TM
I N N O V A T I O N F O R P A Y M E N T S
ANNUAL
R E P O R T
2018
w w w . n o v a t t i g r o u p . c o m
For personal use only For personal use only A N N U A L R E P O R T – 2 0 1 7 / 1 8
T A B L E O F C O N T E N T S
Chair m an’s l etter
Review of operat ions
Review of 2018 financi al result s
Rem uneration report (audite d)
Disclo sures relati ng to the direc tors & senior management
Independent auditor ’s declarat ion
Cons olidated statement of profit o r lo ss a nd other comprehensi ve i nco me
Cons olidated statement of financial pos itio n
Cons olidated statement of c hanges in equity
Cons olidated statement of cash flows
Notes to the financial statement s
Directors ’ dec laration
Independent auditor ’s rep ort
Ad ditio nal disclosures
5
6
15
17
27
31
33
34
35
36
37
72
73
78
P A G E 3
For personal use only Directors
P A G E 4
Peter Pawlowitsch (Chairman)
Peter Cook
Brandon Munro
Paul Burton
Kenneth Lai
Steven Zhou
Company secretary
Ian Hobson
Registered offices
Principal place of business
Share register
Auditor
Solicitors
Bankers
Stock exchange listing
Website
United Kingdom
Suite 9 Airport House
Purley Way, Croydon
CR0 0XZ
South Africa
60 – 3rd Avenue
Highlands North
Johannesburg
Gauteng
2192
Malta
The Plaza Commercial Centre
Level 8,
Suite 5
Bisazza Street
Sliema SLM1640
Australia
Level 1,
Legacy House
293 Swanston Street
Melbourne VIC 3000
+61 3 9011 8490
United States of America
300 Congress Street Unit 406
Quincy, Massachusetts 02169
Canada
4th Floor, 931 Fort Street,
Victoria B.C V8V 3K3
Australia
1st Floor
Legacy House
293 Swanston Street
Melbourne VIC 3000
+61 3 9011 8490
Automic Registry Services
Level 2
267 St Georges Terrace
Perth WA 6000
+61 8 9324 2099
William Buck
Level 20, 181 William Street, Melbourne VIC 3000
Milcor Legal
Level 1, 6 Thelma Street, West Perth WA 6005
National Australia Bank
Level 1, 330 Collins Street, Melbourne VIC 3000
Novatti Group Limited shares are listed on the Australian Securities Exchange
(ASX code: NOV)
www.novattigroup.com
www.novattigroup.com/corporategovernance
Australian Financial Services Licence
AFSL No. 448066
Financial Conduct Authority
FCA No. 900631 as an appointed representative of CFS-ZIPP Ltd (FCA No.
900027) for issuance of e-money products
ANNUAL REPORT – 2017/18For personal use only A N N U A L R E P O R T – 2 0 1 7 / 1 8
C H A I R M A N ’ S L E T T E R
Dear f ello w s hareho lde r,
The Company has progressed extremely well on its aim of expanding its transactional businesses
with revenue from its recurring and transactional businesses growing from $0.2M to $1.8M.
For the financial year ended 30 June 2018, the Company reported total revenue of $6.36M, an
increase of 80% from the prior year. Earnings before interest and tax was a loss of $2.0M which
includes non-cash expenses of approximately $0.5M (including option expense), an improvement
of 56% as a result of sustained growth and focus on cost management.
Achievements for the year included:
•
•
•
•
•
•
•
•
Launch of chinapayments.com bill payment service
Increase in B2B processing partnerships
Integration of basis2 billing solution
Acquisition of Vasco Pay prepaid card business
Launch of Australian outbound remittance services
Launch of inbound Australian remittance settlement services
Commercial agreement and integration to Stellar blockchain remittance network
Commencement of the Australian bank licence application process
Driving growth and shareholder value remains paramount for the Board and Management with
the Company placed in its best position in this regard since listing on the ASX. The percentage
of transactional and recurring revenues now being 57% of revenue, providing a solid base from
which to grow.
The Company’s targets for the 2019 financial year are:
•
•
•
•
Continue to focus on growing the Company’s recurring and transactional revenues
including:
- Increase China e-commerce and payment processing relationships
- Grow remittance businesses
- Build consumer facing prepaid card business (Vasco Pay)
Complete the bank license application
Leverage the Novatti Payments Platform and blockchain technologies
Assess strategic acquisition opportunities.
On behalf of the Board, I would like to thank all staff and contractors for their contribution to the
Company and look forward to their support in the coming year.
C h a i r m a n
P E T E R P A W L O W I T S C H
P A G E 5
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R E V I E W O F O P E R A T I O N S
OVERVIEW
The continuing focus on building recurring and financial processing revenue streams has been
rewarded with Novatti having increased more predictable and larger revenue streams. This is
highlighted by the growth in financial processing revenues from $0.2m in FY17 to $1.8M in FY18.
Overall total revenues grew to $6.36M 80% from $3.54M in FY17.
The acquisition of basis2 in May 2017 has been followed by a comprehensive integration into
Novatti providing revenues of $1.6M in line with expectations. In June 2018 Novatti acquired
Vasco Pay Pty Ltd which will enable Novatti to grow its B2C processing revenues and build a
consumer customer base potentially accessible for future banking services growth.
CORPORATE SHARE HIGHLIGHT S
Date
Number of
Shares
Summary
01 July 2017
107,972,647
Number of shares on issue at commencement of
financial year
03 July 2017
17 July 2017
18 July 2017
1,539,285
Fully paid ordinary shares issued pursuant to the
shortfall facility of the retail entitlement offer.
700,000
Fully paid ordinary shares issued pursuant to the
shortfall facility of the retail entitlement offer.
301,777
Management Fee paid in shares to Corporate
Advisors for the 1 for 4 equity raising facility.
11 October 2017
25,000,000
Share Placement to sophisticated Chinese Investor
to raise funds for capital growth
15 December 2017
1,700,000
Conversion of Options to Shares
06 March 2018
18,213,041
Final Share Placement to sophisticated Chinese
Investor to raise funds capital growth
A N N U A L R E P O R T – 2 0 1 7 / 1 8
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BU SINESS OPERATIONS
In FY18, Novatti successfully pursued a growth strategy within a constrained cost base that has seen
growth in existing revenue streams and the development of new revenue streams. Additionally,
FY18 has seen Novatti increase the mix of predictable recurring and transactional revenues as a
component within the overall revenues. The majority of revenues are now increasingly recurring
financial transaction revenues. Such revenues include maintenance fees, SaaS fees, compliance
fees, Flexepin sales and remittance type margins. Achievements during the year include:
•
•
•
•
•
•
•
•
Launch of Chinapayments.com bill payment service
Increase in B2B processing partnerships
Integration of basis2 billing solution
Acquisition of Vasco Pay prepaid card business
Launch of Australian outbound remittance services
Launch of inbound Australian remittance settlement services
Commercial agreement and integration to Stellar blockchain remittance network
Commencement of the Australian bank licence application process
Strong growth
in current
NOVATTI
PLATFORMS
Provide innovative client
platforms for mobile
banking, remittances,
digital wallets, etc
NOVATTI
TRANSACTION
SERVICES
Transaction services
for remittance, cash
vouchers, bill payments,
etc.
Growing
blue-sky
opportunities
P A G E 7
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Novatti Group Revenue
During the year the
Group continued its
transition away from
non recurring revenue
to transactional and
recurring revenues.
This change in
revenue mix is
highlighted in the
graphs below.
$ 7,000,000
$ 6,000,000
$ 5,000,000
$ 4,000,000
$ 3,000,000
$ 2,000,000
$ 1,000,000
$ -
FY17
FY18
Non Recurring
Recuring
R&D Rebate
Transaction Processing
Billing
FY17 Revenue
Breakdown
FY18 Revenue
Breakdown
Non Recurring
Recuring
Transaction Processing
Billing
T HE NOVATTI PLATFORM
“The Novatti Platform
empowers new cost-
effective payment options.”
The Novatti Platform is the technology foundation of the Group and enables a vast variety of
solutions to be deployed on-site or in the cloud. The platform offers highly scalable transaction
processing and stored value account management systems. The Novatti Platform is deployed with
an array of mobile and alternative payment functionality to telecommunication and financial
service companies globally. The platform can be implemented across an expansive range of
internal and external systems such as banks, ATMs, Point of Sale (POS) terminals, mobile phones,
web portals, POS systems, prepaid and post-paid billing systems, and telecommunications
infrastructure. Novatti is focused on increasing financial inclusion to unbanked or underbanked
societies in developing nations with minimal access to traditional bank accounts. The innovative
technologies enable new and cost-effective payment services to solve the needs in emerging
marketplaces, where the internet and mobile penetration is rapidly growing.
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A N N U A L R E P O R T – 2 0 1 7 / 1 8
The Novatti Platform consists of a variety of software modules. Each module can be delivered
as a stand-alone solution or can be integrated with another module (including existing systems)
utilising a common backbone messaging system. The individual modules can be implemented to
support the following payment applications:
• Digital wallets
• Mobile money
• Voucher management
•
•
Distribution and activation of virtual and physical vouchers such as prepaid gift cards or
prepaid debit cards
Airtime distribution (also known as e-top-up, pin-less top-up, mobile top-up or mobile
recharge)
International and domestic bill payments
International and domestic remittances
•
•
• Agency banking to enable branchless banking in remote or isolated areas
Go - to-mar ket stra tegy
The Novatti Payments Platform offers our clients the opportunity to provide innovative services
to their consumers. The Novatti Payments Platform has many varied yet robust and scalable
reference sites in Australia, Asia, Africa, the Middle East, Europe and the Americas. Software
development is primarily handled in Melbourne, with an increasing amount performed by our
Offshore Development Centre in Vietnam. Development costs are increasingly competitive. Novatti
provides the solution on a customisable and configurable Commercial off the Shelf basis either
into the customer’s data centre or by way of a cloud delivered service. Increasingly solutions are
provided on a recurring payment Platform as a Service basis.
FINANCIAL PRO CESSING SER VICES
F inan cial licences
Flexewallet holds an Australian Financial Services Licence (AFSL No. 448066) for non-cash
payments, is registered with AUSTRAC and is a member of the Financial Ombudsman Scheme in
Australia.
Flexe Payments (UK) is approved by the Financial Conduct Authority (FCA No. 900631) as an
appointed representative of CFS-ZIPP Ltd (FCA No. 900027) for the issuance of e-money products.
CFS-Zipp has passported the e-money licence it holds into all the states of the European Union,
effectively allowing Flexe Payments (subject to the appropriate notification) to operate in these
countries.
T ra nsactio n P roces sing Grow th
The increasing focus of the Group is to build our Financial Processing Services. For FY18 these
revenues were derived from B2B partnerships both in Australia and overseas Growth in these
partnerships has seen resultant growth in transaction processing revenues. With the acquisition
of Vasco Pay and the launch of operations of Chinapayments.com Novatti is also poised to create
strong growth in B2C .
Novatti Payment Processing Revenue
$ 800,000
$ 700,000
$ 600,000
$ 400,000
$ 500,000
$ 300,000
$ 200,000
$ 100,000
$ -
Sep-16
Dec-16
M ar-17
Jun-17
Sep-17
Dec-17
M ar-18
Jun-18
Total quarterly processing revenue
P A G E 9
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Flexepin continues to grow strongly
through
increased distribution
to
new countries and new merchants
accepting the voucher as a payment
method. Strongest growth has been
in Canada, with good growth potential
also being seen in new markets in
Europe.
Novatti has continued to develop hard-
to-get strategic relationships to grow
into the remittance market. Novatti
underpins its remittance services with
its Australian Remittance Network
Provider status and the AFSL along
with the oversight of the compliance
team.
The Group has entered into a number
of
partnerships with
companies
involved
in bringing new Chinese
methods to Australia to allow Chinese
consumers to more easily pay for goods
and services. Novatti has used
its
licencing and compliance capabilities
and its technology to facilitate these
services. With over 1.2m Chinese
tourists and over 200,000 Chinese
students in Australia, plus ecommerce
purchases to Australian websites, the
Chinese payment methods herald
major
new
financial
transaction
streams in Australia. Novatti is well
positioned to be a strong beneficiary.
During FY18, Novatti also launched
www.chinapayments.com.
Bill
payment service that enables Chinese
consumers both in Australia and China
to pay Australian BPay bills with their
Chinese digital wallet service.
In June 2018 Novatti acquired Vasco
Pay, a provider of prepaid reloadable
Visa cards. These reloadable Visa cards
basis2 provides an extensive solution
enable consumers to have a flexible
enabling utility clients to manage the
payment instrument linked to a bank
billing for their subscribers. Revenues
account that also includes access to
include
licencing,
support
and
a range of rewards and consumer
professional services and are highly
discounts. Target markets
include
international students, migrants and
corporate disbursements.
predictable over the year.
ANNUAL REPORT – 2017/18For personal use only A N N U A L R E P O R T – 2 0 1 7 / 1 8
D I R E C T O R S ’ R E P O R T
DIRECTORS
The following persons were directors of Novatti Group Limited during the whole of the financial
year and up to the date of this report, unless otherwise stated:
• PETER PAWLOWITSCH
• BRAND ON MUNRO
• PA UL BURTON
• PETER COOK
• KENNETH LAI
• S TEVEN ZHOU
(appointed 12 October
2017)
The directors present their report, together with the financial statements, on the consolidated
entity (referred to hereafter as the 'Group') consisting of Novatti Group Limited (referred to
hereafter as the 'Company', 'Novatti' or 'parent entity') and the entities it controlled at the end
of, or during, the year ended 30 June 2018.
IN FORMATION ON D IRECTO RS
Name:
Title:
Peter Pawlowitsch
Non-Executive Chairman
Qualifications:
BCom, MBA, CPA.
Experience and expertise:
Other current directorships:
Peter is an accountant by profession, with extensive
experience as a director and officer of ASX-listed
entities. He brings to the team experience in operational
management, business administration and project
evaluation in the IT, hospitality and mining sectors gained
during the last 15 years.
Chairman of Dubber Corporation Limited (20 September
2011 – present), Non-executive director of Ventnor
Resources Ltd (12 February 2010 – present), Rewardle
Holdings (30 May 2017 – present), Knosys Limited (16
March 2015 – present).
Former directorships (last 3 years):
Department 13 Ltd (formerly Kunene Resources Ltd)
Special responsibilities:
None.
Interests in shares:
2,343,750 ordinary shares.
Interests in options:
1,000,000
Contractual rights to shares:
None
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Paul Burton
Non-Executive
Name:
Title:
Qualifications:
Chartered Accountant.
Experience and expertise:
Paul has over 14 years of leadership experience in
the payments industry and was the CEO of Datacash
Group Plc, a payments gateway company bought by
MasterCard. Datacash had a significant presence in
Africa and Paul steered the company’s expansion in that
market.
Other current directorships:
Former directorships (last 3 years):
Special responsibilities:
Interests in shares:
None.
None.
None.
None.
Interests in options:
5,750,000.
Name:
Title:
Kenneth Lai
Non-Executive
Qualifications:
Bachelor of Science – Majoring in Computer Science
Experience and expertise:
MD of Hong Kong-based investment firm Prestige Team
Limited, which has interests in payment processing, real
estate, digital marketing and information technology
support services.
Other current directorships:
Former directorships (last 3 years):
Special responsibilities:
None.
None.
None.
Interests in shares:
12,918,750 ordinary shares.
Interests in options:
750,000
Name:
Title:
Qualifications:
Experience and expertise:
Brandon Munro
Non-Executive
BEco; LLB; Grad Dip Applied Finance & Investment from
the Securities Institute of Australia, GAICD, F.Fin
Brandon is a corporate lawyer by profession with
executive experience leading ASX listed companies . He
brings regulatory, governance, mergers and acquisitions
and capital markets knowledge to the team.
Other current directorships:
Managing Director of Bannerman Resources Ltd (9
March 2016 – present).
Former directorships (last 3 years):
Department 13 Ltd (formerly Kunene Resources Ltd)
Rewardle Holdings Ltd
ANNUAL REPORT – 2017/18For personal use only A N N U A L R E P O R T – 2 0 1 7 / 1 8
Special responsibilities:
None.
Interests in shares:
1,562,500 ordinary shares.
Interests in options:
1,000,000
Name:
Title:
Peter Cook
Managing Director and Chief Executive Officer
Qualifications:
BSc, Grad Dip Computing, Grad Dip Securities, GAICD.
Experience and expertise:
Peter has over 25 years of experience as a director and
executive with companies including Coopers & Lybrand
(now PWC), Catsco Pty Ltd and Advanced Network
Management Pty Ltd (Telstra joint venture company)
and many start-up technology companies. Peter’s career
has been largely based on founding and leading multiple
telecommunications and payments companies. Unidial
Pty Ltd and Ezipin Canada Inc. are such examples and all
with successful exits to private and public companies.
Peter was a non- executive Director and Deputy
Chairman of ASX-listed Senetas Corporation Limited from
June 1999 to January 2006.
Other current directorships:
P2P Transport Limited (22 November 2017 – Present).
Former directorships (last 3 years):
Special responsibilities:
None.
None.
Interests in shares:
11,107,904 ordinary shares.
Interests in options:
5,000,000
Name:
Title:
Qualifications:
Experience and expertise:
Other current directorships:
Former directorships (last 3 years):
Special responsibilities:
Interests in shares:
Interests in options:
Steven Zhou
Non-Executive
Hospitality Management Diploma, Financial Mortgage
Certificate IV.
Steven has extensive experience in start up financial
services businesses in China and Australia.
None.
None.
None.
None.
None
'Other current directorships' quoted above are current directorships for listed entities only and
excludes directorships of all other types of entities, unless otherwise stated.
P A G E 1 3
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'Former directorships (last 3 years)' quoted above are directorships held in the last 3 years for
listed entities only and excludes directorships of all other types of entities, unless otherwise
stated.
COMPANY SECRETARY
Ian Hobson was appointed Company Secretary on 12 October 2015 and holds a Bachelor of
Business degree, is a Chartered Accountant and Chartered Secretary. Ian provides secretarial
services and corporate, management and accounting advice to a number of listed companies.
Ian’s fees are based on a fee for service arrangement.
MEETINGS OF DIRECTO RS
The number of meetings of the Group’s Board of Directors (the 'Board') held during the year
ended 30 June 2018, and the number of meetings attended by each director were:
Attended
Held
Peter Pawlowitsch
Peter Cook
Brandon Munro
Paul Burton
Kenneth Lai
Steven Zhou
7
7
7
6
4
1
7
7
7
7
7
5
Held: represents the number of meetings held during the time the director held office.
The Group will not have a separate Audit and Risk Committee until such time as the Board is
of a sufficient size and structure, and the Group’s operations are of a sufficient magnitude, for
a separate committee to be of benefit to the Group. In the meantime, the full Board will carry
out the duties that would ordinarily be assigned to that committee under the written terms of
reference for that committee, including but not limited to, monitoring and reviewing any matters
of significance affecting financial reporting and compliance, the integrity of the financial reporting
of the Group, the Group’s internal financial control system and risk management systems and the
external audit functions.
The Board has not established a Nomination and Remuneration Committee as the role of the
committee will be undertaken by the full Board.
ANNUAL REPORT – 2017/18For personal use only A N N U A L R E P O R T – 2 0 1 7 / 1 8
R E V I E W O F 2 0 1 8 F I N A N C I A L R E S U L T S
The loss for the Group after providing for income tax amounted to ($2,069,034) across all regions
to support growth.
The Group’s Net Asset Position as at 30 June 2018 was $8,749,151 with $4,509,142 held in Cash
or Cash equivalents.
The Group is debt free.
The earnings of the Group for 30 June 2018 is summarised below:
2018
$
2017
$
Sales revenue and Other income^
6,363,684
3,541,917
EBITDA (underlying)*
Profit/(Loss) before Tax
Tax Expense
(582,919)
(4,082,023)
(2,069,034)
(4,717,729)
-
-
Net Profit/(Loss) after Tax
(2,069,034)
(4,717,729)
Cash
Operating Cash flow
4,509,142
654,146
(3,376,374)
(4,005,254)
^Other income as outlined in Note 4 of the financial statements.
*Underlying EBITDA excludes Option expenses, share fundraising expenses, depreciation,
amortisation, withholding tax and VAT unclaimed.
The factors that are considered to affect Total Shareholders Return ('TSR') are summarised below:
2018
$
2017
$
2016
$
Share price at financial year end
0.225
0.115
Total dividends declared (cents per share)
-
-
0.14
-
Basic earnings per share (cents per share)
(1.53)
(5.03)
(9.06)
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DIVIDENDS
There were no dividends paid, provided or declared as at 30 June 2018.
Sig nificant changes in the stat e of affairs
Share Placements.
On 11 October 2017, Novatti Group Limited announced the placement of 25,000,000 shares to a
sophisticated investor. This raised $3.5M.
On 28 February 2018, Novatti Group Limited announced the placement of 18,204,041 shares to
sophisticated investors. This raised a further $3.5M.
Acquis ition of V asco P ay Pty Ltd
Novatti Group Limited acquired 100% of Vasco Pay, a reloadable Visa card provider that targets
multiple market segments including millennials, parents, students and disbursements. Completion
of the acquisition occurred 8 June 2018.
Upfront consideration for the acquisition was $150,000 plus 1.6 million Novatti Group Ltd shares.
In addition, the vendors have the right to participate in earn outs which are based on EBITDA
multiples of 1.225 on the 30 June 2020 EBITDA and 1.1025 of 30 June 2021 EBITDA. The earn outs
may be taken in cash or shares at an issue price of 90% of an agreed to 90 day VWAP. The 1.6
million shares are escrowed, 50% released in 12 months and the balance released in 24 months
from completion.
MATTERS SUBSEQUEN T TO THE END OF T HE
FINANCIAL YEAR
The Group received its FY17 Research and Development rebate of $923,660 on 17 July 2018.
No other matter or circumstance has arisen since 30 June 2018 that has significantly affected, or
may significantly affect the Group’s operations, the results of those operations, or the Group’s
state of affairs in future financial years.
LIKELY DEVELOPMENTS AND EXP ECT ED RES U LT S
OF OPERATIONS
The Group will continue its principal activity of sales and deploying the Novatti Platform,
transaction and billing services.
EN VIRONMENTAL REGULA TI ON
The Group
Commonwealth or State law.
is not subject to any significant environmental regulation under Australian
ANNUAL REPORT – 2017/18For personal use only A N N U A L R E P O R T – 2 0 1 7 / 1 8
R E M U N E R A T I O N R E P O R T ( A U D I T E D )
The remuneration report details the key management personnel remuneration arrangements for
the Group, in accordance with the requirements of the Corporations Act 2001 and the Corporations
Regulations 2001.
Key management personnel are those persons having authority and responsibility for planning,
directing and controlling the activities of the entity, directly or indirectly, including all directors.
The remuneration report is set out under the following main headings:
Principles used to determine the nature and amount of remuneration
•
• Details of remuneration
Service agreements
•
•
Share-based compensation
• Additional information
• Additional disclosures relating to key management personnel
P RINCIPLES USED TO DETERMINE T HE N AT U RE
AND AMOUNT OF REMUN ER AT IO N
The objective of the Group’s executive reward framework is to ensure reward for performance
is competitive and appropriate for the results delivered. The framework aligns executive and
non-executive rewards with the achievement of strategic objectives and the creation of value for
shareholders, and conforms to the market best practice for the delivery of reward. The Board of
Directors (the 'Board') ensures that executive reward satisfies the following key criteria for good
reward governance practices:
Competitiveness and reasonableness
•
• Acceptability to shareholders
•
•
Transparency
Performance linkage/alignment of executive compensation
As there is currently no Nomination and Remuneration Committee, the full Board is responsible
for determining and reviewing remuneration arrangements for its directors and executives. The
performance of the Group depends on the quality of its directors and executives. The remuneration
philosophy is to attract, motivate and retain high performance and high quality personnel.
The full Board has structured an executive remuneration framework that is market competitive
and complementary to the reward strategy of the Group.
Alignment of shareholders’ interests:
• Rewards capability and experience,
• Reflects competitive reward for contribution to growth in shareholder wealth, and
•
Provides a clear structure for earning rewards.
In accordance with best practice corporate governance, the remuneration structure of non-
executive directors and executives are separate.
NON-EXECUTIVE DIRECT ORS ’ REMUN ERAT I ON
Fees and payments to non-executive directors reflect the demands and responsibilities of their
role. Non-executive directors’ fees and payments are reviewed annually by the Board. The Board
may, from time to time, receive advice from independent remuneration consultants to ensure
non-executive directors’ fees and payments are appropriate and in line with the market. For
the FY18 financial period there was no advice from independent remuneration consultants. The
Chairman’s fees are determined independently to the fees of other non-executive directors based
on similar roles in the external market. The Chairman is not present at any discussions relating to
the determination of his remuneration. Non-executive directors do receive share options.
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ASX listing rules require the aggregate non-executive directors’ remuneration be determined
periodically by a general meeting. The total maximum remuneration of non-executive directors
was set by the Constitution and subsequent variation is by ordinary resolution of Shareholders
in general meeting with the Constitution, the Corporations Act and the ASX Listing Rules, as
applicable. The maximum remuneration has been set at an amount not to exceed $500,000.
EXECUTIVE REMUNERATION
The Group’s remuneration policy for executive directors and senior management is designed to
promote superior performance and long-term commitment to the Group.
Remuneration policies and arrangements for the Key Executive Members of the Group including
the Chief Executive Officer, Chief Operating Officer and the Chief Financial Officer are reviewed
by the Board and ratified each year.
The Group rewards its executives with a level and mix of remuneration based on their position
and responsibility, which has both fixed and variable components.
The executive remuneration and reward framework has three components:
•
•
•
Fixed remuneration including base pay and non-monetary benefits,
Short-term performance incentives, and
Long-term incentives.
The combination of these three components comprises the executive’s total remuneration.
Novatti Group’s business objective:
To provide global software technology, utility billing and payment services. Through technology
and services, Novatti helps economies, corporations and consumers digitise cash transactions.
Remuneration strategy linkages to business objective:
ALIGN THE INTERESTS OF
EXECUTIVES WITH SHAREHOLDERS
ATTRACT, MOTIVATE AND RETAIN
HIGH PERFORMING INDIVIDUALS
• The remuneration strategy incorporates 'at-risk'
components, including both short and long-term
elements delivered in equity.
• Remuneration is competitive with companies of a
similar size and complexity.
• Performance is assessed against a suite of financial
• Deferred and long-term remuneration is designed
and non-financial measures relevant to the
success of the Company and generating returns for
shareholders.
to encourage long-term consistent performance and
employee retention.
Remuneration
component
Vehicle
Purpose
Link to
Performance
Fixed
Remuneration
Consisting of base salary,
superannuation and non-
monetary benefits. Executives
may receive their fixed
remuneration in the form of
cash or other fringe benefits (for
example motor vehicle benefits)
where it does not create any
additional costs to the Group
and provides additional value to
the executive.
To provide competitive fixed
remuneration set with reference
to role, market, experience and
performance.
Reviewed annually by the
Board, based on individual and
business unit performance,
the overall performance of the
Group and comparable market
remunerations.
Short Term
Incentive
Is paid in cash.
Long Term
Performance
Equity including Options, Shares
and/or Rights.
This is designed to reward
executives for their contribution
to the achievement of annual
Group, business unit and
individual outcomes.
Reward executives for their
contribution to the creation
of shareholder value over the
longer term.
Directly linked to pre-agreed
KPIs. Reviewed regularly with the
relevant executive member. Final
performance is determined by
the Board.
It aims to align the targets of the
business units with the targets of
those executives responsible for
meeting those targets.
ANNUAL REPORT – 2017/18For personal use only A N N U A L R E P O R T – 2 0 1 7 / 1 8
DETAILS OF THE INCENTIVE PL AN S US ED:
Sh ort Term Incentive p rogram (S TI):
The STI Program awards a cash bonus based on key members achieving targets from a Group,
Business Unit and individual perspective.
STI awarded to each executive depends on the extent to which specific targets set at the beginning
of the financial year by the Board are met. Targets are set by a cascading process from the Board
through the executive group.
The targets consist of financial and non-financial Key Performance Indicators (KPIs). These may
include but are not limited to:
•
•
•
•
Product management and project platform implementation,
Financial and Business Unit operational targets linked to the achievement of the Group’s
growth in annual sales revenue and controllable financial drivers including cash, market
growth (including geographical market growth), expense management control and
capital management improvement,
Corporate development matters including employment, retention, and remuneration of
core personnel, leadership and succession, cultural development and communication
activities, and
Establishment of business operational frameworks and procedures as well as Risk
Management in respect of financial and operational issues.
These measures were chosen as they represent the key drivers for the short-term success of the
business and provide a framework for delivering long-term value.
These measurement methods were selected as they directly reflect whether the STI performance
targets have been met or not, as set by the Board.
The results of the STI financial performance measures are listed in the remuneration table below,
on pages 21-22.
Lo ng Term I ncent ive program (LTI)
LTI awards are reviewed annually to executives and are provided in order to align the remuneration
of Key Executive Members with the creation of shareholder value. LTI comprise equity instruments
including shares and options, where the incentive involves the time-based vesting of options on
the basis that the executive or employee continues to be employed by the Group and are eligible
under the Company’s Employee Share Plan (ESP) and or Option Plan (ESOP).
The vesting of these awards is dependent on the length of time and service of the executive or
employee, and alternatively, they can also be awarded at the discretion of the Board.
The achievement of the Group’s strategic and financial objectives is the key focus of the efforts
of the Group. As indicated above, over the course of each financial year, the Board reviews the
Group’s executive remuneration policy to ensure that the remuneration framework remains
focused on driving and rewarding executive performance, while being closely aligned to the
achievement of Group strategic objectives and the creation of shareholder value.
LTI are based on participation within Novatti’s ESP and or ESOP. LTI, based on equity remuneration
(being either the issue of securities, issue of performance shares and or rights or the issue of
options), are made in accordance with thresholds as set out in this financial plan. By using the
Group’s ESP and or ESOP to offer shares and options to employees, the interest of employees
is aligned with shareholder wealth. A copy of the ESP and ESOP can be found via the Group’s
website.
The table below sets out the summary information for key executives of their Options’ vesting and
their lapsing date of options as LTI awards for FY18.
P A G E 1 9
For personal use only P A G E 2 0
2018
Start date
Peter Cook^
12 Nov 2015
Alan Munday*
12 Nov 2015
Steven Stamboultgis*
12 Nov 2015
Total
No of Options
vested in 2018
-
250,000
200,000
450,000
No of
Options
lapsed/
cancelled
Balance not
vested in
2018
Lapsing date
for Options
-
-
-
-
-
30 June 2019
250,000
30 June 2019
200,000
30 June 2019
450,000
No Options have been issued to executives for the year ended 30 June 2018.
2017
Start date
Peter Cook^
12 Nov 2015
Alan Munday*
12 Nov 2015
Steven Stamboultgis*
12 Nov 2015
No of Options
vested in 2017
-
250,000
200,000
No of
Options
lapsed/
cancelled
Balance not
vested in
2017
Lapsing date
for Options
-
-
-
-
30 June 2019
500,000
30 June 2019
400,000
30 June 2019
Paolo Montessori*
3 Feb 2016
750,000
4,500,000
-
30 June 2019
Total
1,200,000
4,500,000
900,000
^Total Options issued had vested in the year ended 30 June 2017. These options were subject to 24 months
escrow which ended 18 January 2018.
*Options are exercisable at $0.20 and vest over three equal tranches on 1 July 2016, 1 July 2017 and 1 July
2018.
DETAILS OF REMUNERATIO N
Amo unts o f r emuneration
Details of the remuneration of key management personnel of the Group are set out in the
following tables.
The key management personnel of the Group consisted of the following directors of Novatti Group
Limited:
•
•
•
•
•
•
Peter Pawlowitsch – Non-Executive Chairman
Peter Cook – Managing Director and Chief Executive Officer
Brandon Munro – Non-Executive Director
Kenneth Lai – Non-Executive Director
Paul Burton – Non-Executive Director
Steven Zhou – Non-Executive Director (appointed 12 October 2017)
Other key management personnel
•
•
Alan Munday – Group Chief Operating Officer
Steven Stamboultgis – Chief Financial Officer
ANNUAL REPORT – 2017/18For personal use only A N N U A L R E P O R T – 2 0 1 7 / 1 8
Cash
salary &
fees
Cash
bonus
Non-mon-
etary
Long
service
leave
Options
exp in yr
Equity-
settled
Superan-
nuation
$
$
$
$
$
$
Total
$
Cash
bonus
paid or
payable
Cash
bonus
forfeited Fixed Rem At risk STI At risk LTI
Options
as a pro-
portion
of total
rem
%
%
%
%
%
%
2018
Non-Executive
Directors:
Peter Pawlowitsch
(Chairman)
59,361
Kenneth Lai
Paul Burton
-
-
Brandon Munro
36,530
Steven Zhou
26,429
Executive Directors:
Peter Cook*
190,290
Other Key
Management
Personnel:
Alan Munday
200,913
Steven Stamboultgis
164,384
Total
677,907
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
12,903
5,639
77,903
5,919
70,432
-
-
5,919
70,432
12,903
3,470
52,903
-
2,571
29,000
48,317
2,042
64,513
20,049
325,211
-
-
1,717
9,677
19,543
231,850
1,287
7,742
15,616
189,029
48,317
5,046
184,089
66,888
982,247
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
83
-
-
76
100
80
96
96
-
-
-
-
-
-
-
17
17
100
100
100
100
24
-
24
-
20
20
4
4
4
4
* FY18 remuneration decreased by $15,094 to account for an overpayment in the FY17 year.
Cash
salary &
fees
Cash
bonus
Non-mon-
etary
Long
service
leave
Options
exp in yr
Equity-
settled
Superan-
nuation
$
$
$
$
$
$
Total
$
Cash
bonus
paid or
payable
Cash
bonus
forfeited Fixed Rem At risk STI At risk LTI
Options
as a pro-
portion
of total
rem
%
%
%
%
%
%
2017
Non-Executive
Directors:
Peter Pawlowitsch
(Chairman)
59,361
Kenneth Lai
Paul Burton
-
-
Brandon Munro
36,530
Executive Directors:
-
-
-
-
-
-
-
-
-
-
-
-
19,546
5,639
84,546
8,683
106,417
-
-
8,683
106,417
19,546
3,470
59,546
Peter Cook
251,701
109,500
16,073
1,717
97,735
21,070
497,796
Other Key
Management
Personnel:
Alan Munday
200,912
63,805
Steven Stamboultgis
164,382
-
Paolo Montessori
145,833
35,000
-
-
-
1,342
14,660
27,281
308,000
878
11,728
15,616
192,604
-
16,505
-
197,338
Total
858,719
208,305
16,073
3,937
294,820
73,076 1,454,930
-
-
-
-
-
-
-
-
-
-
-
-
77
-
-
67
100
80
100
-
100
97
96
92
0
-
-
0
0
0
0
0
23
23
100
100
100
100
33
33
20
20
3
4
8
3
4
8
P A G E 2 1
For personal use only P A G E 2 2
SERVICE AGREEMENTS
Remuneration and other terms of employment for key management personnel are formalised in
service agreements. Details of these agreements are as follow:
Name:
Title:
Peter Cook
Managing Director and Chief Executive Officer
Agreement commenced:
20 November 2015
Term of agreement:
The term is not fixed.
Remuneration:
Annual Review
Bonus:
Termination:
Base salary of $273,750 (including superannuation). 5 million Options
each exercisable at $0.20 on or before 30 June 2019 (as set out in
Section 13.3 of the Replacement Prospectus dated 8 December 2015).
Remuneration is subject to an annual review to be conducted by
the board. Factors to be considered include personal competency
progression, achievement of personal development targets and KPI’s,
company remuneration policy, its financial position and current market
equivalent positions. KPI’s to be agreed each year and may be varied by
mutual agreement.
The executive bonus structure targets are reviewed annually with
both parties acting in good faith and reflecting the current needs of
the business. The performance bonus can be up to up to $219,000
(including statutory superannuation).
The agreement may be terminated, (A) by either party without cause
with six months’ notice, or at the election of the Group, immediately
with payment in lieu of six months’ notice (subject to the limitation
of the Corporations Act and Listing Rules). (B) By the Group on one
months’ notice, if the executive is unable to perform his duties due to
illness, accident or incapacitation, for three consecutive months or a
period aggregating more than three months in any 12-month period.
Name:
Title:
Alan Munday
Group Chief Operating Officer
Agreement commenced:
20 November 2015
Term of agreement:
The term is not fixed.
Remuneration:
Annual Review
Bonus:
Termination:
Base salary of $220,000 (including statutory superannuation), 750,000
Options, each exercisable at $0.20 on or before 30 June 2019, vesting over
three equal tranches on 1 July 2016, 2017 and 2018, if the employment has
not terminated by the relevant date, on the same terms and conditions (as
set out in Section 13.3 of the Replacement Prospectus dated 8 December
2015).
Remuneration is subject to an annual review to be conducted by the
board. Factors to be considered include personal competency progression,
achievement of personal development targets and KPI’s, company
remuneration policy, its financial position and current market equivalent
positions. KPI’s to be agreed each year and may be varied by mutual
agreement.
The executive bonus structure targets are reviewed annually with both
parties acting in good faith and reflecting the current needs of the
business. The performance bonus can be up to up to $80,000 (including
statutory superannuation).
The agreement may be terminated, (A) without cause, with three
months’ notice from the Group or two months’ from the executive, or
payment in lieu of notice at the Group’s election (subject to the limitation
of the Corporations Act and Listing Rules). (B) by Novatti on one months’
notice, if the executive is unable to perform his duties due to illness,
accident or incapacitation, for three consecutive months or a period
aggregating more than three months in any 12-month period or (C),
summarily following material breach or in the case of serious misconduct.
ANNUAL REPORT – 2017/18For personal use only A N N U A L R E P O R T – 2 0 1 7 / 1 8
Name:
Title:
Steven Stamboultgis
Chief Financial Officer
Agreement commenced:
20 November 2015
Term of agreement:
The term is not fixed.
Remuneration:
Annual Review
Base salary of $180,000 (including statutory superannuation) and
600,000 Options, each exercisable at $0.20 on or before 30 June 2019,
vesting over three equal tranches on 1 July 2016, 2017 and 2018, if
the employment has not terminated by the relevant date, on the same
terms and conditions (as set out in Section 13.3 of the Replacement
Prospectus dated 8 December 2015).
Remuneration is subject to an annual review to be conducted by
the board. Factors to be considered include personal competency
progression, achievement of personal development targets and KPI’s,
company remuneration policy, its financial position and current market
equivalent positions. KPI’s to be agreed each year and may be varied by
mutual agreement.
Bonus:
None.
Termination:
The agreement may be terminated by either party without cause with
three months’ notice, or in the case of the Group, immediately with
payment in lieu of notice (subject to the limitation of the Corporations
Act and Listing Rules), by the Group on one months’ notice, if the
executive is unable to perform his duties due to illness, accident or
incapacitation, for three months or a period aggregating more than
three months in any 12 month period, or summarily following material
breach or in case of serious misconduct.
P A G E 2 3
For personal use only P A G E 2 4
SHARE-BASED COMPENSATION
I ssue of shares
No shares or options were issued as part of compensation for the year ended 30 June 2018.
For the FY17 year the following occurred:
•
•
•
Options were issued to Kenneth Lai and Paul Burton in FY17 as their director
remuneration.
Kenneth and Paul had been each offered 750,000 options, vesting 12 months and 24
months equally after appointment date. Each option has an exercise price of $0.25. The
last day for exercising is 30 June 2019
The options issued to Kenneth and Paul were subject to shareholder approval, which was
ratified at the Group’s 2016 Annual General Meeting (AGM).
Fair value
per option
at grant
date
Grant
number
Opening
Balance
Options
Opening
Balance
Vested
Balance
Vested during
the yr
Options
lapsed/
cancelled
during yr
Value ex
during
the yr
Expiry date
First ex
date
Last ex date
2018
Grant date
Director
Executive Directors
Peter Cook
12 Nov 15
5,000,000
$0.20
5,000,000
5,000,000
30 Jun 19
12 Nov 15
30 Jun 19
Other Key Management
Personnel:
Alan Munday
12 Nov 15
250,000
$0.20
250,000
250,000
30 Jun 19
1 Jul 16
30 Jun 19
Alan Munday
12 Nov 15
250,000
$0.20
250,000
250,000
30 Jun 19
1 Jul 17
30 Jun 19
Alan Munday
12 Nov 15
250,000
$0.20
250,000
30 Jun 19
1 Jul 18
30 Jun 19
Steven Stamboultgis
12 Nov 15
200,000
$0.20
200,000
200,000
30 Jun 19
1 Jul 16
30 Jun 19
Steven Stamboultgis
12 Nov 15
200,000
$0.20
200,000
200,000
30 Jun 19
1 Jul 17
30 Jun 19
Steven Stamboultgis
12 Nov 15
200,000
$0.20
200,000
30 Jun 19
1 Jul 18
30 Jun 19
Non-Executive
Directors
Peter Pawlowitsch
12 Nov 15
1,000,000
$0.20
1,000,000
1,000,000
30 Jun 19
12 Nov 15
30 Jun 19
Brandon Munro
12 Nov 15
1,000,000
$0.20
1,000,000
1,000,000
30 Jun 19
12 Nov 15
30 Jun 19
Kenneth Lai
31 May 16
375,000
$0.25
375,000
375,000
30 Jun 19
31 May 17
30 Jun 19
Kenneth Lai
31 May 16
375,000
$0.25
375,000
375,000
30 Jun 19
31 May 18
30 Jun 19
Paul Burton
12 Nov 15
5,000,000
$0.20
5,000,000
5,000,000
30 Jun 19
12 Nov 15
30 Jun 19
Paul Burton
31 May 16
375,000
$0.25
375,000
375,000
30 Jun 19
31 May 17
30 Jun 19
Paul Burton
31 May 16
375,000
$0.25
375,000
375,000
30 Jun 19
31 May 18
30 Jun 19
Steven Zhou
-
-
-
-
-
-
-
-
-
Total
14,850,000
14,850,000
13,200,000
1,200,000
ANNUAL REPORT – 2017/18For personal use only A N N U A L R E P O R T – 2 0 1 7 / 1 8
Fair value
per option
at grant
date
Grant
number
Opening
Balance
Options
Opening
Balance
Vested
Balance
Vested during
the yr
Options
lapsed/
cancelled
during yr
Value ex
during
the yr
Expiry date
First ex
date
Last ex date
2017
Grant date
Director
Executive Directors
Peter Cook1
12 Nov 15
5,000,000
$0.20
5,000,000
5,000,000
-
-
30 Jun 19
12 Nov 15
30 Jun 19
30 Jun 19
1 Jul 16
30 Jun 19
30 Jun 19
1 Jul 17
30 Jun 19
30 Jun 19
1 Jul 18
30 Jun 19
30 Jun 19
1 Jul 16
30 Jun 19
30 Jun 19
1 Jul 17
30 Jun 19
30 Jun 19
1 Jul 18
30 Jun 19
30 Jun 19
27 Jan 17
30 Jun 19
30 Jun 19
27 Jan 18
30 Jun 19
30 Jun 19
27 Jan 19
30 Jun 19
30 Jun 19
12 Nov 15
30 Jun 19
30 Jun 19
12 Nov 15
30 Jun 19
30 Jun 19
31 May 17
30 Jun 19
30 Jun 19
31 May 18
30 Jun 19
30 Jun 19
12 Nov 16
30 Jun 19
30 Jun 19
31 May 17
30 Jun 19
30 Jun 19
31 May 18
30 Jun 19
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Other Key Management
Personnel:
Alan Munday
12 Nov 15
250,000
$0.20
250,000
Alan Munday
12 Nov 15
250,000
$0.20
250,000
Alan Munday
12 Nov 15
250,000
$0.20
250,000
Steven Stamboultgis
12 Nov 15
200,000
$0.20
200,000
Steven Stamboultgis
12 Nov 15
200,000
$0.20
200,000
Steven Stamboultgis
12 Nov 15
200,000
$0.20
200,000
Paolo Montessori
3 Feb 16
1,750,000
$0.20
1,750,000
Paolo Montessori
3 Feb 16
1,750,000
$0.20
1,750,000
Paolo Montessori
3 Feb 16
1,750,000
$0.20
1,750,000
Non-Executive
Directors
-
-
-
-
-
-
-
Peter Pawlowitsch
12 Nov 15
1,000,000
$0.20
1,000,000
1,000,000
Brandon Munro
12 Nov 15
1,000,000
$0.20
1,000,000
1,000,000
Kenneth Lai2
31 May 16
375,000
$0.25
375,000
Kenneth Lai2
31 May 16
375,000
$0.25
375,000
-
-
Paul Burton
12 Nov 15
5,000,000
$0.20
5,000,000
5,000,000
-
-
-
-
-
-
-
250,000
-
-
200,000
-
-
750,000
1,000,000
1,750,000
1,750,000
-
-
-
-
375,000
-
-
Paul Burton3
31 May 16
375,000
$0.25
375,000
375,000
Paul Burton3
31 May 16
375,000
$0.25
375,000
-
Total
20,100,000
20,100,000
12,000,000
2,325,000
4,500,000
1Peter Cook’s 5,000,000 options were escrowed for 24 months from grant date. They were released from escrow on 18 January 2018
2Kenneth Lai’s 750,000 Options were subject to shareholder approval and occurred at the FY16 Annual General Meeting.
3Paul Burton’s 750,000 Options were subject to shareholder approval and occurred at the FY16 Annual General Meeting.
P A G E 2 5
For personal use only P A G E 2 6
Options granted carry no dividend or voting rights.
No options were granted to directors or key management personnel during the year ended 30
June 2018.
Values of options over ordinary shares exercised and lapsed for directors and other key
management personnel during the year ended 30 June 2018 are set out below:
2018
Name
Peter Pawlowitsch
Peter Cook
Brandon Munro
Kenneth Lai
Paul Burton
Steven Zhou
Alan Munday
Steven Stamboultgis
Total
2017
Name
Peter Pawlowitsch
Peter Cook
Brandon Munro
Kenneth Lai
Paul Burton
Steven Zhou
Alan Munday
Steven Stamboultgis
Total
Number
of Options
granted during
the yr
Value of
Options
granted during
the yr
Value of
Options ex
during the
yr
Value of
Options lapsed
during the yr
$
$
$
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Number
of Options
granted during
the yr
Value of
Options
granted during
the yr
Value of
Options ex
during the
yr
Value of
Options lapsed
during the yr
$
$
$
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
The factors that are considered to affect Total Shareholders Return ('TSR') are summarised below:
2018
$
2017
$
2016
$
Share price at financial year end
0.225
0.115
Total dividends declared (cents per share)
-
-
0.14
-
Basic earnings per share (cents per share)
(1.53)
(5.03)
(9.06)
ANNUAL REPORT – 2017/18For personal use only A N N U A L R E P O R T – 2 0 1 7 / 1 8
D I S C L O S U R E S R E L A T I N G T O T H E
D I R E C T O R S & S E N I O R M A N A G E M E N T
AD DITIONAL DISCLOS URES REL AT IN G T O K EY
MANAGEMENT PERSON NEL
The number of shares in the Group held during the financial year by each director and other
members of key management personnel of the Group, including their personally related parties,
is set out below:
Bal at the start
of the yr
Received as
part of rem Additions
Disposals/
other
Bal at the end
of the year
Ordinary shares
Peter Pawlowitsch
Peter Cook
Brandon Munro
Kenneth Lai
Paul Burton
Steven Zhou
Alan Munday
Steven Stamboultgis
Total
2,343,750
11,107,904
1,562,500
12,918,750
-
-
50,000
20,000
28,002,904
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,343,750
11,107,904
1,562,500
12,918,750
-
-
50,000
20,000
28,002,904
O p tion hold ing
The number of options over ordinary shares in the Group held during the financial year by each
director and other members of key management personnel of the Group, including their personally
related parties, is set out below:
Bal at the start
of the yr
Granted
Exercised
Expired/for-
feited/other
Bal at the end
of the yr
Options over ordinary shares
-
Peter Pawlowitsch
Peter Cook
Brandon Munro
Kenneth Lai
Paul Burton
Paul Burton
Steven Zhou
Alan Munday
Steven Stamboultgis
Total
1,000,000
5,000,000
1,000,000
750,000
750,000
5,000,000
-
750,000
600,000
14,850,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,000,000
5,000,000
1,000,000
750,000
750,000
5,000,000
-
750,000
600,000
14,850,000
Other transactions with key management personnel and their related parties.
P A G E 2 7
For personal use only P A G E 2 8
Ser vices
During the financial year, a payment of $11,000 (GST inc) was made to Gyeon Pty Ltd, a company
associated with Peter Pawlowitsch for the provision of services related to business acquisitions.
During the financial year, ePay Global Ltd invoiced the Group $523,000 (GST inc) for services
including, introducing new investors and promoting the Novatti business. Steven Zhou is a 16%
shareholder and director of ePay Global Ltd.
No other payments were made to Directors outside of their normal duties as Directors for Novatti
Group Ltd.
Lo ans f ro m Directors:
There are no loans that were entered into or, outstanding with the Directors of Novatti Group Ltd
as at 30 June 2018.
Cu rrent and no n- current liabilities to a D irect or:
There are no other current or non-current liabilities outstanding to Directors of the Group as at
30 June 2018.
This concludes the remuneration report, which has been audited.
Sh a res under optio n
Unissued ordinary shares of Novatti Group Limited under option at the date of this report are as
follow:
Grant date
Expiry date
Ex price
12 Nov 15
30 Jun 19
12 Nov 15
30 Jun 19
12 Nov 15
30 Jun 19
12 Nov 15
30 Jun 19
8 Jan 16
30 Jun 19
3 Feb 16
30 Jun 19
8 Feb 16
30 Jun 19
31 May 16
30 Jun 19
24 Jun 16
30 Jun 19
21 Jul 16
31 Dec 19
$0.20
$0.20
$0.20
$0.20
$0.20
$0.20
$0.20
$0.25
$0.20
$0.20
Opening
Number
under option
13,750,000
1,150,000
1,150,000
1,150,000
2,859,250
750,000
4,000,000
1,500,000
Expired/
forfeited/
other
Options
converted to
Shares
Closing
Number
under option
-
-
-
-
-
-
-
-
-
-
-
-
-
-
13,750,000
1,150,000
1,150,000
1,150,000
2,859,250
750,000
1,994,250
2,005,750
-
1,500,000
3,107,000
883,332
187,334
2,036,334
1,000,000
-
-
1,000,000
Total
30,416,250
883,332
2,181,584
27,351,334
No person entitled to exercise the options had or has any right by virtue of the option to participate
in any share issue of the Group or of any other body corporate.
Sh a res issued u pon the exercise of options
2,181,584 shares were issued by Novatti Group Limited during the year ended 30 June 2018 up to
the date of this report as a result of the exercise of options granted.
I nd emn ity and ins urance of officer s
The Group has indemnified the directors and executives of the Group for costs incurred, in their
capacity as a director or executive, for which they may be held personally liable, except where
there is a lack of good faith.
During the financial year, the Group paid a premium in respect of a contract to insure the directors
and executives of the Group against liability to the extent permitted by the Corporations Act 2001.
The contract of insurance prohibits disclosure of the nature of the liability and the amount of the
premium.
ANNUAL REPORT – 2017/18For personal use only A N N U A L R E P O R T – 2 0 1 7 / 1 8
IN DEMNITY AND INSURANCE O F A UD IT O R
The Group has not, during or since the end of the financial year, indemnified or agreed to indemnify
the auditor of the Group or any related entity against a liability incurred by the auditor.
During the financial year, the Group has not paid a premium in respect of a contract to ensure the
auditor of the Group or any related entity.
P ROCEEDINGS ON BEHAL F OF THE GRO UP
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to
bring proceedings on behalf of the Group, or to intervene in any proceedings to which the Group
is a party for the purpose of taking responsibility on behalf of the Group for all or part of those
proceedings.
NON-AUDIT SERVICES
Details of the amounts paid or payable to the auditor for non-audit services provided during the
financial year by the auditor are outlined in Note 17 to the financial statements.
The directors are satisfied that the provision of non-audit services during the financial year, by
the auditor (or by another person or firm on the auditor’s behalf), is compatible with the general
standard of independence for auditors imposed by the Corporations Act 2001 for the following
reasons:
•
•
All non-audit services have been reviewed and approved to ensure that they do not
impact the integrity and objectivity of the auditor; and
none of the services undermine the general principles relating to auditor independence
as set out in APES 110 Code of Ethics for Professional Accountants issued by the
Accounting Professional and Ethical Standards Board, including reviewing or auditing the
auditor’s own work, acting in a management or decision-making capacity for the Group,
acting as advocate for the Group or jointly sharing economic risks and rewards.
P A G E 2 9
For personal use only P A G E 3 0
A
copy of
the auditor’s
independent
declaration as required under section 307C of
the Corporations Act 2001 is set out on the
following page.
This report is made in accordance with a
resolution of directors, pursuant to section
298(2)(a) of the Corporations Act 2001.
On behalf of the directors
Peter Pawlowitsch
Chairman
30 August 2018
Melbourne
The Board of Directors of Novatti Group
Limited ('Novatti', 'Group' or the 'Company')
is responsible for corporate governance.
The Board has chosen
to prepare
the
Corporate Governance Statement ('CGS') in
accordance with the third edition of the ASX
Corporate Governance Council’s Principles
and Recommendations under which the CGS
may be available on the Company’s website.
Accordingly, a copy of the Company’s CGS
is available on the Novatti Group website at
www.novattigroup.com under the Corporate
Governance section.
ANNUAL REPORT – 2017/18For personal use only A N N U A L R E P O R T – 2 0 1 7 / 1 8
I N D E P E N D E N T A U D I T O R ’ S
D E C L A R A T I O N
AUDITOR’S INDEPENDENCE DECLARATION UNDER SECTION 307C OF THE
CORPORATIONS ACT 2001 TO THE DIRECTORS OF NOVATTI GROUP LIMITED
I declare that, to the best of my knowledge and belief during the year ended 30 June 2018
there have been:
— no contraventions of the auditor independence requirements as set out in the
Corporations Act 2001 in relation to the audit; and
— no contraventions of any applicable code of professional conduct in relation to the
audit.
William Buck Audit (Vic) Pty Ltd
ABN 59 116 151 136
J. C. Luckins
Director
Dated this 30th day of August, 2018
P A G E 3 1
For personal use only
P A G E 3 2
FINANCIAL REPO RT
Genera l inf or mation
The financial statements cover Novatti Group Limited as a Group consisting of Novatti Group
Limited and the entities it controlled at the end of, or during, the year. The financial statements
are presented in Australian dollars, which is Novatti Group Limited’s functional and presentation
currency.
Novatti Group Limited is a listed public company limited by shares, incorporated and domiciled in
Australia. Its registered office and principal place of business are:
Registered office and Principal place of business
1st floor
Legacy House
293 Swanston Street
Melbourne VIC 3000
A description of the nature of the Group’s operations and its principal activities are included in
the Directors’ report, which is not part of the financial statements.
The financial statements were authorised for issue, in accordance with a resolution of Directors.
ANNUAL REPORT – 2017/18For personal use only A N N U A L R E P O R T – 2 0 1 7 / 1 8
CONSOLIDATED STATEMENT O F PRO FI T O R LO S S
AND OTHER COMPREHENSIV E INCO ME
For the year ended 30 June 2018
Revenue
Other income
Total Revenue
Expenses
Note
4
4
Consolidated
2018
$
Consolidated
2017
$
5,421,432
942,252
6,363,684
2,191,206
1,350,711
3,541,917
Client hosting fees and other direct services
Employee benefits
(741,864)
(621,183)
(5,244,607)
(5,883,090)
Depreciation and amortisation expense
10 & 11
Occupancy
Finance charges
Foreign currency translation (losses)/gains
Travel expenses
Marketing expenses
Data management expenses
Share of net profit of joint ventures accounted for
using the equity method
Withholding tax not claimable
VAT not claimable
Accounting fees
Public company running costs
Other expenses
Loss before income tax expense
(290,663)
(191,736)
(22,433)
75,750
(370,048)
(291,230)
(102,399)
(54,946)
(143,149)
(15,869)
(14,493)
(289,696)
(124,526)
(75,355)
(224)
(8,511)
(8,576)
(53,022)
(128,738)
(574,343)
(488,585)
(149,439)
(35,607)
(120,754)
(287,741)
(435,287)
(2,069,034)
(4,717,729)
Income tax expense
5
-
-
Loss after income tax expense for the year attributable
to owners
(2,069,034)
(4,717,729)
Other comprehensive income:
Items that may be reclassified subsequently to profit
or loss
Foreign exchange translation differences
Total comprehensive income for the year attributable
to owners
471,892
(45,018)
(1,597,142)
(4,762,747)
Basic earnings per share (cents per share)
26
(1.53)
2018
Cents
2017
Cents
(5.03)
The above statement of Profit or Loss and Other Comprehensive Income (OCI) should be read in
conjunction with the accompanying notes.
P A G E 3 3
For personal use only
P A G E 3 4
CONSOLIDATED STATEMENT O F F IN AN C IA L
P OSITION
As at 30 June 2018
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Financial Assets – funds in trust
Other
Total current assets
Non-current assets
Investments accounted for using the equity method
Property, plant and equipment
Intangible assets
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Unearned revenue
Employee benefits
Total current liabilities
Non-current liabilities
Employee benefits
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Accumulated Losses
Total equity
Note
Consolidated
2018
$
Consolidated
2017
$
6
8
7
9
10
11
4,509,142
4,155,983
2,210,873
162,450
654,146
1,538,316
63,735
118,047
11,038,448
2,374,244
4,969
142,507
3,236,191
3,383,667
4,363
26,391
2,668,614
2,699,368
14,422,115
5,073,612
12
4,630,598
1,737,351
660,532
358,067
565,272
479,605
5,649,197
2,782,228
23,767
23,767
19,124
19,124
5,672,964
2,801,352
8,749,151
2,272,260
13
14
22,234,239
14,296,835
1,692,831
1,084,310
(15,177,919)
(13,108,885)
8,749,151
2,272,260
The above statement of financial position should be read in conjunction with the accompanying
notes.
ANNUAL REPORT – 2017/18For personal use only A N N U A L R E P O R T – 2 0 1 7 / 1 8
CONSOLIDATED STATEMENT O F CHA NG ES I N
EQUITY
For the year ended 30 June 2018
Consolidated
Issued
capital
$
Option
reserves
$
Foreign
currency
translation
reserve
$
Accumu-
lated
Losses
$
Total
Equity
$
Balance at 1 July 2017
14,296,835
1,128,479
(44,169)
(13,108,885)
2,272,260
Loss after income tax
expense for the year
Transactions with
owners in their capacity
as owners:
Shares issued during the
period
Vesting of share based
payments
Foreign exchange
translation differences
-
-
-
(2,069,034)
(2,069,034)
14,296,835
1,128,479
(44,169)
(15,177,919)
203,226
7,937,404
-
136,629
-
471,892
-
-
-
7,937,404
136,629
471,892
Balance at 30 June 2018
22,234,239
1,265,108
427,723
(15,177,919)
8,749,151
For the year ended 30 June 2017
Consolidated
Issued
capital
$
Option
reserves
$
Foreign
currency
translation
reserve
$
Accumu-
lated
Losses
$
Total
Equity
$
Balance at 1 July 2016
11,940,604
713,465
849
(8,391,156)
4,263,762
Loss after income tax
expense for the year
Transactions with
owners in their capacity
as owners:
Shares issued during the
period
Vesting of share based
payments
Foreign exchange
translation differences
-
-
-
(4,717,729)
(4,717,729)
11,940,604
713,465
849
(13,108,885)
(453,967)
2,356,231
-
415,014
-
(45,018)
-
-
-
2,356,231
415,014
(45,018)
Balance at 30 June 2017
14,296,835
1,128,479
(44,169)
(13,108,885)
2,272,260
The above statement of changes in equity should be read in conjunction with the accompanying
notes.
P A G E 3 5
-
-
-
-
-
-
-
-
For personal use only
P A G E 3 6
CONSOLIDATED STATEMENT O F CA S H FL OW S
As at 30 June 2018
Cash flows from operating activities
Receipts from customers (inclusive of GST)
Payments to suppliers and employees (inclusive of
GST)
Interest received
Receipt of Research and Development rebate
Interest and other finance costs paid
Income taxes paid
Note
Consolidated
2018
Consolidated
2017
33,894,283
5,926,927
(37,266,137)
(11,266,308)
17,913
-
(22,433)
-
29,895
1,320,099
(15,872)
-
Net cash used in operating activities
25
(3,376,374)
(4,005,254)
Cash flows from investing activities
Payment for acquisition of Vasco Pay Pty Ltd
Payment for acquisition of basis 2
Joint Venture High Impact Corp. – Loan
Proceeds from sale of plant and equipment
Receipts of adjustments from basis2 purchase in FY’17
Payment for Intangible Assets
Payments for plant and equipment
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of shares
Share issue transaction costs
Net cash provided from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the
financial year
Effects of exchange rate changes on cash and cash
equivalents
(150,000)
-
-
(2,354,879)
(11,257)
1,502
242,935
(208,840)
(139,467)
(265,127)
(13,233)
2,100
-
-
(10,289)
(2,376,301)
7,542,060
(121,312)
7,420,748
2,327,935
(3,390)
2,324,545
3,779,246
(4,057,010)
654,146
4,725,649
75,750
(14,493)
Cash and cash equivalents at the end of the financial
year
6
4,509,142
654,146
The above statement of financial position should be read in conjunction with the accompanying
notes.
ANNUAL REPORT – 2017/18For personal use only A N N U A L R E P O R T – 2 0 1 7 / 1 8
NOTES TO THE FINANCIA L S TA TEMENT S
For the year ended 30 June 2018
NOTE 1. SIGNIFICANT ACCOU NTI NG PO LI CIE S
Sta tement of Co mpliance
The consolidated financial statements are general purpose financial statements which have been
prepared in accordance with Australian Accounting Standards (AASBs) adopted by the Australian
Accounting Standards Board (AASB) and the Corporations Act 2001.
The consolidated financial statements comply with International Financial Reporting Standards
(IFRS) adopted by the International Accounting Standards Board (IASB). For the purposes of
preparing the consolidated financial statements, the Company is a for-profit entity.
The principal accounting policies adopted in the preparation of the financial statements are
set out below. These policies have been consistently applied to all the years presented, unless
otherwise stated.
N ew, revis ed or amending Acc ount ing St and ard s and
Interp retations ad op ted
The Group has adopted all of the new, revised or amending Accounting Standards and
Interpretations issued by the Australian Accounting Standards Board ('AASB') that are mandatory
for the current reporting period.
The adoption of these Accounting Standards and Interpretations did not have any significant
impact on the financial performance or position of the Group.
B asi s of P rep aratio n
The financial statements have been prepared on an accruals basis and are based on the historical
cost convention. Unless otherwise stated the carrying amounts of financial assets and liabilities
reflect their fair value.
Cr itica l accounting estimates
The preparation of the financial statements requires the use of certain critical accounting
estimates. It also requires management to exercise its judgment in the process of applying the
Group’s accounting policies. The areas involving a higher degree of judgment or complexity, or
areas where assumptions and estimates are significant to the financial statements are disclosed
in Note 2.
P ar ent entity information
In accordance with the Corporations Act 2001, these financial statements present the results of
the Group only. Supplementary information about the legal parent entity is disclosed in Note 20.
P rincip les of cons olidation
These are the financial statements of Novatti Group Limited (the 'Company' or as the 'legal
parent') and its controlled entities (the 'Group') as at 30 June 2018.
Control is achieved when the Group is exposed, or has rights, to variable returns from its
involvement with the investee and has the ability to affect those returns through its power over
the investee. Specifically, the Group controls an investee if and only if the Group has:
•
•
•
Power over the investee (i.e. existing rights that give it the current ability to direct the
relevant activities of 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 its returns.
P A G E 3 7
For personal use only P A G E 3 8
Intercompany transactions, balances and unrealised gains on transactions between entities in
the Group are eliminated. Unrealised losses are also eliminated unless the transaction provides
evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have
been changed where necessary to ensure consistency with the policies adopted by the Group.
O p erating segments
Operating segments are presented using the 'management approach', where the information
presented is on the same basis as the internal reports provided to the Chief Operating Decision
Makers ('CODM'). The CODM is responsible for the allocation of resources to operating segments
and assessing their performance.
F or eign curr ency tr anslation
The financial statements are presented in Australian dollars, which is Novatti Group Limited’s
functional and presentation currency.
Foreign currency transactions
Foreign currency transactions are translated into Australian dollars using the exchange rates
prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the
settlement of such transactions and from the translation at financial year-end exchange rates
of monetary assets and liabilities denominated in foreign currencies are recognised in profit or
loss.
Foreign operations
The assets and liabilities of foreign operations are translated into Australian dollars using the
exchange rates at the reporting date. The revenues and expenses of foreign operations are
translated into Australian dollars using the average exchange rates, which approximate the rates
at the dates of the transactions, for the period. All resulting foreign exchange differences are
recognised in other comprehensive income through the foreign currency reserve in equity.
The foreign currency reserve is recognised in profit or loss when the foreign operation or net
investment is disposed of.
ANNUAL REPORT – 2017/18For personal use only A N N U A L R E P O R T – 2 0 1 7 / 1 8
Re venue reco gnition
Revenue is recognised when it is probable that the economic benefit will flow to the Group and
the revenue can be reliably measured. Revenue is measured at the fair value of the consideration
received or receivable.
The Group derived the following revenue for the provisions of its services:
Platform Sales
Deployment and the support of specialist mobile and alternative payment technology. There are
two primary components, the recognition of revenue on the completion and delivery of agreed
milestones and the revenue recognised for ongoing maintenance and support.
Billing Solutions
Provision of technologically advanced billing and customer information system platforms for the
utilities industry.
Transaction Sales
Included within transaction sales are:
•
•
•
•
Fees for software as a service
Fees for the facilitation of top up vouchers
Settlement Services of financial transactions
Fees from 'Prepaid' reloadable cards
Interest
Interest revenue is recognised on a time proportional basis that takes into account the effective
yield on the financial asset.
Unearned revenue
Unearned revenue includes revenue from clients whereby services are billed in advance of their
anniversary dates and have outstanding services owing at the balance date of 30 June 2018.
Accrued revenue
Accrued revenue includes revenue from the sales of services unbilled as at 30 June 2018.
Other revenue
Other revenue is recognised when it is received or when the right to receive payment is
established.
Government grants
Government grants, including Research and Development revenues, are recognised where there is
reasonable assurance that the grant will be received and all attached conditions will be fulfilled.
I nco me tax
The income tax expense or benefit for the period is the tax payable on that period’s taxable income
based on the applicable income tax rates that have been enacted by reporting date, adjusted by
the changes in deferred tax assets and liabilities attributable to temporary differences, unused tax
losses and the adjustment recognised for prior periods, where applicable.
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates
expected to be applied when the assets are recovered or liabilities are settled, based on those tax
rates that are enacted or substantively enacted, except for:
•
•
When the deferred income tax asset or liability arises from the initial recognition of
goodwill or an asset or liability in a transaction that is not a business combination and
that, at the time of the transaction, affects neither the accounting nor taxable profits;
or
When the taxable temporary difference is associated with interests in subsidiaries,
associates or joint ventures, and the timing of the reversal can be controlled and it is
probable that the temporary difference will not reverse in the foreseeable future.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses
only if it is probable that future taxable amounts will be available to utilise those temporary
differences and losses.
P A G E 3 9
For personal use only P A G E 4 0
The carrying amount of recognised and unrecognised deferred tax assets are reviewed at each
reporting date. Deferred tax assets recognised are reduced to the extent that it is no longer
probable that future taxable profits will be available for the carrying amount to be recovered.
Previously unrecognised deferred tax assets are recognised to the extent that it is probable that
there are future taxable profits available to recover the asset.
Deferred tax assets and liabilities are offset only where there is a legally enforceable right to
offset current tax assets against current tax liabilities and deferred tax assets against deferred
tax liabilities; and they relate to the same taxable authority on either the same taxable entity or
different taxable entities that intend to settle simultaneously.
Novatti Group Limited (the 'head legal entity') and its wholly owned Australian subsidiaries have
formed an income tax consolidated group under the tax consolidation regime. The head entity
and each subsidiary in the tax-consolidated group continue to account for their own current and
deferred tax amounts. The tax-consolidated group has applied the 'separate taxpayer within group'
approach in determining the appropriate amount of taxes to allocate to members of the tax-
consolidated group.
In addition to its own current and deferred tax amounts, the head entity also recognises the current
tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax
credits assumed from each subsidiary in the tax consolidated group.
Assets or liabilities arising under tax funding agreements with the tax-consolidated entities are
recognised as amounts receivable from or payable to other entities in the tax-consolidated group.
The tax funding arrangement ensures that the intercompany charge equals the current tax liability
or benefit of each tax consolidated group member, resulting in neither a contribution by the head
entity to the subsidiaries nor a distribution by the subsidiaries to the head entity.
Ca sh and cas h equ ivalents
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.
Cash and cash equivalents include cash held in trust for remittance top up voucher services.
Receipts from top up voucher distributors are recognised as (cash) 'Receipts from Customers' whilst
remittances to merchants for top up vouchers are recognised as (cash) 'Payments to suppliers and
employees'.
T rade a nd oth er receivables
Trade receivables are initially recognised at fair value and subsequently measured at amortised
cost using the effective interest method, less any provision for impairment. Trade receivables are
generally due for settlement within 30 days.
Collectability of trade receivables is reviewed on an ongoing basis. Debts that are known to be
uncollectable are written off by reducing the carrying amount directly. A provision for impairment of
trade receivables is raised when there is objective evidence that the Group will not be able to collect
all amounts due according to the original terms of the receivables. Significant financial difficulties of
the debtor, probability that the debtor will enter bankruptcy or financial reorganisation and default
or delinquency in payments (more than 60 days overdue) are considered indicators that the trade
receivable may be impaired. The amount of the impairment allowance 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.
Other receivables are recognised at amortised cost, less any provision for impairment.
Bu s iness co mbina tio ns
The acquisition method of accounting is used to account for business combinations regardless of
whether equity instruments or other assets are acquired.
The consideration transferred is the sum of the acquisition date fair values of the assets transferred,
equity instruments issued or liabilities incurred by the acquirer to former owners of the acquiree
ANNUAL REPORT – 2017/18For personal use only A N N U A L R E P O R T – 2 0 1 7 / 1 8
and the amount of any non-controlling interest in the acquiree. For each business combination, the
non-controlling interest in the acquiree is measured at either fair value or at the proportionate share
of the acquiree’s identifiable net assets. All acquisition costs are expensed as incurred to profit or
loss.
On the acquisition of a business, the Group assesses the financial assets acquired and liabilities
assumed for appropriate classification and designation in accordance with the contractual terms,
economic conditions, the Group’s operating or accounting policies and other pertinent conditions in
existence at the acquisition date.
Contingent consideration to be transferred by the acquirer is recognised at the acquisition-date
fair value. Subsequent changes in the fair value of the contingent consideration classified as an
asset or liability is recognised in profit or loss. Contingent consideration classified as equity is not
remeasured and its subsequent settlement is accounted for within equity.
The difference between the acquisition date fair value of assets acquired, liabilities assumed and
any non- controlling interest in the acquiree and the fair value of the consideration transferred
and the fair value of any pre-existing investment in the acquiree is recognised as goodwill. If the
consideration transferred and the pre-existing fair value is less than the fair value of the identifiable
net assets acquired, being a bargain purchase to the acquirer, the difference is recognised as a gain
directly in profit or loss by the acquirer on the acquisition- date, but only after a reassessment of
the identification and measurement of the net assets acquired, the non-controlling interest in the
acquiree, if any, the consideration transferred and the acquirer’s previously held equity interest in
the acquirer.
Business combinations are initially accounted for on a provisional basis. The acquirer retrospectively
adjusts the provisional amounts recognised and also recognises additional assets or liabilities during
the measurement period, based on new information obtained about the facts and circumstances
that existed at the acquisition- date. The measurement period ends on either the earlier of (i)
12 months from the date of the acquisition or (ii) when the acquirer receives all the information
possible to determine fair value.
F in ancial Ins tr ument s
Recognition and initial measurement
Financial assets and financial liabilities are recognised when the Group becomes a party to the
contractual provisions to the instrument. For financial assets, this is equivalent to the date that
the Group commits itself to either the purchase or sale of the asset (i.e. trade date accounting is
adopted). Financial instruments are initially measured at fair value plus transaction costs.
Classification and subsequent measurement
Financial instruments are subsequently measured at fair value, amortised cost using the effective
interest method, or cost depending on their classification. Classification is determined based on the
purpose of the acquisition and subsequent reclassification to other categories is restricted. Financial
assets are derecognised when the rights to receive cash flows from the financial assets have expired
or have been transferred and the Group has transferred substantially all the risks and rewards of
ownership.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that
are not quoted in an active market and are subsequently measured at amortised cost. Gains or
losses are recognised in the statement of profit or loss and other comprehensive income through
the amortisation process and when the financial asset is derecognised.
Financial liabilities
Non-derivative financial liabilities other than financial guarantees are subsequently measured at
amortised cost. Gains or losses are recognised in profit or loss through the amortisation process and
when the financial liability is derecognised.
Impairment of financial assets
The Group assesses at the end of each reporting period whether there is any objective evidence
that a financial asset or group of financial assets is impaired. Objective evidence includes significant
P A G E 4 1
For personal use only P A G E 4 2
financial difficulty of the issuer or obligor; a breach of contract such as default or delinquency in
payments; the lender granting to a borrower concessions due to economic or legal reasons that
the lender would not otherwise do; it becomes probable that the borrower will enter bankruptcy
or other financial reorganisation; the disappearance of an active market for the financial asset; or
observable data indicating that there is a measurable decrease in estimated future cash flows.
The amount of the impairment allowance for financial assets carried at cost is the difference between
the asset’s carrying amount and the present value of estimated future cash flows, discounted at the
current market rate of return for similar financial assets.
P lan t and e qui pment
Plant and equipment are measured on the cost basis and therefore carried at cost less accumulated
depreciation and any accumulated impairment. In the event the carrying amount of plant and
equipment is greater than the estimated recoverable amount, the carrying amount is written down
immediately to the estimated recoverable amount and impairment losses are recognised either in
profit or loss. A formal assessment of recoverable amount is made when impairment indicators are
present.
The carrying amount of plant and equipment is reviewed annually by directors to ensure it is not
in excess of the recoverable amount from these assets. The recoverable amount is assessed on
the basis of the expected net cash flows that will be received from the asset’s employment and
subsequent disposal. The expected net cash flows have been discounted to their present values in
determining recoverable amounts.
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. All other repairs and
maintenance are recognised as expenses in profit or loss during the financial period in which they
are incurred.
The depreciable amount of all fixed assets, is depreciated on a straight-line basis over the asset’s
useful life to the Group commencing from the time the asset is held ready for use. Leasehold
improvements are depreciated over the shorter of either the unexpired period of the lease or the
estimated useful lives of the improvements.
The estimated useful lives for the current period are as follows:
Leasehold improvements
Plant and equipment
Fixtures and Fittings
2 years
2 years
10 years
The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate,
at each reporting date.
An item of plant and equipment is derecognised upon disposal or when there is no future economic
benefit to the Group. Gains and losses between the carrying amount and the disposal proceeds are
taken to the statement of profit or loss and other comprehensive income in the period in which they
arise.
I nt angible as s ets
Intangible assets with finite useful lives that are acquired separately are carried at cost less
accumulated amortisation and accumulated impairment losses. Amortisation is recognised on
a straight-line basis over their estimated useful lives. The estimated useful life and amortisation
method are reviewed at the end of each reporting period, with the effect of any changes in estimate
being accounted for on a prospective basis. Intangible assets with indefinite useful lives that are
acquired separately are carried at cost less accumulated impairment losses.
The estimated useful lives for Intangibles for the current period is:
Customer lists
Intellectual Property: Technology – Billing Software
10 years
10 years
ANNUAL REPORT – 2017/18For personal use only
A N N U A L R E P O R T – 2 0 1 7 / 1 8
Intangible assets acquired in a business combination
Intangible assets, including customer lists and intellectual property acquired in a business
combination and recognised separately from goodwill are initially recognised at their fair value at
the acquisition date (which is regarded as their cost).
Subsequent to initial recognition, intangible assets acquired in a business combination are reported
at cost less accumulated amortisation and accumulated impairment losses, on the same basis as
intangible assets that are acquired separately.
Derecognition of Intangible assets
An intangible asset is derecognised on disposal, or when no future economic benefits are expected
from use or disposal. Gains or losses arising from derecognition of an intangible asset, measured
as the difference between the net disposal proceeds and the carrying amount of the asset, are
recognised in profit or loss when the asset is derecognised.
Goodwill
Goodwill arising on an acquisition of a business is carried at cost as established at the date of
acquisition of the business less accumulated impairment losses, if any.
For the purposes of impairment testing, goodwill is allocated to each of the Group’s cash-generating
units (or groups of cash-generating units) that is expected to benefit from the synergies of the
combination.
A cash-generating unit to which goodwill has been allocated is tested for impairment annually,
or more frequently when there is an indication that the unit may be impaired. If the recoverable
amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated
first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets
of the unit pro rata based on the carrying amount of each asset in the unit. Any impairment loss for
goodwill is recognised directly in profit or loss. An impairment loss recognised for goodwill is not
reversed in subsequent periods.
On disposal of the relevant cash-generating unit, the attributable amount of goodwill is included in
the determination of the profit or loss on disposal.
Impairment of tangible and intangible assets other than goodwill
At the end of each reporting period, the Group reviews the carrying amounts of its tangible and
intangible assets to determine whether there is any indication that those assets have suffered an
impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in
order to determine the extent of the impairment loss (if any). When it is not possible to estimate
the recoverable amount of an individual asset, the Group estimates the recoverable amount of
the cash- generating unit to which the asset belongs. When a reasonable and consistent basis of
allocation can be identified, corporate assets are also allocated to individual cash-generating units,
or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable
and consistent allocation basis can be identified.
Intangible assets with indefinite useful lives and intangible assets not yet available for use are
tested for impairment at least annually, and whenever there is an indication that the asset may be
impaired.
Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing
value in use, the estimated future cash flows are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the time value of money and the risks
specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its
carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its
recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the
relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a
revaluation decrease.
P A G E 4 3
For personal use only P A G E 4 4
When an impairment loss subsequently reverses, the carrying amount of the asset (or a cash-
generating unit) is increased to the revised estimate of its recoverable amount, but so that the
increased carrying amount does not exceed the carrying amount that would have been determined
had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A
reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset
is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a
revaluation increase.
Lea ses
The determination of whether an arrangement is or contains a lease is based on the substance of the
arrangement and requires an assessment of whether the fulfilment of the arrangement is dependent
on the use of a specific asset or assets and the arrangement conveys a right to use the asset.
A distinction is made between finance leases, which effectively transfer from the lessor to the lessee
substantially all the risks and benefits incidental to the ownership of leased assets, and operating
leases, under which the lessor effectively retains substantially all such risks and benefits.
Finance leases are capitalised. A lease asset and liability are established at the fair value of the
leased assets, or if lower, the present value of minimum lease payments. Lease payments are
allocated between the principal component of the lease liability and the finance costs, so as to
achieve a constant rate of interest on the remaining balance of the liability.
Leased assets acquired under a finance lease are depreciated over the asset’s useful life or over the
shorter of the asset’s useful life and the lease term if there is no reasonable certainty that the Group
will obtain ownership at the end of the lease term.
Operating lease payments, net of any incentives received from the lessor, are charged to profit or
loss on a straight-line basis over the term of the lease.
T rad e and o ther pay ables
These amounts represent liabilities for goods and services provided to the Group prior to the end
of the financial year and which are unpaid. Due to their short-term nature, they are measured at
amortised cost and are not discounted. The amounts are unsecured and are usually paid within 30
days of recognition.
P ro visio ns
Provisions are recognised when the Group has a present (legal or constructive) obligation as a result
of a past event, it is probable the Group will be required to settle the obligation, and a reliable
estimate can be made of the amount of the obligation. The amount recognised as a provision is
the best estimate of the consideration required to settle the present obligation at the reporting
date, taking into account the risks and uncertainties surrounding the obligation. If the time value of
money is material, provisions are discounted using a current pre-tax rate specific to the liability. The
increase in the provision resulting from the passage of time is recognised as a finance cost.
Em ploy ee ben ef its
Short-term employee benefits
Liabilities for wages and salaries, including non-monetary benefits, annual leave and long service
leave expected to be wholly settled within 12 months of the reporting date are measured at the
amounts expected to be paid when the liabilities are settled.
Other long-term employee benefits
The liability for long service leave is not expected to be settled wholly within 12 months of the
reporting date and is measured as the present value of expected future payments to be made in
respect of services provided by employees up to the reporting date 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 date on corporate bonds with terms to maturity and currency that match, as closely as
possible, the estimated future cash outflows.
Defined contribution superannuation expense
Contributions to defined contribution superannuation plans are expensed in the period in which
they are incurred.
ANNUAL REPORT – 2017/18For personal use only A N N U A L R E P O R T – 2 0 1 7 / 1 8
Share-based payments
Equity-settled and cash-settled share-based compensation benefits are provided to employees.
Equity-settled transactions are awards of shares, or options over shares, which are provided to
employees in exchange for the rendering of services.
The cost of equity-settled transactions are measured at fair value on grant date. Fair value is
independently determined using the Black-Scholes option pricing model that takes into account
the exercise price, the term of the option, the impact of dilution, the share price at grant date
and expected price volatility of the underlying share, the expected dividend yield and the risk-
free interest rate for the term of the option, together with non- vesting conditions that do not
determine whether the Group receives the services that entitle the employees to receive payment.
No account is taken of any other vesting conditions.
Market conditions are taken into consideration in determining fair value. Therefore, any awards
subject to market conditions are considered to vest irrespective of whether or not that market
condition has been met, provided all other conditions are satisfied.
If equity-settled awards are modified, as a minimum an expense is recognised as if the modification
has not been made. An additional expense is recognised, over the remaining vesting period, for any
modification that increases the total fair value of the share-based compensation benefit as at the
date of modification.
If equity-settled awards are cancelled, it is treated as if it has vested on the date of cancellation,
and any remaining expense is recognised immediately. If a new replacement award is substituted
for the cancelled award, the cancelled and new award is treated as if they were a modification.
I ssued capital
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.
Dividends
Dividends are recognised when declared during the financial year and no longer at the discretion
of the Company.
Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to the owners of Novatti
Group Limited, 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 financial year.
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.
Go o ds a nd Services Ta x ('GST') and other similar t axes
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST
incurred is not recoverable from the tax authority. In this case it is recognised as part of the cost of
the 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 tax authority is included in other receivables
or other payables in the statement of financial position.
Cash flows are presented on a gross basis in the statement of cash flows. The GST components of
cash flows arising from investing or financing activities which are recoverable from, or payable to
the tax authority, are presented as operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or
payable to, the tax authority.
P A G E 4 5
For personal use only P A G E 4 6
N ew Acco unting St andards an d Int erpretat ions not yet
ma n da tory or ea rly ado pted
Australian Accounting Standards and Interpretations that have recently been issued or amended but
are not yet mandatory, have not been early adopted by the Group for the annual reporting period
ended 30 June 2018. The Group’s assessment of the impact of these new or amended Accounting
Standards and Interpretations, most relevant to the Group, are set out below:
AASB 9 Financial Instruments
This standard is applicable to annual reporting periods beginning on or after 1 January 2018. The
standard replaces all previous versions of AASB 9 and completes the project to replace IAS 39 Financial
Instruments: Recognition and Measurement. AASB 9 introduces new classification and measurement
models for financial assets. A financial asset shall be measured at amortised cost, if it is held within
a business model whose objective is to hold assets in order to collect contractual cash flows, which
arise on specified dates and solely principal and interest. All other financial instrument assets are to
be classified and measured at fair value through profit or loss unless the entity makes an irrevocable
election on initial recognition to present gains and losses on equity instruments (that are not held-
for-trading) in OCI. For financial liabilities, the standard requires the portion of the change in fair
value that relates to the entity’s own credit risk to be presented in OCI (unless it would create an
accounting mismatch). New simpler hedge accounting requirements are intended to more closely
align the accounting treatment with the risk management activities of the entity. New impairment
requirements will use an Expected Credit Loss ('ECL') model to recognise an allowance. Impairment
will be measured under a 12-month ECL method unless the credit risk on a financial instrument has
increased significantly since initial recognition in which case the lifetime ECL method is adopted.
The standard introduces additional new disclosures. The Group has undertaken an assessment of its
financial assets and liabilities and have concluded that there is no material impact on the transactions
and balances recognised in the financial statements when this standard was adopted for the year
ended 30 June 2018.
The Group has adopted this standard from 1 July 2018.
AASB 15 Revenue from Contracts with Customers
This standard is applicable to annual reporting periods beginning on or after 1 January 2018. The
standard provides a single standard for revenue recognition. The core principle of the standard is that
an entity will recognise revenue to depict the transfer of promised goods or services to customers
in an amount that reflects the consideration to which the entity expects to be entitled in exchange
for those goods or services. The standard will require: contracts (either written, verbal or implied)
to be identified, together with the separate performance obligations within the contract; determine
the transaction price, adjusted for the time value of money excluding credit risk; allocation of the
transaction price to the separate performance obligations on a basis of relative stand-alone selling
price of each distinct good or service, or estimation approach if no distinct observable prices exist; and
recognition of revenue when each performance obligation is satisfied. Credit risk will be presented
separately as an expense rather than adjusted to revenue. For goods, the performance obligation
would be satisfied when the customer obtains control of the goods. For services, the performance
obligation is satisfied when the service has been provided, typically for promises to transfer services
to customers. For performance obligations satisfied over time, an entity would select an appropriate
measure of progress to determine how much revenue should be recognised as the performance
obligation is satisfied. Contracts with customers will be presented in an entity’s statement of financial
position as a contract liability, a contract asset, or a receivable, depending on the relationship
between the entity’s performance and the customer’s payment. Sufficient quantitative and qualitative
disclosure is required to enable users to understand the contracts with customers; the significant
judgments made in applying the guidance to those contracts; and any assets recognised from the
costs to obtain or fulfil a contract with a customer.
The Group has undertaken a full assessment of the impact of AASB 15. Based on the Group’s
assessment, this standard is not expected to have a material impact on the transactions and balances
in the financial statements when it is adopted for the year ended 30 June 2019. The Group will
adopt the 'Modified Retrospective' method of transition under AASB 15 Revenue from Contracts with
Customers. The Group will consider the application of AASB 15 with respect to new contracts entered
into.
AASB 16 Leases
This standard is applicable to annual reporting periods beginning on or after 1 January 2019. Earlier
application is permitted for entities that apply AASB 16 Leases at or before the date of initial
application of this Standard. AASB 16 introduces a single lessee accounting model and requires a
lessee to recognise assets and liabilities for all leases with a term of more than 12 months, unless the
ANNUAL REPORT – 2017/18For personal use only A N N U A L R E P O R T – 2 0 1 7 / 1 8
underlying asset is of low value. A lessee is required to recognise a right-of-use asset representing
its right to use the underlying leased asset and a lease liability representing its obligations to make
lease payments. A lessee measures right-of-use assets similarly to other non-financial assets (such
as property, plant and equipment) and lease liabilities similarly to other financial liabilities. As a
consequence, a lessee recognises depreciation of the right- of-use asset and interest on the lease
liability, and also classifies cash repayments of the lease liability into a principal portion and an
interest portion and presents them in the statement of cash flows applying AASB 107 Statement
of Cash Flows. Assets and liabilities arising from a lease are initially measured on a present value
basis. The measurement includes non-cancellable lease payments (including inflation-linked
payments), and also includes payments to be made in optional periods if the lessee is reasonably
certain to exercise an option to extend the lease, or not to exercise an option to terminate the
lease.
The previous accounting model for leases required lessees and lessors to classify their leases as
either finances leases or operating leases and account for those two types of leases differently.
That model was criticised for failing to meet the needs of users of financial statements because
it did not always provide a faithful representation of leasing transactions. In particular, it did not
require lessees to recognise assets and liabilities arising from operating leases. Accordingly, the
International Accounting Standards Board (IASB) and the US national standard-setter, the Financial
Accounting Standards Board (FASB), initiated a joint project to develop a new approach to lease
accounting that requires a lessee to recognise assets and liabilities for the rights and obligations
created by leases. This approach will result in a more faithful representation of a lessee’s assets
and liabilities and, together with enhanced disclosures, will provide greater transparency of a
lessee’s financial leverage and capital employed.
The consolidated entity will adopt AASB16 from 1 July 2019. The Group is also currently
determining the assets and liabilities that will need to be recognised under the standard. Whilst
the Group has yet to prepare a detailed analysis of its impact, it does note that the financial
statements will be reflective of a 'right of use' asset for capitalisation in the statement of financial
position. A liability corresponding to the capitalised lease will also be recognised. In the earlier
periods of the lease, the expenses associated with the lease under AASB16 will be higher when
compared to the lease expenses under AASB117. However EBITDA (Earnings before interested, tax
and depreciation) results will be improved as the operating expense is replaced by depreciation
in the profit and loss under AASB16.
NOTE 2. CRITICAL ACCOUNTING JUD GMEN TS,
ES TIMATES AND ASSUMPTIONS
The preparation of the financial statements requires management to make judgments, estimates
and assumptions that affect the reported amounts in the financial statements. Management
continually evaluates its judgments and estimates in relation to assets, liabilities, contingent
liabilities, revenue and expenses. Management bases its judgments, estimates and assumptions
on historical experience and on other various factors, including expectations of future events;
management believes to be reasonable under the circumstances. The resulting accounting
judgments and estimates will seldom equal the related actual results. The judgments, estimates
and assumptions that have a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities (refer to the respective notes) within the next financial year are
discussed below.
Sh a re- based p ayment transact ions
The Group measures the cost of equity-settled transactions with employees by reference to the
fair value The Group measures the cost of equity-settled transactions with employees by reference
to the fair value of the equity instruments at the date at which they are granted. The fair value
is determined by using the Black- Scholes model taking into account the terms and conditions
upon which the instruments were granted. The accounting estimates and assumptions relating
to equity-settled share-based payments would have no impact on the carrying amounts of assets
and liabilities within the next annual reporting period but may impact profit or loss and equity.
The value of the Performance Shares were based on their fair value at the time of grant using a share
price of $0.16, with each of the four milestones discounted for the probability of achievement.
P A G E 4 7
For personal use only P A G E 4 8
This value is recognised within the accounts of the legal parent and upon consolidation, is
eliminated.
P ro vis ion f or imp airment of rec eivables
The provision for impairment of receivables assessment requires a degree of estimation and
judgment. The level of provision is assessed by taking into account the recent sales experience,
the ageing of receivables, historical collection rates and specific knowledge of the individual
debtor’s financial position.
NOTE 3. OPERATING SEGMEN TS
I dentif icatio n of reportable oper ating seg ment s
The Group is organised into four operating business segments: (A) Novatti Platform, incorporating
enterprise sales and Maintenance & Support via the Novatti Platform, (B) Advanced Billing
Solutions, incorporating Basis2 operating under Novatti Incorporated (C) Transaction Services
incorporating Flexewallet Pty Ltd, Flexepayments (South Africa) Pty Ltd, Flexe Payments Ltd and
Vasco Pay Pty Ltd (D) Novatti Group Limited is the legal parent that holds the financial assets
for the Group. These operating business segments are based on the internal reports that are
reviewed and used by the Board of Directors (who are identified as the Chief Operating Decision
Makers ('CODM')) in assessing performance and in determining the allocation of resources.
The CODM reviews EBITDA (earnings before interest, tax, depreciation and amortisation). The
accounting policies adopted for internal reporting to the CODM are consistent with those adopted
in the financial statements. The information reported to the CODM is on at least a monthly basis.
T yp es of p ro du cts and services
The principal products and services of each of these operating segments are as follows:
Novatti Platform
Develops, deploys and supports specialised mobile and alternate payment technology, primarily
through the deployment of the Novatti Platform.
Advanced Billing Solutions
Basis2 trading under Novatti Inc. provides a technologically advanced billing and CIS solution to
service providers in the utilities industry.
Transaction Services
TransferBridge: Provides a comprehensive global network that interconnects emerging payment
platforms, remittance operators, financial institutions, retailers, utilities and all types of
telecommunication operators.
Flexewallet and Flexe Payments: Offer customers an alternative payment method in the form of a
prepaid cash voucher. Vouchers can be used for a multitude of payment methods such as prepaid
account top-ups and for secure online payment of goods and services. Vouchers are available in a
variety of currencies and locations globally.
Vasco Pay Pty Ltd: Provides a payment system centred around reloadable prepaid cards that meets
the needs and wants of international and local university and college students.
Intersegment transactions
Intersegment transactions were made at market rates. Intersegment transactions are eliminated
on consolidation.
Intersegment receivables, payables and loans
Intersegment loans are initially recognised at the consideration received. Intersegment loans are
eliminated on consolidation.
ANNUAL REPORT – 2017/18For personal use only A N N U A L R E P O R T – 2 0 1 7 / 1 8
O p erating segment information
Novatti
Platform
$
Billing
Solutions
$
Transaction
Services
$
Novatti
Group
Limited
$
Total
$
Consolidated –
30 June 2018
Revenue
Sales to external
customers
Intersegment sales
2,062,654
1,580,475
1,778,303
-
-
5,421,432
5,421,432
Total sales revenue
2,062,654
1,580,475
1,778,303
Other revenue
Total revenue
-
-
-
923,660
923,660
2,062,654
1,580,475
1,778,303
923,660
6,345,092
EBITDA
(1,637,355)
216,581
102,279
(394,417)
(1,712,912)
Depreciation and
amortisation
Interest revenue
Finance costs
Other costs
Loss before income tax
expense
Income tax expense
Loss after income tax
expense
(290,663)
18,592
(22,433)
(61,618)
(2,069,034)
-
(2,069,034)
Segment Assets
2,305,470
2,676,754
4,819,106
4,620,785
14,422,115
Segment Liabilities
1,205,237
435,381
3,655,012
377,334
5,672,964
Employee Benefits
3,785,823
30,930
1,025,625
402,231
5,224,607
Additions to non-
current assets (other
than financial assets,
deferred tax, post-
employment benefits
assets, rights under
insurance contracts)
-
-
-
-
-
Revenue from Australian customers is $639,065 (FY17: $735,303).
Revenue from customers in other countries is $4,782,367 (FY17: $1,452,743).
Revenue from a single customer in a country other than Australia is $675,914 (FY17: $614,675).
P A G E 4 9
For personal use only
P A G E 5 0
Consolidated –
30 June 2017
Revenue
Sales to external
customers
Novatti
Platform
$
Billing
Solutions
$
Transaction
Services
$
Novatti
Group
Limited
$
1,779,151
192,197
219,858
Intersegment sales
-
-
-
Total sales revenue
1,779,151
192,197
219,858
Other revenue
Total revenue
1,320,099
-
-
3,099,250
192,197
219,858
Total
$
2,191,206
-
2,191,206
1,320,099
3,511,305
-
-
-
-
-
EBITDA
(2,339,528)
(12,345)
(1,225,198)
(915,409)
(4,492,480)
Depreciation and
amortisation
Interest revenue
Finance costs
Other costs
Loss before income tax
expense
Income tax expense
Loss after income tax
expense
(54,946)
30,612
(15,869)
(185,046)
(4,717,729)
-
(4,717,729)
Segment Assets
1,106,774
1,952,078
793,548
1,221,212
5,073,612
Segment Liabilities
1,365,923
424,973
762,056
248,400
2,801,352
Employee Benefits
4,330,968
16,646
1,089,226
446,250
5,883,090
Additions to non-
current assets (other
than financial assets,
deferred tax, post-
employment benefits
assets, rights under
insurance contracts)
-
-
-
-
-
ANNUAL REPORT – 2017/18For personal use only
A N N U A L R E P O R T – 2 0 1 7 / 1 8
NOTE 4. REVENUE
Sales revenue:
Novatti Platform
Billing Solutions
Payment Processing Services
Other revenue:
Interest
Research and Development
Consolidated
2018
$
Consolidated
2017
$
2,062,654
1,584,475
1,778,303
5,421,432
1,779,151
192,197
219,858
2,191,206
18,592
923,660
942,252
30,612
1,320,099
1,350,711
Revenue
6,363,684
3,541,917
P A G E 5 1
For personal use only P A G E 5 2
NOTE 5. INCOME TAX EXPENSE
Reconciliation of Income tax expense to prima facie tax
payable
Loss before Income Tax
Consolidated
2018
$
Consolidated
2017
$
(2,069,034)
(4,717,729)
Prima facie income tax on loss at the domestic tax rate of Novatti
Group Ltd of 27.5%
(568,984)
(1,297,375)
Adjustment for tax rate differences in foreign jurisdictions
Adjustment for tax exempt research and development tax
incentive received
9,899
45,003
(254,007)
(363,027)
Adjustments from prior periods year income tax losses utilised
in current period
Adjustment for changes in tax rates
Adjustment for non-deductible expenses:
- Share based payments expense
- Adjustment for R&D accounting expense included within
R&D incentive
- Other non-deductible expenses
Current year tax losses not brought to account
Current year temporary differences not brought to account
Adjustments in respect of current income tax of previous year
Adjustments for changes in tax rates
Prior year income tax losses utilised in the current year
Income tax expense
Deferred tax assets not brought to account:
Unused tax losses for which no deferred tax asset has been
recognised
Deductible temporary differences for which no deferred tax
asset has been recognised
(54,641)
(6,165)
4,358
71,148
583,923
2,889
(211,580)
1,121,245
(382,190)
(529,283)
(4,358)
6,166
-
(12,502)
(79,378)
-
112,876
880,066
1,755
(712,582)
1,333,060
167,708
(788,186)
-
-
-
9,251,114
7,135,200
119,626
1,521,340
9,370,740
8,656,540
Potential tax benefit @ 27.5% (2017: 27.5%)
2,576,954
2,380,549
ANNUAL REPORT – 2017/18For personal use only A N N U A L R E P O R T – 2 0 1 7 / 1 8
NOTE 6. CURRENT ASSETS – CASH AN D CAS H
EQUIVALENTS
Cash on hand
Cash at bank
Consolidated
2018
$
Consolidated
2017
$
6,914
4,502,228
4,509,142
17,897
636,249
654,146
Reconciliation to cash and cash equivalents at the end of the financial year
The above figures are reconciled to cash and cash equivalents at the end of the financial year as
shown in the statement of cash flows as follows:
Cash and Cash Equivalents
Cash at bank
Consolidated
2018
$
Consolidated
2017
$
4,509,142
4,509,142
654,146
654,146
NOTE 7. NET POSITION OF FUND S I N TRUST
FUNDS HELD FOR S ETTL EMENT AND REMIT TA NCE
Reconciliation of the amounts displayed in the table below represent the net balance of client
monies held in trust that is payable/receivable in the Statement of Financial Position in relation
to the transaction services business of Novatti Group Limited. These funds are distributed under
instructions within 24 hours.
Settlement Funds Payable*
Remittance Funds Payable*
Cash and cash equivalents held in trust
*Refer to Note 12 Trade and Other Payables.
Consolidated
2018
$
Consolidated
2017
$
1,498,840
712,033
2,210,873
63,735
-
63,735
NOTE 8. CURRENT ASSETS – TRADE A ND O THER
RECEIVABLES
Trade receivables
Consolidated
2018
$
Consolidated
2017
$
2,787,629
947,184
I mpa irment of receivables
The Group’s trade and other receivables have been reviewed for indicators of impairment. Trade
receivables were not found to be impaired and a provision has not been recorded. There are no
other impaired trade receivables in any of the Group’s subsidiaries.
The Group did not consider a provision required in relation to credit risk based on the aggregate
balances after reviewing the credit terms of customers based on recent collection practices.
P A G E 5 3
For personal use only P A G E 5 4
The ageing of the past due but not impaired receivables are as follows:
Current
0 to 3 months overdue
3 to 6 months overdue
Over 6 months overdue
Other receivables
Accrued Revenue
Consolidated
2018
$
Consolidated
2017
$
891,056
70,022
441,281
1,385,270
2,787,629
438,384
49,067
459,733
-
947,184
1,368,354
591,132
Total trade and other receivables
4,155,983
1,538,316
Management are of the opinion that these receivables are reflective of fair value and should not
be impaired.
NOTE 9. OTHER CURRENT ASS ETS
Prepayments
Security Term Deposit
Other
Consolidated
2018
$
Consolidated
2017
$
73,715
33,233
55,502
63,670
32,554
21,823
162,450
118,047
NOTE 10. NON-CURREN T ASSETS – P LA NT AN D
EQUIPMENT
Plant and equipment – at cost
Less: accumulated depreciation
Leasehold fixtures and fittings – at cost
Less: accumulated depreciation
Fixtures and fittings – at cost
Less: accumulated depreciation
Consolidated
2018
$
Consolidated
2017
$
568,824
(432,253)
136,571
436,513
(420,297)
16,216
14,922
(14,922)
-
26,083
(20,147)
5,936
14,922
(11,478)
3,444
26,083
(19,352)
6,731
Total plant and equipment
142,507
26,391
ANNUAL REPORT – 2017/18For personal use only A N N U A L R E P O R T – 2 0 1 7 / 1 8
Re conciliations
Reconciliations of the written down values at the beginning and end of the current and previous
financial year are set out below:
Plant &
Equipment
at cost
$
Fixtures &
Fittings at
cost
$
Leasehold
Fixtures &
Fittings at
cost
$
Total
$
2018
Gross carrying amount
Balance 1 July 2017
436,513
26,083
14,922
477,518
Additions
Disposals
139,467
(7,157)
-
-
-
-
139,467
(7,157)
Balance 30 June 2018
568,824
26,083
14,922
609,828
Accumulated depreciation and
impairment
Balance 1 July 2017
(420,297)
(19,352)
(11,478)
(451,127)
Disposals
Depreciation expense
Balance 30 June 2018
Net book value
As at 1 July 2017
Balance 30 June 2018
2017
Gross carrying amount
6,708
-
-
6,708
(18,664)
(795)
(3,444)
(22,903)
(432,253)
(20,147)
(14,922)
(467,322)
16,216
136,571
6,731
5,936
3,444
26,391
-
142,507
Plant &
Equipment
at cost
$
Fixtures &
Fittings at
cost
$
Leasehold
Fixtures &
Fittings at
cost
$
Total
$
Balance 1 July 2016
431,440
26,083
14,922
472,445
Additions
Disposals
10,289
(5,216)
-
-
-
-
10,289
(5,216)
Balance 30 June 2017
436,513
26,083
14,922
477,518
Accumulated depreciation and
impairment
Balance 1 July 2016
(402,349)
(18,557)
(5,182)
(426,088)
Disposals
Depreciation expense
Balance 30 June 2017
Net book value
As at 1 July 2016
Balance 30 June 2017
2,892
-
-
2,892
(20,840)
(795)
(6,296)
(27,931)
(420,297)
(19,352)
(11,478)
(451,127)
29,091
16,216
7,526
6,731
9,740
3,444
46,357
26,391
P A G E 5 5
For personal use only
P A G E 5 6
NOTE 11. INTANGIBLES
Intangible assets – at cost
Less: Accumulated amortisation
Consolidated
2018
$
Consolidated
2017
$
3,471,652
(235,461)
3,236,191
4,482,292
(1,813,678)
2,668,614
Goodwill
$
Intellectual
Property
$
Customer
Lists
$
Licenses
$
Total
$
2018
Gross carrying amount
Balance 1 July 2017
2,000
847,000
1,846,182
-
2,695,182
Additions
Disposals
567,630
-
-
-
-
-
208,840
776,470
-
-
Balance 30 June 2018
569,630
847,000
1846,182
208,840
3,471,652
Accumulated depreciation
and impairment
Balance 1 July 2017
(20)
(8,349)
-
20
-
-
(84,654)
(93,003)
-
(183,126)
(201,325)
58,867
(20,568)
-
(267,760)
(294,328)
58,867
-
-
Disposals
Depreciation expense
Balance 30 June 2018
Foreign Exchange*
Net book value
As at 1 July 2017
Balance 30 June 2018
2017
Gross carrying amount
Balance 1 July 2016
Additions
Disposals
Balance 30 June 2017
Accumulated depreciation and
impairment
Balance 1 July 2016
Disposals
Depreciation expense
Balance 30 June 2017
Foreign Exchange*
Net book value
As at 1 July 2016
Balance 30 June 2017
1,980
569,630
838,651
753,997
1,827,983
1,703,724
-
2,668,614
208,840
3,236,191
Goodwill
$
Intellectual
Property
$
Customer
Lists
$
Total
$
-
2,000
-
2,000
-
(20)
(20)
-
-
-
847,000
1,846,182
2,695,182
-
-
-
847,000
1846,182
2,695,182
-
-
(8,349)
(8,349)
-
-
(18,199)
(18,199)
58,867
-
-
(20,568)
(20,568)
58,867
-
1,980
-
-
-
838,651
1,827,983
2,668,614
*In accordance with AASB 121 the foreign exchange variance between the cost of the Intangible Asset and accumulated
amortisation for the period is of AUD 58,867. This is a result of the conversion of the carrying amount of Customer Lists from
USD 1,261,533 to AUD 1,703,724, using an exchange rate average over the period of AUD 0.7405 to USD 1.
ANNUAL REPORT – 2017/18For personal use only
A N N U A L R E P O R T – 2 0 1 7 / 1 8
NOTE 12. CURRENT LIABI LITIE S – T RADE A ND OT HER
PAYABLES
Trade payables
Accrued expenses
Settlement Funds Payable*
Remittance Funds Payable*
Consolidated
2018
$
Consolidated
2017
$
1,748,011
671,714
1,498,840
712,033
4,630,598
700,348
973,268
63,735
-
1,737,351
*Refer to Note 7 Net Position of Funds in Trust.
All amounts are short term and the carrying values are considered to be a reasonable approximation
of fair value.
P A G E 5 7
For personal use only P A G E 5 8
NOTE 13. EQUITY – ISSUED CAPI TAL
Mo vements in ordin ary share capital
Ordinary shares
Opening Balance.
No.
30 June 2018
$
No.
30 June 2017
$
87,883,826
11,940,604
Beginning of the period 1 July 2017
107,972,647
14,296,835
5 million Performance Shares were converted to Ordinary Shares on a one for one basis at a
total nominal value of $1 upon the achievement of Milestone 1, as announced to the ASX on 16
September 2016. There is no change in the value of 'Issued Capital'
11.9 million Shares issued pursuant to one for four Entitlement Offer – Institutional Component,
on the 16 May 2017. See Note 13(i)
3.1 million Shares pursuant to one for four Entitlement Offer – Retail Component, on the 29
May 2017. See Note 13(i)
-
-
-
1.5 million fully paid ordinary shares issued on 3 July 2017. See Note 13(i)
1,539,285
Capital Raising Costs related to shortfall facility
Corporate Advisor Management Fee. See Note 13(i)
-
-
-
-
-
-
-
-
Adjustment to the final consideration of the Management Fee. See Note 13(i)
(22,769)
Corporate Advisor Management Fee – 18 July 2017. See Note 13(i)
301,777
-
Fully paid ordinary shares pursuant to the shortfall facility of the Retail Entitlement Offer – 18
July 2017.
700,000
98,000
25M fully paid ordinary shares issued to major shareholder– 11 October 2017. See Note 13(ii)
25,000,000
3,500,000
Adjustment to consideration of Shortfall Placement Fee provided to Corporate Advisor– 30
November 2017
Corporate Advisor Shortfall Placement Fee final consideration – 30 November 2017
Fully paid ordinary shares on exercise of options – 16 November 2017
Value of option expense recognised in reserve for 90,666 Options converted to ordinary shares
Fully paid ordinary shares on exercise of options – 14 December 2017
Fully paid ordinary shares on exercise of options – 18 December 2017
Value of option expense recognised in reserve for 1.7M Options converted to ordinary shares
Professional Consulting Fees for Funds raised and listing new shares on the ASX – 31 December
2017
Fully paid ordinary shares on exercise of options – 09 February 20184
Fully paid ordinary shares on exercise of options – 14 February 20185
Value of option expense recognised in reserve for 184,600 Options converted to ordinary shares
-
-
90,666
500,000
1,200,000
120,000
64,600
17,077
(7,500)
18,133
1,223
100,000
240,000
101,674
(68,447)
24,000
12,920
11,090
18.2M fully paid ordinary shares issued to major shareholder– 06 March 2018. See Note 13(ii)
18,213,041
3,500,000
Professional Consulting Fees for Funds raised and listing new shares on the ASX – 31 March
2018
Fully paid ordinary shares on exercise of ESOP 06 March 2018
Value of option expense recognised in reserve for 96,667 Options converted to ordinary shares
Fully paid ordinary shares on exercise of options – 1 May 2018
Value of option expense recognised in reserve for 109,650 Options converted to ordinary shares
96,667
109,650
(32,406)
19,333
1,520
21,930
6,585
Consideration for acquisition of the shares in Vasco Pay Pty Ltd
1,600,000
408,000
Please refer to Note 23, Business Combinations
Professional Consulting Fees for Funds raised and listing new shares on the ASX – 30 June 2018
(12,960)
5,000,000
-
11,910,051
1,667,407
3,178,770
445,028
215,500
(36,722)
65,018
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Closing Balance
157,508,333
22,234,239
107,972,647
14,296,835
4 For further information please refer to the ASX, 'Announcements' webpage dated 14 December 2017.
5 Please refer to ASX 'Announcements' dated 18 December 2017.
ANNUAL REPORT – 2017/18For personal use only
A N N U A L R E P O R T – 2 0 1 7 / 1 8
(i) Accelerated Non-Renounceable Entitlement Offer
On 8 May 2017, Novatti Group Limited announced an accelerated 1 for 4 non-renounceable pro-
rata entitlement offer of new ordinary shares in the Company at an issue price of $0.14, the
purpose of the offer was to fund the acquisition of basis2, a new business for the group.
At 31 December 2017, 17,629,882 ordinary shares have been issued under this entitlement raising
$2.4M. For further details on the Capital Raising refer to the 'Acquisition of basis2 and Accelerated
Entitlement Offer' document, dated 8 May 2017.
1.5 million fully paid ordinary shares were issued on 3 July 2017. The Shares were issued pursuant
to the shortfall facility of the Retail Entitlement Offer as at 30 June 2017.
As final settlement of the Management Fee to the Corporate Advisor for the one for four
accelerated Entitlement Offer, it was agreed that 301,777 ordinary shares be provided at a value
of $42,249, down from 464,419 shares at $65,018 at 30 June 2017. In addition, there was an
adjustment to the placement fee paid to the Advisor on the completion of the raising. The net
amount of the adjustment was for $9,577.
(ii) Placement to raise $7 million
On 11 October 2017, the Company announced an investment of $3.5 million by a Chinese
technology investor, Mr Xiadi Chen, by the issue of 25 million shares at 14 cents per share, that
contemplated a further investment by Mr Chen of up to $6.5 million at 19.217 cents per share. By
mutual agreement, the Company has released Mr Chen from this commitment in lieu of a separate
raising capped at $3.5 million from other Chinese technology investors at the same issue price.
The non-associated investors are Madam Qing Li and Mr Qiang (Peter) Wei. Madam Li had
subscribed for 10,407,452 shares (for $2 million), taking her total shareholding in the Company to
22,907,452 shares, representing approximately 14.71% of the Company’s issued share capital. Mr
Wei subscribed for 7,805,589 shares (for $1.5 million), representing approximately 5.01% of the
Company’s issued share capital.
As announced on the ASX 28 February 2018, a total of 18,213,041 fully paid ordinary shares were
issued under the Company’s current capacity per ASX listing rule 7.1. No options were issued
under this capital raising.
O rd inary s har es
Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding
up of the Company in proportion to the number of and amounts paid on the shares held. The
fully paid ordinary shares have no par value and the Company does not have a limited amount of
authorised capital.
On a show of hands, every member present at a meeting in person or by proxy shall have one vote
and upon a poll, each shareholder shall have one vote.
Sh a re buy -back
There is no current on-market share buy-back.
O p tions and P erfo rma nce Shar es
Information is set out in Note 26 relating to options and performance shares issued, exercised and
lapsed during the financial year and options outstanding at the end of the financial year.
Ca pital r isk manag ement
The Group’s objectives when managing capital is to safeguard its ability to continue as a going
concern, so that it can provide returns for shareholders and benefits for other stakeholders and
to maintain an optimum capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends
paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce
debt.
The Group would look to raise capital when an opportunity to invest in a business or company was
seen as value adding relative to the current company’s share price at the time of the investment.
P A G E 5 9
For personal use only P A G E 6 0
NOTE 14. EQUITY – RESERVE
Option reserve
Foreign currency reserve
Consolidated
2018
$
Consolidated
2017
$
1,265,108
427,723
1,692,831
1,128,479
(44,169)
1,084,310
O p tion r eserve
The option reserve is used to record the fair value of options issued to employees and directors as
part of their remuneration. It is also used to record the fair value of options issued. The balance
is transferred to Issued Capital when options are granted and balance is transferred to retained
earnings when options lapse.
F or eign curr ency r ese rv e
The reserve is used to recognise exchange differences arising from the translation of the financial
statements of foreign operations to Australian dollars.
NOTE 15 . FINANCIAL INSTRUME NT S
F inan cial r isk ma nag ement objec tives
The Group is exposed to risks that arise from the use of its financial instruments. This Note
describes Novatti Group’s objectives, policies and processes for managing those risks and the
methods used to measure them. There have been no substantive changes in the Group’s exposure
to financial instrument risks, its objectives, policies and processes for managing those risks or
the methods used to measure them from previous periods unless otherwise stated in this Note.
The Board assumes the role of the Group’s Audit, Risk & Compliance Committee and oversees how
management monitors compliance with the Group’s risk management policies and procedures
and reviews the adequacy of the risk management framework in relation to the risks faced by the
Group.
P rincip al f inancial instrument s
The principal financial instruments used by Novatti Group, from which financial instrument risk
arises, are as follows:
•
•
•
Cash at bank and on deposit, and
Trade receivables, and
Trade and other payables.
ANNUAL REPORT – 2017/18For personal use only A N N U A L R E P O R T – 2 0 1 7 / 1 8
The Board has overall responsibility for the determination of the Group’s risk management
objectives and policies and whilst retaining ultimate responsibility for them, has delegated the
authority for designing and operating processes that ensure the effective implementation of the
objectives and policies to the Group’s finance function. The Board receives regular reports from
the Chief Financial Officer through which it reviews the effectiveness of the processes put in place
and the appropriateness of the objectives and policies it sets.
The overall objective of the Board is to set policies that seek to reduce risk as far as possible
without unduly affecting the Group’s competitiveness and flexibility. Further details regarding
these policies are set out below.
Trade receivables
Clients of the Group range from financial service providers, telecommunication operators to
airline companies. New client contracts may require Customers to pay fees based on 'Project
Milestone arrangements' in accordance with agreed upon contract terms. Moving from milestone
to milestone requires the payment of each to move onto the next. In addition, companies may be
charged for on-going service and maintenance contracts on a monthly or quarterly basis based on
the initial contract value and last up to 5 - 10 years.
Transactional sales obligations are settled generally on 21-day terms and after receipt from
distributors.
The Group undertakes transactions with a large number of customers and regularly monitors
payments in accordance with credit terms, the financial assets that are neither past due nor
impaired, are expected to be received in accordance with the credit terms.
The Group does not have any material credit risk exposure for other receivables or other financial
instruments.
Liquidity risk
Liquidity risk arises from the Group’s management of working capital. It is the risk that the Group
will encounter difficulty in meeting its financial obligations as they fall due. The Group’s policy is
to ensure that it will always have sufficient cash to allow it to meet its liabilities when they become
due. To achieve this aim, it seeks to maintain cash balances to meet expected requirements for a
period of at least three months.
The Group also seeks to reduce liquidity risk by ensuring that its cash deposits are earning interest
at the best rates. At balance date, these reports indicate that the Group is expected to have
sufficient liquid resources to meet its obligations under all reasonably expected circumstances.
As at 30 June 2018, the financial liabilities of the Group include:
•
•
Trade and other payables. For further details including breakdown of balances, please
refer to Note 1 Trade and other payables and Note 12, for a breakdown of account
balances.
Lease commitments. Refer to Note 18 for a summary of the contractual maturities of
commitments
The contractual amounts of financial liabilities are equal to their carrying values.
Currency risk
The Group’s policy is, where possible, to allow group entities to settle liabilities denominated in
their functional currency with the cash generated from their own operations in that currency.
Where group entities have liabilities denominated in a currency (and have insufficient reserves of
that currency to settle them), cash already denominated in that currency will, where possible, be
transferred from elsewhere within the Group.
In order to monitor the continuing effectiveness of this policy, the Board receives a monthly
forecast, analysed by the geographical region’s cash balances, commitments and receipts,
converted to the Group’s main functional currency, Australian Dollars (AUD).
The Group is exposed to currency risk on cash at bank and on its financial assets in Canadian
Dollars (CAD) to fund its Canadian operations, Euro (EUR) and Great British Pounds (GBP) to
service its European Operations in the UK and also US Dollars (USD).
P A G E 6 1
For personal use only P A G E 6 2
Currency risk sensitivity analysis –
Other currencies (CAD)
Foreign currency denominated financial assets
and liabilities, translated into Australian Dollars
at the closing rate, are as follows:
Consolidated
Nominal amounts
Cash at bank and on
term deposit
Consolidated
Nominal amounts
Cash at bank and on
term deposit
2018
CAD
2,593,011
2017
CAD
318,013
The following tables below illustrate the sensitivity of the net result for the year and equity in
regards to the Group’s financial assets and financial liabilities compared with the currency on
deposit and AUD exchange rate. It assumes a +/- 5% change in the exchange rate for the year
ended at 30 June 2018. This percentage has been determined based on average market volatility in
exchange rates in the previous 12 months. The sensitivity analysis is based on the Group’s foreign
currency financial instruments held at each reporting date. This assumes that other variables, in
particular interest rates, remain constant.
If the Australian dollar had strengthened against the CAD by 5% then this would have had the
following impact on profit and other equity:
Consolidated
2018
2017
Consolidated
2018
2017
Profit after tax
(130,250)
(15,194)
Profit after tax
144,362
Other Equity
-
-
Other Equity
-
16,799
-
Exposures to foreign exchange rates vary during the year depended on the volume of overseas
transactions. Nonetheless, the analysis above is considered to be representative of the Group’s
exposure to foreign currency risk.
Currency risk
Foreign currency denominated financial assets and liabilities, translated into Australian Dollars at
the closing rate, are as follows:
Consolidated
Nominal amounts
Cash at bank and on
term deposit
2018
USD
548,683
Consolidated
Nominal amounts
Cash at bank and on
term deposit
2017
USD
102,544
Foreign exchange risk arises from future commercial transactions and recognised financial assets
and financial liabilities denominated in a currency that is not the entity’s functional currency. The
risk is measured using sensitivity analysis and cash flow forecasting.
ANNUAL REPORT – 2017/18For personal use only A N N U A L R E P O R T – 2 0 1 7 / 1 8
If the Australian dollar had strengthened
against the USD by 5% then this would have
had the following impact on profit and other
equity:
Consolidated
2018
2017
Profit after tax
(46,872)
(6,271)
Other Equity
-
-
If the Australian dollar had weakened against
the USD by 5% then this would have had the
following impact on profit and other equity:
Consolidated
2018
2017
Profit after tax
53,661
Other Equity
-
7,145
-
Currency risk sensitivity analysis – Other currencies (EUR)
Foreign currency denominated financial assets and liabilities, translated into Australian Dollars at
the closing rate, are as follows:
Consolidated
Nominal amounts
Cash at bank and on
term deposit
2018
EUR
374,152
Consolidated
Nominal amounts
Cash at bank and on
term deposit
2017
EUR
15,892
Consolidated
2018
2017
Profit after tax
(43,221)
(1,635)
Other Equity
-
-
If the Australian dollar had strengthened
against the EUR by 5% then this would have
had the following impact on profit and other
equity:
Consolidated
2018
2017
Profit after tax
50,630
Other Equity
-
1,897
-
If the Australian dollar had weakened against
the EUR by 5% then this would have had the
following impact on profit and other equity:
Currency risk sensitivity analysis – Other currencies (GBP)
Foreign currency denominated financial assets and liabilities, translated into Australian Dollars at
the closing rate, are as follows:
Consolidated
Nominal amounts
Cash at bank and on
term deposit
2018
GBP
3,796
Consolidated
Nominal amounts
Cash at bank and on
term deposit
2017
GBP
960
Consolidated
2018
2017
Profit after tax
Other Equity
(322)
-
(77)
-
If the Australian dollar had strengthened
against the GBP by 5% then this would have
had the following impact on profit and other
equity:
Consolidated
2018
2017
Profit after tax
Other Equity
356
-
86
-
If the Australian dollar had weakened against
the GBP by 5% then this would have had the
following impact on profit and other equity:
P A G E 6 3
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NOTE 16. KEY MANAGEMENT P ERS ON NEL
D ISCLOSURES
Co mp ensation
The aggregate compensation made to directors and other members of key management personnel
of the Group is set out below:
Short-term employee benefits
Post-employment benefits
Long-term benefits
Share-based payments
Consolidated
2018
$
Consolidated
2017
$
726,224
66,888
5,046
184,089
982,247
1,083,097
64,882
3,937
294,820
1,454,930
NOTE 17. REMUNERATION OF AUDI TORS
During the financial year, the following fees were paid or payable for services provided by William
Buck, the auditor of the Company, its network firms and unrelated firms:
Audit services – William Buck
Audit or review of the 30 June financial statements
Review of the 31 December financial statements
Preparation of the tax return and associated tax services
Investigative Accountant’s Report
Consolidated
2018
$
Consolidated
2017
$
33,312
16,300
49,612
26,700
1,925
78,237
26,750
13,000
39,750
9,850
-
49,600
NOTE 18. COMMITMENTS
During the financial year, the following fees were paid or payable for services provided by William
Buck, the auditor of the Company, its network firms and unrelated firms:
Committed at the reporting date but not recognised as liabilities,
payable:
• Within one year
• One to five years
• More than five years
Consolidated
2018
$
Consolidated
2017
$
215,158
1,085,749
-
146,791
1,155,783
-
1,300,907
1,302,574
Lease commitments within the above figures include contracted amounts for offices in Melbourne, the United Kingdom,
South Australia and New South Wales. On renewal, the terms of the leases are re-negotiated.
This note includes all capital commitments for the group
ANNUAL REPORT – 2017/18For personal use only A N N U A L R E P O R T – 2 0 1 7 / 1 8
NOTE 19. RELATED PARTY TRAN SACT ION S
Key managemen t pers onnel
Disclosures relating to key management personnel are set out in the remuneration report and also
within Note 16.
P ar ent and ultimate controlling par ty
Novatti Group Ltd was incorporated on 19 June 2015. For accounting purposes, Novatti Pty Ltd
was identified as the accounting acquirer and Novatti Group Ltd was identified as the accounting
subsidiary. The shares in Novatti Pty Ltd were acquired by the Novatti Group on a scrip for scrip
basis.
Lo ans f ro m Directors
There are no loans that were entered into or, outstanding with the Directors of Novatti Group Ltd
as at 30 June 2018.
Cu rrent and no n- current liabilities to a D irect or
There are no current or non-current liabilities outstanding to Directors of the Group as at 30 June
2018.
Services
During the financial year a payment of $11,000 (GST inc) was made to Gyeon Pty Ltd, a company
associated with Peter Pawlowitsch for the provision of services related to business acquisitions.
During the financial year, ePay Global Ltd invoiced the Group $523,000 (GST inc) for services
including, introducing new investors and promoting the Novatti business. Steven Zhou is a 16%
shareholder and director of ePay Global Ltd.
There were no other Director related services that have been provided to the Group outside of the
Directors normal fiduciary duties and responsibilities as Directors of Novatti Group.
Lo ans to /fr om related part ies
Loan provided to the Group’s joint venture partner, High Impact. This loan agreement is for a
total of USD18,335 (AUD24,762) as at 30 June 2018 (FY17, USD10,000, AUD13,233). The loan is on
commercial terms and interest has been calculated daily at 6% per annum.
There were no other loans to or from related parties at the current reporting date.
T erm s and co nd itions
All transactions were made on normal commercial terms and conditions and not at market rates.
NOTE 20. PARENT ENTITY INFORMAT ION
Set out below is the supplementary information of the 'legal' parent entity, Novatti Group Ltd.
Novatti Group Ltd entered into a Share Purchase Agreement with the equity holders of Novatti Pty
Ltd to acquire all the shares in Novatti Pty Ltd on 28 September 2015.
Sta tement of profit o r loss and other c ompr ehens ive income
Loss after income tax
Total comprehensive loss
Parent
2018
$
Parent
2017
$
(476,838)
(476,838)
(901,206)
(901,206)
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Sta tement of financial position
Total current assets
Total assets
Total current liabilities
Total liabilities
Equity
Issued capital
Performance Share Reserve
Reserves
Accumulated losses – Opening 1 July 2017
Option adjustment
Losses incurred for the year ended 30 June 2018
Parent
2018
$
Parent
2017
$
3,297,158
380,581
25,220,460
17,494,331
337,334
377,334
248,400
248,400
25,151,243
17,213,839
600,000
1,265,108
(1,696,387)
-
(476,838)
600,000
1,128,479
(910,161)
114,980
(901,206)
(2,173,225)
(1,696,387)
Total equity
24,843,126
17,245,931
NOTE 21 CONTINGENT LIABIL ITI ES
Co ntingent liabilities
There exists a bank guarantee for offices leased in Melbourne. As at 30 June 2018 these totalled
$33,233, (FY17 $32,554). No other guarantees exist.
The parent entity had no contingent liabilities as at 30 June 2018.
Ca pital co mmitment s – plant and equipme nt
The legal parent entity had no capital commitments for plant and equipment as at 30 June 2018.
Sig nificant acco unting p olicies
The accounting policies of the legal parent entity Novatti Group Ltd are consistent with those of
the Group, as disclosed in Note 1, with exception to the following that are not relevant at the
Group level:
•
•
Investments in subsidiaries are accounted for at cost, less any impairment, in the parent
entity.
Dividends received from subsidiaries are recognised as other income by the parent
entity.
ANNUAL REPORT – 2017/18For personal use only A N N U A L R E P O R T – 2 0 1 7 / 1 8
NOTE 22. INTERESTS IN SUBSID IARIES
The consolidated financial statements incorporate the assets, liabilities and results of the following
wholly owned subsidiaries in accordance with the accounting policy described in Note 1:
Principal place of
business / country of
incorporation
Ownership
interest
2018
Ownership
interest
2017
%
%
Name
Novatti Group Ltd Subsidiaries
Novatti Pty Ltd
Flexe Payments Ltd
Flexe Payments Pty Ltd
Flexe Payments (MLT) Ltd
Flexe Payments Shd Bdn
Novatti Commerce Solutions Inc.
Novatti Commerce Solutions (MLT) Ltd
Australia
United Kingdom
South Africa
Malta
Malaysia
Canada
Malta
Novatti Technologies Ltd
United Kingdom
Novatti Inc.
Vasco Pay Pty Ltd
United States of America
Australia
Novatti Pty Ltd Subsidiaries
Flexewallet Pty Ltd
Flexewallet (NZ) Ltd
TransferBridge Pty Ltd
Australia
New Zealand
Australia
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
-
-
-
-
100%
100%
-
100%
-
100%
NOTE 23. B USINESS COMBIN ATI ON
On 8 June 2018, Novatti Group Limited acquired 100% of the shares in Vasco Pay Pty Ltd.
Vasco Pay is an Australian proprietary company that owns and conducts a proprietary personalised
prepaid reloadable payment card program to use wherever Visa is available.
Details of the purchase consideration, net assets at provisional fair value and goodwill are as
follows:
Purchase consideration (refer below):
Cash component
Equity component by way of issuing 1.6M share in the Company at $0.255
Total upfront consideration
The assets and liabilities recognised as a result of the acquisition are as follows:
2018
$
150,000
408,000
558,000
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Cash at bank
Cash on hand
Tax liabilities
Other Liabilities
Goodwill
Total consideration
Provisional Fair Value
$
15,218
200
(48)
(25,000)
567,630
558,000
The net assets of Vasco Pay Pty Ltd have been stated at provisional fair value as at 30 June 2018.
A full assessment of the net assets and goodwill recognised on acquisition will be made over the
next financial year ended 30 June 2019.
Su m mary of acquisition
Earn outs
The acquisition of Vasco Pay includes an earn out consideration. The earn outs are:
•
•
The first earn out is the Vasco Pay 30 June 2020 EBITDA multiplied by 1.225.
The second earn out is the Vasco Pay 30 June 2021 EBITDA multiplied by 1.1025.
The earn outs may be paid in cash or shares. If paid out in shares, they are issued at an issue price
of 90% of the 90 day VWAP and paid within 10 days of the later of:
•
•
The certification of the respective period’s accounts; or
The determination of a dispute to the certification of the period’s accounts.
As at the date of acquisition, the Director’s had determined that it was too early to determine a
reasonable fair value of the 'earn out' for the years’ ended 30 June 2020 and 2021.
Earn out protection
Novatti undertakes to the vendors to use all reasonable endeavours to procure that till the end
of the second earn-out period the business of Vasco Pay shall be conducted commercially and in
good faith with a view to maximising profit during the earn out and Novatti will provide an intra-
group loan funding to Vasco Pay for working capital purposes up to the sum of $1,541,000.
Novatti, in its absolute discretion may elect, by providing written notice to Vasco Pay within 60
days after the relevant date, to not fund any undrawn commitments under the intra-group loan,
in the event that the actual number of active cards as at:
31 December 2018 is below 5,487;
i.
ii. 30 June 2019 is below 13,231;
iii. 31 December 2019 is below 20,180;
iv. 30 June 2020 is below 28,414;
v. 31 December 2020 is below 37,027;
vi. 30 June 2021 is below 46,241;
vii. 31 December 2021 is below 55,738;
viii. 30 June 2022 is below 65,752; or
ix. 31 December 2022 is below 75,679.
An active card means a card that has been sold and activated by a customer and remains active
as at the relevant date.
Revenue and profit contribution
If the acquisition had occurred on 1 July 2017, the acquired business would have contributed
revenues of approximately $3,548 and net loss of $62,862 to the group.
ANNUAL REPORT – 2017/18For personal use only A N N U A L R E P O R T – 2 0 1 7 / 1 8
Purchase consideration
Outflow of cash to acquire Vasco Pay, net of cash acquired
Cash consideration
Net outflow of cash
2018
$
150,000
150,000
2017
$
-
-
Acquisition related costs
Acquisition related costs of $18,500 for legal fees were incurred by the Group in connection to the
purchase of Vasco Pay and are included in other expenses in the profit and loss and in operating
cash flows in the statement of cash flows.
Acquis ition of ba sis 2 on the 26 May 2017
As part of the conditions subsequent to the contract of settlement between Novatti Group Limited
and Prophecy International Pty Ltd, 60 days following the date of acquisition of basis2 the net
adjustment amount owed to Novatti Group Limited was paid by Prophecy International Pty Ltd
on the 26 July 2017. The final adjustment amount received in FY18 was $242,935. There were no
changes to the provisional values previously disclosed.
NOTE 24. EVENTS AFTER THE RE PORTI N G P ERIO D
There are no other matters or circumstances that have arisen since 30 June 2018 that have
significantly affected, or may significantly affect the Group’s operations, the results of those
operations, or the Group’s state of affairs in future financial years.
P A G E 6 9
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NOTE 25. RECONCILIATION OF PROFI T AFTE R
IN COME TAX TO NET CASH FROM OP ERATI N G
AC TIVITIES
Loss after income tax expense for the year
(2,069,034)
(4,717,729)
Consolidated
2018
$
Consolidated
2017
$
Adjustments for:
Depreciation and amortisation
Share based payments
Non-cash option expense
Unrealised Foreign Exchange Gain
Intangibles – Goodwill on Consolidation
Loss on disposal of fixed assets
Change in operating assets and liabilities:
290,682
516,656
258,719
(75,750)
(417,630)
(1,054)
(Increase)/decrease in trade and other receivables
(2,763,054)
Increase/(decrease) in trade and other payables
Increase/(decrease) in deferred income
Increase/(decrease) in employee benefits
905,723
95,260
(116,893)
54,946
-
410,457
14,493
-
224
(277,849)
(100,349)
382,626
227,927
Net cash from operating activities
(3,376,374)
(4,005,254)
NOTE 26. EARNINGS PER SHARE
Loss after income tax
Loss after income tax attributable to the owners of Novatti
Group Limited
Weighted average number of ordinary shares outstanding
during the year:
Number used in calculating Earnings Per Share
Number of potential ordinary shares that are considered to be
antidilutive
Consolidated
2018
$
Consolidated
2017
$
(2,069,034)
(4,717,729)
(2,069,034)
(4,717,729)
2018
No of ordinary
shares
2017
No of ordinary
shares
135,436,622
93,765,798
30,406,378
34,609,355
2018
Cents
2017
Cents
Basic and diluted earnings per share
(1.53)
(5.03)
ANNUAL REPORT – 2017/18For personal use only A N N U A L R E P O R T – 2 0 1 7 / 1 8
NOTE 27. S HARE-B ASED PAYMEN TS
Options
A share option plan has been established by the Group and approved by shareholders at a general
meeting, whereby the Group may, at the discretion of the Board, grant options over ordinary
shares in the Company to certain key management personnel and staff of the Group.
The Employee Share Option Plan is designed to provide long-term incentives for Senior
Management (including Directors’) and Staff to deliver long-term shareholder returns. Options
are issued for nil consideration and are granted in accordance with performance guidelines
established by the Board.
The following Share based payment arrangements were in existence during the current financial
year and are supported by the table below.
Options issued to senior management and staff of the Group vest in three equal portions each
year from the first year of vesting over 36 months.
Grant date
Vesting date
Expiry date
Ex price
Exp’d volatility
Risk free rate
Exp’d dividend
yield
53.90%
53.90%
53.90%
53.90%
53.90%
53.90%
53.90%
57.74%
57.74%
57.74%
57.74%
57.74%
57.74%
57.74%
$0.20
$0.20
$0.20
$0.20
$0.20
$0.20
$0.20
$0.25
$0.25
$0.20
$0.20
$0.20
$0.20
$0.20
$0.20
2.32%
2.32%
2.32%
2.32%
2.32%
2.32%
2.32%
2.13%
2.13%
2.13%
2.13%
2.13%
2.13%
2.13%
2.13%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
Bal at start
13,750,000
1,150,000
1,150,000
1,150,000
2,859,250
750,000
4,000,000
750,000
750,000
1,035,661
1,035,661
1,035,678
-
-
-
Granted
during yr
Ex during yr
Forfeited
during yr
-
-
-
-
-
-
1,994,250
-
-
187,334
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
333,333
333,333
333,334
-
-
-
-
-
-
-
-
-
294,444
294,444
294,444
-
-
-
Bal at
13,750,000
1,150,000
1,150,000
1,150,000
2,859,250
750,000
2,005,750
750,000
750,000
553,883
741,217
1,035,660
333,333
333,333
333,334
29,416,250
1,000,000
2,181,584
883,332-
27,351,334
$0.202
-
-
$0.202
30 Jun 19
30 Jun 19
30 Jun 19
30 Jun 19
30 Jun 19
30 Jun 19
30 Jun 19
30 Jun 19
30 Jun 19
30 Jun 19
30 Jun 19
30 Jun 19
31 Dec 19
31 Dec 19
31 Dec 19
12 Nov 15
12 Nov 15
12 Nov 15
12 Nov 15
12 Nov 15
8 Jan 16
3 Feb 16
8 Feb 16
1 Jul 16
1 Jul 17
1 Jul 18
8 Jan 16
3 Feb 17
8 Feb 16
31 May 16
31 May 17
31 May 16
31 May 18
24 Jun 17
24 Jun 18
24 Jun 19
21 Jul 17
21 Jul 18
21 Jul 19
24 Jun 16
24 Jun 16
24 Jun 16
21 Jul 16
21 Jul 16
21 Jul 16
Total
Weighted Average
Exercise Price
Entitlement
The Options will entitle the holder to subscribe for one Share upon the exercise of each Option
that has vested in the holder. If the Options are subject to a vesting period, where the relevant
person is no longer employed or engaged, as the case may be, by the Group on a vesting date,
the Options will not vest to that holder. Options that have previously vested in the holder shall be
retained by the holder.
Shares Issued on Exercise
Shares issued on exercise of the Options will rank equally with the other issued Shares.
If there is any reconstruction of the issued share capital of the Company, the rights of the Option
holder may be varied to comply with the Listing Rules that apply to the reconstruction at the time
of the reconstruction.
There are no participation rights or entitlements inherent in the Options and the holder will not
be entitled to participate in new issues of capital offered to Shareholders during the currency of
the Options.
The fair value of the options is valued at 'grant date' using the Black-Scholes model. Assumptions
used in the calculation of the option expense can be found in the table above.
P A G E 7 1
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D I R E C T O R S ’ D E C L A R A T I O N
IN THE DIRECTORS’ OPINION :
•
•
•
•
the attached financial statements and notes comply with the Corporations Act 2001,
the Accounting Standards, the Corporations Regulations 2001 and other mandatory
professional reporting requirements;
the attached financial statements and notes comply with International Financial
Reporting Standards as issued by the International Accounting Standards Board as
described in Note 1 to the financial statements;
the attached financial statements and notes give a true and fair view of the Group’s
financial position as at 30 June 2018 and of its performance for the financial year ended
on that date;
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 required by section 295A of the Corporations Act
2001.
Signed in accordance with a resolution of directors made pursuant to section 295(5)(a) of the
Corporations Act 2001.
On behalf of the directors
________________________________
Peter Pawlowitsch
Chairman
30 August 2018
Melbourne
ANNUAL REPORT – 2017/18For personal use only A N N U A L R E P O R T – 2 0 1 7 / 1 8
I N D E P E N D E N T A U D I T O R ’ S
R E P O R T
Novatti Group Limited
Independent auditor’s report to members
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Novatti Group Limited (the Company and its
controlled entities (the Group)), which comprises the consolidated statement of financial
position as at 30 June 2018, the consolidated statement of profit or loss and other
comprehensive income, the consolidated statement of changes in equity and the
consolidated statement of cash flows for the year then ended, and notes to the financial
statements, including a summary of significant accounting policies and other explanatory
information, and the directors’ declaration.
In our opinion, the accompanying financial report of the Group, is in accordance with the
Corporations Act 2001, including:
(i) giving a true and fair view of the Group’s financial position as at 30 June 2018 and of its
financial performance for the then year ended; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations
2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our
responsibilities under those standards are further described in the Auditor’s
Responsibilities for the Audit of the Financial Report section of our report. We are
independent of the Group in accordance with the auditor independence requirements of
the Corporations Act 2001 and the ethical requirements of the Accounting Professional
and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants
(the Code) that are relevant to our audit of the financial report in Australia. We have also
fulfilled our other ethical responsibilities in accordance with the Code.
We confirm that the independence declaration required by the Corporations Act 2001,
which has been given to the directors of the Company, would be in the same terms if given
to the directors as at the time of this auditor’s report.
P A G E 7 3
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P A G E 7 4
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our
audit of the financial report of the current period. These matters were addressed in the context of our audit
of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate
opinion on these matters.
REVENUE RECOGNITION
Area of focus
Refer also to notes 1,4
The Group has entered into multiple new agreements for
generating new sources of income and include the following:
⎯ Platform sales;
⎯ Software as a Service fees (SAAS);
⎯ Support and maintenance fees;
⎯ Licence fees; and
⎯ Credits from the Australian Taxation Office for
Research and Development activities.
How our audit addressed it
Our audit procedures included:
- Determining whether revenue
-
recognised is in-compliance with its
accounting policies
Identifying and verifying the
achievement of performance
milestones and recognition of
revenue relative to the accretion of
that achievement;
- Agreeing revenue streams to a
The Group also has new contractual agreements which will
add further complexity to its revenue recognition activities.
These include:
sample of underlying contracts with
third parties
- Examining the existence of the
revenue, both by testing to contract
and to subsequent receipt of
invoicing of the revenue to the
customer
- Analytically reviewing the
reasonableness of accrued revenue
and billings-in-advance accounts.
⎯ Those revenues derived by the newly acquired
Vasco Pay;
⎯ Its agreement with Banque Berno Saudi Fransi; and
⎯ Its agreement to generate revenues with Lightyear.
Finally, we note that revenues and revenue recognition are
strongly tied to the achievement of bonuses tied to incentive
structures for key management personnel.
Each revenue stream requires a bespoke revenue
recognition model to ensure that revenue is only recognised
a) when probable; b) can be reliably measured; and c) as the
service is rendered to the customer.
The Group is also actively managing its transition to the new
revenue standard (AASB 15), which will require further
analysis of these models under that standard, particularly in
identifying separable performance milestones, identifying
variable revenue and applying the new constraint
requirements in estimating the amount of variable
consideration recognised as revenue under the new highly
probable threshold.
ANNUAL REPORT – 2017/18For personal use only
A N N U A L R E P O R T – 2 0 1 7 / 1 8
ACQUISITION OF VASCO PAY
Area of focus
Refer also to notes 1,11,23
The Group acquired the Vasco Pay business in June
2018. The acquisition involved the following amounts of
consideration:
⎯ A cash payment of $150,000;
⎯ The issue of 1,600,000 shares, to be held in escrow
in two tranches vesting in 1 and 2 years;
⎯ Earn-out agreements, entitling the vendors to
EBITDA targets for the 2020 and 2021 June
financial year ends.
This transaction is considered a significant purchase for
the Group.
Accounting for this transaction is complex and requires
significant judgements and estimates by management:
— to determine the date of acquisition;
— to determine the fair value of assets and liabilities
acquired, including the fair value of any vendor
warranties and guarantees (including restraint of
trade requirements), with the residual excess
purchase consideration amount allocated to
goodwill; and
— to determine the fair value of deferred consideration
and of the share-based consideration held in
escrow.
Other Information
How our audit addressed it
Our audit procedures included:
— Review of the Share Purchase
Agreement to understand the key terms
and conditions of the acquisition;
— Assessment of the intangible assets
identified by management for their
separability and basis to allow
recognition and assessed whether the
measurement basis and assumptions
underlying the estimate of fair values
were appropriate;
— Testing the Group’s determination of fair
values with reference to work performed
by external valuation expert and our
Corporate Advisory division;
— Testing the appropriateness of the
deferred consideration and share-based
consideration held in escrow; and
— Reviewing whether the conditions
precedent have been satisfied
We also assessed the adequacy of the
Group’s disclosures in respect of the
acquisition.
The directors are responsible for the other information. The other information comprises the information
included in the Group’s annual report for the year ended 30 June 2018, but does not include the financial
report and the auditor’s report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not express
any form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information and, in
doing so, consider whether the other information is materially inconsistent with the financial report or our
knowledge obtained in the audit or otherwise appears to be materially misstated.
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If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the Director’s 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 preparing the financial report, the directors are responsible for assessing the ability of the Group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or has no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our
opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted
in accordance with the Australian Auditing Standards will always detect a material misstatement when it
exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the basis of this
financial report.
A further description of our responsibilities for the audit of these financial statements is located at the
Auditing and Assurance Standards Board website at:
http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf
This description forms part of our independent auditor’s report.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in of the directors’ report for the year ended 30 June
2018.
In our opinion, the Remuneration Report of Novatti Group Limited, for the year ended 30 June 2018,
complies with section 300A of the Corporations Act 2001.
ANNUAL REPORT – 2017/18For personal use only
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Responsibilities
The directors of the Company are responsible for the preparation and presentation of the Remuneration
Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an
opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing
Standards.
William Buck Audit (Vic) Pty Ltd
ABN: 59 116 151 136
J. C. Luckins
Director
Melbourne, 30 August 2018
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A D D I T I O N A L D I S C L O S U R E S
DISTR IBUTION OF EQUITABL E SEC U RIT IES
Analysis of number of equitable security holders by size of holding:
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and over
Holding less than a marketable parcel
EQUITY SECURITY HOLD ERS
Twenty largest quoted equity security holders
No of holders of
ordinary shares
No of ordinary
shares
19
275
202
455
71
1,022
19
4,701
838,895
1,720,754
16,321,881
138,622,101
157,508,332
4,701
The names of the twenty largest security holders of quoted equity securities are listed below:
BRAYTER LIMITED
XIADI CHEN
QING LI
CORANGAMITE PTY LTD
MADAM QING LI
CHI WAI KENNETH LAI
QIANG WEI
MR KENNETH LAI
PACIFIC NOMINEES LIMITED
J P MORGAN NOMINEES AUSTRALIA LIMITED
SQUITCHY LANE HOLDINGS PTY LTD
BNP PARIBAS NOMINEES PTY LTD
MOSCH PTY LTD
NAMIB NOMINEES PTY LTD
SEQUOI NOMINEES PTY LTD
HAVEN SUPER PTY LTD
MR TREVOR JAMES PRESSER & MS HELEN PRESSER
ACQUISITIVE PTY LTD
SEAFIELD SUPERANNUATION PTY LTD
JASPER SUPERANNUATION PTY LTD
CITICORP NOMINEES PTY LIMITED
MR GEORGE ANTHONY VENUTI & MRS CAROLYN ANNE VENUTI
DR PETER POON
Total
Number held 24
Aug 2018
46,631,507
12,500,000
12,500,000
Percent of total
shares issued
29.91%
8.02%
8.02%
11,107,904
10,407,452
10,335,000
7,805,589
2,583,750
1,812,500
1,506,380
1,440,090
1,284,472
1,171,875
781,250
781,250
781,250
714,285
686,236
580,000
575,000
522,792
495,000
456,164
127,459,746
7.12%
6.68%
6.63%
5.01%
1.66%
1.16%
0.97%
0.92%
0.82%
0.75%
0.50%
0.50%
0.50%
0.46%
0.44%
0.37%
0.37%
0.34%
0.32%
0.29%
81.76%
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U NQUOTED EQUITY SECURIT IES
No of issue
No of holders
Options over ordinary shares issued
27,351,334
27
There are no holders of unquoted equity securities holding 20% or greater of the number of
unquoted equity securities on issue.
SU BSTANTIAL HOLDERS
Substantial holders in the Company are set out below:
Ordinary shares
BRAYTER LIMITED
QING LI
CHI WAI KENNETH LAI
SECURITIES SUBJECT TO ESCROW
Ordinary Shares escrowed to 15 June 2019 from quotation
Ordinary Shares escrowed to 15 June 2020
VOTING RIGHTS
The voting rights attached to ordinary shares are set out below:
Number held
3 Aug 2018
Percent of total
shares issued
46,631,506
22,907,452
12,918,750
29.61
14.54
8.20
Number of
shares
800,000
800,000
O rd inary s har es
On a show of hands, every member present at a meeting in person or by proxy shall have one vote
and upon a poll, each share shall have one vote.
There are no other classes of equity securities.
Use o f funds
Since admission, the Company has used its cash in a way consistent with business objectives.
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