n o v a t t i g r o u p . c o m
ANNUAL
REPORT
2019
P A G E 2
T A B L E O F
C O N T E N T S
Contents
Chair m an’s l etter
Review of operat ions
Review of 2019 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 or Lo ss and o ther C omprehens ive Income
Cons olidated Statement of Financi al Pos itio n
Cons olidated Statement of Changes in Equi ty
Cons olidated Statement of Cash Fl ows
Notes to the Fi nanc ial 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
76
77
82
P A G E 3
ANNUAL REPORT - 2018/19 Directors
Peter Pawlowitsch
Peter Cook
Brandon Munro
Paul Burton
Kenneth Lai
Steven Zhou
Company secretary
Ian Hobson
Registered office and principal place of
business
Share register
Auditor
Solicitors
Bankers
Australia
Level 3,
461 Bourke Street,
Melbourne VIC 3000
+61 3 9011 8490
Automic Registry Services
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
Stock exchange listing
Novatti Group Limited shares are listed on the Australian Securities
Exchange (ASX code: NOV)
Website
Corporate Governance Statement
www.novattigroup.com
www.novattigroup.com/investors/corporate-governance
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
P A G E 4
ANNUAL REPORT - 2018/19 C H A I R M A N ’ S L E T T E R
Dear fellow shareholder,
Novatti continues to grow and succeed as a leading Fintech payments and technology company.
The continuing focus on building recurring and financial processing revenue streams has been
rewarded with Novatti now having increased more predictable and larger revenue streams.
This is highlighted by the growth in financial processing revenues from $1.8M in FY18 to $4.1M
in FY2019. Overall, total revenues grew to $8.89M, up 40% from $6.36M in FY18.
This growth has been driven by the following achievements during the year:
•
•
•
•
•
•
Launch of chinapayments.com bill payment service
Increase in B2B processing partnerships
Integration of basis2 billing solution
Impact of the acquisition of Vasco Pay prepaid card business in FY18
Launch of Australian outbound remittance services
Launch of inbound Australian remittance settlement services
In conjunction with this strong growth in the core operations of Novatti, Novatti has undertaken
extensive activities to create the opportunity for a bank licence within the Group. This
culminated in the formal application to APRA in November 2018 for a Restricted Authorised
Deposit taking Institution licence, which has then continued through APRA’s review process
during the remainder of the financial year.
Driving growth and shareholder value remains paramount for the Board and Management and
the Company is in its best position in this regard since listing on the ASX with the percentage
of transactional and recurring revenue now being 49% up from 33% in FY18 providing a solid
base to grow from. The Company’s targets for the FY20 financial year are:
•
•
•
•
Continue to focus on growing the Company’s recurring and transactional revenues
Receive a restricted bank licence from APRA
Leverage the Novatti Payments Platform into new revenue opportunities
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.
P E T E R P AW L O W I T S C H
C h a i r m a n
P A G E 5
ANNUAL REPORT - 2018/19 R E V I E W O F O P E R A T I O N S
O VERVIEW
The Group growth as a leading Fintech payments and technology company is evident in this
year. The ongoing focus on building recurring and financial processing revenue streams has been
realised with increased predictable and larger revenue streams. This is further emphasised with
the increase in financial processing revenues from $1.8M in FY18 to $4.1M in FY19. Overall total
revenues grew to $8.89M, up 40%, from $6.36M in FY18.
Overall total revenues grew to $8.89M,
up 40%, from $6.36M in FY18
In conjunction with this strong growth in the core operations of Novatti, Novatti has undertaken
extensive activities to create the opportunity for a bank licence within the Group. This culminated
in the formal application to APRA in November 2018 for a Restricted Authorised Deposit-taking
Institution licence, which has then continued through APRA’s review process during the remainder
of the financial year.
CO RPORATE SHARE HI GH LIGH TS
Date
Number of Shares –
Novatti Group Ltd
Summary
01 July 2018
157,508,333
Number of shares on issue at commencement
of financial year
28 February 2019
84,500
Conversion of Options to Shares
29 March 2019
9,286,381
Placement to further the Company’s application
for a restricted banking licence and working
capital.
P A G E 6
ANNUAL REPORT - 2018/19 BUS INESS OPERATIONS
In FY2019, Novatti committed resources to two major growth strategies:
1. Drive growth in existing revenue streams and development additional related financial
processing revenue streams
FY2019 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
and financial transaction revenues. Such revenues include platform usage, support and SAAS
fees, and transaction processing fees. Strong growth has been attained within all of the lines of
business and revenue streams including Chinapayments.com, Remittances, Vasco prepaid cards,
Flexepin and the Platform sales. New initiatives including agreements with Bank of Shanghai, IBM
World Wire, SendFX, SplitPay and many new B2B partnerships auger well for additional growth.
2. Create a new digital bank, with initial activities focussed on gaining a Restricted banking
licence
Novatti lodged its formal application to APRA in November 2018 for a Restricted Authorised
Deposit taking Institution licence which has then continued through APRA’s review process during
the remainder of the financial year. During FY19 the banking team operated with between 8 and
13 staff plus specialist external service providers who were variously involved in creating the
application, defining the technology roll-out, planning the go to market strategy and preparing for
the launch of banking services. The company is well prepared to receive a Restricted bank licence
and move to an operational phase.
RE V ENUE RESULTS
The execution of the long term growth strategies have continued to evidence with the continued
strong growth in the year on year revenue results as below:
During the year the Group continued its transition away from non recurring revenue to transactional
and recurring revenues.
P A G E 7
ANNUAL REPORT - 2018/19 THE NOVATTI PLATFORM
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 under-banked societies in
developing nations with minimal access to traditional bank accounts. The innovative technologies
enable new and cost-effective payment service to solve the needs in emerging marketplaces,
where the internet and mobile penetration is rapidly growing.
The Novatti Platform consists of a variety of software modules. Each module can be delivered as
a standalone solution or 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
Revenues from the Novatti Platform are classified as either Non-Recurring or Recurring.
FINANCIAL PROCESSING SERV IC ES
Fin anc ial licences
Novatti subsidiary Flexewallet Pty Ltd 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.
Novatti subsidiary Flexe Payments (UK) Ltd 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.
P A G E 8
ANNUAL REPORT - 2018/19 Tra nsaction Processi ng Growth
The increasing focus of the Group is to build our Financial Processing Services. For FY19, these
revenues were derived from B2B partnerships both in Australia and overseas growth in these
partnerships has seen resultant growth in transaction processing revenues.
P A G E 9
ANNUAL REPORT - 2018/19 D I R E C T O R S ’ R E P O R T | R E V I E W O F O P E R A T I O N S
Flexepin continues to grow strongly
The Group
has
continued
to
basis2 provides an extensive solution
through
increased distribution to
develop hard-to-get strategic B2B
set to enable utility clients to manage
new countries and new merchants
relationships
to grow
into
the
the billing of
their subscribers.
accepting the voucher as a payment
remittance market. Novatti provides
Revenues include licencing, support
method.
Strongest
growth
has
a full service including technology,
and professional services and are
been in Canada, with good growth
compliance and banking services for
highly predictable over the year.
potential also being seen
in new
our B2B customers to enable them
markets in LATAM, Europe and Africa.
to operate as outbound and inbound
Revenues
from
this stream are
remittance
providers.
Novatti
classified as Billing.
Revenues
from
this stream are
underpins
its remittance services
classified as Transaction Processing.
with
its Australian Remittance
Network Provider status and the
AFSL along with the oversight of the
compliance team.
Revenues
from
this stream are
classified as Transaction Processing.
The Group has entered into a number
of partnerships with companies that
are 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
In June 2018, the Group acquired
capabilities
and
its
technology
Vasco Pay, a provider of prepaid
to facilitate these services. With
over 1.2M Chinese
tourists and
reloadable
reloadable
Visa
Visa
cards.
These
cards
enable
over 200,000 Chinese
students
consumers to have a flexible payment
in Australia,
plus
e-commerce
instrument linked to a bank account
purchases to Australian websites,
that also includes access to a range
the Chinese payment methods herald
of rewards and consumer discounts.
major new
financial
transaction
Target markets include international
streams in Australia. Novatti is well
students, migrants and corporate
positioned to be a strong beneficiary.
Novatti also brought to market during
disbursements.
FY18 the www.chinapayments.com
Revenues
from
this stream are
bill payment service that enable
classified as Transaction Processing.
Chinese consumers both in Australia
and China to pay Australian BPay
bills with their Chinese digital wallet
service.
Revenues
from
this
stream are
classified as Transaction Processing.
P A G E 1 0
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ANNUAL REPORT - 2018/19 D I R E C T O R S ’ R E P O R T | R E V I E W O F O P E R A T I O N S
D I R E C T O R S ’ R E P O R T
D IR ECTORS
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:
• PE TER PAWLOWITSCH
• BRANDON M UNRO
• PA UL BURTON
• PE TER COOK
• KE NNETH LA I
• STEVE N Z HOU
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 2019.
INFOR M AT I ON ON DI RECTORS
Name:
Title:
Peter Pawlowitsch
Non-Executive Chairman
Qualifications:
BCom, CPA, MBA, FGIA
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
Non-Executive Chairman of Family Zone Cyber Safety
Ltd (24 September – present), Non-Executive Director
of VRX Silica Ltd (formerly Ventor Resources Ltd) (12
February 2010 – present), Dubber Corporation Ltd (20
September 2011 – present) and Knosys Ltd (16 March
2015 – present)
Former directorships (last 3 years):
Rewardle Holdings Ltd
Special responsibilities:
None
Interests in shares:
2,343,750 ordinary shares
Interests in options:
2,500,000
A N N U A L R E P O R T - 2 0 1 8 / 1 9
P A G E 1 1
ANNUAL REPORT - 2018/19 D I R E C T O R S ’ R E P O R T | R E V I E W O F O P E R A T I O N S
Name:
Title:
Paul Burton
Non-Executive
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:
1,000,000
Name:
Title:
Kenneth Lai
Non-Executive
Qualifications:
BSc 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:
1,000,000
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)
P A G E 1 2
ANNUAL REPORT - 2018/19 D I R E C T O R S ’ R E P O R T | R E V I E W O F O P E R A T I O N S
Former directorships (last 3 years):
Department 13 Ltd (formerly Kunene Resources Ltd),
Rewardle Holdings Ltd
Special responsibilities:
None
Interests in shares:
1,562,500 ordinary shares
Interests in options:
1,500,000
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:
2,500,000
Name:
Title:
Steven Zhou
Non-Executive
Qualifications:
BSc, Grad Dip Computing, Grad Dip Securities, GAICD
Experience and expertise:
Steven has extensive experience in start-up financial
services businesses in China and Australia
Other current directorships:
Former directorships (last 3 years):
Special responsibilities:
Interests in shares:
Interests in options:
None
None
None
None
1,000,000
‘Other current directorships’ quoted above are current directorships for listed entities only and excludes directorships
of all other types of entities, unless otherwise stated.
‘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.
P A G E 1 3
ANNUAL REPORT - 2018/19 D I R E C T O R S ’ R E P O R T | R E V I E W O F O P E R A T I O N S
CO MPANY SECRE TARY
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.
MEE TINGS OF DIREC TORS
The number of meetings of the Group’s Board of Directors (the ‘Board’) held during the year
ended 30 June 2019, and the number of meetings attended by each director were:
Peter Pawlowitsch
Peter Cook
Brandon Munro
Paul Burton
Kenneth Lai
Steven Zhou
Attended
Held
11
11
11
11
5
7
11
11
11
11
11
11
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.
P A G E 1 4
ANNUAL REPORT - 2018/19 R E V I E W O F 2 0 1 9 F I N A N C I A L R E S U L T S
D I R E C T O R S ’ R E P O R T | R E V I E W O F O P E R A T I O N S
The loss for the Group after providing for income tax amounted to $4,954,313 across all regions
to support growth.
The Group’s net asset position as at 30 June 2019 was $6,123,057 with $1,806,924 held in cash
or cash equivalents.
The loss of the Group for 30 June 2019 is summarised below:
Net loss from operations
(4,954,313)
(2,069,034)
2019
$
2018
$
Add
Interest
Less
Depreciation and amortisation
Finance charges
Tax and other indirect tax expenses
EBITDA
Less
Option expense
Due dilligence costs
EBITDA (underlying)*
Cash
(10,282)
(18,592)
389,337
75,664
245,006
290,682
22,433
61,599
(4,254,588)
(1,712,912)
386,085
497,853
136,629
818,218
(3,370,650)
(758,065)
1,806,924
4,509,142
Operating cash flow
(2,103,520)
(3,376,374)
* 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:
Share price at financial year end
2019
$
0.165
Total dividends declared (cents per share)
-
2018
$
0.225
-
2017
$
0.115
-
2016
$
0.14
-
Basic losses per share (cents per share)
(3.09)
(1.53)
(5.03)
(9.06)
D IVIDENDS
There were no dividends paid, provided nor declared as at 30 June 2019.
S ignifi cant cha nges i n the s tate of af fairs
Share Placements
On 29 March 2019, Novatti Group Limited announced the placement of 9,286,381 shares. This
placement to sophisticated investors raised $1.95M and was completed in order to further the
Company’s application for a restricted banking licence and working capital.
P A G E 1 5
ANNUAL REPORT - 2018/19 D I R E C T O R S ’ R E P O R T | R E V I E W O F O P E R A T I O N S
MATTERS SUBSEQUE NT TO THE EN D OF TH E
FINANC IAL YEAR
No other matter or circumstance has arisen since 30 June 2019 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.
LIK ELY DEVELOPME NTS AN D EX PECTE D RESULTS OF
O PERATIONS
The Group will continue its principal activity of sales and deploying the Novatti Platform,
transaction and billing services.
Novatti lodged its application to APRA for a restricted Authorised Deposit-Taking Institution (ADI)
or banking licence in November 2018. The focus of such a banking licence is to offer new banking
services to Australian customers with a focus on new migrants. Novatti is currently building future
banking services customers by way of its remittance services, Vasco prepaid card services and
its China Payments bill payment services. Novatti is regularly engaging with APRA as it continues
its review on Novatti’s bank licence application. In parallel, Novatti is continuing to expand its
banking services team in preparation for launch assuming a successful application. In line with its
growth strategy, the Company intends to apply for a full non-restricted ADI in due course.
The Group’s board is cognisent that significant funding is required to maintain the business plan
for the subsidiary that is seeking the bank licence. Novatti undertakes ongoing discussions with
strategic and financial partners that will support the bank licence and associated business plan.
Without appropriate funding, Novatti would need to review this business plan and reduce its
involvement in this project. Such a reduction would see that the activities for the bank licence
application and operations would largely be put on hold pending financing. At the date of this
report the board has a number of funding options for the bank licence opportunity.
EN VI RONMENTAL RE GULATION
The Group
Commonwealth or State law.
is not subject to any significant environmental regulation under Australian
P A G E 1 6
ANNUAL REPORT - 2018/19 D I R E C T O R S ’ R E P O R T | 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 )
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
PR INCIPLES USED TO DETERMIN E TH E N ATU RE AN D
A MOUNT OF REMUNE RATION
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
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.
NO N-EXEC UTI VE DIRECTORS’ REMUN ERATION
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 FY19 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.
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. The
current level of fees was approved at the Group’s 27 November 2018 Annual General Meeting.
P A G E 1 7
ANNUAL REPORT - 2018/19 D I R E C T O R S ’ R E P O R T | 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 )
EXE CUTIVE REMUNE RATION
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
Long-term incentives
The combination of these three components comprises the executive’s total remuneration.
The following table illustrates how the Group’s remuneration strategy aligns with the Group’s
strategic direction and links remuneration outcomes to performance:
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.
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
• Performance is assessed against a suite of financial
and non-financial measures relevant to the
success of the Company and generating returns for
shareholders
• Remuneration is competitive with companies of a
similar size and complexity
• Deferred and long-term remuneration is designed
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.
Short Term
Incentive
Is paid in cash.
Long Term
Performance
Equity including Options,
Shares and/or Rights.
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.
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.
P A G E 1 8
ANNUAL REPORT - 2018/19 D I R E C T O R S ’ R E P O R T | 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 )
D ETAI LS OF THE INCENTIVE PLAN S US ED :
S ho r t Term In c en tive program (STI)
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
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 page 21.
Lo ng Term In centi ve 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 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 FY19.
P A G E 1 9
ANNUAL REPORT - 2018/19 D I R E C T O R S ’ R E P O R T | 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 )
2019
Name
Start date
No. of Options
vested in 2019
No. of
Options
lapsed/
cancelled
Balance not
vested
Lapsing date
for Options
Peter Cook
27 Nov 2018
Alan Munday
12 Nov 2015
Steven Stamboultgis
12 Nov 2015
833,334
250,000
200,000
-
1,666,666
30 Nov 2022
250,000
200,000
-
-
30 June 2019
30 June 2019
Total
1,283,334
450,000
1,666,666
Refer to table on page 24 for details.
2018
Name
Start date
No. of Options
vested in 2018
Peter Cook
12 Nov 2015
Alan Munday
12 Nov 2015
Steven Stamboultgis
12 Nov 2015
Total
Refer to table on page 25 for details.
-
250,000
200,000
450,000
D ETAI LS OF R EMUNERATION
A moun ts of rem u nerati on
No. of
Options
lapsed/
cancelled
Balance not
vested
Lapsing date
for Options
-
-
-
-
-
30 June 2019
250,000
30 June 2019
200,000
30 June 2019
450,000
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
Other key management personnel
•
•
Alan Munday – Group Chief Operating Officer
Steven Stamboultgis – Chief Financial Officer
P A G E 2 0
ANNUAL REPORT - 2018/19 D I R E C T O R S ’ R E P O R T | 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 )
2019
Cash salary
& fees
Non-
monetary
Long
service
leave
Annual
leave
Share-based
payments exp in yr
equity – settled
Superan-
nuation
Total
Fixed rem At risk STI At risk LTI
Share-based
payments as a
proportion of
total rem
$
$
$
$
$
$
$
%
%
%
%
Non-Executive
Directors:
Peter Pawlowitsch
(Chairman)
Kenneth Lai
Paul Burton
104,560
-
-
Brandon Munro
38,814
Steven Zhou
33,485
Executive Directors:
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
131,833
6,940
243,333
46
52,733
52,733
-
-
52,733
52,733
79,100
3,687
121,601
52,733
3,181
89,399
-
-
35
41
Peter Cook
335,432
45,568
7,180
31,223
131,833
19,000
570,236
77
Other Key Manage-
ment Personnel:
Alan Munday
261,196
Steven Stamboultgis
191,781
-
-
4,956
(9,207)
2,854
3,930
-
-
20,531
277,476
100
18,219
216,784
100
965,268
45,568
14,990
25,946
500,965
71,558 1,624,295
-
-
-
-
-
-
-
54
100
100
65
59
54
100
100
65
59
23
23
-
-
-
-
2018
Cash salary
& fees
Non-
monetary
Long service
leave
Annual
leave
Share-based
payments exp in yr
equity – settled
Superan-
nuation
Total
Fixed rem At risk STI At risk LTI
Share-based
payments as a
proportion of
total rem
$
$
$
$
$
$
$
%
%
%
%
Non-Executive
Directors:
Peter Pawlowitsch
(Chairman)
Kenneth Lai
Paul Burton
59,361
-
-
Brandon Munro
36,530
Steven Zhou
26,429
Executive Directors:
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
12,903
5,639
77,903
83
5,919
70,432
-
-
5,919
70,432
-
-
12,903
3,470
52,903
76
-
2,571
29,000
100
Peter Cook
190,290
48,317
2,042
3,064
64,513
20,049
328,275
81
Other Key Manage-
ment Personnel:
Alan Munday
200,913
Steven Stamboultgis
164,384
-
-
1,717
3,565
9,677
19,543
235,415
1,287
10,939
7,742
15,616
199,968
96
96
677,907
48,317
5,046
17,568
184,089
66,888
999,815
-
-
-
-
-
-
-
-
17
100
100
24
-
19
4
4
17
100
100
24
-
19
4
4
P A G E 2 1
ANNUAL REPORT - 2018/19 D I R E C T O R S ’ R E P O R T | 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 )
S ER VICE AGREEME NTS
Remuneration and other terms of employment for key management personnel are formalised in
service agreements. Details of these agreements are as follows:
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 $400,000 (including statutory superannuation). 2.5M
incentive options exercisable at $0.19 upon the achievement of
three milestones. (Refer to the milestones listed under Share-based
compensation granted and issued below)
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 KPIs,
company remuneration policy, its financial position and current market
equivalent positions. KPIs to be agreed each year and may be varied by
mutual agreement.
None.
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 $300,000 (including statutory superannuation).
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 KPIs, company
remuneration policy, its financial position and current market equivalent
positions. KPIs to be agreed each year and may be varied by mutual
agreement.
None.
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 month’s
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.
P A G E 2 2
ANNUAL REPORT - 2018/19 D I R E C T O R S ’ R E P O R T | 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 )
Name:
Title:
Steven Stamboultgis
Chief Financial Officer
Agreement commenced:
20 November 2015
Term of agreement:
The term is not fixed.
Remuneration:
Annual Review
Bonus:
Termination:
Base salary of $210,000 (including statutory superannuation).
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 KPIs,
company remuneration policy, its financial position and current market
equivalent positions. KPIs to be agreed each year and may be varied by
mutual agreement.
None.
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 executive on one month’s notice, if Steven
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
ANNUAL REPORT - 2018/19 D I R E C T O R S ’ R E P O R T | 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 )
S HARE-BASED COMPE NSATION GRANTED AND ISSU ED
Options granted
The Group granted an aggregate of 9.5M options to directors with vesting linked to the achievements
of certain specified milestone events for the year ended 30 June 2019 as follows:
• Milestone 1: Options vest when the 20-day VWAP achieving a price greater than or equal
to 130% of the November 2018 20-day VWAP at any time during the period commencing 1
December 2018 and ending 30 November 2019 (inclusive). This milestone was achieved on 22
March 2019
• Milestone 2: Options vest when the 20-day VWAP achieving a price greater than or equal
to 160% of the November 2018 20-day VWAP at any time during the period commencing 1
December 2018 and ending 30 November 2020 (inclusive). This milestone is yet to be reached
• Milestone 3: Options vest when the 20-day VWAP achieving a price greater than or equal
to 190% of the November 2018 20-day VWAP at any time during the period commencing 1
December 2018 and ending 30 November 2021 (inclusive). This milestone is yet to be reached
•
The exercise price for the Incentive Options will be equal to the November 2018 20-day VWAP.
The incentive options will expire on 30 November 2022 after which date all of the incentive
options not yet exercised automatically lapse
•
The fair value of the options are valued at “grant date” using the Binomial model
No other shares or options were issued as part of compensation for the year ended 30 June 2019.
2019
Grant date
Grant
number
Fair value
per option
at grant
date
Opening
balance
Options
Opening
balance
vested
Balance
vested during
the yr
Options
lapsed
during yr
Value
Options
lapsed
during
the yr
Expiry date
First ex
date
Last ex date
Directors
Executive Directors
Peter Cook
Peter Cook
Other key manage-
ment personnel:
12 Nov 15
5,000,000
$0.20
5,000,000
5,000,000
-
5,000,000
292,655
30 Jun 19
12 Nov 15
30 Jun 19
27 Nov 18
2,500,000
$0.1947
-
-
833,334
-
-
30 Nov 22
22 Mar 19
30 Nov 22
Alan Munday
12 Nov 15
250,000
$0.20
250,000
250,000
Alan Munday
12 Nov 15
250,000
$0.20
250,000
250,000
-
-
250,000
16,300
30 Jun 19
1 Jul 16
30 Jun 19
250,000
16,300
30 Jun 19
1 Jul 17
30 Jun 19
Alan Munday
12 Nov 15
250,000
$0.20
250,000
-
250,000
250,000
16,300
30 Jun 19
1 Jul 18
30 Jun 19
Steven Stamboultgis
12 Nov 15
200,000
$0.20
200,000
200,000
Steven Stamboultgis
12 Nov 15
200,000
$0.20
200,000
200,000
-
-
200,000
11,706
30 Jun 19
1 Jul 16
30 Jun 19
200,000
11,706
30 Jun 19
1 Jul 17
30 Jun 19
Steven Stamboultgis
12 Nov 15
200,000
$0.20
200,000
-
200,000
200,000
11,706
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
-
1,000,000
58,531
30 Jun 19
12 Nov 15
30 Jun 19
Peter Pawlowitsch
27 Nov 18
2,500,000
$0.1947
-
-
833,334
-
-
30 Nov 22
22 Mar 19
30 Nov 22
Brandon Munro
12 Nov 15
1,000,000
$0.20
1,000,000
1,000,000
1,000,000
58,531
30 Jun 19
12 Nov 15
30 Jun 19
Brandon Munro
27 Nov 18
1,500,000
$0.1947
-
-
500,000
-
-
30 Nov 22
22 Mar 19
30 Nov 22
Kenneth Lai
31 May 16
375,000
$0.25
375,000
375,000
Kenneth Lai
31 May 16
375,000
$0.25
375,000
375,000
-
-
375,000
9,712
30 Jun 19
31 May 17
30 Jun 19
375,000
9,712
30 Jun 19
31 May 18
30 Jun 19
Kenneth Lai
27 Nov 18
1,000,000
$0.1947
-
-
333,334
-
-
30 Nov 22
22 Mar 19
30 Nov 22
Paul Burton
12 Nov 15
5,000,000
$0.20
5,000,000
5,000,000
Paul Burton
31 May 16
375,000
$0.25
375,000
375,000
Paul Burton
31 May 16
375,000
$0.25
375,000
375,000
-
-
-
5,000,000
292,655
30 Jun 19
12 Nov 15
30 Jun 19
375,000
9,712
30 Jun 19
31 May 17
30 Jun 19
375,000
9,712
30 Jun 19
31 May 18
30 Jun 19
Paul Burton
27 Nov 18
1,000,000
$0.1947
Steven Zhou
27 Nov 18
1,000,000
$0.1947
-
-
-
-
333,334
333,334
-
-
-
-
30 Nov 22
22 Mar 19
30 Nov 22
30 Nov 22
22 Mar 19
30 Nov 22
Total
24,350,000
14,850,000
14,400,000
3,616,670
14,850,000
825,238
P A G E 2 4
ANNUAL REPORT - 2018/19 D I R E C T O R S ’ R E P O R T | 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 )
2018
Grant date
Grant
number
Fair value
per option
at grant
date
Opening
balance
Options
Opening
balance
vested
Balance
vested during
the yr
Options
lapsed
during yr
Value
Options
lapsed
during
the yr
Expiry date
First ex
date
Last ex date
Directors
Executive Directors
Peter Cook
12 Nov 15
5,000,000
$0.20
5,000,000
5,000,000
Other key manage-
ment personnel
Alan Munday
12 Nov 15
250,000
$0.20
250,000
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
200,000
Steven Stamboultgis
12 Nov 15
200,000
$0.20
200,000
Steven Stamboultgis
12 Nov 15
200,000
$0.20
200,000
-
-
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 Lai
31 May 16
375,000
$0.25
375,000
375,000
-
-
250,000
-
-
200,000
-
-
-
-
Kenneth Lai
31 May 16
375,000
$0.25
375,000
-
375,000
Paul Burton
12 Nov 15
5,000,000
$0.20
5,000,000
5,000,000
Paul Burton
31 May 16
375,000
$0.25
375,000
375,000
-
-
Paul Burton
31 May 16
375,000
$0.25
375,000
Steven Zhou
-
-
-
-
-
-
375,000
-
Total
14,850,000
14,850,000
13,200,000
1,200,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
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
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 15
30 Jun 19
30 Jun 19
31 May 17
30 Jun 19
30 Jun 19
31 May 18
30 Jun 19
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
P A G E 2 5
ANNUAL REPORT - 2018/19 D I R E C T O R S ’ R E P O R T | 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 )
Options granted carry no dividend or voting rights.
9.5M options were granted to Directors during the year ended 30 June 2019.
Values of options over ordinary shares exercised and lapsed for Directors and other key
management personnel during the year ended 30 June 2019 are set out below:
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
2019
Name
Peter Pawlowitsch
Peter Cook
Brandon Munro
Kenneth Lai
Paul Burton
Steven Zhou
Alan Munday
Steven Stamboultgis
$
2,500,000
2,500,000
1,500,000
1,000,000
1,000,000
1,000,000
-
-
$
290,542
290,542
174,325
116,217
116,217
116,217
-
-
Total
9,500,000
1,104,060
$
-
-
-
-
-
-
-
-
-
$
58,531
292,655
58,531
19,424
312,079
-
48,900
35,118
825,238
2018
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
$
-
-
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
-
-
The factors that are considered to affect Total Shareholders Return (‘TSR’) are summarised below:
Share price at financial year end
Total dividends declared (cents per share)
2019
$
0.165
-
2018
$
0.225
2017
$
0.115
2016
$
0.14
-
-
-
Basic losses per share (cents per share)
(3.09)
(1.53)
(5.03)
(9.06)
P A G E 2 6
ANNUAL REPORT - 2018/19 D I R E C T O R S ’ R E P O R T | 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
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
A DDITIONAL DISCLOSURES RELATING TO KEY
MA NAGEMENT PERSONNEL
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
Op t ion h olding
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
Bal at the end
of the yr
Options over ordinary shares
Peter Pawlowitsch
1,000,000
2,500,000
Peter Cook
Brandon Munro
Kenneth Lai
Paul Burton
Steven Zhou
Alan Munday
Steven Stamboultgis
5,000,000
2,500,000
1,000,000
1,500,000
750,000
5,750,000
1,000,000
1,000,000
-
1,000,000
750,000
600,000
-
-
Total
14,850,000
9,500,000
-
-
-
-
-
-
-
-
-
1,000,000
2,500,000
5,000,000
2,500,000
1,000,000
1,500,000
750,000
5,750,000
1,000,000
1,000,000
-
1,000,000
750,000
600,000
-
-
14,850,000
9,500,000*
* For vesting conditions, please refer to page 24 'Share-based compensation granted and issued'.
O THER TRANSACTIONS WITH KEY MAN AG EMENT PERSON NEL
A ND THEIR RELATED PARTIES
S e r vic es
No other payments were made to Directors outside of their normal duties as Directors for Novatti Group Ltd.
P A G E 2 7
ANNUAL REPORT - 2018/19 D I R E C T O R S ’ R E P O R T | 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
Lo a ns from Direc tors:
Novatti Group Ltd entered into a loan agreement on 10 June 2019, for $600,000 with an entity
associated with Peter Pawlowitsch. The loan drawn down as at 30 June 2019 was $400,000. The
interest rate payable on the loan facility is 12% per annum. Repayment of the loan and accrued
interest occurred on 30 July 2019.
For further information on the terms of the loan agreement, refer to Note 22.
Cu rr ent an d n on-c urr ent liabilities to a Director:
There are no other current or non-current liabilities outstanding to Directors of the Group as at
30th June 2019.
This concludes the remuneration report, which has been audited.
S ha res un der opti on
Unissued ordinary shares of Novatti Group Limited under option at the date of this report are as
follows:
Grant date
12 Nov 15
12 Nov 15
12 Nov 15
Expiry date
30 Jun 19
30 Jun 19
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
Ex. price
$0.20
$0.20
$0.20
$0.20
$0.20
$0.20
$0.20
$0.25
Opening
number
under option
13,750,000
1,150,000
1,150,000
Expired
13,750,000
1,150,000
1,150,000
1,150,000
1,150,000
2,859,250
2,859,250
750,000
750,000
2,005,750
1,921,250
84,500
1,500,000
1,500,000
Options
converted to
Shares
-
Closing
number
under option
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,000,000
9,500,000*
24 Jun 16
30 Jun 19
$0.20
2,036,334
2,036,334
21 Jul 16
31 Dec 19
$0.20
1,000,000
27 Nov 18
30 Nov 22
$0.1957
9,500,000
-
-
Total
36,851,334
26,266,834
84,500
10,500,000
* See page 24 ‘Share-based compensation granted and issued’.
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.
S ha res issued u pon the exercis e of options
84,500 shares were issued by Novatti Group Limited during the year ended 30 June 2019 up to the
date of this report as a result of the exercise of options granted.
Ind em nity an d in sura nce of of ficers
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.
P A G E 2 8
A N N U A L R E P O R T - 2 0 1 8 / 1 9
D I R E C T O R S ’ R E P O R T | 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
IND EMNITY AND INSURANCE OF AU DITOR
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.
PR OCEEDINGS ON BEHALF OF THE GROUP
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.
NO N-AUDI T 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 20 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
• 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
A N N U A L R E P O R T - 2 0 1 8 / 1 9
P A G E 2 9
A copy of
the auditor’s
independence
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
26 September 2019
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
Peter Pawlowitsch
Chairman
www.novattigroup.com under the Corporate
Governance section.
P A G E 3 0
A N N U A L R E P O R T - 2 0 1 8 / 1 9
D I R E C T O R S ’ R E P O R T | 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
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
P A G E 3 1
ANNUAL REPORT - 2018/19 F I N A N C I A L R E P O R T
F I N A N C I A L R E P O R T
GE NERAL INFORMATION
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
Level 3,
461 Bourke 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
on the date of signing the attached Director’s Declaration.
P A G E 3 2
ANNUAL REPORT - 2018/19 F I N A N C I A L R E P O R T | C O N S O L I D A T E D S T A T E M E N T O F P R O F I T O R L O S S A N D O T H E R C O M P R E H E N S I V E I N C O M E
CO NSOLIDATED STATEME NT OF PR OFI T OR
LOS S AND OTHER COM PREHE NSIV E IN C OM E
For the year ended 30 June 2019
Note
Consolidated
2019
Consolidated
2018
4
4
$
8,416,464
473,938
8,890,402
$
5,421,432
942,252
6,363,684
Revenue
Other income
Total Revenue
Expenses
Client hosting fees and other direct services
Employee benefits
(1,879,065)
(7,684,661)
(741,864)
(5,244,607)
Depreciation and amortisation expense
11 & 12
Occupancy
Finance charges
Foreign currency translation (losses)/gains
Travel expenses
Marketing and selling expenses
Insurance
Data management expenses
Share of net profit of joint ventures accounted for
using the equity method
Accounting fees
Due diligence costs
Public company running costs
Other expenses
Loss before income tax expense
Income tax expense
Loss after income tax expense for the year
attributable to owners
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
(389,337)
(336,365)
(75,664)
(248,644)
(478,069)
(602,196)
(157,977)
(226,394)
(290,663)
(191,736)
(22,433)
75,750
(370,048)
(346,872)
(88,032)
(102,399)
(40)
(224)
(160,167)
(497,853)
(246,957)
(831,567)
(128,738)
(235,229)
(339,114)
(406,509)
(4,924,554)
(2,069,034)
5
(29,759)
-
(4,954,313)
(2,069,034)
102,049
471,892
(4,852,264)
(1,597,142)
2019
Cents
2018
Cents
Basic and diluted loss per share
29
(3.09)
(1.53)
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
ANNUAL REPORT - 2018/19
F I N A N C I A L R E P O R T | C O N S O L I D A T E D S T A T E M E N T O F F I N A N C I A L P O S I T I O N
C O N S O L I D A T E D S T A T E M E N T O F
F I N A N C I A L P O S I T I O N
As at 30 June 2019
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Financial assets – funds in trust
Other current assets
Total current assets
Non-current assets
Investments accounted for using the equity method
Other investments
Plant and equipment
Intangible assets
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Settlement and remittance funds payable
Unearned revenue
Loans
Employee benefits
Total current liabilities
Non-current liabilities
Employee benefits
Lease incentive
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Accumulated losses
Total equity
Note
Consolidated
2019
Consolidated
2018
$
$
6
8
7
9
10
11
12
13
14
15
22
16
17
1,806,924
4,287,947
3,754,633
612,511
4,509,142
4,155,983
2,210,873
162,450
10,462,015
11,038,448
5,224
800,000
623,124
4,645,343
6,073,691
4,969
-
142,507
3,236,191
3,383,667
16,535,706
14,422,115
4,641,419
3,754,633
937,160
402,506
508,095
10,243,813
51,502
117,334
168,836
10,412,649
6,123,057
2,419,725
2,210,873
660,532
-
358,067
5,649,197
23,767
-
23,767
5,672,964
8,749,151
24,074,324
22,234,239
2,180,965
1,692,831
(20,132,232)
(15,177,919)
6,123,057
8,749,151
The above statement of financial position should be read in conjunction with the accompanying
notes.
P A G E 3 4
ANNUAL REPORT - 2018/19 F I N A N C I A L R E P O R T | C O N S O L I D A T E D S T A T E M E N T O F C H A N G E S I N E Q U I T Y
C O N S O L I D A T E D S T A T E M E N T O F
C H A N G E S I N E Q U I T Y
For the year ended 30 June 2019
Consolidated
Share-
based
payment
reserve
$
Foreign
currency
translation
reserve
$
Accumu-
lated
losses
$
Issued
capital
$
Total
equity
$
Balance at 1 July 2018
22,234,239
1,265,108
427,723
(15,177,919)
8,749,151
Loss after income tax
expense for the year
Transactions with
owners in their capacity
as owners:
Shares issued during the
period net of transaction
costs
Vesting of share-based
payments
Foreign exchange
translation differences
-
-
-
(4,954,313)
(4,954,313)
22,234,239
1,265,108
427,723
(20,132,232)
3,794,838
1,840,085
-
386,085
-
102,049
-
-
-
1,840,085
386,085
102,049
Balance at 30 June 2019
24,074,324
1,651,193
529,772
(20,132,232)
6,123,057
For the year ended 30 June 2018
Consolidated
Share-
based
payment
reserve
$
Foreign
currency
translation
reserve
$
Accumu-
lated
losses
$
Issued
capital
$
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 net of transaction
costs
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
The above statement of changes in equity should be read in conjunction with the accompanying
notes.
P A G E 3 5
ANNUAL REPORT - 2018/19
F I N A N C I A L R E P O R T | C O N S O L I D A T E D S T A T E M E N T O F C A S H F L O W S
C O N S O L I D A T E D S T A T E M E N T O F
C A S H F L O W S
For the year ended 30 June 2019
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
Note
Consolidated
2019
Consolidated
2018
$
$
27,464,350
33,894,283
(30,380,369)
(37,266,137)
(35,496)
923,660
(75,665)
17,913
-
(22,433)
Net cash used in operating activities
28
(2,103,520)
(3,376,374)
Cash flows from investing activities
Payment for acquisition of Vasco Pay Pty Ltd
-
(150,000)
Payment for acquisition of investment partnership
(200,000)
-
Joint venture Hi Impact – Loan
Loans to investment businesses
Proceeds from sale of plant and equipment
Receipts of adjustments from basis2 purchase in FY18
Payments for banking licence
Payments for plant and equipment
Net cash used in investing activities
Cash flows from financing activities
Loans from related parties
Proceeds from issue of shares
Share issue transaction costs
Net cash provided from financing activities
-
(11,257)
(200,000)
-
-
(1,662,628)
(527,511)
(2,590,139)
400,000
1,972,094
(132,009)
2,240,085
-
1,502
242,935
(208,840)
(139,467)
(265,127)
-
7,542,060
(121,312)
7,420,748
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
(2,453,574)
3,779,246
4,509,142
654,146
(248,644)
75,750
Cash and cash equivalents at the end of the financial
year
6
1,806,924
4,509,142
The above statement of cash flows should be read in conjunction with the accompanying notes.
P A G E 3 6
ANNUAL REPORT - 2018/19 F I N A N C I A L R E P O R T | N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
N O T E S T O T H E F I N A N C I A L
S T A T E M E N T S
For the year ended 30 June 2019
NO TE 1. SIGNIFICANT ACCOUNTING POLICIES
S t at emen t of Com pl ia nce
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.
Ba s is of Preparation
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.
Crit i cal acc ounting 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.
Pa rent entity in forma tion
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 23.
Pri nc iples of c onsoli da tion
These are the financial statements of Novatti Group Limited (the ‘Company’) and its controlled
entities (the ‘Group’) as at 30 June 2019.
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
The ability to use its power over the investee to affect its returns
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.
P A G E 3 7
ANNUAL REPORT - 2018/19 F I N A N C I A L R E P O R T | C O N S O L I D A T E D S T A T E M E N T O F C A S H F L O W S
Ne w, rev ised or a mending accounting s tandards and
in te rpretati on s ad opted
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 financial year ended 30 June 2019.
Disclosures required by these standards that are deemed material have been included in this
financial report on the basis that they represent a significant change in the information from that
previously made available.
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 year ended 30 June
2019.
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
Measurement and classification
At the date of initial application, existing financial assets and liabilities of the Group were
assessed in terms of the requirements of AASB 9. In this regard, the Group has determined that
the adoption of AASB 9 has impacted on the classification of financial instruments as follows:
Class of Financial
Instrument
Measurement under AASB
139 (i.e. prior to 1 July 2018)
Cash and cash
equivalents
Trade and other
receivables
Loans and receivables
Loans and receivables
Funds held in trust
Loans and receivables
New measurement category
under AASB 9 (i.e. from 1 July
2018)
Financial assets at amortised
cost
Financial assets at amortised
cost
Financial assets at amortised
cost
Trade and other
payables
Financial liability at amortised
cost
Financial liability at amortised
cost
Investments
Fair value
Fair value with gains or losses
recognised through other
comprehensive income in
statement of profit or loss and
other comprehensive income
The change in classification has not resulted in any re-measurement adjustments at 1 July 2018.
Impairment of financial assets
In relation to financial assets carried at amortised cost, AASB 9 requires an expected credit loss
model to be applied as opposed to an incurred credit loss model under AASB 139.
For trade receivables, the Group applies the simplified approach permitted by AASB 9, which
requires expected lifetime losses to be recognised from initial recognition of the receivables.
While cash and cash equivalents are also subject to the impairment requirements of AASB 9, all
balances are assessed to have low credit risk as they are held with reputable financial institutions.
The Directors have assessed the requirements of AASB 9 and have determined there is no impact
on the Group for the financial year ended 30 June 2019.
AASB 15 Revenue from Contracts with Customers
AASB 15 replaces AASB 118, revenue and several revenue related interpretations. The new standard
had been first adopted from 1 July 2018. The Group has adopted the ‘Modified Retrospective’
method of transition under AASB 15 Revenue from Contracts with Customers.
The Group has undertaken a full assessment of the impact of AASB 15. Based on the Group’s
assessment, this standard has not had a material impact on the transactions and balances when it
was first adopted for this year ended 30 June 2019. For maintenance and support services where
P A G E 3 8
ANNUAL REPORT - 2018/19 F I N A N C I A L R E P O R T | N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
revenue is billed either yearly or quarterly in advance depending on the terms of the service
agreement, it is the practice of the Group to apportion revenue. Maintenance and support income
is apportioned across the period over which the customer consumes the service, such that any
unused portion of the annual or quarterly invoices will be deferred and recognised in the balance
sheet.
Revenue recognition
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.
To determine whether to recognise revenue the Group follows a five-step process:
1.
2.
3.
4.
5.
Identifying the contract with a customer
Identifying the performance obligations
Determining the transaction price
Allocating the transaction price to the performance obligations
Recognising revenue when/as performance obligations are satisfied
Revenue is recognised either at a point in time or over time when (or as) the Group satisfies
performance obligations by transferring the promised services to its customers.
The Group recognises contract liabilities for consideration received in respect of unsatisfied
performance obligations where applicable and reports these as other liabilities in the statement
of financial position. Similarly, if the Group satisfies a performance obligation before it receives
consideration, the Group recognises a receivable in its statement of financial position, depending
on whether something other than the passage of time is required before the consideration is due.
The Group derived the following revenue:
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 that are recognised at the stage of performance completion and the revenue
for ongoing maintenance and support, recognised on a straight-line basis, monthly over the
subscription term.
Billing solutions
Provision of technologically advanced billing and customer information system platforms for the
utilities industry. Yearly licence fees are amortised over the relevant year and professional services
revenue is recognised in the month the service is provided at that point in time.
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
•
•
•
•
Revenue from transaction sales are recognised in the month at the point in time for which the
transaction takes place.
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 for the financial year ended 30 June 2019.
Accrued revenue
Accrued revenue includes revenue from the sales of services unbilled as at 30 June 2019.
P A G E 3 9
ANNUAL REPORT - 2018/19 Other revenue
Other revenue is recognised at the time it is received or when the right to receive payment is
established.
Government grants
Government grants, including Research and Development revenues, are recognised at the point
in time where there is reasonable assurance that the grant will be received and all attached
conditions will be fulfilled.
Op e rating segm en ts
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.
Fin a nc ial I nstrum en ts
The Group’s financial instruments recognised in the statement of financial position consists of
trade receivables and payables, investments and cash held in trust for remittance and settlement
services.
Recognition and 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 including investments are initially measured at fair value.
Transactions costs are included as part of initial measurement, except for financial assets at fair
value through profit or loss.
Classification and subsequent measurement
The Group assesses its financial instruments and these are subsequently measured at amortised
cost using the effective interest method, or fair value through other comprehensive income or fair
value through profit or loss. 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.
Financial assets at fair value through profit or loss
Financial assets not measured at amortised cost or at fair value through other comprehensive
income are classified as financial assets at fair value through profit or loss. Typically, such financial
assets will be either: (i) held for trading, where they are acquired for the purpose of selling in the
short-term with an intention of making a profit, or a derivative; or (ii) designated as such upon
initial recognition where permitted. Fair value movements are recognised in profit or loss.
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 evidence that a
financial asset or Group of financial assets is impaired. Evidence includes significant 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 A G E 4 0
ANNUAL REPORT - 2018/19 Ca sh and ca sh equ iva lents
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.
Tra de an d other rec ei vable s
Trade receivables are initially recognised at fair value and subsequently measured at amortised
cost using the effective interest method, less any allowance for expected credit losses. Trade
receivables are generally due for settlement within 30 days.
The Group has applied the simplified approach to measuring expected credit losses, which uses a
lifetime expected loss allowance. To measure the expected credit losses, trade receivables have
been grouped based on days overdue.
Other receivables are recognised at amortised cost, less any allowance for expected credit losses.
Fo re ign cur rency tr ansl ation
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.
A N N U A L R E P O R T - 2 0 1 8 / 1 9
P A G E 4 1
Inc om e ta x
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.
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.
Pl an t and equipment
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
P A G E 4 2
ANNUAL REPORT - 2018/19 F I N A N C I A L R E P O R T | N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
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:
Plant and equipment
Leasehold fixtures and fittings at cost
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.
Int a ngible assets
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. The estimated useful lives for intangibles for
the current period are:
Customer lists
Intellectual Property: Technology – Billing Software
Vasco Pay brand
10 years
10 years
10 years
Intangible assets acquired in a business combination
Intangible assets, including customer lists, intellectual property and brand 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.
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
P A G E 4 3
ANNUAL REPORT - 2018/19
F I N A N C I A L R E P O R T | N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
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
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.
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.
Tra de an d other pa yab les
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.
Share-based payments
Equity-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 be 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.
P A G E 4 4
ANNUAL REPORT - 2018/19 Iss u ed 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.
Go o ds and Ser vi ces Ta x (‘GST’) and ot her similar taxes
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST
incurred is not recoverable from the tax authority. When it is not recoverable, it is then recorded
separately on the statement of profit or loss and other comprehensive income. 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.
Ne w Ac coun ting Stand ards and Interpretations not yet
ma n dator y or early a dopted
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 2019.
P A G E 4 5
ANNUAL REPORT - 2018/19 F I N A N C I A L R E P O R T | N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
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:
Standard
Mandatory date for annual
reporting periods beginning on
or after
Reporting period standard adopted by
the Group
AASB 16 Leases
1 January 2019
Interpretation 23 Uncertainty
over income tax treatments
1 January 2019
1 July 2019
1 July 2019
AASB 16 Leases
Management has considered the impact of AASB 16 – Leases and has prepared a detailed
calculation to quantify the impact as at the adoption date of 1 July 2019. AASB 16 introduces a
single lessee accounting model on the statement of financial position. As a result the Group, as a
lessee, from the application date will recognise right of use assets to represent its right to use the
underlying assets and lease liabilities to represent its obligation to make lease payments. Lessor
accounting remains similar to previous accounting policies.
The Group plans to apply AASB 16 using the modified retrospective approach. Based on the
analysis undertaken and the recent contractual terms for the leases entered into by the Group,
the standard is not expected to have a material impact on the transactions and balances in the
prior financial year. The expected cumulative impact of the implementation of this standard as at
1 July 2019 is set out below.
Total expected value of right of use asset
Total expected value of lease liability
Total expected impact to retained earnings
Total expected dollar value
1,748,557
1,829,951
(81,394)
P A G E 4 6
ANNUAL REPORT - 2018/19
F I N A N C I A L R E P O R T | N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
NO TE 2. CRITICAL ACCOUNTING JUDG MENTS,
ES T IMATES 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.
S ha re-ba sed p aym en t trans actions
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 either the Black-Scholes or Binomial models 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.
Va lu ation of Vasc o Pay brand
The Vasco Pay brand asset value has been calculated using the discounted cash flow method. A
discount rate of 10.75% has been applied in assessing its value. The brand name is expected to
generate cash flows via the attraction of customers to the credit card program manager offering.
Stannards was contracted to complete the valuation of the brand on behalf of the Group.
A ss essm ent of earn -outs payable f or Vasc o Pay Pty Lt d
The calculation of the earn-outs will be determined as per the agreed terms of contract. The Vasco
Pay business is transitioning itself into acting as a credit card program manager. The earn-outs
for FY20 and FY21 will be based on income generated from the new credit card program. As FY20
progresses and the new credit card program gains traction, the Directors of the Group will be in a
better position to determine whether the earn-outs can be provided for FY20 and FY21. Refer to
Note 26 'Business combination'.
E st imation of useful li ves of f inite lif e intangible as sets
The Group engages the services of expert consultants in order to determine the valuation, estimated
useful lives and related amortisation charges for its finite life intangible assets. Grant Thornton
was engaged to conduct the valuation on Customer lists and Intellectual Property Technology –
Billing Software and they provided the estimated useful lives for these assets. Stannards provided
the estimated useful life on the Vasco Pay brand as part of its valuation.
The useful lives could change significantly as a result of technical innovations or some other event.
The amortisation charge will increase where the useful lives are less than previously estimated
lives, or, technically obsolete or non-strategic assets that have been abandoned or sold will be
written off or written down.
Re c over y of deferred tax ass ets
Deferred tax assets are recognised for deductible temporary differences only if the Group
considers it is probable that future taxable amounts will be available to utilise those temporary
differences and losses. The directors have determined that the losses to date do not validate the
requirement to book any DTA for carry forward losses and will consider the recognition of DTAs
in future periods.
P A G E 4 7
ANNUAL REPORT - 2018/19 F I N A N C I A L R E P O R T | N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
Fa ir value and hier arc hy of financ ial inves tme nt as s ets
The Group is required to classify all assets and liabilities, measured at fair value, using a three
level hierarchy, based on the lowest level of input that is significant to the entire fair value
measurement, being: Level 1: Quoted prices (unadjusted) in active markets for identical assets or
liabilities that the entity can access at the measurement date; Level 2: Inputs other than quoted
prices included within Level 1 that are observable for the asset or liability, either directly or
indirectly; and Level 3: Unobservable inputs for the asset or liability. Considerable judgement is
required to determine what is significant to fair value and therefore which category the asset or
liability is placed in can be subjective.
The fair value of assets and liabilities classified as level 3 is determined by the use of valuation
models. These include discounted cash flow analysis or the use of observable inputs that require
significant adjustments based on unobservable inputs.
The financial asset investments acquired in FY19 have been classified by the Group in level 3.
These investments are in private entities where obtaining input values is not readily possible.
Input values recognised were based on judgement and most recent transaction values.
Refer to Note 18 for further information on how the financial asset investments have been
categorised and valued in accordance with the hierarchy.
Pro visi on for i mpair ment of receivable s
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.
P A G E 4 8
A N N U A L R E P O R T - 2 0 1 8 / 1 9
F I N A N C I A L R E P O R T | N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
NO TE 3. OPERATING SEGM ENT S
Id e n tification of repor tabl e operating s egments
The Group is organised into five operating business segments:
1. Novatti Platform, incorporating enterprise sales and Maintenance & Support via the
Novatti Platform
2. Billing Solutions, incorporating Basis2 operating under Novatti Incorporated
3.
Transaction Services incorporating Flexewallet Pty Ltd, Flexe Payments (South Africa) Pty
Ltd, Flexe Payments Ltd, Vasco Pay Pty Ltd
4. Banking, incorporating the banking services under Novatti B Holding Company Pty Ltd
5. Novatti Group Limited, 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.
Typ es of p roduc ts a nd ser vices
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.
Billing Solutions
Basis2 trading under Novatti Inc. provides a technologically advanced billing and CIS solution to
service providers in the utilities industry.
Transaction Processing
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: Offers 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.
Banking Services
Novatti B Holding Company Pty Ltd, on approval as a Restricted Authorised Deposit-Taking
Institution ('RADI') or its banking licence by APRA, Novatti B Holding Company Pty Ltd will offer
new banking services to Australian customers with a focus on the migrant demographic.
Int e r segment transa c tions
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.
P A G E 4 9
ANNUAL REPORT - 2018/19 F I N A N C I A L R E P O R T | N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
Op e rating segm en t information
Consolidated –
30 June 2019
Revenue
Sales to external
customers
Intersegment sales
Novatti
Platform
$
Billing
Solutions
$
Transaction
Services
$
Banking
Services
$
Novatti
Group
Limited
$
Total
$
2,289,873
2,224,146
3,902,445
Total sales revenue
2,289,873
2,224,146
3,902,445
Other revenue
-
-
-
Total revenue excluding
interest revenue
2,289,873
2,224,146
3,902,445
-
-
-
-
-
-
8,416,464
8,416,464
463,656
463,656
463,656
8,880,120
EBITDA
(1,771,002)
248,963
(1,793,756)
(66,231)
(872,562)
(4,254,588)
Depreciation and
amortisation
Interest revenue
Finance costs
Other costs
Profit/(loss) before
income tax expense
Income tax expense
Profit/(loss) after income
tax expense
(43,021)
(198,153)
(63,509)
4,760
-
15
(29,637)
(795)
(39,508)
(9,899)
(28,849)
(176,499)
-
-
-
-
(84,654)
(389,337)
5,507
10,282
(5,724)
(75,664)
-
(215,247)
(1,848,799)
21,166
(2,073,257)
(66,231)
(957,433)
(4,924,554)
-
(29,759)
-
-
-
(29,759)
(1,848,799)
(8,593)
(2,073,257)
(66,231)
(957,433)
(4,954,313)
Segment Assets
2,112,875
2,872,489
7,124,600
1,782,082
2,643,660
16,535,706
Segment Liabilities
2,427,419
472,741
6,204,495
Employee Benefits
4,678,844
42,287
2,397,542
-
-
1,307,994
10,412,649
565,988
7,684,661
Additions to non-
current assets (other
than financial assets,
deferred tax, post-
employment benefits
assets, rights under
insurance contracts)
518,568
-
8,942
1,662,628
-
2,190,138
For the breakdown of operating segment revenue into disaggregated revenue components, refer
to Note 4.
Revenue from Australian customers is $2,038,278 (FY18: $1,161,589).
Revenue from customers in other countries is $6,378,186 (FY18: $4,259,862).
Revenue from a single customer in a country other than Australia is $1,959,434 (FY18: $675,914).
P A G E 5 0
ANNUAL REPORT - 2018/19
F I N A N C I A L R E P O R T | N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
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
-
-
-
923,660
923,660
Total revenue excluding
interest revenue
2,062,654
1,580,475
1,778,303
923,660
6,345,092
EBITDA
(1,502,842)
216,581
(32,234)
(394,417)
(1,712,912)
Depreciation and
amortisation
Interest revenue
Finance costs
Other costs
Profit/(loss) before
income tax expense
Income tax expense
Profit/(loss) after income
tax expense
(22,903)
(183,126)
-
-
-
-
(19,106)
(698)
(1,773)
(2,091)
(8,576)
(50,931)
(84,634)
(290,663)
18,592
18,592
(856)
(20)
(22,433)
(61,618)
(1,546,942)
24,181
(84,938)
(461,335)
(2,069,034)
-
-
-
-
-
(1,546,942)
24,181
(84,938)
(461,335)
(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)
348,307
-
-
567,630
915,937
P A G E 5 1
ANNUAL REPORT - 2018/19
F I N A N C I A L R E P O R T | N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
NOTE 4. REVENUE
Sales revenue:
Platform
Billing Solutions
Transaction processing
Other revenue:
Interest
Other income
Timing of revenue recognition
Services provided
at point in time
Services provided
over time
Consolidated
2019
$
-
1,418,910
3,902,445
5,321,355
-
463,656
463,656
2,289,873
805,236
-
3,095,109
2,289,873
2,224,146
3,902,445
8,416,464
10,282
-
10,282
10,282
463,656
473,938
Revenue
5,979,791
2,910,611
8,890,402
Sales revenue:
Platform
Billing Solutions
Transaction processing
Other revenue:
Interest
Other income
Timing of revenue recognition
Services provided
at point in time
Services provided
over time
Consolidated
2018
$
-
812,487
1,778,303
3,362,778
-
923,660
923,660
2,062,654
767,988
-
2,062,654
2,062,654
1,584,475
1,778,303
5,421,432
18,592
18,592
18,592
923,660
942,252
Revenue
4,286,438
2,081,246
6,363,684
P A G E 5 2
ANNUAL REPORT - 2018/19 F I N A N C I A L R E P O R T | N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
NO TE 5 . INCOME TAX EXPENSE
Reconciliation of Income tax expense to prima facie tax
payable
Loss before Income Tax
Consolidated
2019
$
Consolidated
2018
$
(4,924,554)
(2,069,034)
Prima facie income tax on loss at the domestic tax rate of Novatti
Group Ltd of 27.5%
(1,354,252)
(568,984)
Adjustment for tax rate differences in foreign jurisdictions
Adjustment for tax payable in foreign jurisdictions
Adjustment for tax exempt research and development tax
incentive received
Adjustments from prior periods
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
23,800
27,395
9,899
-
(126,695)
(254,007)
20,546
(54,641)
-
-
107,563
291,252
21,075
(992,774)
814,248
520,084
(311,799)
-
-
(6,165)
4,358
71,148
583,923
2,889
(211,580)
1,121,245
(382,190)
(529,283)
(4,358)
6,166
Income tax expense
29,759
-
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
9,132,742
9,251,114
1,850,028
119,626
10,982,770
9,370,740
Potential tax benefit @ 27.5% (2018: 27.5%)
3,020,262
2,576,954
P A G E 5 3
ANNUAL REPORT - 2018/19 F I N A N C I A L R E P O R T | N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
NO TE 6. CURRENT ASSETS – CASH AND CASH
EQ UIVALENTS
Cash on hand
Cash at bank
Consolidated
2019
$
Consolidated
2018
$
7,910
1,799,014
1,806,924
6,914
4,502,228
4,509,142
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
Balance as per statement of cash flows
1,806,924
1,806,924
4,509,142
4,509,142
NO TE 7. POSI TION OF FUNDS IN TRUST
Reconciliation of the amounts displayed in the table below represent the 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 held in separate bank
accounts and are distributed under instructions within 24 hours.
Fu nds held for Settlement and Remittance
Settlement funds payable*
Remittance funds payable*
Cash and cash equivalents held in trust
Consolidated
2019
$
Consolidated
2018
$
1,934,582
1,820,051
3,754,633
1,498,840
712,033
2,210,873
* Refer to Note 14 Current liabilities – Settlement and Remittance funds payable
NO TE 8. CURRENT ASSETS – TRADE AND OTH ER
RE CEIVABLE S
Trade receivables
Consolidated
2019
$
Consolidated
2018
$
3,787,197
2,787,629
Imp ai rm ent of rec ei vables
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.
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 4
ANNUAL REPORT - 2018/19 F I N A N C I A L R E P O R T | N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
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
2019
$
1,462,811
Consolidated
2018
$
891,056
-
467,979
1,856,407
3,787,197
70,022
441,281
1,385,270
2,787,629
500,750
1,368,354
Total trade and other receivables
4,287,947
4,155,983
Management are of the opinion that these receivables are reflective of fair value and should not be
impaired.
Within the over 6 months overdue balance for FY19 and FY18 is a security deposit receivable. FY19 security
deposit receivable was $130,572 (AUD/USD $0.7023). Prior the value was $123,849 (AUD/USD $0.7405).
NO TE 9. OTHER CURRENT ASS ETS
Prepayments
Security term deposit
Loan to unlisted entity*
Other
Consolidated
2019
$
144,184
99,739
200,610
167,978
612,511
Consolidated
2018
$
73,715
33,233
-
55,502
162,450
* Terms of loan agreement include:
Principal amount: $200,000
Term: 12 months from the first drawdown. The loan was first drawn down on 20 May 2019.
Interest: 6%
Repayment: The principal is repayable at the expiry of the term. The borrower may extend the date for
repayment by up to 6 months. The borrower may repay all or any portion of the principal and interest prior
to the end of the loan term.
Conversion: Where the principal amount and interest has not been repaid within 6 months after the end
of term, as may be extended, the lender may convert some or all of the monies outstanding into fully paid
ordinary shares in the borrower.
Security: The borrower charges in favour of the lender all its right, title and interest in present and after
acquired property including any interest to grant a security interest. The charge continues to real property.
The borrower has no power to create any security in the collateral ranking in priority or equal rank to the
agreement without obtaining the lender's prior written consent.
NO TE 10. OTHE R INVESTMENT S
Investment in SendFX Pty Ltd*
Investment in Slice Payments Pty Ltd•
Consolidated
2019
$
560,000
240,000
800,000
Consolidated
2018
$
-
-
-
* SendFX has issued Novatti Group Ltd 200,000 shares for a deemed issue price of $1 and 360,000 shares in
consideration as payment for services provided.
• Slice Payments Pty Ltd has issued Novatti Group Ltd 300,000 shares in consideration as payment for services
provided for deemed issue.
Movements in fair value will occur in subsequent periods through the profit or loss. At 30 June
2019, fair value was equal to cost.
P A G E 5 5
ANNUAL REPORT - 2018/19 F I N A N C I A L R E P O R T | N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
NO TE 11. NON-CURRE NT ASSETS – PLANT AND
EQ UIPMENT
Plant and equipment – at cost
Less: accumulated depreciation
Leasehold fixtures and fittings – at cost
Less: accumulated depreciation
Consolidated
2019
$
626,781
Consolidated
2018
$
568,824
(471,657)
155,124
(432,253)
136,571
495,636
(27,636)
468,000
41,005
(35,069)
5,936
Total plant and equipment
623,124
142,507
Re c onc il iations
Reconciliations of the written down values at the beginning and end of the current and previous
financial year are set out below:
2019
Gross carrying amount
Balance 1 July 2018
Additions
Disposals
Balance 30 June 2019
Accumulated depreciation
Balance 1 July 2018
Disposals
Depreciation expense
Balance 30 June 2019
Net book value
As at 1 July 2018
Balance 30 June 2019
Plant &
Equipment at cost
$
Leasehold Fixtures
& Fittings at cost
$
Total
$
568,824
57,957
-
626,781
41,005
469,553
(14,922)
495,636
609,829
527,510
(14,922)
1,122,417
(432,253)
(35,069)
(467,322)
-
(39,404)
(471,657)
14,922
(7,489)
14,922
(46,893)
(27,636)
(499,293)
136,571
155,124
5,936
468,000
142,507
623,124
P A G E 5 6
ANNUAL REPORT - 2018/19
F I N A N C I A L R E P O R T | N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
2018
Gross carrying amount
Balance 1 July 2017
Additions
Disposals
Balance 30 June 2018
Accumulated depreciation
Balance 1 July 2017
Disposals
Depreciation expense
Balance 30 June 2018
Net book value
As at 1 July 2017
Balance 30 June 2018
Plant &
Equipment at cost
$
Leasehold Fixtures
& Fittings at cost
$
Total
$
436,513
139,468
(7,157)
568,824
(420,297)
6,708
(18,664)
(432,253)
41,005
-
-
41,005
477,518
139,468
(7,157)
609,829
(30,830)
(451,127)
-
(4,239)
(35,069)
6,708
(22,903)
(467,322)
16,216
136,571
10,175
5,936
26,391
142,507
NO TE 12. INTANGIBLES
Intangible assets – at cost
Less: accumulated amortisation
Consolidated
2019
$
Consolidated
2018
$
5,305,858
(660,515)
4,645,343
3,471,652
(235,461)
3,236,191
P A G E 5 7
ANNUAL REPORT - 2018/19
F I N A N C I A L R E P O R T | N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
2019
Balance 1 July 2018
Foreign exchange translation
difference*
Reclassification of Goodwill
to Brand Asset•
Additions
Disposals
Goodwill
$
569,630
-
-
-
(567,630)
567,630
-
-
-
-
Brand
Asset
$
Intel-
lectual
Property
$
Custom-
er Lists
$
Licences
$
Software
$
Website
$
Total
$
847,000
1,846,182
208,840
-
-
-
-
171,578
-
-
-
-
-
-
-
-
-
3,471,652
171,578
-
-
-
1,453,023
200,000
9,605
1,662,628
-
-
-
-
Balance 30 June 2019
2,000
567,630
847,000
2,017,760
1,661,863
200,000
9,605
5,305,858
Accumulated amortisation
Balance 1 July 2018
Amortisation expense
Foreign exchange translation
difference*
Balance 30 June 2019
Net book value
As at 1 July 2018
-
-
-
-
-
(93,003)
(142,458)
(59,637)
(84,654)
(198,153)
-
-
(82,610)
(59,637)
(177,657)
(423,221)
-
-
-
-
569,630
-
753,997
1,703,724
208,840
-
-
-
-
-
-
-
-
-
-
(235,461)
(342,444)
(82,610)
(660,515)
3,236,191
Balance 30 June 2019
2,000
507,993
669,343
1,594,539
1,661,863
200,000
9,605
4,645,343
* In accordance with AASB 121 the foreign exchange variance between the cost of the Intangible Asset and accumulated amortisation for
the period is AUD 88,968. This is a result of the conversion of the carrying amount of Customer Lists from USD 1,119,897 to AUD 1,594,539,
using an exchange rate average over the period of AUD 0.7148 to USD 1.
• Please refer to Note 26 ‘Business combination’.
Major additions to intangible assets over the financial reporting period ended 30 June 2019;
include additions to licences, software and website. These additions relate to the costs incurred in
pursuit of the Group’s RADI application, which is in the process of being approved by APRA. These
costs will not be amortised as the life of the banking licence is infinite. Costs in relation to the
software and website will begin to be amortised when the RADI is granted. The banking licence
will be subject to impairment testing from the time it has been granted.
2018
Balance 1 July 2017
Additions
Balance 30 June 2018
Accumulated amortisation
Balance 1 July 2017
Amortisation expense
Foreign exchange
translation difference
Balance 30 June 2018
Net book value
As at 1 July 2017
Balance 30 June 2018
Goodwill
$
2,000
567,630
569,630
Intellectual
Property
$
Customer
Lists
$
Licences
$
Total
$
847,000
1,846,182
-
2,695,182
-
-
208,840
776,470
847,000
1,846,182
208,840
3,471,652
(20)
20
-
-
(8,349)
(18,199)
(84,654)
(183,126)
-
58,867
(93,003)
(142,458)
1,980
569,630
838,651
753,997
1,827,983
1,703,724
-
-
-
-
-
(26,568)
(267,760)
58,867
(235,461)
2,668,614
208,840
3,236,191
P A G E 5 8
A N N U A L R E P O R T - 2 0 1 8 / 1 9
F I N A N C I A L R E P O R T | N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
NO TE 13. CURRENT LIABILITIES – TRADE AND OTH ER
PAYABLES
Trade payables
Accrued expenses
Lease incentive
Consolidated
2019
$
Consolidated
2018
$
3,592,651
1,038,221
10,547
1,748,011
671,714
-
4,641,419
2,419,725
NO TE 14. CURRENT LIABILITIES – SETTLEMENT AND
RE MITTANCE FUNDS PAYABLE
Settlement funds payable*
Remittance funds payable*
Consolidated
2019
$
Consolidated
2018
$
1,934,582
1,820,051
3,754,633
1,498,840
712,033
2,210,873
* Client Funds held for Settlement and Remittance, refer to Note 7.
All amounts are short term and the carrying values are considered to be a reasonable approximation
of fair value.
NO TE 15. CURRENT LIABILITIES – UN EARN ED REVENU E
Revenue billed in advance
Reconciliation of the values at the beginning and end of the
current and previous financial year
Are set out below:
Consolidated
2019
$
Consolidated
2018
$
937,160
660,532
Opening balance
Amounts billed in advance during the year
660,532
3,008,561
565,272
2,153,274
Transfer to revenue – performance obligations satisfied
(2,731,933)
(2,058,014)
937,160
660,532
A N N U A L R E P O R T - 2 0 1 8 / 1 9
P A G E 5 9
F I N A N C I A L R E P O R T | N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
NO TE 16. EQUITY – ISSUED CAPITAL
Mo v ements i n ordin ar y share c apital
Ordinary shares
No.
$
Opening Balance
Beginning of the period 1 July 2018
157,508,333
22,234,239
Fully paid ordinary shares on exercise of options – 28 February
2019•
84,500
21,954
Placement to further the Company’s application for a restricted
banking licence – 29 March 2019
Placement fee to corporate adviser for share placement
9,286,381
1,950,140
(132,009)
Closing Balance – 30 June 2019
166,879,214
24,074,324
• For further information, please refer to the ASX ‘Announcements’ web page dated 28 February 2019.
On 18 March, the Group secured approximately $2M to further its application for a restricted
banking licence and additional working capital. On 29 March, $1.95M was received from
professional and sophisticated investors at an issue price of $0.21. The Chairman has also
subscribed to the placement for approximately 238,096 shares at $50,000, subject to shareholder
approval at the Group’s FY19 Annual General Meeting.
Ord i nar y shares
Ordinary shares entitle the holder to participate in dividends, when declared 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.
S ha re buy- bac k
There is no current on-market share buy-back.
Op t ions
Information is set out in Note 30 relating to options issued, exercised and lapsed during the
financial year and options outstanding at the end of the financial year.
Ca p ital risk managem ent
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 6 0
ANNUAL REPORT - 2018/19 F I N A N C I A L R E P O R T | N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
NO TE 17. EQUITY – RESERVE
Option reserve
Foreign currency reserve
Consolidated
2019
$
Consolidated
2018
$
1,651,193
529,772
2,180,965
1,265,108
427,723
1,692,831
Op t ion reser ve
he 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.
On the 27th November 2018 at the Notice of Annual General Meeting (AGM) of shareholders,
9.5M unlisted incentive options were approved to be issued to Group’s Directors at an exercise
price of $0.19.
In accordance with Resolution 9 of the AGM the incentive options will be issued free of charge
and within one month after the date of the meeting, options issued to directors will be exercisable
upon the successful completion of three milestones:
•
•
Options that are linked to a specific milestone will not “vest” unless and until the relevant
milestone has been achieved within the prescribed timeframe or a “change of control
event” occurs during that period. If neither of these events occurs within the prescribed
timeframe, then the relevant number of incentive options will automatically lapse
In addition, all “unvested” options will be forfeited and automatically lapse upon the
recipient terminating or being removed from their role with the Company, unless the
Board determines otherwise
See the terms and conditions in Schedule 3 of the Notice of 2018 AGM for further details.
Details of these milestones and timeframes for achievement are as follows:
Milestone 1: The 20-day VWAP achieving a price greater than or equal to 130% of the
November 2018 20-day VWAP at any time during the period commencing 1 December 2018
and ending 30 November 2019 (inclusive).
Milestone 2: The 20-day VWAP achieving a price greater than or equal to 160% of the
November 2018 20-day VWAP at any time during the period commencing 1 December 2018
and ending 30 November 2020 (inclusive).
Milestone 3: The 20-day VWAP achieving a price greater than or equal to 190% of the
November 2018 20-day VWAP at any time during the period commencing 1 December 2018
and ending 30 November 2021 (inclusive).
The exercise price for the incentive options will be equal to the November 2018 20-day VWAP. The
incentive options will expire on 30 November 2022 after which date all of the incentive options
not yet exercised automatically lapse.
The fair value of the options is valued at “grant date” using the binomial model.
Fo re ign cur rency reser ve
The reserve is used to recognise exchange differences arising from the translation of the financial
statements of foreign operations to Australian dollars.
P A G E 6 1
ANNUAL REPORT - 2018/19 F I N A N C I A L R E P O R T | N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
NO TE 18. FINANCIAL INSTRUMEN TS
Fin a nc ial risk m ana gement objec tive s
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.
Pri nc ipal fi nan cial in struments
The principal financial instruments used by Novatti Group, from which financial instrument risk
arises, are as follows:
•
•
•
•
Cash at bank and on deposit
Trade receivables
Trade and other payables
Investments
Client funds held for settlement and remittance are not recognised as financial instruments as the
net value of the two net off in total.
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.
Investments
Investment risk arises from the Group’s investment in unlisted entities. Values are initially
recorded at cost and are subsequently measured at fair value through the statement of profit or
loss and other comprehensive income. Refer to Note 10 and within this note.
P A G E 6 2
ANNUAL REPORT - 2018/19 F I N A N C I A L R E P O R T | N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
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 2019, the financial liabilities of the Group include:
•
•
•
Trade and other payables. For further details including breakdown of balances, refer to
trade and other payables in Note 13 for a breakdown of account balances
Lease commitments. Refer to Note 21 for a summary of the contractual maturities of
commitments
Related party loan. Refer to Note 22
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, accounts receivable and payable accounts
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 3
ANNUAL REPORT - 2018/19 F I N A N C I A L R E P O R T | N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
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
Trade receivables
Trade payables
2019
CAD
2,632,819
475,365
(1,327,733)
1,780,451
Consolidated
Nominal amounts
Cash at bank and on
term deposit
Trade receivables
Trade payables
2018
CAD
2,664,941
5,798
(878,411)
1,792,328
The following tables below illustrate the sensitivity of the net result for the year and equity in
regard 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 2019. 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:
If the Australian dollar had weakened against
the CAD by 5% then this would have had the
following impact on profit and other equity:
Consolidated
2019
2018
Consolidated
2019
Profit after tax
(84,783)
(85,349)
Profit after tax
93,708
Other equity
-
-
Other equity
-
2018
94,333
-
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 sensitivity analysis – Other currencies (USD)
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
Trade receivables
Trade payables
2019
USD
74,606
2,248,852
(135,958)
2,187,500
Consolidated
Nominal amounts
Cash at bank and on
term deposit
Trade receivables
Trade payables
2018
USD
741,007
2,358,866
(204,907)
2,894,966
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.
P A G E 6 4
ANNUAL REPORT - 2018/19 F I N A N C I A L R E P O R T | N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
If the Australian dollar had strengthened
against the USD by 5% then this would have
had the following impact on profit and 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
2019
2018
Consolidated
2019
2018
Profit after tax
(104,167)
(137,856)
Profit after tax
115,132
152,367
Other equity
-
-
Other equity
-
-
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
Trade receivables
Trade payables
2019
EUR
630,209
437,713
(819,300)
248,622
Consolidated
Nominal amounts
Cash at bank and on
term deposit
Trade receivables
Trade payables
2018
EUR
590,726
375,928
(153,775)
812,879
If the Australian dollar had strengthened
against the EUR by 5% then this would have
had the following impact on profit and other
equity:
If the Australian dollar had weakened against
the EUR by 5% then this would have had the
following impact on profit and other equity:
Consolidated
2019
2018
Consolidated
2019
Profit after tax
(11,839)
(38,709)
Profit after tax
13,085
Other equity
-
-
Other equity
-
2018
42,783
-
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F I N A N C I A L R E P O R T | N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
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
Trade receivables
Trade payables
2019
GBP
6,863
7,437
(37,965)
(23,665)
Consolidated
Nominal amounts
Cash at bank and on
term deposit
Trade receivables
Trade payables
2018
GBP
6,770
13,287
(37,795)
(17,738)
If the Australian dollar had strengthened
against the GBP by 5% then this would have
had the following impact on profit and other
equity:
If the Australian dollar had weakened against
the GBP by 5% then this would have had the
following impact on profit and other equity:
Consolidated
2019
Profit after tax
1,127
Other equity
-
2018
845
-
Consolidated
2019
Profit after tax
(1,246)
Other equity
-
2018
(934)
-
Price risk
The Group is exposed to other price risk on its investments in unlisted entities. These investments
are classified on the statement of financial position as investment assets initially recorded at cost
and are subsequently measured at fair value through the statement of profit or loss and other
comprehensive income. The investments are in two different entities. The assets and liabilities
within these investments indirectly expose the Group to equity price risks. It is not considered
practicable to ‘look through’ the investments to analyse these risks in detail. These investments
were acquired in the FY19 year.
If the fair value of investments increased by 10% this would have increased other income for
both the Group by $80,000. A decrease of 10% would have reduced other income by the same
amount.
Investments measured at fair value in the statement of financial position are grouped into three
levels of a fair value hierarchy:
Level 1 – the instrument has quoted prices (unadjusted) in active markets for identical
assets or liabilities
Level 2 – a valuation technique is applied using inputs other than quoted prices within
Level 1 that are observable for the financial instrument, either directly (i.e. as prices), or
indirectly (i.e. derived from prices)
Level 3 – a valuation technique is applied using inputs that are not based on observable
market data (unobservable inputs)
2019
Assets
Shares in unlisted entities
Level 1
Level 2
Level 3
$
-
-
$
-
-
$
800,000
800,000
Total
$
800,000
800,000
The value of the $800,000 is made up of three components:
1.
2.
3.
$360,000 relates to an agreed $1 per share for professional services to be provided over
the FY20 year.
$200,000 relates to the acquisition of shares at $1 per share.
$240,000 equates to $0.80 per 1 share, of which the Group was compensated, (and
received 300,000 shares) for providing professional services.
P A G E 6 6
ANNUAL REPORT - 2018/19 F I N A N C I A L R E P O R T | N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
NO TE 19. KEY MANAGEMENT P ERSONN EL DISC LOSURES
Co mpensa tion
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
2019
$
Consolidated
2018
$
1,036,782
71,558
14,990
500,965
1,624,295
743,792
66,888
5,046
184,089
999,815
NO TE 20. REMUNE RATION OF AUD ITORS
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 of the 30 June 19 financial statements
Review of the 31 December 18 financial statements
Other services – William Buck
Preparation of the tax return and associated tax services
(including R&D)
Investigative consulting
NO TE 21. COMMITM ENTS
Capital commitments – operating
Committed at the reporting date but not recognised as liabilities,
payable:
• Within one year
• One to five years
• More than five years
Consolidated
2019
$
Consolidated
2018
$
44,540
35,000
79,540
58,905
11,970
150,415
33,312
16,300
49,612
26,700
1,925
78,237
Consolidated
2019
$
Consolidated
2018
$
256,899
1,829,951
-
215,158
1,085,749
-
2,086,850
1,300,907
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.
P A G E 6 7
ANNUAL REPORT - 2018/19 F I N A N C I A L R E P O R T | N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
NO TE 22. RELATED PARTY TRANSACTIONS
Ke y managem ent p ersonnel
Disclosures relating to key management personnel are set out in the remuneration report and also
within Note 19.
Pa rent and ultim ate c ontrolling 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 a ns from Direc tors
Novatti Group Ltd entered into a short-term loan agreement with an entity associated with Peter
Pawlowitsch on June 2019. The term of the loan is 3 months from the date of the first drawdown
notice.
The facility amount of the loan is $600,000.
The loan up to an aggregate of the facility amount may be drawn down at any time and from time
to time up to a maximum of 6 times during the term in amounts of no less than $50,000.
Interest is payable at 12% per annum beginning the day of the first drawdown and the loan is
unsecured. The loan does not have any equity conversion rights.
During the term, the Group must prepay as much of all or any portion of the principal amount
drawn down and any interest outstanding out of the receipt of funds from:
(a) The ATO for taxation refunds in respect of the R&D grant in associated with income tax
returns for the FY18 financial year.
(b) Receipts from material debtor(s) as these may occur.
All such repayments must be made within 5 days upon the receipt of funds from the FY18 income
tax refunds and or receipts from the material debtor.
Loan drawdown as at 30 June 2019 was $400,000, with interest payable of $2,506. Total payable
is $402,506 as at 30 June 2019. Repayment of the loan and accrued interest occurred on 30 July
2019.
There are no other loans that were entered into or, outstanding with any other Director of Novatti
Group Ltd as at 30 June 2019.
Cu rr ent an d n on-c urr ent liabilities to a Director
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 a ns to/from related par ties
Loan provided to the Group’s joint venture partner, Hi Impact. This loan agreement is for a total
of USD 18,335 (AUD 29,940) as at 30 June 2019 (FY18, USD 18,335 (AUD 24,762)). 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.
Terms and c on diti ons
All transactions were made on normal commercial terms and conditions and not at market rates.
P A G E 6 8
ANNUAL REPORT - 2018/19 F I N A N C I A L R E P O R T | N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
NO TE 23. PARENT ENTITY INFORMATION
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.
Statement of profit or loss and other comprehensive income
Loss after income tax
Total comprehensive loss
S t at emen t of fina nc ia l position
Total current assets
Total assets
Total current liabilities
Total liabilities
Equity
Issued capital
Performance share reserve
Reserves
Accumulated losses – Opening
Losses incurred for the year
Parent
2019
$
(964,177)
(964,177)
Parent
2018
$
(476,838)
(476,838)
Parent
2019
$
Parent
2018
$
1,172,317
3,297,158
27,413,112
25,220,460
1,307,994
1,307,994
337,334
377,334
26,991,327
25,151,243
600,000
1,651,193
600,000
1,265,108
(2,173,225)
(1,696,387)
(964,177)
(476,838)
(3,137,402)
(2,173,225)
Total equity
26,105,118
24,843,126
NO TE 24. CONTINGENT LIABIL IT IES
Co nt in gent liabilities
There exists a bank guarantee for offices leased in Melbourne. As at 30 June 2019, this totalled
$78,031 (FY18 $33,233). No other guarantees exist.
The parent entity had no contingent liabilities as at 30 June 2019.
Ca p ital com mitm en ts – plant and equipment
The legal parent entity had no capital commitments for plant and equipment as at 30 June 2019.
S ignifi cant accou n ting policies
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
P A G E 6 9
ANNUAL REPORT - 2018/19 F I N A N C I A L R E P O R T | N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
NO TE 25. 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
2019
Ownership
interest
2018
%
%
Name
Novatti Group Ltd Subsidiaries
Novatti Pty Ltd
Flexe Payments Ltd
Flexe Payments Pty Ltd
Flexe Payments (MLT) Ltd
Novatti Commerce Solutions Inc.
Novatti Commerce Solutions (MLT) Ltd
Australia
United Kingdom
South Africa
Malta
Canada
Malta
Novatti Technologies Ltd
United Kingdom
Novatti Inc.
Vasco Pay Pty Ltd
Novatti B Holding Pty Ltd*
Novatti IBA Pty Ltd*
Novatti Billing Solutions Pty Ltd*
Flexe Payments (AUS) Pty Ltd*
UAB Novtec Global*
Novatti Pty Ltd Subsidiaries
Flexewallet Pty Ltd
Flexewallet (NZ) Ltd
TransferBridge Pty Ltd
United States of America
Australia
Australia
Australia
Australia
Australia
Lithuania
Australia
New Zealand
Australia
* Entities that were newly incorporated in FY19 and not acquired.
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
-
-
-
-
-
100%
100%
100%
P A G E 7 0
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F I N A N C I A L R E P O R T | N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
NO TE 26. BUSI NESS COMBINATION
A cq u is ition of Vasc o Pay Pty Ltd on t he 8th June 201 8
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
2018
$
150,000
408,000
558,000
Cash at bank
Cash on hand
Tax liabilities
Other liabilities
Goodwill
Vasco Brand Name
Total consideration
Final Fair Value
2019
$
15,218
200
(48)
(25,000)
-
567,630
558,000
Provisional Fair Value
2018
$
15,218
200
(48)
(25,000)
567,630
-
558,000
The net assets of Vasco Pay Pty Ltd had been stated at provisional fair value as at 30 June 2018.
A full assessment of the net assets and goodwill had been completed during FY19 and the Board
have determined that there is a value attached to its brand name. An independent valuation has
been conducted and the estimated fair value attached to the Vasco brand is $567,630.
S u mm ar y of ac qu isition
Earn-outs
The acquisition of Vasco Pay included an earn-out consideration. The earn-outs are:
•
•
The first earn-out is the 30 June 2020 EBITDA multiplied by 1.225
The second earn-out is the 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
The determination of a dispute to the certification of the period’s accounts
Vasco Pay is transitioning itself into acting as a credit card program manager. As the business will
be operating in a different market segment than previously, historical performance information
will be not be a reliable measure in valuing the earn-outs for FY20 and FY21.
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,
P A G E 7 1
ANNUAL REPORT - 2018/19 F I N A N C I A L R E P O R T | N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
in the event that the actual number of active cards as at:
•
•
•
•
•
•
•
•
•
31 December 2018 is below 5,487
30 June 2019 is below 13,231
31 December 2019 is below 20,180
30 June 2020 is below 28,414
31 December 2020 is below 37,027
30 June 2021 is below 46,241
31 December 2021 is below 55,738
30 June 2022 is below 65,752
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.
NO TE 27. EVENTS AFTER TH E REPORTING PERIOD
The Group’s board is aware that significant funding is needed to continue with the business plan
for the subsidiary seeking the ADI licence with APRA. The board undertakes ongoing discussions
with strategic and financial partners that would support the bank licence and associated business
plan. Without appropriate funding, the Group will need to review this business plan and reduce
its involvement in this project. Consequently, the bank licence application and related operations
would largely be put on hold pending financing. At the date of this report the board has a number
of funding options for the bank licence opportunity.
There are no other matters or circumstances that have arisen since 30 June 2019 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.
NO TE 28. RECONC ILIATION OF PROF IT AF TER IN COME
TAX TO NET C ASH FROM OPERATING ACTIVITIES
Loss after income tax expense for the year
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:
Consolidated
2019
$
Consolidated
2018
$
(4,954,313)
(2,069,034)
389,337
5,053
386,085
248,644
-
-
290,682
516,656
258,719
(75,750)
(417,630)
(1,054)
(Increase)/decrease in trade and other receivables
(2,398,156)
(2,763,054)
Increase/(decrease) in trade and other payables
Increase/(decrease) in deferred income
Increase/(decrease) in employee benefits
3,765,439
276,628
177,763
905,723
95,260
(116,893)
Net cash from operating activities
(2,103,520)
(3,376,374)
P A G E 7 2
ANNUAL REPORT - 2018/19 F I N A N C I A L R E P O R T | N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
NO TE 29. EARNINGS PER SH ARE
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
non-dilutive whilst is the Group is in a loss position
Basic and diluted earnings per share
Consolidated
2019
$
Consolidated
2018
$
(4,954,313)
(2,069,034)
(4,954,313)
(2,069,034)
2019
No. of ordinary
shares
2018
No. of ordinary
shares
159,902,694
135,436,622
35,005,520
30,406,378
2019
Cents
(3.09)
2018
Cents
(1.53)
NO TE 30. SHARE-BASED 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 options granted in FY19 were calculated based on the Binomial model method of calculation
for share-based payments.
The inputs for the options granted in FY19 are listed below:
•
•
•
•
Grant date – 27 November 2018
Expiry date – 30 November 2022
Volatility – 80%
Risk free rate – 2.21%
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.
P A G E 7 3
ANNUAL REPORT - 2018/19 Grant date
Vesting date
Expiry date
Exercised
price
Expected
volatility
Risk free
rate
Expected
dividend
yield
Balance at
start
Granted
during yr
Exercised
during year
Expired
during year
Balance at
end
12 Nov 15
12 Nov 15
30 Jun 19
12 Nov 15
12 Nov 15
12 Nov 15
8 Jan 16
3 Feb 16
1 Jul 16
1 Jul 17
1 Jul 18
30 Jun 19
30 Jun 19
30 Jun 19
8 Jan 16
30 Jun 19
3 Feb 17
30 Jun 19
8 Feb 16
8 Feb 16
30 Jun 19
31 May 16
31 May 17
30 Jun 19
31 May 16
31 May 18
30 Jun 19
24 Jun 16
24 Jun 17
30 Jun 19
24 Jun 16
24 Jun 18
30 Jun 19
24 Jun 16
24 Jun 19
30 Jun 19
21 Jul 16
21 Jul 16
21 Jul 16
21 Jul 17
31 Dec 19
21 Jul 18
31 Dec 19
21 Jul 19
31 Dec 19
27 Nov 18
Variable*
30 Nov 22
$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
$0.19
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%
57.74%
80.00%
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%
2.12%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
13,750,000
1,150,000
1,150,000
1,150,000
2,859,250
750,000
2,005,750
750,000
750,000
259,489
741,217
1,035,628
333,333
333,333
333,334
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
9,500,000
-
-
-
-
-
-
13,750,000
1,150,000
1,150,000
1,150,000
2,859,250
750,000
84,500
1,921,250
750,000
750,000
259,489
741,217
1,035,628
-
-
-
-
-
-
-
-
-
-
-
-
-
333,333
333,333
333,334
9,500,000
-
-
-
-
-
-
-
-
-
-
-
-
Total
Weighted
Average
Exercise Price
27,351,334
9,500,000
84,500
26,266,834
10,500,000
$0.202
$0.202
* Refer to Note 2 'Critical accounting estimates' for share-based payment assumptions and Note 17 'Option reserve' for details on the option vesting conditions.
F I N A N C I A L R E P O R T | N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
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 and Binomial models.
Assumptions used in the calculation of the option expense can be found in the table above.
A N N U A L R E P O R T - 2 0 1 8 / 1 9
P A G E 7 5
F I N A N C I A L R E P O R T | D I R E C T O R S ’ D E C L A R A T I O N
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 2019 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
26 September 2019
Melbourne
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ANNUAL REPORT - 2018/19 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
F I N A N C I A L R E P O R T | 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 2019, 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 2019 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 believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
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ANNUAL REPORT - 2018/19
F I N A N C I A L R E P O R T | 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
P A G E 7 8
ANNUAL REPORT - 2018/19 P A G E 7 9
ANNUAL REPORT - 2018/19 F I N A N C I A L R E P O R T | 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
P A G E 8 0
ANNUAL REPORT - 2018/19 P A G E 8 1
ANNUAL REPORT - 2018/19 A D D I T I O N A L D I S C L O S U R E S
F I N A N C I A L R E P O R T | A D D I T I O N A L D I S C L O S U R E S
DIS TRI BUTION OF EQUITABL E SECURIT IE S
Analysis of number of equitable security holders by size of holding:
Number of
holders of
ordinary shares
24
244
192
484
108
Number of
ordinary shares
4,593
772,008
1,630,422
18,751,431
145,720,759
1,052
166,879,213
135
235,557
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
E QUI TY SECURITY HOLDERS
Twenty largest quoted equity security holders
The names of the twenty largest security holders of quoted equity securities are listed below:
Number held
3 Aug 2019
Percent of total
shares issued
BRAYTER LIMITED
XIADI CHEN
QING LI
CORANGAMITE PTY LTD
MADAM QING LI
CHI WAI KENNETH LAI
QIANG WEI
MR KENNETH LAI
PACIFIC NOMINEES LIMITED
BNP PARIBAS NOMINEES PTY LTD
MOSCH PTY LTD
MR TREVOR JAMES PRESSER & MS HELEN PRESSER
36 INVESTMENTS PTY LTD
JP MORGAN NOMINEES AUSTRALIA PTY LTD
DR PETER POON
JASPER SUPERANNUATION PTY LTD
NAMIB NOMINEES PTY LTD
SEQUOI NOMINEES PTY LTD
HAVEN SUPER PTY LTD
ACQUISITIVE PTY LTD
CITICORP NOMINEES PTY LIMITED
GOLDFIRE ENTERPRISES PTY LTD
MR DIDIER HENRI MARCHAND
Total
46,631,507
12,500,000
12,500,000
11,107,904
10,407,452
10,335,000
7,805,589
2,583,750
1,812,500
1,256,242
1,171,875
972,380
950,720
916,742
902,164
825,000
781,250
781,250
781,250
706,236
639,827
628,721
567,917
127,565,276
27.94%
7.49%
7.49%
6.66%
6.24%
6.19%
4.68%
1.55%
1.09%
0.75%
0.70%
0.58%
0.57%
0.55%
0.54%
0.49%
0.47%
0.47%
0.47%
0.42%
0.38%
0.38%
0.34%
76.44%
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ANNUAL REPORT - 2018/19 F I N A N C I A L R E P O R T | A D D I T I O N A L D I S C L O S U R E S
UNQUOTED EQUITY SECURITIES
Options over ordinary shares issued
Number of issue
Number of
holders
10,500,000
7
There are no holders of unquoted equity securities holding 20% or greater of the number of
unquoted equity securities on issue.
S UBSTANTIAL HOLDE RS
Substantial holders in the Company are set out below:
BRAYTER LIMITED
QING LI
CHI WAI KENNETH LAI
S ECUR ITIES SUBJE CT TO ESCROW
Ordinary Shares escrowed to 15 June 2020
VOTI NG RIGHTS
The voting rights attached to ordinary shares are set out below:
Ordinary shares
Number held
19 Aug 2019
Percent of total
shares issued
46,631,506
22,907,452
12,918,750
27.94
13.72
7.74
Number of
shares
800,000
Ord i nar y shares
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 of fund s
Since admission, the Company has used its cash in a way consistent with business objectives.
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ANNUAL REPORT - 2018/19 A N N U A L R E P O R T
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