation in total and for each
of the categories required in AASB 124. In the current year the individual key management personnel disclosure previously
required by AASB 124 (note 21 in the 30 June 2013 financial statements) is now disclosed in the remuneration report due to an
amendment to Corporations Regulations 2001 issued in June 2013.
AASB 13 Fair Value Measurement and AASB 2011-8 Amendments to Australian Accounting Standards arising from AASB 13. AASB 13
defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction in
the principal (or most advantageous) market at the measurement date under current market conditions. Fair value under AASB
13 is an exit price regardless of whether that price is directly observable or estimated using another valuation technique. The
fair value of future trailing commissions receivable and payable, as identified in note 2, has not changed due to the adoption of
this standard.
AASB 10 ‘Consolidated Financial Statements’, AASB 2011- 7 ‘Amendments to Australian Accounting Standards arising from the
Consolidation and Joint Arrangements Standards’. The Standard identifies the principles of control, determines how to identify
whether an investor controls an investee and therefore must consolidate the investee, and sets out the principles for the
preparation of consolidated financial statements. The Standard introduces a single consolidation model for all entities based
on control, irrespective of the nature of the investee (i.e. whether an entity is controlled through voting rights of investors
or through other contractual arrangements as is common in ‘special purpose entities’). Under AASB 10, control is based on
whether an investor has:
•
•
•
Power over the investee
Exposure, or rights, to variable returns from its involvement with the investee, and
The ability to use its power over the investee to affect the amount of the returns.
AASB 12 ‘Disclosure of Interests in Other Entities’, AASB 2011-7 ‘Amendments to Australia Accounting Standards arising from the
Consolidation and Joint Arrangements Standards’. Requires the extensive disclosure of information that enables users of
financial statements to evaluate the nature of, and risks associated with, interests in other entities and the effects of those
interests on its financial position, financial performance and cash flows.
42
Notes to the Consolidated Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 30 June 2014
In high-level terms, the required disclosures are grouped into the following broad categories:
•
•
•
•
Significant judgements and assumptions – such as how control, joint control, significant influence has been determined
Interests in subsidiaries – including details of the structure of the Group, risks associated with structured entities, changes
in control, and so on
Interests in joint arrangements and associates – the nature, extent and financial effects of interests in joint arrangements
and associates (including names, details and summarised financial information)
Interests in unconsolidated structured entities – information to allow an understanding of the nature and extent of
interests in unconsolidated structured entities and to evaluate the nature of, and changes in, the risks associated with its
interests in unconsolidated structured entities.
AASB 12 lists specific examples and additional disclosures which further expand upon each of these disclosure objectives, and
includes other guidance on the extensive disclosures required.
AASB 119 ‘Employee Benefits (2011)’, ‘AASB 2011-10 Amendments to Australian Accounting Standards arising from AASB 119 (2011)’.
An amended version of AASB 119 ‘Employee Benefits’ with revised requirements for pensions and other post-employment
benefits, termination benefits and other changes.
The key amendments include:
•
•
•
•
Requiring the recognition of changes in the net defined benefit liability (asset) including immediate recognition of
defined benefit cost, disaggregation of defined benefit cost into components, recognition of remeasurements in other
comprehensive income, plan amendments, curtailments and settlements (eliminating the ‘corridor approach’ permitted by
the existing AASB 119)
Introducing enhanced disclosures about defined benefit plans
Modifying accounting for termination benefits, including distinguishing benefits provided in exchange for service and
benefits provided in exchange for the termination of employment and affect the recognition and measurement of
termination benefits
Clarifying various miscellaneous issues, including the classification of employee benefits, current estimates of mortality
rates, tax and administration costs and risksharing and conditional indexation features
•
Incorporating other matters submitted
Management have considered the amendments to AASB 10 Consolidated Financial Statements, AASB 12 Disclosure of Interests in
Other Entities, and AASB 119 Employee Benefits and determined no material impact for Mortgage Choice.
Historical cost convention
These financial statements have been prepared under the historical cost convention, as modified by the revaluation of
financial assets and liabilities (including derivative instruments) at fair value through profit and loss.
Critical accounting estimates
The preparation of financial statements requires the use of certain critical accounting estimates. It also requires management
to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of
judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed
in note 3.
B. Principles of consolidation
i/ Subsidiaries
The consolidated financial statements incorporate the financial statements of the Company and entities (including
structured entities) controlled by the Company and its subsidiaries. Control is achieved when the Company:
• has power over the investee;
•
is exposed, or has rights, to variable returns from its involvement with the investee; and
• has the ability to use its power to affect its returns.
The Company reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes
to one or more of the three elements of control listed above.
The acquisition method of accounting is used to account for business combinations by the Group (refer to note 1(G)).
Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated.
Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred.
Notes to the Consolidated Financial Statements
43
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 30 June 2014
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
ii/ Employee Share Trust
The Group has formed a trust to administer the Group’s employee share scheme. This trust is consolidated, as the
substance of the relationship is that the trust is controlled by the Group.
Shares held by the employee share scheme are disclosed as treasury shares and deducted from contributed equity in both
the consolidated and company accounts.
C. Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision
maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the
operating segments, has been identified as the Chief Executive Officer.
D. Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable.
The Company provides loan origination services through its franchise network and receives origination commission on the
settlement of loans. Additionally, the lender will normally pay a trailing commission over the life of the loan. Revenue over the
estimated life of loans written is recognised on the settlement of the loans as no additional services are required to receive the
entitled funds. Additionally, the Company earns income from the sale of franchises and franchisee services. Other companies
in the Group earn service fees by processing commissions for contracted brokers and provide software services. Revenue is
recognised as the service is performed.
Revenue from sale of services is recognised as follows:
i/ Origination commissions arising from mortgage broking activities
Origination commissions received by the Company are recognised as revenue on settlement of the loan. Commissions may
be “clawed back” by lenders at a later date as per their individual policies. These potential clawbacks are estimated and
recognised at the same time as origination commission.
ii/ Trailing commissions arising from mortgage broking activities
The Company receives trailing commissions from lenders over the life of the settled loans in its loan book based on
outstanding balance. The Company makes trailing commission payments to franchisees based on the outstanding loan
book balance of the individual franchisees.
On initial recognition at settlement, trailing commission revenue and the related receivable are recognised at fair value
being the net present value of the expected future trailing commissions to be received. An associated expense and payable
to the franchisees are also recognised initially measured at fair value being the net present value of the expected future
trailing commission payable to franchisees.
Subsequent to initial recognition and measurement, both the trailing commission receivable and payable are measured at
amortised cost. The carrying amounts of the receivable and payable are adjusted to reflect actual and revised estimated
cash flows by recalculating the net present value of estimated future cash flows at the original effective interest rate. Any
resulting adjustment to the carrying value is recognised as income or expense in the income statement.
iii/ Franchise fee income
Franchise fee income is derived from the sale of franchises by the Company and comprises licence fees and contributions
for training, franchise consumables and compliance costs. Licence fees are partially repayable should franchisees
terminate their franchise agreement in accordance with a repayment schedule as defined in the agreement. Licence fee
income is recognised in accordance with this schedule. Contributions for training, consumables and compliance costs
are recognised as revenue on receipt. Licence fees which may be repayable to franchisees at the balance sheet date are
included in liabilities.
iv/ Health sales income
The Group receives origination and trailing commission for health insurance policies sold through its comparison website.
The recognition of this revenue is consistent with mortgage origination and trailing commissions arising from mortgage
broking activities detailed in (i) and (ii) above.
v/ Mortgage lead income
The Group sells leads generated by its comparison website to mortgage brokers. This income is recognised at the time the
lead is delivered.
44
Notes to the Consolidated Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 30 June 2014
vi/ Financial services revenue
Financial services revenue is derived from the provision of financial advice and from commission revenue from insurance
products. Revenue from the provision of financial services is recognised at the time the service is provided.
vii/ Service fee income
The Group provided services to mortgage brokers aggregating through LoanKit by collecting origination and trailing
commissions and processing them for the broker in exchange for a fee, as well as providing software and other services.
Fees for these services are recognised at the time the service is provided.
viii/ Interest income
Interest income is recognised using the effective interest method. When a receivable is impaired, the Group reduces the
carrying amount to its recoverable amount, being the estimated future cash flow discounted at the original effective
interest rate of the instrument, and continues unwinding the discount as interest income.
ix/ Other income
Other income includes contributions from lenders towards conferences and workshops which are recognised as income in
the period the conference or workshop is held. Also included in this category are other non-operating revenues recognised
in the period to which the income relates.
E. Income tax
The income tax expense for the period is the tax payable on the current period’s taxable income, based on the applicable
income tax rate adjusted by changes in deferred tax assets and liabilities attributable to temporary differences.
The current income tax charge is calculated on the basis of the tax laws substantively enacted at the end of the reporting
period. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax
regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid
to the tax authorities.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of
assets and liabilities and their carrying amounts in the consolidated financial statements. However, the deferred income tax is
not accounted for if it arises from initial recognition of an asset or liability in a transaction, other than a business combination,
that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined
using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply
when the related deferred income tax asset is realised or the deferred income tax liability is settled.
Deferred tax assets are recognised for deductible temporary differences only if it is probable that future taxable amounts will
be available to utilise those temporary differences and losses.
Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases
of investments in controlled entities 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.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities
and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset
where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and
settle the liability simultaneously.
Mortgage Choice Limited and its wholly-owned controlled entities have elected to consolidate under the tax consolidation
legislation. As a consequence, these entities are taxed as a single entity and the deferred tax assets and liabilities of these
entities are set off in the consolidated financial statements.
Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive
income or directly in equity. In this case the tax is also recognised in other comprehensive or directly in equity, respectively.
i/
Investment allowances
Companies within the Group may be entitled to claim special tax deductions for investments in qualifying assets or in relation to
qualifying expenditure (eg the Research and Development Tax Incentive regime in Australia or other investment allowances). The
Group accounts for such allowances as tax credits, which means that the allowance reduces income tax payable and current tax
expense. A deferred tax asset is recognised for unclaimed tax credits that are carried forward as deferred tax assets.
ii/ Tax consolidation legislation
Mortgage Choice Limited and its wholly owned Australian controlled entities are members of a consolidated group for
income tax purposes.
The head entity Mortgage Choice Limited and the controlled entities in the tax consolidated group account for their
own current and deferred tax amounts. These tax amounts are measured as if each entity in the tax consolidated group
continues to be a standalone taxpayer in its own right.
Notes to the Consolidated Financial Statements
45
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 30 June 2014
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
In addition to its own current and deferred tax amounts, Mortgage Choice Limited also recognises current tax liabilities or
assets, and deferred tax assets arising from unused tax losses and unused tax credits assumed from controlled entities in
the tax consolidated group.
F. Leases
Leases of property, plant and equipment, where the Group as lessee has substantially all the risks and rewards of ownership,
are classified as finance leases. Finance leases are capitalised at the lease’s inception at the lower of the fair value of the leased
property and the present value of the minimum lease payments. The corresponding rental obligations, net of finance charges,
are included in other long term payables. Each lease payment is allocated between the liability and finance charges so as to
achieve a constant rate on the finance balance outstanding. The interest element of the finance cost is charged to the income
statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability
for each period. The property, plant and equipment acquired under finance leases is depreciated over the shorter of the asset’s
useful life and the lease term.
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. Payments made under operating leases (net of any incentives received from the lessor) are
charged to the income statement on a straight-line basis over the period of the lease.
G. Business combinations
The acquisition method of accounting is used to account for all business combinations regardless of whether equity
instruments or other assets are acquired. The consideration transferred for an acquisition comprises the fair values of the
assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration also includes the
fair value of any contingent consideration arrangement and the fair value of any pre-existing equity interest in the subsidiary.
Acquisition related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities
assumed in a business combination are, with limited exceptions, measured initially at their fair values at the acquisition date.
On an acquisition by acquisition basis, the Group recognises any non-controlling interest in the acquiree either at fair value or
at the non-controlling interest’s proportionate share in the acquiree’s net identifiable assets.
The excess of the consideration transferred and the amount of any non-controlling interest in the acquiree over the fair
value of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net
identifiable assets of the subsidiary acquired and the measurement of all amounts has been reviewed, the difference is
recognised directly in profit or loss as a bargain purchase.
Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their
present value as at the date of exchange. The discount rate used is the entity’s incremental borrowing rate, being the rate at
which a similar borrowing could be obtained from an independent financier under comparable terms and conditions.
Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial liability are
subsequently remeasured to fair value with changes in fair value recognised in profit or loss.
H. Impairment of assets
Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually
for impairment or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets
are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be
recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable
amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of
assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which
are largely independent of the cash inflows from other assets or groups of assets (cash generating units). Nonfinancial assets
that have suffered impairment are reviewed for possible reversal of that impairment at each reporting date.
I. Cash and cash equivalents
For cash flow statement presentation purposes, cash and cash equivalents includes cash on hand, deposits held at call with
financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are
readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Overdrafts are
shown in borrowings in current liabilities on the balance sheet.
46
Notes to the Consolidated Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 30 June 2014
J. Trade receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest
method, less provision for impairment. Trade receivables are generally due in 30 days.
Collectability of receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off. A
provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to
collect all amounts due according to the original terms of receivables. The amount of the provision is the difference between
the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest
rate. Cash flows relating to short term receivables are not discounted if the effect of discounting is immaterial. The amount of
the provision is recognised in the income statement in other expenses.
K. Trailing commissions receivable
Receivables related to trailing commissions are recognised in accordance with the revenue recognition policy outlined in note 1(D).
L. Investments and other financial assets
The Group classifies its investments in the following categories: financial assets at fair value through profit or loss, loans and
receivables, held-to-maturity investments, and available-for-sale financial assets. The classification depends on the purpose
for which the investments were acquired. Management determines the classification of its investments at initial recognition
and, in the case of assets classified as held to maturity, re-evaluates this designation at each reporting date.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.
They are included in current assets, except for those with maturities greater than twelve months after the balance sheet date which are
classified as non-current assets. Loans and receivables are included in trade and other receivables in the balance sheet (note 11).
M. Property, plant and equipment
All property, plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is
directly attributable to the acquisition of the items.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when
it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be
measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to
the income statement during the financial period in which they are incurred.
Depreciation on other assets is calculated using the straight line method to allocate their cost or revalued amounts, net of their
residual values, over their estimated useful lives or, in the case of leasehold improvements, the shorter lease term as follows:
Office equipment
Computer equipment
Furniture and fittings
5-10 years
3-4 years
5-15 years
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater
than its estimated recoverable amount (note 1(H)).
Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the income statement.
N. Intangible assets
Software
Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring to use the specific
software. These costs are amortised over their estimated useful lives (three to five years).
Costs associated with developing or maintaining computer software programmes are recognised as an expense as incurred. Costs
that are directly associated with the production of identifiable and unique software products controlled by the Group, and that
will probably generate future economic benefits exceeding costs beyond one year, are recognised as intangible assets.
Computer software development costs recognised as assets are amortised over their estimated useful lives.
Notes to the Consolidated Financial Statements
47
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 30 June 2014
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
O. Trade and other payables
These amounts represent liabilities for goods and services provided to the consolidated entity prior to the end of the financial
year and which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition.
P. Trailing commissions payable
Payables related to trailing commissions are recognised in accordance with the revenue recognition policy outlined in note 1(D).
Q. Borrowing costs
Borrowing costs are recognised as expenses using the effective interest method.
R. Provisions
Provisions for legal claims and make good obligations are recognised when the Group has a present legal or constructive
obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the
amount has been reliably estimated. Provisions are not recognised for future operating losses.
Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the
present obligation at the balance sheet date. The discount rate used to determine the present value reflects current market
assessments of the time value of money and the risks specific to the liability. The increase in the provision due to the passage
of time is recognised as interest expense.
S. Employee benefits
Short-term obligations
Liabilities for wages and salaries, including non-monetary benefits and annual leave expected to be settled within twelve
months after the end of the period in which the employees render the related service, are recognised in respect of employees’
services up to the end of the reporting period and are measured at the amounts expected to be paid. The liability for annual
leave is included in provisions. The liability for all other short-term employee benefits is included in trade and other payables.
Other long-term employee benefit obligations
The liability for long service leave and any annual leave, which is not expected to be settled within 12 months after the end of the
period in which the employees render the related service, is recognised in the provisions and measured as the present value of
expected future payments to be made in respect of services provided by employees up to the end of the reporting period using
the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee
departures and periods of service. Expected future payments are discounted using market yields at the reporting period on
national government bonds with terms and currency that match, as closely as possible, the estimated future cash outflows.
The obligations are presented as current liabilities in the balance sheet if the entity does not have an unconditional right to defer
settlement for at least twelve months after the reporting date, regardless of when the actual settlement is expected to occur.
Retirement benefit obligations
Contributions to the defined contribution fund are recognised as an expense as they become payable. Prepaid contributions
are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.
Share-based payments
Share-based compensation benefits are provided to employees via the Mortgage Choice Executive Performance Option Plan,
and the Mortgage Choice Performance Share Plan. Information relating to these schemes is set out in note 31.
The fair value of options granted under the Mortgage Choice Executive Performance Option Plan and performance
shares granted under the Mortgage Choice Performance Share Plan is recognised as an employee benefit expense with a
corresponding increase in equity. The total amount to be expensed is determined by reference to the fair value of the options
and performance shares granted, which includes any market performance conditions but excludes the impact of any service
and non-market performance vesting conditions and the impact of any non-vesting conditions.
Non-market vesting conditions are included in assumptions about the number of options that are expected to vest. The total
expense is recognised over the vesting period, which is the period over which all of the specified vesting conditions are to be
satisfied. At the end of each period, the entity revises its estimates of the number of options that are expected to vest based
on the non-marketing vesting conditions. It recognises the impact of the revision to original estimates, if any, in profit or loss,
with a corresponding adjustment to equity.
48
Notes to the Consolidated Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 30 June 2014
The Mortgage Choice Executive Performance Option Plan and performance shares granted under the Mortgage Choice
Performance Share Plan are administered by the Mortgage Choice Performance Share Plan Trust; see note 1(B)(ii).
Short term incentive plans
The Group recognises a liability and an expense where contractually obliged or where there is a past practice that it has
created a constructive obligation.
Termination benefits
Termination benefits are payable when employment is terminated before the normal retirement date, or when an employee
accepts voluntary redundancy in exchange for these benefits. The Group recognises termination benefits when it is
demonstrably committed to either terminating the employment of current employees according to a detailed formal plan
without possibility of withdrawal or providing termination benefits as a result of an offer made to encourage voluntary
redundancy. Benefits falling due more than twelve months after balance sheet date are discounted to present value.
T. Contributed equity
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown
in equity as a deduction, net of tax, from the proceeds. Incremental costs directly attributable to the issue of new shares or
option for the acquisition of a business are not included in the cost of the acquisition as part of the purchase consideration.
Where any group company purchases the Company’s equity instruments, for example as the result of a share buy-back or
a share-based payment plan, the consideration paid, including any directly attributable incremental costs (net of income
taxes) is deducted from equity attributable to the owners of Mortgage Choice Limited as treasury shares until the shares are
cancelled or reissued. Where such ordinary shares are subsequently reissued, any consideration received, net of any directly
attributable incremental transaction costs and the related income tax effects, is included in equity attributable to the owners
of Mortgage Choice Limited.
U. Dividends
Provision is made for the amount of any dividend declared, that is approved by the Directors on or before the end of the
financial year but not yet paid at the reporting date.
V. Earnings per share
i/ Basic earnings per share
Basic earnings per share is determined by dividing net profit after income tax attributable to members of the Company,
excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares
outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year.
ii/ Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account
the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the
weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential
ordinary shares.
W. Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable
from the taxation authority. In this case it is recognised as part of the cost of acquisition of the asset or as part of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable
from, or payable to, the taxation authority is included with other receivables or payables in the balance sheet.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities
which are recoverable from, or payable to the taxation authority, are presented as operating cash flow.
X. Rounding of amounts
The Company is of a kind referred to in Class Order 98/100, issued by the Australian Securities & Investments Commission,
relating to the “rounding off” of amounts in the financial statements. Amounts in the financial statements have been rounded
off in accordance with that Class Order to the nearest thousand dollars, or in certain cases, to the nearest dollar.
Y. New accounting standards and interpretations
At the date of authorisation of the financial statements, the Standards and Interpretations listed below were in issue but not
yet effective.
Notes to the Consolidated Financial Statements
49
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 30 June 2014
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
Standard/Interpretation
AASB 9 ‘Financial Instruments’, and the relevant
amending standards
AASB 2013-9 ‘Amendments to Australian Accounting
Standards – Conceptual Framework, Materiality and
Financial Instruments’
Z. Parent entity financial information
Effective for annual reporting
periods beginning on or after
Expected to be initially applied
in the financial year ending
1 January 2018
30 June 2019
1 January 2014
30 June 2015
The financial information for the parent entity, Mortgage Choice Limited, disclosed in note 32 has been prepared on the same
basis as the consolidated financial statements, except as set out below.
Investments in subsidiaries, associates and joint venture entities
Investments in subsidiaries, associates and joint venture entities are accounted for at cost in the financial statements of
Mortgage Choice Limited. Dividends received from subsidiaries and associates are recognised in the parent entity’s profit or
loss when its right to receive the dividend is established.
Tax consolidation legislation
Mortgage Choice Limited and its wholly-owned Australian controlled entities have implemented the tax consolidation legislation.
The head entity, Mortgage Choice Limited, and the controlled entities in the tax consolidated group account for their own
current and deferred tax amounts. These tax amounts are measured as if each entity in the tax consolidated group continues
to be a standalone taxpayer in its own right.
In addition to its own current and deferred tax amounts, Mortgage Choice Limited also recognises the current tax liabilities (or
assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from controlled entities in
the tax consolidated group.
The entities have entered into a tax funding agreement under which the wholly-owned entities fully compensate Mortgage
Choice Limited for any current tax payable assumed and are compensated by Mortgage Choice Limited for any current tax
receivable and deferred tax assets relating to unused tax losses or unused tax credits that are transferred to Mortgage Choice
Limited under the tax consolidation legislation. The funding amounts are determined by reference to the amounts recognised
in the wholly-owned entities’ financial statements.
The amounts receivable/payable under the tax funding agreement is due upon receipt of the funding advice from the head
entity, which is issued as soon as practicable after the end of each financial year. The head entity may also require payment of
interim funding amounts to assist with its obligations to pay tax instalments.
Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as current amounts
receivable from or payable to other entities in the Group.
Any difference between the amounts assumed and amounts receivable or payable under the tax funding agreement are
recognised as a contribution to (or distribution from) wholly-owned tax consolidated entities.
Financial guarantees
Where the parent entity has provided financial guarantees in relation to loans and payables of subsidiaries for no
compensation, the fair values of these guarantees are accounted for as contributions and recognised as part of the cost of the
investment.
Note 2
Financial risk management
The Group has limited exposure to financial risks with the exception of credit risk. The Group does not use derivative financial
instruments such as foreign exchange contracts, interest rate swaps or other derivative instruments to hedge risk exposures.
It does not operate internationally, does not have any debt or significant interest rate exposure and is not exposed to either
securities price risk or commodity price risk.
Risk management is carried out by the Group’s finance department under policies approved by the Board of Directors.
50
Notes to the Consolidated Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 30 June 2014
The Group holds the following financial instruments:
Financial Assets
Current
Cash and cash equivalents
Trade and other receivables*
Non-current
Receivables
* Excludes prepayments
Financial Liabilities
Current
Trade and other payables
Non-current
Trade and other payables
2014
$’000
2013
$’000
12,445
96,903
10,953
93,388
238,244
347,592
227,567
331,908
2014
$’000
2013
$’000
66,702
63,118
142,900
209,602
134,938
198,056
The Group’s policies in relation to financial risks to which it has exposure are detailed below.
A. Market risk
Interest rate risk
The Group’s main interest rate risk arises from cash and cash equivalents. At 30 June 2014 the weighted average interest rate on
its cash balances was 2.50% (2013 2.75%). If interest rates were to increase by 100 basis points, the Group’s after tax result would
increase by $144,000 (2013 $121,000). A decrease of 100 basis points would reduce the Group’s after tax result by $144,000 (2013
$121,000).
The Group does not have any borrowings and therefore is not exposed to interest rate risk on borrowings.
B. Credit risk
Credit risk is assessed on a Group basis. It arises from cash and cash equivalents placed with banks as well as credit exposure
to financial institutions on the Group’s lender panel from which future trailing commissions are due. The majority of these
financial institutions are Authorised Deposit-taking Institutions (ADIs) and therefore regulated by the Australian Prudential
Regulation Authority (APRA) and are independently rated. This forms the basis of the Group’s assessment of credit risk. If the
lender has not been independently rated, credit risk is assessed taking into account its financial position, past experience and
other factors. The table below indicates the Group’s exposure to each ratings category.
Notes to the Consolidated Financial Statements
51
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 30 June 2014
NOTE 2 FINANCIAL RISK MANAGEMENT continued
The Group bears the risk of non-payment of future trailing commissions by lenders should they become insolvent but
correspondingly, there is no legal requirement to pay out any trailing commissions due to brokers or franchisees that have not
been received. The risk profile of the Group is set out in the table below.
Standard & Poor’s
Credit Rating
Cash and cash
equivalents
Trade and franchisee
receivables
NPV Future trailing
commissions receivable
2014
ADIs
Non ADIs
2013
ADIs
Non ADIs
Total Receivable
12,445
Standard & Poor’s
Credit Rating
Cash and cash
equivalents
Trade and franchisee
receivables
NPV Future trailing
commissions receivable
AA-
A+
A
A-
BBB+
BBB
BBB-
Not rated
AA-
A+
A
A-
BBB+
Not rated
$ 000
12,445
–
–
–
–
–
–
–
12,445
–
–
–
–
–
–
–
AA-
A+
A
A-
BBB+
BBB
BBB-
Not rated
AA-
A+
A-
BBB+
Not rated
$ 000
10,953
–
–
–
–
–
–
–
10,953
–
–
–
–
–
–
$ 000
9,021
859
403
1,161
1,153
44
–
231
12,872
95
45
10
162
27
3,948
4,287
17,159
$ 000
232,040
20,915
4,347
28,700
17,873
1,108
–
5,903
310,886
–
–
–
1,368
–
4,857
6,225
317,111
$ 000
8,204
797
1,205
109
901
13
30
316
11,575
12
15
116
15
2,695
2,853
14,428
$ 000
223,336
20,321
26,982
2,345
16,811
425
916
8,690
299,826
–
–
1,317
–
4,789
6,106
305,932
Total Receivable
10,953
52
Notes to the Consolidated Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 30 June 2014
C. Liquidity risk and fair value estimation
Prudent liquidity risk management implies maintaining sufficient cash and marketable securities. The Group manages
liquidity risk by continuously monitoring forecast and actual cash flows and matching maturity profiles of financial assets and
liabilities. Surplus funds are generally only invested in instruments that are tradable in highly liquid markets.
The tables below analyse the Group’s financial assets into relevant maturity groupings based on the expected future
cashflows. No financial assets are past due or impaired.
At 30 June 2014
Non-derivatives
Interest bearing
Cash and cash
equivalents
Franchisee receivables
Non-interest bearing
Cash and cash
equivalents
Trade receivables
Franchisee and other
receivables
Future trailing
commissions receivable
Less than
6 months
6 – 12
months
Between 1
and 2 years
Between 2
and 5 years
$’000
$’000
$’000
$’000
Over
5 years
$’000
Total
cash flows
Carrying
Amount
$’000
$’000
12,442
284
3
14,112
1,349
–
296
–
–
6
–
628
–
–
23
–
1,395
–
718
12,442
3,321
12,442
2,495
–
–
51
–
–
–
3
14,112
3
14,112
1,429
1,429
42,711
40,477
71,912
145,035
98,362
398,497
317,111
70,901
40,779
72,563
146,481
99,080
429,804
347,592
The fair value of the future trailing commissions receivable is $338,578,000. The fair value of all other assets is the same as their
carrying amount.
At 30 June 2013
Non-derivatives
Interest bearing
Cash and cash
equivalents
Other receivables
Non-interest bearing
Cash and cash
equivalents
Trade receivables
Franchisee and other
receivables
Future trailing
commissions receivable
Less than 6
months
6 – 12
months
Between 1
and 2 years
Between 2
and 5 years
$’000
$’000
$’000
$’000
Over
5 years
$’000
Total
cash flows
Carrying
Amount
$’000
$’000
10,950
253
3
12,370
693
–
227
–
–
22
–
410
–
–
–
–
844
–
1,774
10,950
3,508
10,950
1,938
–
–
–
–
–
–
3
3
12,370
12,370
715
715
42,892
40,626
72,416
143,276
94,772
393,982
305,932
67,161
40,875
72,826
144,120
96,546
421,528
331,908
The fair value of the future trailing commissions receivable is $333,805,000. The fair value of all other assets is the same as their
carrying amount.
The tables below analyse the Group’s financial liabilities into relevant maturity groupings based on the expected future cashflows.
Notes to the Consolidated Financial Statements
53
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 30 June 2014
NOTE 2 FINANCIAL RISK MANAGEMENT continued
Contractual maturities
of financial liabilities
At 30 June 2014
Non-derivatives
Non-interest bearing
Trade payables
Licence fees and other
payables
Future trailing
commissions payable
Less than 6
months
6 – 12
months
Between 1
and 2 years
Between 2
and 5 years
$’000
$’000
$’000
$’000
Over
5 years
$’000
Total
cash flows
Carrying
Amount
$’000
$’000
12,085
5,817
–
155
–
11
–
–
–
–
12,085
12,085
5,983
5,983
25,894
24,543
43,602
87,979
59,746
241,764
191,534
43,796
24,698
43,613
87,979
59,746
259,832
209,602
The fair value of the future trailing commissions payable is $204,973,000. The fair value of all other liabilities is the same as
their carrying amount.
Contractual maturities
of financial liabilities
At 30 June 2013
Non-derivatives
Non-interest bearing
Trade payables
Licence fees and other
payables
Future trailing
commissions payable
Less than 6
months
6 – 12
months
Between 1
and 2 years
Between 2
and 5 years
$’000
$’000
$’000
$’000
Over
5 years
$’000
Total
cash flows
Carrying
Amount
$’000
$’000
10,693
5,078
–
128
–
29
–
–
–
–
10,693
10,693
5,235
5,235
25,373
23,938
43,025
85,768
56,851
234,955
182,128
41,144
24,066
43,054
85,768
56,851
250,883
198,056
The fair value of the future trailing commissions payable is $198,993,000. The fair value of all other liabilities is the same as
their carrying amount.
54
Notes to the Consolidated Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 30 June 2014
Note 3
Critical accounting estimates and judgements
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including
expectations of future events that are believed to be reasonable under the circumstances.
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom
equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next financial year are discussed below.
Trailing commissions
The Group receives trailing commissions from lenders on settled loans over the life of the loan based on the loan book balance
outstanding. The Group also makes trailing commission payments to franchisees based on their individual loan book balance
outstanding.
The amortised cost of trailing commissions receivable and the corresponding payable to franchisees is determined by using
the discounted cash flow valuation technique, which requires the use of assumptions. The key assumptions to determine the
amortised cost at balance sheet date are the future run-off rate of the underlying loan portfolio, the discount rate and the
percentage paid to franchisees. The future run-off rate used is actually a series of rates applied to the underlying loans based
primarily on their age at the date of valuation. The weighted average life shown below is the result of the series of future run-off
rates applied to the specific loan data at the balance sheet date.
The determination of the assumptions to be used in the valuation is made by Management based primarily on two factors:
an annual assessment, with external actuaries, of the underlying loan portfolio including historical run-off rate analysis and
consideration of current and future economic factors. These factors are complex and the determination of assumptions requires a
high degree of judgement.
The significant assumptions used in the valuation are listed below:
Weighted average loan life
Average discount rate
Percentage paid to franchisees (10 year average)
2014
4.0 years
7.6%
61%
2013
4.0 years
8.4%
60%
If the series of run-off rates used in the valuation of trailing commissions receivable and payable were to differ by +/- 10% from
Management’s estimates, the impact on the balance sheet would be:
•
•
a decrease in net assets of $5.4 million (made up of decreases in current assets of $0.8 million, non-current assets of $18.9
million, current liabilities of $0.5 million, non-current liabilities of $11.5 million and deferred tax liabilities of $2.3 million) if run-
off rates increase by 10%; or
an increase in net assets of $6.1 million (made up of increases in current assets of $0.9 million, non-current assets of $21.2
million, current liabilities of $0.5 million, non-current liabilities of $12.9 million and deferred tax liabilities of $2.6 million) if run-
off rates decrease by 10%.
Changes to the discount rate are likely to occur as a result of changes to the interest rate. However, management does not consider
this to have a material impact on the fair value calculation of trailing commissions receivable and the corresponding payable to
franchisees. Management does not consider material changes to the percentage paid to franchisees to be reasonably possible.
In the current period, the annual review of the underlying loan book found that the run-off rate experienced in 2014 was faster
than that assumed in the valuation model and an adjustment to the profit and loss for the year was recognised to reflect the
actual experience in the portfolio. In addition the assumptions used in the valuation of future trailing commissions were
changed to reflect an extension of the current economic environment for the short to medium term. These changes to the trailing
commission model resulted in a $1.1 million negative adjustment after tax to the Group’s profit and loss for FY14 (2013 – $3.0 million
positive adjustment).
Notes to the Consolidated Financial Statements
55
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 30 June 2014
Note 4
Segment information
A. Description of segments
Management has determined the operating segments based on the reports reviewed by the Chief Executive Officer that are
used to make strategic and operating decisions.
The Chief Executive Officer considers the business from both a product and cash versus IFRS presentation of the results.
Therefore management has identified four reportable product segments, Mortgage Choice franchised mortgage broking (MOC),
Help Me Choose health fund and mortgage comparison website (HMC), Mortgage Choice Financial Planning (MCFP) and LoanKit
aggregation mortgage broking (LoanKit) (discontinued). The Group operates only in Australia.
B. Information provided to the Chief Executive Officer
Information provided to the Chief Executive Officer for the year ended 30 June 2014 is as follows:
Product Segments
2014
Revenue
Gross Profit (IFRS)
Gross profit (cash)
Depreciation and amortisation
Income tax expense
NPAT (IFRS)
NPAT (cash)
NPAT (IFRS) incl sale of LoanKit
NPAT (cash) incl sale of LoanKit
2013
Revenue
Gross Profit (IFRS)
Gross profit (cash)
Depreciation and amortisation
Income tax expense
NPAT (IFRS)
NPAT (cash)
Total
$’000
MOC
$’000
178,793
170,841
63,074
61,545
1,603
8,210
18,455
18,708
19,799
20,052
Total
$’000
156,534
62,378
57,073
1,760
8,222
18,714
15,774
58,740
57,261
1,392
8,488
19,106
19,342
20,450
20,686
MOC
$’000
151,459
58,647
54,031
1,496
8,748
19,944
17,410
HMC
$’000
4,646
3,369
3,319
129
92
214
203
214
203
HMC
$’000
3,827
2,578
1,889
154
30
69
(402)
LoanKit
(discontinued)
$’000
329
329
329
28
(39)
(92)
(98)
(92)
(98)
LoanKit
$’000
1,135
1,135
1,135
110
(137)
(320)
(283)
MCFP
$’000
2,977
636
636
54
(331)
(773)
(739)
(773)
(739)
MCFP
$’000
113
18
18
–
(419)
(979)
(951)
56
Notes to the Consolidated Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 30 June 2014
2014
2013
% change
2014
2013
% change
Cash versus IFRS
Origination commission income
Trailing commission income**
Origination commission paid
Trailing commission paid**
$000
63,014
87,407
Cash*
$000
51,965
86,680
150,421
138,645
45,777
52,192
97,969
37,375
51,289
88,664
Net core commissions
52,452
49,981
Diversified products net revenue
1,208
833
HMC, LoanKit and Financial Planning
net revenue
Other income
Gross Profit
Operating Expenses
Share based remuneration
Net profit before tax
4,125
3,760
2,967
3,292
61,545
57,073
35,085
34,670
–
–
26,460
22,403
Net profit after tax
18,708
15,774
After tax gain on sale of LoanKit
1,344
–
IFRS***
$000
$000
63,014
98,535
161,549
45,777
61,841
107,618
51,965
92,500
144,465
37,375
52,493
89,868
53,931
54,597
1,208
833
4,175
3,760
3,656
3,292
63,074
62,378
35,085
1,324
34,670
772
26,665
26,936
18,455
18,714
1,344
–
21%
7%
12%
22%
18%
20%
(1%)
45%
14%
14%
1%
1%
72%
(1%)
(1%)
–
21%
1%
8%
22%
2%
10%
5%
45%
39%
14%
8%
1%
18%
19%
–
NPAT including gain on sale of
LoanKit
20,052
15,774
27%
19,799
18,714
6%
*
Cash is based on accruals accounting and excludes share based remuneration and the net present value of future trailing
commissions receivable and payable.
** Trailing commission income and trailing commission paid include discount unwind as itemised in the consolidated income
statement.
*** IFRS income and expenses include trading results to 30 September 2013 in the discontinued operation (LoanKit). Refer note 5
for further details.
Notes to the Consolidated Financial Statements
57
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 30 June 2014
NOTE 4 SEGMENT INFORMATION continued
The following provides additional detail to assist in reconciliation of the above table to the consolidated income statement:
Diversified products commissions
Diversified products direct costs
Diversified products net income
Help Me Choose commissions*
Help Me Choose direct costs
Help Me Choose net income
Financial Planning revenue
Financial Planning direct costs
Financial Planning net revenue
LoanKit service fees
HMC, LoanKit and Financial
Planning net revenue
2014
Cash
2013
% change
2014
IFRS
2013
% change
$000
5,691
4,483
1,208
4,537
1,277
3,260
2,896
2,341
555
310
$000
3,777
2,944
833
3,136
1,249
1,887
113
95
18
1,062
51%
52%
45%
45%
2%
73%
2463%
2364%
2983%
(71%)
$000
5,691
4,483
1,208
4,587
1,277
3,310
2,896
2,341
555
310
$000
3,777
2,944
833
3,825
1,249
2,576
113
95
18
1,062
51%
52%
45%
20%
2%
28%
2463%
2364%
2983%
(71%)
4,125
2,967
39%
4,175
3,656
14%
Franchise income
Interest
Other Income
Other income
1,522
538
1,700
3,760
1,192
536
1,564
3,292
28%
0%
9%
14%
1,522
538
1,700
3,760
1,192
536
1,564
3,292
28%
0%
9%
14%
*
Help Me Choose cash income is based on accruals accounting and excludes the net present value of future trailing
commissions’ receivable on health policies written during the year.
C. Other information
i/ Operating income
Operating income from the origination of a residential mortgage is comprised of commission paid at the time the loan is
originated and a trailing commission which is paid over the life of the loan. Prior to the introduction of IFRS in 2006, trailing
commission was recognised as income as it became due over the life of a loan. Under IFRS, the future trailing cash flows to
be received over the life of a loan are estimated, discounted to present value and recognised at the time a loan settles. The
Chief Executive Officer considers both methods in measuring the Group’s performance.
58
Notes to the Consolidated Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 30 June 2014
ii/ Net profit after tax
The cash net profit after tax (as shown on preceding page) reconciles to the IFRS profit after tax as follows:
Cash Net profit after tax
NPV future trails on new loans originated, net of payout
Less net cash from trail previously recognised under IFRS
Plus adjustments to loan book assumptions
Plus gain on prepayment of trail liability
Plus reversal of amortisation of trail liability*
NPV future trails on Help Me Choose policies written
Less net cash from trail previously recognised under IFRS
Less share based payments expense
Net IFRS after tax profit for the year
2014
$000’s
20,052
19,934
2013
$000’s
15,774
16,956
(18,134)
(16,989)
(1,146)
3,027
184
198
413
(378)
(1,324)
19,799
40
196
577
(95)
(772)
18,714
* Under cash profit, the prepayment of trail liability is spread over the estimated life of the trail book portfolio.
iii/ Gross profit and net core commissions
The cash gross profit and net core commissions reconcile to their IFRS equivalents as follows:
Cash
NPV future trails on new loans originated, net of payout
Gross Profit
Net Core Commissions
2014
$000’s
61,545
28,476
2013
$000’s
57,073
24,222
2014
$000’s
52,452
28,476
2013
$000’s
49,981
24,222
Less net cash from trail previously recognised under IFRS
(25,906)
(24,270)
(25,906)
(24,270)
Plus adjustments to loan book assumptions
Plus gain on prepayment of trail liability
Plus reversal of amortisation of trail liability*
NPV future trails on Help Me Choose policies written
Less net cash from trail previously recognised under IFRS
IFRS
(1,638)
4,325
(1,638)
264
283
590
(540)
63,074
58
281
825
(136)
62,378
264
283
–
–
4,325
58
281
–
–
53,931
54,597
* Under cash profit, the prepayment of trail liability is spread over the estimated life of the trail book portfolio.
Notes to the Consolidated Financial Statements
59
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 30 June 2014
Note 5
Discontinued operation
i/
Description
On 30 September 2013 Mortgage Choice sold 100% of the issued shares in Beagle Finance Pty Limited, owner of the LoanKit
mortgage brokerage aggregation business, for cash consideration of $1,850,000. The LoanKit division is reported in these
financial statements as a discontinued operation.
Financial information relating to the discontinued operation for the year is set out below.
ii/
Financial performance and cash flow information
The financial performance and cash flow information presented are for the years ended 30 June 2014 and 30 June 2013. This
includes costs incurred by Mortgage Choice between 1 October 2013 and 30 June 2014.
2014
$’000
310
–
19
329
460
(131)
39
(92)
1,665
(321)
1,344
1,252
2014
$’000
(60)
1,850
1,790
2013
$’000
1,062
3
70
1,135
1,592
(457)
137
(320)
–
–
–
(320)
2013
$’000
(47)
–
(47)
Revenue
Interest
Other income
Expenses
Loss before income tax
Income tax expense
Loss after tax of discontinued operation
Gain on sale of division before income tax
Income tax expense
Gain on sale of division after income tax
Profit/(loss) from discontinued operation
Net cash inflow/(outflow) from operating activities
Net cash inflow from investing activities
(2013 includes inflow of $1,750,000 from sale of the division)
Net increase/(decrease) in cash for discontinued operation
60
Notes to the Consolidated Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 30 June 2014
iii/ Details of the sale of the division
Consideration received or receivable:
Cash
Fair value of contingent consideration
Total disposal consideration
Selling costs
Carrying amount of net assets sold
Income tax expense
The carrying amounts of the assets and liabilities as at the date of sale (30 September 2013) were:
Assets
Cash and cash equivalents
Trade and other receivables
Intangible assets
Total assets
Liabilities
Trade and other payables
Total Liabilities
Net assets
2014
$’000
2013
$’000
1,750
100
1,850
(155)
(30)
1,665
(321)
1,344
–
–
–
–
–
–
–
30 September 2013
$’000
13
6
29
48
18
18
30
Notes to the Consolidated Financial Statements
61
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 30 June 2014
Note 6
Revenue
Revenue from continuing operations
Sales revenue
Services
Other revenue
Interest earned on deposits and loans
Interest in relation to discount unwind
Other income
Note 7
Other income
Conference sponsorships (note (A))
Other
A. Conference sponsorships
2014
$’000
2013
$’000
152,549
127,728
538
23,696
1,681
533
25,644
1,494
178,464
155,399
2014
$’000
1,610
71
1,681
2013
$’000
1,491
3
1,494
Lenders sponsor Mortgage Choice’s National Conference, High Flyers’ Conference, quarterly state conferences, and periodic
training days and workshops.
62
Notes to the Consolidated Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 30 June 2014
Note 8
Expenses
Profit from ordinary activities before income tax includes the following specific expenses:
Finance costs
Interest and finance charges (note (A))
Net loss on disposal of property, plant and equipment
Depreciation
Plant and equipment
Amortisation
Leasehold improvements
Computer software
Other provisions
Employee entitlements
Rental expense relating to operating leases
Defined contribution superannuation expense
Termination benefits
A. Interest and finance charges
2014
$’000
2013
$’000
14,129
15,470
–
–
354
376
60
1,189
195
1,125
1,259
47
168
1,216
147
1,075
1,146
47
Interest expense comprises the unwinding of the discount in relation to payment of trailing commission to franchisees.
Notes to the Consolidated Financial Statements
63
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 30 June 2014
Note 9
Income tax
A. Income tax expense
Current tax
Deferred tax
Under (over) provided in prior years
Income tax expense is attributable to:
Profit from continuing operations
Profit from discontinued operations
Deferred income tax (revenue) expense including income tax expense comprises:
(Increase)/decrease in deferred tax assets (note 13)
Increase/(decrease) in deferred tax liabilities (note 18)
2014
$’000
8,011
520
–
8,531
8,249
282
8,531
(3,016)
3,536
520
2013
$’000
7,062
1,172
(12)
8,222
8,359
(137)
8,222
(612)
1,784
1,172
B. Numerical reconciliation of income tax expense to prima facie tax payable
Profit from continuing operations before income tax expense
26,796
27,393
Income tax calculated @ 30% (2013 – 30%)
Discontinued operations tax expense
Tax effect of amounts which are not deductible/(assessable) in calculating taxable income:
Under/(over) provision from prior years
Income tax expense
No part of the deferred tax asset shown above and in note 13 is attributable to tax losses.
8,039
282
210
8,531
–
8,531
8,218
(137)
153
8,234
(12)
8,222
64
Notes to the Consolidated Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 30 June 2014
Note 10
Current Assets – Cash and cash equivalents
Cash at bank and on hand
Risk exposure
2014
$’000
2013
$’000
12,445
10,953
The Group’s exposure to interest rate risk is discussed in note 2. The maximum exposure to credit risk at the reporting date is the
carrying amount of each class of cash and cash equivalents mentioned above.
Note 11
Trade and other receivables
2014
2013
Current
$’000
Non-current
$’000
Total
$’000
Current
$’000
Non-current
$’000
Total
$’000
Trade receivables (1)
14,112
–
14,112
12,370
–
12,370
Net present value of future trailing
commissions receivable
Franchisee receivables
Other receivables
Prepayments
80,975
236,136
317,111
80,014
225,918
305,932
939
877
1,973
98,876
2,108
–
–
3,047
877
1,973
238,244
337,120
409
595
1,922
95,310
1,649
–
–
2,058
595
1,922
227,567
322,877
(1) Subject to a limited charge in favour of The Loan Book Security Trust (refer to note 15)
A. Other receivables
These amounts generally arise from transactions outside the usual operating activities of the consolidated entity.
B. Impaired trade receivables
As at 30 June 2014 current trade receivables were not impaired (2013 – $22,000). The amount of the provision in 2013 was
$15,000.
C. Risk exposure
Information about the Group’s exposure to credit risk and interest rate risk is provided in note 2.
D. Fair values
The carrying amounts of trade and other receivables at year end is a reasonable approximation of their fair values with the
exception of the net present value of future trailing commissions receivable which are accounted for at amortised cost.
Notes to the Consolidated Financial Statements
65
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 30 June 2014
Note 12
Non-Current Assets – Property, plant and equipment
Year ended 30 June 2014
Opening net book amount
Additions
Disposals
Depreciation charge
Closing net book amount
At 30 June 2014
Cost
Accumulated depreciation
Net book amount
Year ended 30 June 2013
Opening net book amount
Additions
Disposals
Depreciation charge
Closing net book amount
At 30 June 2013
Cost
Accumulated depreciation
Net book amount
Plant and
Equipment
$’000
Leasehold
Improvements
$’000
650
399
–
(354)
695
2,416
(1,721)
695
917
109
–
(376)
650
2,394
(1,744)
650
42
230
–
(60)
212
1,320
(1,108)
212
208
2
–
(168)
42
1,096
(1,054)
42
Total
$’000
692
629
–
(414)
907
3,736
(2,829)
907
1,125
111
–
(544)
692
3,490
(2,798)
692
66
Notes to the Consolidated Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 30 June 2014
Note 13
Non-current assets – Deferred tax assets
The balance comprises temporary differences attributable to:
Net present value of future trailing commissions payable
Employee benefits
Depreciation and amortisation
Accrued expenses
Total deferred tax assets
Set-off of deferred tax assets pursuant to set-off provisions (note 18)
Net deferred tax assets
Deferred tax assets to be recovered within 12 months
Deferred tax assets to be recovered after more than 12 months
Movements
At 30 June 2012
Charged/(credited) to the income
statement
At 30 June 2013
Charged/(credited) to the income
statement
At 30 June 2014
NPV of future trailing
commissions payable
Employee
benefits
Depreciation and
amortisation
Accrued
expenses
$’000
$’000
$’000
$’000
54,263
375
54,638
2,821
57,459
747
128
875
70
945
220
44
264
53
317
121
65
186
72
258
Other
$’000
–
–
–
–
–
2014
$’000
2013
$’000
57,459
54,638
945
317
258
875
264
186
58,979
55,963
(58,979)
(55,963)
–
–
15,677
43,302
58,979
15,034
40,929
55,963
Total
$’000
55,351
612
55,963
3,016
58,979
Notes to the Consolidated Financial Statements
67
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 30 June 2014
Note 14
Non-current assets – intangible assets
At 30 June 2012
Cost
Accumulated amortisation
Net book amount
Year ended 30 June 2013
Opening net book amount
Additions
Amortisation charge
Closing net book amount
At 30 June 2013
Cost
Accumulated amortisation
Net book amount
Year ended 30 June 2014
Opening net book amount
Additions
Amortisation charge
Closing net book amount
At 30 June 2014
Cost
Accumulated amortisation
Net book amount
68
Notes to the Consolidated Financial Statements
Computer
Software
$’000
7,651
(5,443)
2,208
2,208
1,295
(1,216)
2,287
8,946
(6,659)
2,287
2,287
1,251
(1,189)
2,349
9,200
(6,851)
2,349
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 30 June 2014
Note 15
Current liabilities – Trade and other payables
Trade payables(1)
Net present value of future trailing commissions payable
Licence fees repayable
Other payables
(1) Loan Book Security Trust
2014
$’000
12,085
48,645
236
5,736
66,702
2013
$’000
10,693
47,219
226
4,980
63,118
The Loan Book Security Scheme provides security for the trailing commissions payable to certain eligible franchisees based
on performance criteria. Mortgage Choice Limited has granted two charges in favour of a trustee on behalf of the eligible
franchisees. The independent trustee is AET Structured Finance Services Pty Limited.
The first charge is over a specified percentage of the Company’s trailing commission income. The purpose of this charge is
to be the first source of funds available to eligible franchisees for the payment of trailing commissions in the event that
administration or liquidation occurs. The charge will crystallise and can be enforced by eligible franchisees only in the event of
liquidation or administration of Mortgage Choice Limited.
As at 30 June 2014, the amount that would be subject to charge resulting from applying the specified percentage to the trailing
commission immediately due to be received by Mortgage Choice Limited is $4,137,371 (2013 – $3,939,267). This is included as part
of the balance of trade payables at 30 June 2014 and would be subject to charge until disbursed to the eligible franchisees. The
amount subject to the charge would vary dependant on trailing commission due to be received by Mortgage Choice Limited
from month to month.
The second charge is a floating charge over all of the assets of Mortgage Choice Limited. It is limited in the powers it allows
the security trustee to exercise prior to liquidation. Its primary purpose is to ensure that the loan book security structure need
not be subject to the moratorium arising if an administrator were to be appointed to Mortgage Choice Limited. Only after
liquidation does this charge confer comprehensive mortgagee powers on the security trustee.
Fair values
The carrying amounts of trade and other payables at year end is a reasonable approximation of their fair values with the
exception of the net present value of future trailing commissions payable which are accounted for at amortised cost.
Notes to the Consolidated Financial Statements
69
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 30 June 2014
Note 16
Current liabilities – Provisions
Make good provision (A)
Employee entitlements – annual leave
Employee entitlements – long service
leave
A. Make good provision
Current
$’000
Non-current
$’000
85
795
223
1,103
498
–
264
762
2014
Total
$’000
583
795
487
1,865
Current
$’000
Non-current
$’000
28
776
189
993
330
–
196
526
2013
Total
$’000
358
776
385
1,519
Mortgage Choice is required to restore the leased premises of its offices to their original condition at the end of the respective
lease terms. A provision has been recognised for the present value of the estimated expenditure required to remove any
leasehold improvements. 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. Make good costs that are not expected to be settled
within twelve months have been included in non-current liabilities.
Note 17
Non-current liabilities – Trade and other payables
Net present value of future trailing commissions payable
Licence fees repayable
2014
$’000
2013
$’000
142,899
134,909
11
29
142,900
134,938
70
Notes to the Consolidated Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 30 June 2014
Note 18
Non-current liabilities – Deferred tax liabilities
The balance comprises temporary differences attributable to:
NPV of future trailing commissions receivable
Intangibles
Prepayments and other receivables
Setoff of deferred tax assets pursuant to setoff provisions (note 13)
Net deferred tax liabilities
Deferred tax liabilities to be settled within 12 months
Deferred tax liabilities to be settled after more than 12 months
Movements – Consolidated
At 30 June 2012
Charged to the income statement
At 30 June 2013
Charged to the income statement
At 30 June 2014
NPV of future trailing
commissions payable
$’000
89,827
1,953
91,780
3,353
95,133
2014
$’000
2013
$’000
95,133
91,780
404
47
230
38
95,584
92,048
(58,979)
(55,963)
36,605
36,085
24,699
70,885
95,584
Intangibles
$’000
Prepayments and
other receivables
$’000
393
(163)
230
174
404
44
(6)
38
9
47
24,043
68,005
92,048
Total
$’000
90,264
1,784
92,048
3,536
95,584
Notes to the Consolidated Financial Statements
71
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 30 June 2014
Note 19
Contributed equity
A. Share capital
Ordinary shares – fully paid
2014
shares
’000
2013
shares
’000
2014
$’000
2013
$’000
122,170
121,709
4,604
4,018
Ordinary shares entitle the holder 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.
On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and
upon a poll each share is entitled to one vote.
Ordinary shares have no par value and the Company does not have a limited amount of authorised capital.
Total contributed equity as at 30 June 2014:
Details
Total ordinary shares on issue
Treasury shares (note (i))
Total ordinary shares held as contributed equity
i/ Treasury shares
Number of shares
123,780,387
(1,610,491)
122,169,896
Treasury shares are shares in Mortgage Choice Limited that are held by the Mortgage Choice Performance Share Plan
Trust for the purpose of issuing shares under the Mortgage Choice Performance Share Plan (PSP) (see note 31 for further
information).
Date
30 June 2012
31 August 2012
Details
Balance
Treasury shares issues under the Performance Share Plan to employees
3 September 2012
Treasury shares issues under the Performance Share Plan to employees
14 September 2012
Treasury shares issues under the Performance Share Plan to employees
14 September 2012
Shares issued to the Mortgage Choice Performance Share Plan Trust
30 June 2013
31 August 2013
Balance
Treasury shares issues under the Performance Share Plan to employees
3 September 2013
Treasury shares issues under the Performance Share Plan to employees
13 September 2013
Treasury shares issues under the Performance Share Plan to employees
31 October 2013
Shares issued to the Mortgage Choice Performance Share Plan Trust
30 June 2014
Balance
Number of shares
1,520,917
(169,333)
(189,699)
(51,097)
611,710
1,722,498
(169,333)
(189,699)
(102,080)
349,105
1,610,491
72
Notes to the Consolidated Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 30 June 2014
Movements in ordinary share capital:
Date
Details
30 June 2012
Balance
31 August 2012
Exercise of options
31 August 2012
Treasury shares issues under the Performance Share Plan to employees
3 September 2012
Treasury shares issues under the Performance Share Plan to employees
10 September 2012
Exercise of options
12 September 2012
Exercise of options
19 September 2012
Exercise of options
20 September 2012
Exercise of options
14 September 2012
Treasury shares issues under the Performance Share Plan to employees
14 September 2012
Shares issued to the Mortgage Choice Performance Share Plan Trust
14 September 2012
Held as treasury shares
30 June 2013
Balance
31 August 2013
Treasury shares issues under the Performance Share Plan to employees
3 September 2013
Treasury shares issues under the Performance Share Plan to employees
13 September 2013
Treasury shares issues under the Performance Share Plan to employees
31 October 2013
Shares issued to the Mortgage Choice Performance Share Plan Trust
31 October 2013
Held as treasury shares
30 June 2014
Balance
B. Employee share scheme
Number of shares
118,798,655
$’000
1,558
650,000
169,333
189,699
250,000
800,000
248,794
551,206
51,097
611,710
(611,710)
514
201
220
197
632
197
435
64
–
–
121,708,784
4,018
169,333
189,699
102,080
349,105
(349,105)
210
223
153
–
–
122,169,896
4,604
Information relating to the employee share scheme, including details of shares issued under the scheme, is set out in note 31.
C. Options
Information relating to the Mortgage Choice Executive Performance Option Plan, including details of options issued, exercised
and lapsed during the financial year and options outstanding at the end of the financial year is set out in note 31.
Notes to the Consolidated Financial Statements
73
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 30 June 2014
Note 20
Reserves and retained profits
A. Reserves
Share-based payments reserve
Movements:
Share-based payments reserve
Balance 1 July
Performance shares expensed/(reversed)
Vesting of shares held by the Mortgage Choice Performance Share Plan Trust to employees
Balance 30 June
B. Retained profits
Balance 1 July
Net profit for the year
Dividends
Balance 30 June
C. Nature and purpose of reserves
i/ Share-based payments reserve
2014
$’000
2,210
1,472
1,324
(586)
2,210
2014
$’000
93,642
19,799
(17,924)
95,517
2013
$’000
1,472
1,260
772
(560)
1,472
2013
$’000
90,801
18,714
(15,873)
93,642
The share-based payments reserve is used to recognise the fair value of options and performance shares granted but not
vested.
74
Notes to the Consolidated Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 30 June 2014
Note 21
Dividends
A. Ordinary shares
Final dividend declared out of profits of the Company for the year ended 30 June 2012 of 7.0
cents per fully paid share paid on 18 September 2012:
Fully franked based on tax paid @ 30%
7.0 cents per share
Interim dividend declared out of profits of the Company for the half-year ended 31 December
2012 of 6.0 cents per fully paid share paid 19 March 2013:
Fully franked based on tax paid @ 30%
6.0 cents per share
Final dividend declared out of profits of the Company for the year ended 30 June 2013 of 7.0
cents per fully paid share paid on 16 September 2013:
Fully franked based on tax paid @ 30%
7.0 cents per share
Interim dividend declared out of profits of the Company for the half-year ended 31 December
2013 of 7.5 cents per fully paid share paid 24 March 2014:
Fully franked based on tax paid @ 30%
7.5 cents per share
B. Dividends not recognised at year end
In addition to the above dividends, since year end the Directors have recommended the
payment of a final dividend of 8.0 cents per fully paid ordinary share, (2013 – 7.0 cents) fully
franked based on tax paid at 30%. The aggregate amount of the proposed dividend expected
to be paid on 15 September 2014 out of retained profits at 30 June 2014, but not recognised as a
liability at year end, is
C. Franked dividend
The franked portions of the final dividends recommended after 30 June 2013 will be franked out
of existing franking credits or out of franking credits arising from the payment of income tax in
the year ending 30 June 2013.
Franking credits available for subsequent financial years to the equity holders of the parent
entity based on a tax rate of 30% (2013 – 30%)
The above amounts represent the balance of the franking account as at the end of the financial
year, adjusted for:
(a) franking credits that will arise from the payment of the amount of the provision for income
tax;
(b) franking debits that will arise from the payment of dividends recognised as a liability at the
reporting date; and
(c) franking credits that will arise from the receipt of dividends recognised as receivables at the
reporting date.
2014
$’000
2013
$’000
–
–
8,640
9,284
17,924
8,467
7,406
–
–
15,873
9,910
8,640
2014
$’000
2013
$’000
4,602
4,279
The impact on the franking account of the dividend recommended by the Directors since year end, but not recognised as a
liability at year end, will be a reduction in the franking account of $4,247,000 (2013: $3,703,000).
Notes to the Consolidated Financial Statements
75
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 30 June 2014
Note 22
Key management personnel disclosures
D. Key management personnel compensation
Short-term employee benefits
Post-employment benefits
Long–term benefits
Share-based payments
Balance 30 June
2014
$
2013
$
2,431,947
2,270,421
97,761
19,130
87,528
49,866
1,000,339
522,805
3,549,177
2,930,620
Detailed remuneration disclosures are provided in the Directors’ report on pages 10 – 27 of the remuneration report.
76
Notes to the Consolidated Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 30 June 2014
Note 23
Remuneration of auditors
During the year the following fees were paid or payable for services provided by the auditor of the parent entity, its related
practices and nonrelated audit firms:
2014
A. Audit services
Deloitte Touche Tohmatsu Australian firm:
Audit and review of financial reports
Total remuneration for audit services
B. Non-audit services
Non-audit-related services
Deloitte Actuaries and Consultants Limited:
Actuarial services
Total remuneration for non-audit-related services
Taxation services
Deloitte Touche Tohmatsu Australian firm:
Taxation services
Total remuneration for taxation services
Total remuneration for non-audit services
2013
A. Audit services
PricewaterhouseCoopers Australian firm:
Audit and review of financial reports
Total remuneration for audit services
B. Non-audit services
Audit-related services
PricewaterhouseCoopers Australian firm:
Other assurance services
Total remuneration for audit-related services
Taxation services
PricewaterhouseCoopers Australian firm:
Tax compliance services
Other tax services
Total remuneration for taxation services
Total remuneration for non-audit services
$
192,500
192,500
75,000
75,000
1,644
1,644
76,644
235,150
235,150
–
–
23,900
18,800
42,700
42,700
Notes to the Consolidated Financial Statements
77
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 30 June 2014
Note 24
Contingencies
Contingent liabilities
The Group had contingent liabilities at 30 June 2014 in respect of:
Guarantees
Guarantees given in respect of premises leases $760,459 (2013: $960,826).
Contingent claims
From time to time disputes occur between the Company and its franchisees in the normal course of operation, a number of which
may be unresolved at any point in time. At 30 June 2014 and 30 June 2013, there were no disputes or claims in progress that are
expected to have a material financial impact on the Company.
No material losses are anticipated in respect of any of the above contingent liabilities.
Note 25
Commitments
Lease commitments
Non-cancellable operating leases
The Group leases various offices under noncancellable operating leases expiring within one to six years. The leases have varying
terms, escalation clauses and renewal rights. On renewal, the terms of the leases are renegotiated. The Group also leases various
pieces of office equipment under non-cancellable operating leases.
Operating leases
Operating lease expenditure contracted for at the reporting date
but not recognised as liabilities payable:
Within one year
Later than one year but not later than five years
Later than five years
2014
$’000
2013
$’000
1,070
3,352
–
4,422
942
3,135
200
4,277
78
Notes to the Consolidated Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 30 June 2014
Note 26
Related party transactions
E. Parent entity
The ultimate parent entity within the Group is Mortgage Choice Limited.
F. Subsidiaries
Interests in subsidiaries are set out in note 27.
G. Key management personnel
Disclosures relating to key management personnel are set out in note 22. Additional disclosures are set out in the Directors’
report in the remuneration report.
H. Loans to/from related parties
The Group has formed a trust to administer the Group’s employee share scheme. This is funded by the parent entity. This trust
is consolidated, as the substance of the relationship is that the trust is controlled by the Group.
No provisions for doubtful debts have been raised in relation to any outstanding balances, and no expense has been
recognised in respect of bad or doubtful debts due from related parties.
Note 27
Subsidiaries
Significant investments in subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of the following principal subsidiaries in
accordance with the accounting policy described in note 1(B):
Name of entity
MC Loan Book Security Pty Limited
Beagle Finance Pty Limited
Help Me Choose Pty Limited
Mortgage Choice Financial Planning Pty Limited
Country of
Incorporation
Class of
Shares
Australia
Australia
Australia
Australia
Ordinary
Ordinary
Ordinary
Ordinary
Equity holding *
2014
%
100
–
100
100
2013
%
100
100
100
100
These subsidiaries, except Mortgage Choice Financial Planning Pty Limited, have been granted relief from the necessity
to prepare financial reports in accordance with Class Order 98/1418 issued by the Australian Securities and Investments
Commission.
* The proportion of ownership interest is equal to the proportion of voting power held.
Notes to the Consolidated Financial Statements
79
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 30 June 2014
Note 28
Events occurring after the balance sheet date
Dividend payment
Subsequent to year end, a final ordinary dividend of $9,910,000 (8.0 cents per fully paid share) was declared out of profits of the
Company for the year ended 30 June 2014 on 21 August 2014 to be paid on 15 September 2014.
Note 29
Reconciliation of profit after income tax to net cash inflow from operating activities
Profit for the year
Depreciation and amortisation
Change in net present value of future trailing inflows
Change in net present value of future trailing outflows
Employee expense benefits – share-based payments
Interest received
Net loss/(gain) on sale of LoanKit
Change in operating assets and liabilities:
(Increase)/decrease in trade and other receivables
(Increase)/decrease in other operating assets
Increase/(decrease) in trade payables
Increase/(decrease) in other operating liabilities
Increase/(decrease) in provision for income taxes payable
Increase/(decrease) in deferred tax liabilities
Increase/(decrease) in other provisions
Net cash inflow from operating activities
2014
$’000
19,799
1,603
(11,177)
9,932
1,324
(538)
(1,666)
(3,014)
(51)
847
766
401
520
346
2013
$’000
18,714
1,760
(6,643)
1,621
772
(536)
–
(1,371)
(379)
293
502
(918)
1,173
146
19,092
15,134
80
Notes to the Consolidated Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 30 June 2014
Note 30
Earnings per share
A. Basic earnings per share
From continuing operations
From discontinued operation
Total basic earnings per share
B. Diluted earnings per share
From continuing operations
From discontinued operation
Total diluted earnings per share
Earnings used in calculating earnings per share
Profit from continuing operations
Profit from discontinued operations
Profit for the year attributable to owners of the Company
Weighted average number of shares used as the denominator
Weighted average number of ordinary shares used as the denominator
in calculating basic earnings per share
Adjustments for calculation of diluted earnings per share:
Options
Share rights
Weighted average number of ordinary shares and potential ordinary
shares used as the denominator in calculating diluted earnings per share
Information concerning the classification of securities
A. Options
Consolidated
2014
Cents
2013
Cents
15.0
1.0
16.0
15.0
1.0
16.0
15.2
0.3
15.5
15.2
0.3
15.5
$’000
$’000
18,547
1,252
19,034
(320)
19,799
18,714
2014
Number
2013
Number
123,663,700
122,747,895
–
203,385
82,576
–
123,746,276
122,951,280
Options granted to employees under the Mortgage Choice Executive Performance Option Plan are considered to be potential
ordinary shares and have been included in the determination of diluted earnings per share. The options have not been included in
the determination of basic earnings per share. Details relating to the options are set out in the Remuneration report.
B. Performance Share Plan
Shares issued to employees under the Mortgage Choice Performance Share Plan are considered to be ordinary shares and have been
included in the determination of basic earnings per share. Details relating to the shares are set out in the Remuneration report.
C. Share Rights Plan
Share rights granted to the CEO under the Mortgage Choice Share Rights Plan that have vested are considered to be potential
ordinary shares and have been included in the determination of diluted earnings per share. The share rights have not been included
in the determination of basic earnings per share. Details relating to the share rights are set out in the Remuneration report.
Notes to the Consolidated Financial Statements
81
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 30 June 2014
Note 31
Share-based payments
A. Executive Performance Option Plan (EPOP)
The Executive Performance Option Plan may be offered on an annual basis to eligible executives as determined by the Board.
The details of each offer may differ as to the particulars, especially with regard to performance criteria, performance period
and service criteria. At the present time this is a legacy plan as options have not been issued under the plan since May 2009.
In the year ending 30 June 2013, no options were offered.
Under the terms of the EPOP, options are offered over one ordinary share of Mortgage Choice Limited and have an exercise
price based on the market value of the Company’s shares at the time of offer. Market value will be the trade-weighted average
price of the Company’s shares over the one-week period immediately preceding the date of offer. The rules of the EPOP permit
the Company to issue new shares or to purchase shares on-market for the purposes of satisfying the exercise of options.
Any options which do not become exercisable following the application of the performance condition and vesting scale will
lapse. An option that has become exercisable but is not exercised will lapse on the earlier of:
•
•
ten years after the date of offer;
three months, or such other period determined by the Board, after the participant ceases employment for a reason other
than a ‘qualifying reason’ (i.e. death, total and permanent disability, redundancy, or any other reason determined by the
Board); and
•
twelve months, or such other period determined by the Board, after the participant ceases employment for a ‘qualifying reason’.
When a participant ceases to be employed by the Company prior to the end of the performance period, other than because of a
‘qualifying reason’, any options that have not become exercisable will lapse. However, if there is cessation of employment due
to a ‘qualifying reason’, the Board may determine that some or all of the options may vest. In the event of a change of control
of the Company, options will vest on a pro-rata basis or in their entirety for certain senior executives.
If the Board determines that a participant has acted fraudulently or dishonestly, has committed an act of harassment
or discrimination, is in serious breach of any duty to Mortgage Choice, or, in the Board’s reasonable opinion, has brought
Mortgage Choice into serious disrepute, any options held by the participant will lapse.
The assessed fair value at grant date of options granted to individuals is allocated equally over the period from grant date
to vesting date. The fair value of market based conditions at grant date are independently determined using a Monte Carlo
simulation model utilising a lattice-based trinomial valuation method that takes into account the exercise price, the term of
the option, the vesting and performance criteria, the impact of dilution, the nontradeable nature of the option, the share price
at grant date and the expected price volatility of the underlying share, the expected dividend yield and the riskfree interest
rate for the term of the option.
Details of options over ordinary shares in the Company provided as remuneration to other key management personnel of the
Company are set out below. Further information on the options is set out in the Directors’ report remuneration report.
Set out below are summaries of options granted under the plan:
Exercise
price
Balance
at start of
the year
Granted
during
the year
Exercised
during
the year
Expired
during
the year
Forfeited
during
the year
Balance at
end of
the year
Exercisable
at end of
the year
Number
Number
Number
Number
Number
Number
Number
Grant Date
Expiry date
2013
1 May 2009
1 May 2019
$0.76
2,500,000
Weighted average exercise price
$0.76
–
–
(2,500,000)
$0.76
–
–
–
–
–
–
–
–
The weighted average share price at the date of exercise of options exercised during the year ended 30 June 2013 was $1.47.
82
Notes to the Consolidated Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 30 June 2014
B. Performance Share Plan (PSP)
The PSP permits eligible employees as identified by the Board to be granted allocated unvested shares from the outset of the
applicable performance period, with the shares to be held on trust for the participants by a share plan trustee. The shares
granted to those employees are subject to the achievement of performance and service requirements as specified by the
Board. The PSP is designed to provide the medium-term to long-term incentive component of remuneration for executives and
other designated employees.
Participation in the PSP is offered on an annual basis. Eligible employees are granted shares to a value determined by reference
to the Company’s reward policy and market practice with regard to share based incentive arrangements provided by peer
organisations. The right to receive vested shares will lapse if the performance and service criteria are not met.
Shares will be acquired for participants following their acceptance of an offer made under the Plan. The shares will be acquired
by the plan trustee and held on trust for participants until they are withdrawn from the Plan (after they have vested or are
deemed to be vested) or are forfeited, in circumstances outlined below. Shares will be acquired only at times permitted under
the Company’s share trading policy. Shares may be acquired by on-market or off-market purchases, by subscribing for new
shares to be issued by the Company, or through the reallocation of forfeited shares. The method of acquisition for each share
allocation will be determined by the Board. The costs of all share acquisitions under the Plan will be funded by the Group.
Participants will not be required to make any payment for the acquisition of shares under the Plan.
A Notice of Withdrawal may be lodged by a participant following the earlier of:
•
•
•
•
a date ten years from grant date;
the participant ceasing to be an employee of the Company;
a ‘capital event’ (generally, a successful takeover offer or scheme of arrangement relating to the Company) occurring; or
the date upon which the Board gives its written consent to the lodgement of a Notice of Withdrawal by the participant.
While shares remain subject to the PSP rules, participants will, in general, enjoy the rights attaching to those shares (such
as voting or dividend rights etc). If a participant resigns from his or her employment with the Company, or otherwise ceases
employment in circumstances not involving “special circumstances”, the participant will be required to forfeit any unvested
shares held under the Plan on the participant’s behalf, unless the Board otherwise determines. Vested shares will be eligible
for withdrawal in accordance with the usual procedure.
If a participant ceases to be employed by the Company or retires from office as a result of special circumstances (including
death, disability, retirement, redundancy, corporate restructure, or any other circumstances determined by the Board),
the Board may in its discretion determine that all or a portion of the participant’s unvested shares are to be treated as
vested shares, notwithstanding the fact that the vesting conditions applicable to the shares have not been met because the
applicable performance period has not expired.
If the Board determines that a participant has acted fraudulently or dishonestly, has committed an act of harassment
or discrimination, is in serious breach of any duty to Mortgage Choice, or, in the Board’s reasonable opinion, has brought
Mortgage Choice into serious disrepute, any shares to which the participant may have become entitled at the end of the
performance period, and any shares held by the participant under the PSP are forfeited by the participant.
The assessed fair value at grant date of performance shares granted to individuals is allocated equally over the period from
grant date to vesting date, and the amount is included in the remuneration tables above.
The fair value of market based conditions at grant date are independently determined using a Monte Carlo simulation
model utilising a lattice-based trinomial valuation method that takes into account the term of the performance shares, the
vesting criteria, the exercise price (zero), the expected price volatility of the underlying share, the expected dividend yield
(acknowledging that dividends will be paid to participants from the date of grant) and the risk-free interest rate for the term of
the performance shares.
Details of performance shares in the Company provided as remuneration to each Director and other key management
personnel are set out below. Further information on the performance shares and the detailed vesting criteria are set out in the
remuneration report.
C. Share Rights Plan
The Share Rights Plan (SRP) permits eligible employees as identified by the Board from time to time to be granted share rights
(“rights’) from the outset of the applicable performance period. The rights granted to those employees are subject to the
achievement of performance and service requirements as specified by the Board. Eligible employees are granted rights to
a value determined by reference to the Company’s reward policy and market practice with regard to share based incentive
arrangements provided by peer organisations. The rights lapse if the performance and service criteria are not met.
Notes to the Consolidated Financial Statements
83
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 30 June 2014
NOTE 31 SHARE-BASED PAYMENTS continued
Upon vesting, the Company must acquire or issue the number of shares, or the fraction thereof, into which the rights are
convertible under the terms of the specific grant. The method of acquisition for each share allocation will be determined by the
Board. The costs of all share acquisitions under the SRP will be funded by the Group. Participants will not be required to make
any payment for the acquisition of rights under the SRP. The Board at its discretion may choose to settle the rights as a cash
payment at its sole discretion.
If a participant ceases to be employed by the Company unvested rights lapse immediately. Notwithstanding this rule if a participant
ceases to be an employee for a qualifying reason (including death, disability, retirement, redundancy, corporate restructure, or any
other circumstances determined by the Board), the Board may in its discretion determine the treatment of any unvested rights.
If the Board determines that a participant has acted fraudulently or dishonestly; is in breach of his or her obligations to
the Group; or is knowingly involved in a material misstatement of financial statements, the Board may determine that the
conditions attached to the rights may be reset; the rights that have not vested may lapse; allocated or vested shares may be
forfeited; or shares that have been sold on vesting must be repaid in part or in full.
The Board may in its sole discretion determine whether some or all of the rights vest or lapse or whether unvested rights
remain subject to applicable conditions of vesting on the event of a change of control.
The assessed fair value at grant date of the rights granted to individuals is allocated equally over the period from grant date to
vesting date, and the amount is included in the remuneration tables above.
The fair value of market based conditions at grant date are independently determined using a Monte Carlo simulation
model utilising a lattice-based trinomial valuation method that takes into account the term of the performance shares, the
vesting criteria, the exercise price (zero), the expected price volatility of the underlying share, the expected dividend yield
(acknowledging that dividends will be paid to participants from the date of grant) and the risk free interest rate for the term of
the rights.
Details of rights issued by the Company provided as remuneration are set out below. Further information on the rights and the
detailed vesting criteria are set out in the remuneration report.
Set out below are summaries of performance shares conditionally issued under the Plan:
Balance at
start of the
year
Granted
during the
year
Vested
during the
year
Expired
during the
year
Forfeited
during the
year
Balance at
end of the
year
Number
Number
Number
Number
Number
Number
Offer Date
Vesting date
Value
2014
9 December 2009
31 August 2013
20 September 2010
3 September 2013
20 September 2010
3 September 2014
16 February 2012
13 September 2013
16 February 2012
12 September 2014
16 February 2012
12 September 2014
14 September 2012
13 September 2013
14 September 2012
12 September 2014
14 September 2012
14 September 2015
14 September 2012
14 September 2015
23 September 2013
12 September 2014
23 September 2013
14 September 2015
23 September 2013
14 September 2016
23 September 2013
14 September 2016
$1.24
$1.17
$1.19
$1.26
$1.26
$0.78
$1.74
$1.74
$1.74
$1.08
$2.77
$2.77
$2.77
$1.68
169,332
189,699
189,702
51,097
281,031
229,925
50,983
50,983
280,364
229,380
–
–
–
–
–
–
–
–
–
–
–
–
–
–
32,692
32,692
179,811
147,125
(169,332)
(189,699)
–
(51,097)
–
–
(50,983)
–
–
–
–
–
–
–
Total
1,722,496
392,320
(461,111)
Weighted average price
$1.26
$2.36
$1.27
84
Notes to the Consolidated Financial Statements
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
189,702
–
281,031
229,925
–
50,983
280,364
229,380
32,692
32,692
179,811
147,125
1,653,705
$1.52
Balance at
start of
the year
Granted
during the
year
Vested
during the
year
Expired
during the
year
Forfeited
during the
year
Balance at
end of the
year
Number
Number
Number
Number
Number
Number
Offer Date
Vesting date
Value
2013
9 December 2009
31 August 2012
9 December 2009
31 August 2013
20 September 2010
3 September 2012
20 September 2010
3 September 2013
20 September 2010
3 September 2014
16 February 2012
14 September 2012
16 February 2012
13 September 2013
16 February 2012
12 September 2014
$1.24
$1.24
$1.16
$1.17
$1.19
$1.26
$1.26
$1.26
16 February 2012
12 September 2014
$0.78*
14 September 2012
13 September 2013
14 September 2012
12 September 2014
14 September 2012
14 September 2015
14 September 2012
14 September 2015
$1.26
$1.26
$1.26
$0.63
169,333
169,332
189,699
189,699
189,702
51,097
51,097
281,031
229,925
–
–
–
–
–
–
–
–
–
–
–
–
–
50,983
50,983
280,364
229,380
(169,333)
–
(189,699)
–
–
(51,097)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
169,332
–
189,699
189,702
–
51,097
281,031
229,925
50,983
50,983
280,364
229,380
1,722,496
$1.26
Total
1,520,915
611,710
(410,129)
Weighted average price
$1.15
$1.49
$1.21
* During the 2013 financial year, the value of the TSR based performance shares granted on 16 February 2012 was corrected.
The weighted average remaining contractual life of performance shares outstanding at the end of the period was 0.93 years
(2013 – 1.22 years).
The model inputs for performance shares granted on 23 September 2013 included:
a/ performance shares are granted for no consideration and vest over a period of four years;
b/ grant date: 23 September 2013 (2013 – 14 September 2012);
c/ share price at grant date: $2.77 (2013 – $1.74);
d/ expected price volatility of the company’s shares: 27.54% (2013 – 28.26%);
e/ expected dividend yield: 0% (2013 – 0%); and
f/ risk-free interest rate: 2.83% (2013 – 2.46%).
D. Expenses arising from share-based payment transactions
Total expenses arising from sharebased payment transactions recognised during the period as part of employee benefit
expense were as follows:
Shares issued under PSP
2014
$’000
1,324
1,324
2013
$’000
772
772
Notes to the Consolidated Financial Statements
85
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continuedfor the year ended 30 June 2014 Note 32
Parent entity financial information
A. Summary financial information
The individual financial statements for the parent entity show the following aggregate amounts:
Balance sheet
Current assets
Total assets
Current liabilities
Total liabilities
Shareholders’ equity
Issued capital
Share-based payments reserve
Retained profits
Profit or loss for the year
Total comprehensive income
2014
$’000
2013
$’000
112,548
109,739
353,085
339,343
69,589
65,926
249,856
237,475
4,604
2,210
96,415
103,229
4,018
1,472
96,378
101,868
20,220
19,944
20,220
19,944
B. Guarantees entered into by the parent entity
The parent entity has not provided any guarantees on behalf of subsidiaries.
The parent entity has provided guarantees in respect of obligations under premises leases of its head office and state offices
totalling $760,459 (2013 – $960,826). No liability was recognised by the parent entity or the consolidated entity in relation to
these guarantees.
C. Contingent liabilities of the parent entity
Other than the guarantees mentioned above, the parent entity did not have any contingent liabilities as at 30 June 2014 or 30
June 2013.
86
Notes to the Consolidated Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continuedfor the year ended 30 June 2014 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
Directors’ Declaration
for the year ended 30 June 2014
for the year ended 30 June 2014
In the Directors’ opinion:
a/
the fi nancial statements and notes set out on pages 36 – 86 are in accordance with the Corporations Act 2001, including:
i/
ii/
complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting
requirements; and
giving a true and fair view of the consolidated entity’s fi nancial position as at 30 June 2014 and of their performance, for the
fi nancial year ended on that date; and
b/ Note 1(A) confi rms that the fi nancial statements also comply with International Financial Reporting Standards as issued by the
International Accounting Standards Board; and
c/
there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and
payable.
The Directors have been given the declarations by the Chief Executive Offi cer and the Chief Financial Offi cer required by Section
295A of the Corporations Act 2001.
This declaration is made in accordance with a resolution of the Directors.
Peter Ritchie
Director
Sydney
21 August 2014
Directors’ Declaration
87
87
INDEPENDENT AUDIT REPORT
for the year ended 30 June 2014
Deloitte Touche Tohmatsu
ABN 74 490 121 060
Grosvenor Place
225 George Street
Sydney NSW 2000
PO Box N250 Grosvenor Place
Sydney NSW 1220 Australia
Tel: +61 2 9322 7000
www.deloitte.com.au
Independent Auditor’s Report
to the Member’s of Mortgage Choice Limited
Report on the Financial Report
We have audited the accompanying financial report of Mortgage Choice Limited, which comprises the
balance sheet as at 30 June 2014, the income statement, the statement of comprehensive income, the
statement of cash flows and the statement of changes in equity for the year ended on that date, notes
comprising a summary of significant accounting policies and other explanatory information, and the
directors’ declaration of the consolidated entity, comprising the company and the entities it controlled
at the year’s end or from time to time during the financial year as set out on pages 37 to 87.
Directors’ Responsibility for the Financial Report
The directors of the company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error. In Note 1, the directors also state, in accordance with Accounting Standard AASB 101
Presentation of Financial Statements, that the consolidated financial statements comply with
International Financial Reporting Standards.
Auditor’s Responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted
our audit in accordance with Australian Auditing Standards. Those standards require that we comply
with relevant ethical requirements relating to audit engagements and plan and perform the audit to
obtain reasonable assurance whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the financial report. The procedures selected depend on the auditor’s judgement, including the
assessment of the risks of material misstatement of the financial report, whether due to fraud or error.
In making those risk assessments, the auditor considers internal control, relevant to the company’s
preparation of the financial report that gives a true and fair view, in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the company’s internal control. An audit also includes evaluating the appropriateness
of accounting policies used and the reasonableness of accounting estimates made by the directors, as
well as evaluating the overall presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
Liability limited by a scheme approved under Professional Standards Legislation.
88
Member of Deloitte Touche Tohmatsu Limited
Independent Audit Report
INDEPENDENT AUDIT REPORT
for the year ended 30 June 2014
Auditor’s Independence Declaration
In conducting our audit, we have complied with the independence requirements of the Corporations
Act 2001. We confirm that the independence declaration required by the Corporations Act 2001 ,
which has been given to the directors of Mortgage Choice Limited, would be in the same terms if
given to the directors as at the time of this auditor’s report.
Opinion
In our opinion:
(a) the financial report of Mortgage Choice Limited is in accordance with the Corporations Act 2001 ,
including:
(i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2014
and of its performance for the year ended on that date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001 ; and
(b) the consolidated financial statements also comply with International Financial Reporting
Standards as disclosed in Note 1
Report on the Remuneration Report
We have audited the Remuneration Report included in pages 10 to 27 of the directors’ report for the
year ended 30 June 2014. The directors of the company are responsible for the preparation and
presentation of the Remuneration Report in accordance with section 300A of the Corporations Act
2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit
conducted in accordance with Australian Auditing Standards.
Opinion
In our opinion the Remuneration Report of Mortgage Choice Limited for the year ended 30 June 2014,
complies with section 300A of the Corporations Act 2001 .
DELOITTE TOUCHE TOHMATSU
Philip Hardy
Partner
Chartered Accountants
Sydney, 21 August 2014
Independent Audit Report
89
Shareholder Information
for the year ended 30 June 2014
The shareholder information set out below was applicable as at 18 August 2014
A. Distribution of equity securities
Analysis of numbers of equity security holders by size of holding:
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
There were 74 holders of less than a marketable parcel of ordinary shares.
B. Equity security holders
Twenty largest quoted equity security holders
The names of the twenty largest holders of quoted equity securities are listed below:
Finconnect (Australia) Pty Ltd
J P Morgan Nominees Australia Limited
Ochoa Pty Ltd
Citicorp Nominees Pty Limited
National Nominees Limited
HSBC Custody Nominees (Australia) Limited
Ochoa Pty Ltd
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