Annual
Report
Novatti Group Limited
Level 3/461 Bourke St, Melbourne VIC 3000
2022/23
Contents
FY23 In Numbers
About Novatti
Corporate directory
Chairman’s Report
CEO’s Report
Review of Operations
Investments
Environmental, Social and Governance
Directors’ Report
Auditor’s independence declaration
Consolidated statement of profit or loss and
other comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the consolidated financial statements
Directors’ declaration
Independent auditor’s report to the members of
Novatti Group Limited
Shareholder information
3
4
5
6
7
8
13
15
24
44
45
46
47
49
50
86
87
91
2
Annual Report FY23 | Novatti Group Limited FY23 in numbers
$39m
Annual sales revenue
– highest ever
+20%
Increase in annual
sales revenue on FY22
60%
Growth in GTV on
FY22
476 bps
Growth in margin
on FY22
$4.2B
Highest GTV
47%
Gross Margin
-$14.5m
Underlying EBITDA
-7% YoY
3
3
About Novatti
Novatti enables businesses to pay and be paid, from any device,
anywhere. From corner stores and startups to global organisations,
our solutions will unlock your ambitions.
4
Annual Report FY23 | Novatti Group Limited Corporate directory
Novatti Group Limited
Directors
Joint company secretaries
Registered office and
principal place of business
Share register
Auditor
Bankers
Peter Pawlowitsch (Non-Executive Chairman)
Peter Cook (Executive Director)
Kenneth Lai (Non-Executive Director)
Killian Murphy (Non-Executive Director)
Ian Hobson
Steven Stamboultgis
Level 3 461 Bourke Street
Melbourne VIC 3000
+61 3 9011 8490
Automic Registry Services
Level 5, 191 St Georges Terrace
Perth WA 6000
+61 8 9324 2099
William Buck
Level 20
181 William Street
Melbourne VIC 3000
ANZ
388 Collins Street
Melbourne VIC 3000
Stock exchange listing
Website
Novatti Group Limited shares are listed on the Australian Securities Exchange
(ASX code: NOV)
www.novatti.com
Corporate Governance Statement
www.novatti.com/corporate-governance
Australian Financial Services Licence
AFSL No.448066
New Zealand Financial Services Provider FSP613789
Financial Conduct Authority
FCA No. 900631 as an appointed representative of CFS-ZIPP Ltd
(FCA No. 900027) for issuance of e-money products
5
Annual Report FY23 | Novatti Group Limited
Chairman’s Report
Peter Pawlowitsch
Chairman
FY23 was a year of great transition for Novatti. At the top of the list, we saw the smooth
transition across a number of senior leadership positions, none more so than CEO -
from Peter Cook to Mark Healy.
Peter had been CEO of Novatti since its founding and of course since its listing on the
ASX. I want to acknowledge Peter’s leadership and contribution during this time. Peter
and his team have now built a world-class payments ecosystem that, as recent results
show, is now being rapidly scaled and monetised. Notably, Novatti’s Gross Transaction
Value increased 46% across FY23, highlighting the strong growth in the underlying
business.
The senior leadership team worked harmoniously to transition the role of CEO from
Peter to Mark, without disruption to the business. Importantly, Mark has wasted no time
in articulating his own new and exciting vision for a streamlined Novatti business, with
a drive for increased margins underway.
Importantly, this new vision remains underpinned by continued growth in digital
payments across the global economy, particularly within Australia and New Zealand.
It is particularly pleasing to see traction in a number of Novatti’s newer businesses
that were incubated in-house, including Acquiring, providing promising signs for future
growth.
There were many other highlights flowing from multiple years of investment and
development across FY23. Perhaps most notably, we saw the launch of International
Bank of Australia after receiving its restricted banking licence, enabling Novatti to focus
on getting this business into market.
FY23 was, however, not without challenge. Notably, we saw a rapid slowdown in
capital markets globally, particularly within growth technology businesses. To this end,
a key focus across the past year was the prudent management of Novatti’s financial
resources, with management implementing an organic headcount reduction strategy
and new funding pathways identified to leverage Novatti’s balance sheet including
through the issue of a $10.5m bond. We continue to take a prudent approach to both
cashflow and balance sheet management to manage any potential uncertainty in the
years ahead.
On behalf of the Board, I want to thank all the Novatti team for their tireless effort to
see Novatti continue to grow and achieve our ambitions. All your achievements are
adding up. Thank you also to all our shareholders for your continued investment and
support for Novatti. We look forward to continuing to report on Novatt’s progress under
Mark’s leadership in the year ahead.
6
Importantly, this
new vision remains
underpinned by
continued growth
in digital payments
across the
global economy,
particularly within
Australia and New
Zealand
Annual Report FY23 | Novatti Group Limited CEO’s Report
Mark Healy
CEO
It is with great pleasure that I report to you on Novatti’s FY23 performance, having
been appointed as CEO towards the end of the financial year.
FY23 saw Novatti continue its long-term growth journey, with positive annual revenue
growth maintained despite challenging economic conditions both in our region and
globally.
Novatti delivered $39m in revenue, an increase of 20% on FY22, which was underpinned
by substantial growth in underlying business activity. Here, Gross Transaction Value
(the value of transactions processed), grew 46% to exceed $4.2b.
Operationally Novatti delivered on many significant milestones:
o
o
o
o
o
o
o
o
Launch of International Bank of Australia, securing a restricted banking licence
Commercial launch of several platforms under development across previous years
Strong commercial traction in the newer Acquiring, Issuing, Cross Border
businesses
Full integration of Acquiring product, covering online, offline and in-app payments
$2.3m Australian Government grant for digital currency payment anti-fraud and
anti-money laundering techniques
Extension of Issuing product capability to include debit card and multi-currency
cards
Support for VISA’s FIFA Women’s World Cup prepaid card solution
Expansion of Cross Border product capability into New Zealand
Many of these milestones followed several years of investment and development. With
this in mind, I want to particularly pay tribute to my predecessor, Peter Cook, for his
leadership during those years to establish Novatt’s world-class payments ecosystem.
It is worth highlighting the impact of some of these milestones in commercial terms.
For example, Acquiring saw a 198% increase in revenue, 44% increase in customers, and
435% increase in Gross Transaction Value. These results highlight the incredible growth
potential of the platforms we are commercialising.
Since my appointment as CEO, we have developed a clear portfolio view of the
Company and initiated a strategy focused on simplifying the business and driving
continued improvements to gross margins on the way to achieving positive cashflow.
By realigning our commercial team around this goal, we have already started seeing an
uplift in gross margins. In addition, our cost optimisation program will continue in FY24.
We expect changes being made to our operations and processes to make it simpler
for merchants and partners to engage multiple Novatti payment services, increasing
opportunities for cross-selling and deeper customer engagement in FY24 and beyond.
7
Acquiring saw
a 198% increase
in revenue and
435% increase in
GTV. These results
highlight the incredible
growth potential of
the platforms we are
commercialising.
Annual Report FY23 | Novatti Group Limited Review of operations
Annual Sales
Revenue increased
by 20% on FY22
Financial Results
Across FY23, Novatti generated $39 million in sales revenue, an increase
of 20% on the previous financial year. The revenue rise represented
organic growth with Novatti not undertaking any major acquisitions during
FY23, a year where the priority was to consolidate the digital payments
ecosystem and extend digital payment services into businesses acquired
in FY22 and earlier.
Expansion of these services, which leverage Novatti’s regulatory,
partnership and technology ecosystem, was reflected in the Company
processing $4.2 billion of Gross Transaction Value (GTV), a 46% increase
on the previous financial year.
Novatti’s underlying EBITDA loss of $14.5 million in FY23 was a 7% increase
on the previous year, primarily contributed to by Novatti’s continued
investment in its core technology platforms with a view to long-term profit
uplift from automation and scale efficiencies. All expenses for platform
development costs are expensed, including a major upgrade by the
Acquiring business to expand into ‘card present’ services where merchants
can link the terminals to their existing online payment gateways to
accept payment via a physical card or digital wallet. The addition of
this capability enabled Novatti to target larger merchants with greater
processing volume.
8
Annual Report FY23 | Novatti Group Limited Reducing costs across the Group was a focus in H2
previous year. The net loss includes $3.3 million in
FY23, with a decrease in staff and drive for productivity
expenses incurred by Novatti on its banking business
resulting in the positive effect of an improvement in
which was granted a restricted banking licence in
revenue per staff member as Novatti’s business scales.
November 2022 when it launched as International
This focus has extended into FY24 under CEO Mark
Bank of Australia and commenced independent
Healy and Novatti’s strategy to streamline multiple
operations. The figure also included $2.2 million of
business units into centralised divisions with a focus on
depreciation and amortisation, $1.3 million in finance
increased gross margins. The impact of this strategy
charges and a payment of $1.1 million in earn-out fees
was highlighted in Q4 FY23 when gross margins across
tied to Novatti’s acquisition of ATX in FY22.
the quarter increased to 51% from 35% in Q4 FY22.
As of 30 June 2023, Novatti had $18.2m in cash. Novatti
Gross margins across FY23 were 47%, a 5% increase
expects the results of its strategy to streamline multiple
from 42% in FY22.
business units into four core divisions to continue
The Novatti Board of Directors consider the underlying
EBITDA loss of $14.5m in FY23 as a more accurate
measure of Novatti’s continuing operations. Net loss
after tax of $26.1 million was a 58% increase on the
to drive revenue, reduce expenses, improve gross
margins and drive the Company towards operating
cash profit in FY24.
Annual Sales Revenue
+20%
Year-on-Year
40
35
30
25
20
15
10
5
-
$ Millions
FY20
FY21
FY22
FY23
9
Annual Report FY23 | Novatti Group Limited Capital Management
On 15 August 2022, Novatti announced the execution of a $10.5 million
corporate bond issue, with a focus on supporting growth in core
payment processing business. The bonds are secured and are issued for
a fixed term of five years from the date funds were received by Novatti,
with interest at 90-day BBSW plus 650 bps and interest settled quarterly.
Completion of the issue occurred on 12 August 2022. The advisors to the
bond issue were entitled to 3.25% of the proceeds received.
At the completion of FY23, Novatti had 338,656,542 ordinary, fully paid
shares issued.
GTV in AUD Billion
5
4
3
2
1
-
$4.225B
$2.649B
$1.144B
$ Billions
FY21
FY22
FY23
Operations
Acquiring
Since being granted licences from both VISA and Mastercard for
Acquiring payments in FY22, Novatti has been able to target businesses
for merchant services. This saw growth in Novatti’s Acquiring business
in FY23 which was headlined by $1.7 million in annualised incremental
revenue, a 198% increase on the previous year.
Acquiring customers grew by 44% in FY23 while GTV of $182 million
represented a 435% increase on the previous financial year.
Acquiring experienced a significant uplift in sales capabilities and
upgrades to technology during the year. These upgrades expanded the
Acquiring product suite from online payment portals to a fully integrated
product offering for customers, covering online, offline and Tap on Phone
10
Acquiring
customers grew by
44% in FY23 while
GTV of $182 million
represented a 435%
increase on the
previous financial
year
Annual Report FY23 | Novatti Group Limited payments. By adding card-present payment options, Acquiring was
able to expand its addressable market to include traditional brick-and-
mortar merchants which required POS terminals. These terminals can
either be leased through Novatti tech partners, or integrated through
an existing Android device so that no additional hardware needed to
be leased or purchased. Merchants that engage Novatti can accept
customer payments from credit cards, debit cards, other digital wallet
mechanisms such as Asian wallets (UnionPay, Alipay and WeChat Pay),
account to account methods including traditional Direct Debit and the
real time new payments platform (NPP).
Value add services were also introduced to provide Novatti’s Acquiring
customers with fraud protection measures and chargeback guarantees.
Some of the larger customer wins across FY23 in Acquiring include a
national gym software business which collects payments from members
across Australia, a major hotel operator, a student accommodation
provider and various telecommunications providers that acquire their
customer payments via Novatti.
Issuing
Since being licensed by VISA Inc in January 2021 to issue cards in New
Zealand, under similar arrangements as Novatti’s licence to issue cards
in Australia, the Company has continued to expand its Issuing business
with new payment services added in FY23 which included multi-
currency capabilities for Novatti-issued prepaid and debit cards.
In FY23 this business processed $442 million GTV, a 147% increase on the
previous financial year. Total customers increased 8% in this time while
sales revenue rose 81% to $3.4 million.
Recent growth in New Zealand is through partnerships with a trans
tasman accounting and automation software provider for deployment…”
and “…a New Zealand based national digital wallet application for utility,
lifestyle and community based payments. Opportunities are also present
in New Zealand for Novatti’s Cross Border division for both inbound and
outbound payments with an increasing presence in New Zealand acting
as a gateway to Novatti’s digital payments ecosystem.
Novatti can issue cards for a diverse range of clients which include
fintechs, small and medium businesses (SMB), multinationals, reward
program operators, BNPL providers, digital wallets and Government.
11
Value add services
were also introduced
to provide Novatti’s
Acquiring customers
with fraud protection
measures and
chargeback
guarantees
Annual Report FY23 | Novatti Group Limited Cross Border Payments
Novatti’s Cross Border Payments business also saw a strong uplift in GTV
to process $479 million in FY23, a 63% increase on the previous year.
This was reflected in $2.7 million sales revenue, a 92% increase on the
previous financial year.
The lifting of international travel restrictions and return of international
students to Australian campuses contributed to GTV growth where
Novatti provides a variety of digital payment services for students,
travellers and migrants from China to pay their Australian bills (eg, tuition
fees, rent, utilities etc) in their native RMB.
Facilitating many of the payment needs for migrants transferring money
to and from Australia, Novatti expanded the ChinaPayments business
into 6 other countries in SouthEast Asia with the launch of Novatti BillPay,
a simple platform that enables users to pay Australian bills from their
native digital wallets.
Novatti has identified opportunities to extend its global payments
infrastructure into further new markets and commenced a partnership
with a Global Tier 1 Bank to access these international markets as part of
Novatti’s strategy to lift overall gross margins across the Group. Accessing
these markets will create additional cross-sell opportunities for Novatti
where its Australian and New Zealand customers can send and collect
funds globally without the need to open a foreign bank account.
The Novatti Global Currency Account allows customers to collect,
convert and pay in 35 currencies and receive in 20+ currencies globally.
Novatti’s Cross Border
Payments business
also saw a strong uplift
in GTV to process
$479 million in FY23,
a 63% increase on the
previous year
12
Annual Report FY23 | Novatti Group Limited Investments
Stablecoin and Digital Currencies
Novatti made strong progress in its digital currency products across
FY23 with the launch of the 1:1 fiat-backed multi-chain AUDD stablecoin.
The stablecoin was created with a focus on compliance, security
and utility. AUDD aims to be a high governance and compliant digital
asset that will reduce friction points in many payment services. AUDD
enables currency and remittances to be sent globally with near-instant
settlement, creating great value for businesses who need to transact on
this scale.
Novatti has actively participated in the Reserve Bank of Australia
research project to explore the potential use cases and economic
benefits of a Central Bank Digital Currency (CBDC) in Australia.
Novatti aims to help shape the future of CBDCs and promote the use
cases for high governance stablecoins in Australia. Through Novatti’s
participation in the CBDC research project, an application of AUDD was
demonstrated through Novatti executing Australia’s first ever charitable
donation using a stablecoin backed 1:1 by Australia’s CBDC (eAUD).
Novatti’s participation in the project will continue into FY24.
In January 2023, Novatti’s ongoing innovation was recognised with a
grant of $2.3m from the Australian Government’s Cooperative Research
Centre for the development of novel anti-fraud and anti-money
laundering techniques for new payment methods centred around digital
currencies.
13
In January 2023,
Novatti’s ongoing
innovation was
recognised with a
grant of $2.3m for the
development of novel
anti-fraud and anti-
money laundering
techniques for new
payment methods
centred around
digital currencies
Annual Report FY23 | Novatti Group Limited In November 2022,
Novatti received a
$12.8 million special
dividend from its stake
in Reckon Limited
(ASX: RKN)
AUDD has currently been developed on Stellar, Ripple’s XRP Ledger and
Ethereum, with extension to other blockchains in planning.
International Bank of Australia
International Bank of Australia (IBOA) launched in November 2022,
having been granted a restricted banking licence by Australia’s banking
regulator, APRA. IBOA will leverage best-in-class digital technologies to
service fintechs and the underserved migrant sector.
International Bank of Australia will also have the strong advantage of
being able to leverage Novatti’s existing payments ecosystem and
global footprint to help win customers quickly.
Since being granted its licence, IBOA has made strides towards
obtaining a full banking licence with the establishment of its core
banking platform, appointment of a Chief Risk Officer and auditor. Major
progress has also been made in its commercial strategy to onboard
customers with more than 100 potential channel partners engaged
with agreements which cover a range of service providers including
migration agents, education agencies and travel operators. All are
critical milestones in securing a full banking licence.
Novatti continues to hold a 91% shareholding in IBOA.
Reckon Limited
Also in November 2022, Novatti received a $12.8 million special dividend
from its stake in Reckon Limited (ASX: RKN). The special dividend of
$0.57 per share, 60% franked, was distributed from the $100m sale
of Reckon’s Accountants Practice Management Group (APMG). Since
acquiring its strategic stake in Reckon Limited in July 2021, Novatti has
now received a total of $14.6m in dividends while its approximate 19.9%
interest remains in place. Novatti also continues to offer digital payment
services to Reckon, seeking to add value to its 109,000 cloud-based
business platform users.
A further $563k is due to be received on 29 September 2023 upon
distribution of Reckon Limited’s FY23 fully-franked interim dividend of
$0.025 per share.
14
Annual Report FY23 | Novatti Group Limited Digital payment
solutions empower
financial inclusion
and literacy, support
sustainability
programs and
help connect our
communities
Environmental, Social
and Governance
Novatti is committed to environmental and social responsibility. As
a growing company, we have commenced the journey to develop
an Environmental, Social and Governance (ESG) program, which
we will continue to strengthen, including developing a more formal
framework. Novatti acknowledges the constantly evolving social and
sustainability requirements and its responsibility to provide transparent
reporting against these requirements to all our stakeholders. Ongoing
formalisation will enable Novatti to identify, assess and manage those
ESG areas which are most relevant to our business.
Novatti is also committed to running our business in an ethical manner.
The Company acknowledges and embraces our regulatory and business
responsibilities given the importance of the services it provides to the
public. Our business is subject to a complex set of laws, regulations and
industry requirements in various jurisdictions globally. These include, but
are not limited to, financial services, consumer protection, anti-money
laundering, and counter-terrorism financing, privacy and data protection,
taxation, employment, corporate regulations and corporate governance.
In addition to the regulatory landscape, Novatti has developed
a sophisticated ecosystem that leverages Technology, Licences,
Partnerships and our Team to deliver its services.
In all jurisdictions in which Novatti operates, we are focused on operating
our business in a responsible and fully compliant manner.
15
Annual Report FY23 | Novatti Group Limited From office recycling
programs to
promoting eco-
conscious practices
among our employees,
our People Experience
team continues to be
a driving force behind
our sustainability
journey
Environmental
Sustainability is a journey. It starts with looking inwards at how we
can minimise the potential negative impacts of our own operations
to reduce our carbon footprint and waste. The adaptation of our
office environments through the global COVID-19 pandemic has led
to reductions in our energy usage, use of consumables, business travel
and office waste. This year we formally adopted a hybrid working
framework and a reduced office footprint which enables lower
carbon emissions. The People Experience team plays a pivotal role in
championing environmental sustainability initiatives across our global
footprint. From office recycling programs to promoting eco-conscious
practices among our employees, our People Experience team continues
to be a driving force behind our sustainability journey. By integrating
sustainability into our daily operations and company culture, we not only
aim to reduce our environmental footprint but also inspire change in the
communities that we service.
The nature of Novatti’s business, driven by our people and the various
digital offerings, means that Novatti is not a significant consumer of
energy or water. However, as we further develop our formal framework,
we will be considering these areas from a perspective of monitoring and
16
improving usage.
16
Social
The Novatti Board acknowledges that our people are at
the core of who we are. This is why we place them at the
centre of our Ecosystem to deliver on our Vision.
Our Vision
Our Values
Novatti places a strong emphasis on recruiting
and retaining talent that enhances our values-
driven culture. The accumulation of our collective
experience, shared values, and individual skills
allow Novatti to deliver on its vision. The values that
empower our people are:
Unlocking the ambitions of our team and clients starts
with a positive mindset
We are deliberate in what we do to focus our energy and
deliver the best possible outcomes for our team and clients
Simple things are understood. By keeping it simple, we avoid
confusion, achieve alignment, and in turn achieve great
things together
Novatti is one, connected team. Together we celebrate
our success and turn mistakes into shared learnings. By
embracing each team member, we unlock their ambitions,
Novatti’s, and those of our clients
With integrity we develop stronger relationships with our
team and our clients
17
Annual Report FY23 | Novatti Group Limited Novatti has adopted
a Diversity Policy to
assist it in attracting,
developing and
retaining people who
are highly competent
and can contribute to
its long-term success
and values
Our Workforce
Novatti’s workforce has grown and diversified as we have matured as a
business and will continue to do so. Novatti does not have any enterprise
agreements - all team members are employed on above award common
law contracts.
Novatti has adopted a Diversity Policy to assist it in attracting, developing
and retaining people who are highly competent and can contribute to
its the long-term success and values by bringing a broader range of
perspectives, experience and ideas.
Our Diversity Policy includes the provision of Equal Opportunity and Non-
discrimination which is backed up by Novatti’s Whistleblower Policy and
procedures.
Our Diversity Profile
The Company has set a diversity objective by 2025 to have 30% or
greater female representation in the total workforce, in senior roles and
on the Board of Directors.
The Company has set a diversity objective by 2030 to have 40% or
greater female representation in the total workforce, in senior roles and
18
on the Board of Directors.
18
When Novatti established these diversity objectives,
it was cognisant that achieving them is influenced by
many factors including:
o
The need to hire the best qualified person for the
available job as established by the Company’s
Diversity Policy
o Changes in the number of people employed due to
expansion or reduction in future business activities of
the Company
o Changes in the composition of the workforce due to
resignations, redundancies or terminations.
As at 30 June 2023, Novatti’s employees in a full-time
and part-time capacity included 39% female (2022 -
40%) and 61% male (2022 - 60%).
Novatti considers a senior role as one which is on or
reporting into the Executive. As at 30 June 2023, four
females (2022 – one) held a senior role.
During 2023 the Company had one female on the
Board as an independent non-executive director prior
to her resignation in December 2022. At 30 June 2023
the company had not yet replaced this Board member
(2022 - one).
Health and Wellness
The health and safety of our team members and
contractors is a high priority for Novatti. There have
been no work-related accidents at Novatti in the last
five years. This is a testament to our secure working
environment and commitment to our teams health and
wellbeing. Novatti prioritises employee well-being by
offering initiatives and activities which cover mental
health, physical fitness and financial stability, alongside
a flexible work structure that empowers our team
members to achieve a work-life balance that suits their
needs. Ensuring a holistic approach, ensures that our
team members thrive both personally and professionally
aligning to our values and corporate responsibility.
19
Novatti prioritises
employee well-being by
offering initiatives and
activities which cover
mental health, physical
fitness and financial
stability
Annual Report FY23 | Novatti Group Limited Governance
The Novatti Board acknowledges that it is accountable to shareholders
and must ensure that the Company is properly managed and protected
to enhance shareholder value by ensuring the long-term strength of
Novatti’s business. Novatti recognises that its reputation is a valuable
asset, which is based largely on the ethical behaviour of the people who
Novatti has established
represent the Company. Novatti has established a Code of Conduct
a Code of Conduct
which outlines how it
expects its people to
not only comply with
the law, but also to
conduct themselves in
a manner consistent
with community and
corporate standards.
which outlines how it expects its people to not only comply with the law,
but also to conduct themselves in a manner consistent with community
and corporate standards.
Novatti has established various statements and policies to support this
Code of Conduct including:
o
o
Board Charter
Statement of Values
o Corporate Governance Statement
o Anti-Bribery and Anti-Corruption
o
Risk Management, Internal Compliance and Control
o Whistleblowing
o
o
Procedures for Selection and Appointment of Directors
Performance Evaluation for Directors and Executives
o Director Skills Matrix
o
Remuneration of Directors and Executives
o Audit
o Continuous Disclosure
o
o
Shareholders Communication
Securities dealing by Directors and Employees
In respect to our People, Novatti has also established various policies,
including, but not limited to:
o Conflict of Interest
o Diversity and Inclusion
o Modern Slavery
o
Employee Incentive Scheme
These policies are all available on Novatti’s website at https://novatti.
com/corporate-governance.
20
Annual Report FY23 | Novatti Group Limited Novatti has adopted a
Code of Ethics, which
details the underlying
values to support the
integrity of its business
In addition to public facing policies, Novatti has an internal Intranet for
staff providing a suite of policies, procedures and templates for use by
our teams.
These include, but not limited to the areas of:
o
o
Human Resources
Information Technology
o Operational
o Marketing
o
o
o
Risk and Compliance
Information Security
Legal
o Anti-Money Laundering
Business Ethics
Acting ethically is critical to Novatti’s reputation and business. We have
a strong culture of risk and compliance throughout our business. To
maximise the protection available to our customers we invest in banking
relationships; systems and security; fraud protection; and our processes,
people and systems.
Novatti has adopted a Code of Ethics, which details the underlying
values to support the integrity of its business. This Code operates
alongside Novatti’s Anti-Bribery and Anti-Corruption policy, Anti Money
Laundering Requirements, Modern Slavery Policy and the overarching
Code of Conduct. Novatti has also implemented a Legal and Regulatory
Compliance Policy Statement which provides details of the overarching
governing principles of Novatti’s approach to compliance, along
with the underlying principles to support the elements of an
effective compliance program.
21
Annual Report FY23 | Novatti Group Limited Data Protection and Information
Security
Novatti places paramount importance on data protection and
information security. This year we certified our information security
management system to the ISO 27001:2013 standard. This uplift and
investment reflects our commitment to global information security
standards, proactive risk mitigation and continuous improvement.
Additionally, we employ a “Defence in Depth” strategy to safeguard
data, creating multiple layers of protection. Our multi-layered
cybersecurity defence system includes network security, access controls,
data encryption, employee training, incident response plans, penetration
testing and 24x7 security monitoring.
Data security and information protection are embedded in our
operational practices and provides a secure environment for both data
and systems.
Moving Money Safely
As a business that moves significant monies for customers around the
world every day, it is critical that Novatti manages its risks in a way that
maintains the trust of our customers, partners and banks, and meets
the expectations of regulators. We have a strong culture of risk and
compliance, with particular emphasis on the responsibility that Novatti
has as an international and domestic money services provider to help
prevent and detect financial crime.
We look forward to seeing our ESG framework develop and strengthen
going forward to the benefit of all our stakeholders.
22
Data security and
information protection
are embedded in our
operational practices
and provides a secure
environment for both
data and systems.
Annual Report FY23 | Novatti Group Limited Annual Report
30 June 2023
ACN 606 556 183
23
Annual Report FY23 | Novatti Group Limited Novatti Group Limited
Directors' report
30 June 2023
The directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as
the 'consolidated entity' or 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 2023.
Directors
The following persons were directors of Novatti Group Limited during the whole of the financial year and up to the date of
this report, unless otherwise stated:
Peter Pawlowitsch (Non-Executive Chairman)
Peter Cook (Executive Director) (retired as Managing Director and Chief Executive Officer on 15 June 2023)
Kenneth Lai (Non-Executive Director)
Abigail Cheadle (Non-Executive Director) (resigned on 28 December 2022)
Killian Murphy (Non-Executive Director) (appointed on 13 October 2022)
Principal activities
Novatti Group Limited is a leading fintech that enables businesses to pay and be paid, from any device, anywhere. Solutions
include issuing, acquiring, processing, and billing, while the dedicated banking subsidiary, International Bank of Australia,
was granted a Restricted Authorised Deposit taking Institution (RADI) license in November 2022.
Dividends
There were no dividends paid, recommended or declared during the current or previous financial year.
Review of operations
The Group's revenue increased by 19.7% to $38,979,000 (30 June 2022: $32,555,000). The underlying EBITDA* increased
by 7% to a loss of $14,481,000 compared to the corresponding prior year of $13,585,000 loss.
The loss for the consolidated entity after providing for income tax amounted to $26,545,000 (30 June 2022: $16,627,000).
The net asset position decreased from $36,641,000 as at 30 June 2022 to $15,475,000 as at 30 June 2023, with $18,215,000
held in cash and cash equivalents.
Net loss from operations
Less:
Interest income
Add back:
Depreciation and amortisation
Finance charges
Indirect tax expenses
EBITDA
Add back/(less)
Vesting of share-based payments
Losses/(gains) on fair valuation of investments
(Gains)/losses on embedded derivative
Dividends from Reckon Limited
One-off transaction costs related to investment in Reckon
Limited
Amounts accrued to vendors of the ATX transaction under
earn-out arrangements treated as employee benefits expense
Banking business
Underlying EBITDA*
Cash
Operating cash flow
30 June 2023 30 June 2022 Change
Change
$'000
$'000
$'000
%
(26,545)
(16,627)
(9,918)
60%
(668)
(34)
(634)
1865%
2,211
1,382
109
(23,511)
2,265
15,877
-
(13,511)
1,853
725
71
(14,012)
358
657
38
(9,499)
19%
91%
54%
68%
1,792
(3,302)
(729)
(1,126)
473
19,179
729
(12,385)
26%
(581%)
(100%)
1100%
-
617
(617)
(100%)
1,060
3,339
(14,481)
18,215
1,393
771
2,404
(13,585)
6,059
(13,032)
289
935
(896)
37%
39%
7%
12,156
14,425
201%
(111%)
24
Novatti Group Limited
Directors' report
30 June 2023
*Underlying EBITDA is a non-IFRS measure calculated as profit before income tax, and before depreciation and amortisation,
share based payments, net finance costs, due diligence costs, gain on embedded derivative and the bank business. The
Company believes this non-IFRS and operational measure is useful in monitoring and understanding the Group’s business
and they should not be considered in isolation nor as a substitute for IFRS measures.
Significant changes in the state of affairs
●
●
1,228,000 fully paid ordinary shares issued to employees as part of the employee incentive scheme;
1,069,869 fully paid ordinary shares issued upon a cashless exercise of 3,666,668 options over fully paid ordinary
shares to employees;
145,905 fully paid ordinary shares issued upon a cashless exercise of 875,000 options over fully paid ordinary share
employees; and
690,247 fully paid ordinary shares issued upon a cashless exercise of 5,310,000 options over fully paid ordinary shares
to employees.
●
●
On 15 August 2022, the Company announced the execution of a $10.5 million corporate bond issue to support growth in
core payment processing business and capital for proposed banking business. The bond is secured and issued for a fixed
term of five years with interest at the floating 90-day BBSW rate plus 650bps, interest settled quarterly. Completion of the
issue occurred on 12 August 2022. The advisors to the bond issue were entitled to receive 3.25% of the proceeds received.
On 7 November 2022, the Company announced that its dedicated banking subsidiary International Bank of Australia Pty
Limited (IBOA), has been granted a Restricted Authorised Deposit-taking Institution (RADI) licence by Australia’s banking
regulator, the Australian Prudential Regulation Authority (APRA). The banking business will launch as the International Bank
of Australia.
On 23 January 2023, the Company's Chief Financial Officer and Joint Company Secretary, Mr Steven Stamboultgis, tendered
his resignation, effective 31 March 2023.
On 23 January 2023, the Company announced that an anti-money laundering fintech project it will lead has been approved
for a $2.3 million grant under the Australian Government’s Cooperative Research Centres Projects (CRC-P) Grants program.
On 3 April 2023, the Company announced the appointment of Ms Dharshini Mendez as its Chief Financial Officer. On the
same day, Mr Stamboultgis agreed to remain with the Company in the role of Joint Company Secretary and to assist with
the transition of Ms Mendez into the role of Chief Financial Officer.
On 14 June 2023, the Company announced the appointment of Mr Mark Healy as Chief Executive Officer effective from 15
June 2023. Mr Peter Cook remains as an Executive Director in a strategic business development focused role.
During the period, the Company finalised a Series A equity round for IBOA Group Holdings Pty Limited (IBOA Group), which
heads the Company’s dedicated banking division and is parent entity of the Bank, as part of securing a restricted banking
licence. Through this funding round, the Company made an additional $5m investment. In addition, sophisticated investors
contributed $3.1m for a total of $8m dollars in this funding round, through issuing shares of IBOA Group to the investor. The
Company consequently retained a 90.68% interest in IBOA Group. The aggregate $8m in new funding under this round will
enable the Bank to launch and build its business.
There were no other significant changes in the state of affairs of the consolidated entity during the financial year.
Matters subsequent to the end of the financial year
No matter or circumstance has arisen since 30 June 2023 that has significantly affected, or may significantly affect the
consolidated entity's operations, the results of those operations, or the consolidated entity's state of affairs in future financial
years.
Likely developments and expected results of operations
The Company has developed and launched its own platform for acquiring services and commenced migrating existing
customers from the third party platform used to launch this service. Developed to provide an omni-channel experience the
platform offers integrated online, face to face and in-app payments expected to support future growth in revenue and
margin. The strong working partnership with Reckon Limited will continue to deepen after the successful integration of the
Novatti acquiring platform with the Reckon One Cloud and the launch of a pilot group of transacting Reckon customers.
25
Novatti Group Limited
Directors' report
30 June 2023
The Company believes there is significant growth opportunities with the use of stablecoins as a future payment solution. The
company launched the 1:1 fiat backed AUDD Stablecoin on the Stellar blockchain in November, 2022 and subsequently the
XRP Ledger in June 2023. Providing a fully collaterised digital representation of the Australian dollar, AUDD has been
developed to meet continuing strong demand for digital currencies and improved payment services.
The Company continues to see strong demand for its services globally, as the macro-level shifts to digital payments shows
no sign of easing. The Company remains confident that this strong global demand will continue to support its growth going
forward.
Environmental regulation
The consolidated entity is not subject to any significant environmental regulation under Australian Commonwealth or State
law.
Key business risks
Going concern
The financial statements for the period ended 30 June 2023 have been prepared on the basis that the entity is a going
concern, which contemplates the continuity of normal business activity, realisation of assets and settlement of liabilities in
the normal course of business. During the 12 month period the entity recorded revenue of $39,979,000, a net loss after tax
of $26,545,000 and incurred net cash inflows from operating activities of $1,393,000, which includes a one-off dividend of
approximately $12,835,000.
The Group’s ability to continue as a going concern is dependent upon its ability to generate positive cash flow from its
business operations. The above matters described indicate that a material uncertainty exists that may cast significant doubt
about the entity’s ability to continue as a going concern and, therefore, that it may be unable to realise its assets and discharge
its liabilities in the normal course of business.
The financial statements have been prepared on the basis that the entity is a going concern, which contemplates the
continuity of normal business activity, realisation of assets and settlement of liabilities in the normal course of business for
the following reasons:
●
●
●
●
●
●
The Directors are planning for the business to reduce net operating cash outflows during FY24 by increasing cash
receipts from customers in order to work towards positive future operating cash flow;
The Group owns a number of investments that the Group can potentially sell;
The entity has historically demonstrated its ability to raise funds to satisfy its cash requirements;
Management are actively considering the future capital requirements of the entity and will consider all funding options
as required;
The Group is undertaking a simplification strategy to extract more value from existing resources rather than adding
extra cost and has the ability to scale back certain activities that are non-essential to existing customers so as to
conserve cash; and
During the year, the Group sold down its interest in the banking entity by 9.32%, by raising $3,100,000 for the banking
operations. The directors may consider, if required, additional partial sales of its interest in this entity, or alternatively
the sale or dilution of the Group’s interest in other non-core business assets.
Should the entity not be able to continue as a going concern it may be required to realise its assets and discharge its liabilities
other than in the ordinary course of business, and at amounts that differ from those stated in the financial statements. The
financial report does not include any adjustments relating to the recoverability or classification of recorded asset amounts,
nor the amounts or classification of liabilities that might be necessary should the Group not be able to continue as a going
concern.
26
Novatti Group Limited
Directors' report
30 June 2023
Regulatory and licencing risk
The Company operates in a complex regulatory environment and in jurisdictions that have varying degrees of enactment
and implementation of regulations.
The financial services sector in Australia and other markets in which the company operates are subject to stringent and
complex regulations,. A failure to comply with financial license conditions, or related regulatory requirements including KYC
and AML, may adversely affect the Company and its business units.
In addition, changes to the regulations themselves or the way such regulations are interpreted, implemented or enforced
may affect the Company’s platforms or products in those jurisdictions or the ability of the Company or its partners to conduct
business in those jurisdictions.
Growth and Profitability (dependent on increasing market penetration)
The Company continues to trade in a loss-making position, incurring operating cash outflows as it strives to achieve positive
operating cash flows through growth.
The Company’s future growth and profitability is dependent on continuing to increase the usage of its products. Its key
strengths are the strong global market and domain knowledge of payments, flexible approaches to value exchange, and
reliable balance management capabilities
A failure to continue to innovate and add new functionality to its platforms, and to operate its platforms at a standard that will
retain clients and attract new clients could lead to customers not renewing their engagement with the Company which could
adversely impact the Company’s financial performance and/or operations. If the Company is not able to grow revenues and
cash receipts, reduce operating costs or obtain additional financing as needed, it may be required to reduce the scope of its
operations and may be prevented from progressing the commercialisation of its technology.
Reliance on key suppliers and third party platforms
The company relies on a range of third party vendors and suppliers to deliver services to customers in a range of markets,
including white labelled platforms, onboarding, processing, transaction facilitation, distribution and banking facilities. In some
cases, limited alternatives are in place or implementing alternatives may involve significant time and cost. If single suppliers
were to discontinue operations, adjust their risk appetite or otherwise restrict services, the Company may need to limit the
scope of operations, discontinue certain products or withdraw from certain markets.
The Company’s products and services are intended for use across a number of internet access platforms, mobile and desktop
devices and software operating systems. The Company depends on the ability of its products and services to operate on
such platforms, devices and operating systems however it cannot control the maintenance, upkeep and continued supply of
effective service from external suppliers in these areas. Any changes in such platforms, operating systems or devices that
adversely affect the functionality of the Company’s products and services or give preferential treatment to competitive
products and services could adversely affect usage of the Company’s products and services.
Reliance on access to and confidence in telecommunications and internet access
In some instances, the Company will depend on the ability of the end consumer and its customers to access a deployed
solution over telecommunications and internet access and to feel confident processing financial transactions online.
27
Novatti Group Limited
Directors' report
30 June 2023
Ability to run effective and reliable financial and payments systems.
The Company develops, deploys, maintains and operates financial and payments systems technology. There is little
tolerance for error or downtime is such systems and the Company must maintain effective and reliable system performance
for all customers. Should the Company experience significant and unanticipated errors and downtime, there may be a loss
of ongoing confidence in the Company’s products that may negatively impact ongoing revenue and sales prospects.
Operational Risk
Operational risk relates to the risk of loss resulting from inadequate or failed internal processes, people and systems, or from
external events which affect our business. Our business is exposed to operational risks such as external and internal fraud,
processing errors, system or hardware failure and failure of information security systems. Loss from operational risk events
could divert investment from new products into remediation of existing systems and processes, damage client relations or
our reputation, adversely affect our financial results or position, as well as divert staff away from their core roles to remediation
activity. In addition, losses could include legal or remediation costs and loss of property and/or information.
Reliance on key senior staff
The Company’s operational success will depend substantially on the continuing efforts of senior executives. The loss of
services of one or more senior executives may have an adverse effect on the Company’s operations.
Reliance on continual product development
The Company’s ability to grow the use of its products and generate revenue will depend in part on its ability to continue to
innovate and develop features for existing products and additional products.
Competition
The Company competes with other businesses and companies. Many of these companies have greater financial and other
resources than the Company and, as a result, may be in a better position to compete for future business opportunities.
Changes in technology
The Company’s success will depend, in part, on its ability to expand its products and grow its business in response to
changing technologies, customer behaviours and third party service providers’ demands and competitive pressures. Further,
the cost of responding to changing technologies is unpredictable and may impact the Company’s profitability or, if such cost
is prohibitive, may reduce the Company’s capacity to expand or maintain its business.
Data loss, theft or corruption
The Company, its hosting providers, and networks are required to adhere to their own and customers’ security and
compliance standards. If adequate safeguards and measures to mitigate breaches are not provided and maintained, it could
negatively impact upon the Company’s reputation, revenues and profitability. If the Company’s security measures are
breached, or if its products are subject to cyber-attacks that expose or restrict customer access to the platform or their data,
its’ solutions may be perceived as less secure than competitors and customers may stop using the Company’s products.
Liquidity and realisation risk
There can be no guarantee that an active market in the shares will be maintained or that the price of the shares will increase.
A Company with a limited free float may experience relatively few potential buyers or sellers at any given time and this may
increase the volatility of the market price of the shares.
Additional requirements for capital
The Company’s capital requirements depend on numerous factors. Depending on the Company’s ability to generate income
from its operations, the Company may require further financing in the future. Any additional equity financing will dilute
shareholdings, and further debt financing, if available, may involve restrictions on financing and operating activities. If the
Company is unable to obtain additional financing as needed, it may be required to reduce the scope of its operations or scale
back its product or market development.
Potential acquisitions
As part of its business strategy, the Company may make acquisitions of, or significant investments in, complementary
companies or prospects although no such acquisitions or investments are currently planned. Any such transactions will be
accompanied by risks commonly encountered in making such acquisitions.
International business risks
The Company has operations internationally. Wherever the Company sets up operations it is exposed to a range of political
and multi-jurisdictional risks such as risks relating to labour practices, environmental matters, difficulty in enforcing contracts,
changes to or uncertainty in the relevant legal regime (including in relation to taxation and foreign investment and practices
of government and regulatory authorities) and other issues in foreign jurisdictions in which the Company operates.
28
Novatti Group Limited
Directors' report
30 June 2023
Businesses that operate across multiple jurisdictions face additional complexities from the unique business requirements in
each jurisdiction.
Sustainability and climate change risk
Environmental, Social and Governance (ESG) risks are becoming increasingly relevant to all businesses in Australia. The
possible effects of climate change may impact the prosperity of economies, environments and societies all around the
world. Although our operations are not subject to any particular and significant environmental regulation under any law of the
countries in which we operate, this area and associated governmental responses have potential impact on our business in
unknown ways.
The Management Risk Committee consisting of the CEO, COO, CFO and GM Corporate Services meet on a regular basis
to review the company's risk profile, risk register and risk control posture against open and any new risks. Any significant
changes in risk profile or risks are discussed, documented, assessed and then action plans updated or established as
required to ensure a suitable level of mitigation relative to the risk appetite of the company.
Information on directors
Name:
Title:
Qualifications:
Experience and expertise:
Other current directorships:
Peter Pawlowitsch
Non-Executive Chairman
BCom, CPA MBA, FGIA
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, Qoria Ltd (formerly Family Zone Cyber Safety Ltd) (ASX:
QOR)
Non-Executive Director, VRX Silica Ltd (ASX: VRX)
Executive Director, Dubber Corporation Ltd (ASX: DUB)
Former directorships (last 3 years): Non-Executive Director, Knosys Ltd (ASX: KNO)
Special responsibilities:
Interests in shares:
Interests in options:
Member of Audit, Risk and Compliance Committee
4,067,295 fully paid ordinary shares
5,500,000 unlisted options
Name:
Title:
Qualifications:
Experience and expertise:
Peter Cook
Executive Director (retired as Managing Director and Chief Executive Officer on 15
June 2023)
BSc, Grad Dip Computing, Grad Dip Securities, GAICD
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
None
Other current directorships:
Former directorships (last 3 years): Non-Executive Director, P2P Transport Limited (ASX: P2P)
Special responsibilities:
Interests in shares:
Interests in options:
Member of Audit, Risk and Compliance Committee and Operational Committee
13,674,571 fully paid ordinary shares
14,000,000 unlisted options
29
Novatti Group Limited
Directors' report
30 June 2023
Name:
Title:
Qualifications:
Experience and expertise:
Kenneth Lai
Non-Executive Director
BSc Majoring in Computer Science
Kenneth is the managing director and wholly owner of Prestige Team Limited, an
investment company which, together with its subsidiaries, holds an investment portfolio
in Hong Kong and Southeast Asia. Prestige Team Limited has interests in real estate,
payment processing, digital marketing and information technology support services.
Kenneth has funded and invested in various Silicon Valley technology funds focusing
on business opportunities within Asia. He also co-founded Legend World Development
Technology Limited, a limited liability company incorporated in Hong Kong, which
provides information technology solutions and integrated marketing solutions to
business setups, and in which he is a shareholder and advisor.
None
Other current directorships:
Former directorships (last 3 years): None
None
Special responsibilities:
13,309,971 fully paid ordinary shares
Interests in shares:
3,000,000 unlisted options
Interests in options:
Name:
Title:
Experience and expertise:
Killian Murphy
Non-Executive Director
Mr Murphy is a Stockbroker with more than 15 years of experience working in capital
markets across Ireland, UK, US and Australia. He currently works for MST Financial, a
research driven full service Stockbroker servicing domestic and international
institutional investors. Prior role includes Head of Industrials for Petra Capital as well
as CIMB Australia and Davy (UK and Ireland).
During this time, he has worked with a number of established and emerging tech and
payments companies, assisting them in crafting their message for institutional investors
and accessing growth capital.
Mr Murphy holds a Master of Arts (Economics) and a Bachelor of Arts (Hons) in
Economics from University College Dublin, National University of Ireland.
Other current directorships:
None
Former directorships (last 3 years): None
Special responsibilities:
Interests in shares:
Interests in options:
Member of the Audit, Risk and Compliance Committee
Nil
2,000,000 unlisted options
'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.
Chief Executive Officer
Mark Healy
Mark has held several senior roles in the Payments industry including most recently as Managing Director of Global Payments
Australia, and prior roles as Chief Operating Officer for Ezidebit and eWAY, and EVP and Chief Risk officer for the Neovia
Financial (now Paysafe) Group in the United Kingdom
Chief Financial Officer
Dharshini Mendez
Dharshini has held multiple senior leadership roles focused on driving organisational growth and has extensive experience
in transformation and change management across Telstra, Australia Post and ASX listed Melbourne IT. Dharshini's academic
credentials include a Masters in Business Accounting and Bachelor of Business Studies (Hons) and is also a Certified
Practicing Accountant (CPA).
30
Novatti Group Limited
Directors' report
30 June 2023
Company secretaries
Ian Hobson
Ian 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.
Steven Stamboultgis
Steven was appointed Company Secretary on 15 March 2021 and was the Chief Financial Officer of the group till 31 March
2023. Steven holds a Bachelor of Business Degree and Master in Commercial Law. He is a Certified Practicing
Accountant. Steven’s fees are based on a fee for service arrangement.
Meetings of directors
The number of meetings of the Company's Board of Directors ('the Board') held during the year ended 30 June 2023, and
the number of meetings attended by each director were:
Peter Pawlowitsch
Peter Cook
Kenneth Lai
Killian Murphy*
Abigail Cheadle**
Full Board
Audit, Risk and Compliance
Committee
Attended
Held
Attended
Held
7
7
5
4
4
7
7
7
4
4
2
2
-
1
1
2
2
-
1
1
Held: represents the number of meetings held during the time the director held office or was a member of the relevant
committee.
*
**
Killian Murphy was appointed on 13 October 2022
Abigail Cheadle resigned on 28 December 2022
Remuneration report (audited)
The remuneration report details the key management personnel remuneration arrangements for the consolidated entity, in
accordance with the requirements of the Corporations Act 2001 and its Regulations.
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
Principles used to determine the nature and amount of remuneration
The objective of the consolidated entity's executive reward framework is to ensure reward for performance is competitive
and appropriate for the results delivered. The framework aligns executive reward with the achievement of strategic objectives
and the creation of value for shareholders, and it is considered to conform 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
performance linkage / alignment of executive compensation
transparency
The Board is responsible for determining and reviewing remuneration arrangements for its directors and executives. The
performance of the consolidated entity depends on the quality of its directors and executives. The remuneration philosophy
is to attract, motivate and retain high performance and high quality personnel.
31
Novatti Group Limited
Directors' report
30 June 2023
The full Board has structured an executive remuneration framework that is market competitive and complementary to the
reward strategy of the Group.
Additionally, the reward framework should seek to enhance executives' interests by:
●
●
●
rewarding capability and experience
reflecting competitive reward for contribution to growth in shareholder wealth
providing a clear structure for earning rewards
In accordance with best practice corporate governance, the structure of non-executive director and executive director
remuneration is separate.
Non-executive directors remuneration
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 year ended 30 June 2023, 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, nor other non-executive directors are not present at any discussions relating to the determination of their
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 at a general meeting in line 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.
Executive remuneration
The consolidated entity aims to reward executives based on their position and responsibility, with a level and mix of
remuneration which has both fixed and variable components.
Remuneration policies and arrangements as well as incentive targets 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 save that the
CEO is not present at any discussions relating to the determination of his remuneration.
The Group rewards its executives with a level and mix of remuneration based on their position and responsibility, which may
have both fixed and variable components.
The executive remuneration and reward framework can have four components:
●
●
●
●
base pay and non-monetary benefits
short-term performance incentives
share-based payments or long-term performance incentives
other remuneration such as superannuation and long service leave
The combination of these comprises the executive's total remuneration.
Short Term Incentive 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 or the CEO are met. Targets are set by the board for the Key Executive Members and the remaining executives
have targets set by the CEO which are approved by the board through the budgeting process.
The targets consist of financial and non-financial Key Performance Indicators ('KPIs'). These may include but are not limited
to:
32
Novatti Group Limited
Directors' report
30 June 2023
●
●
●
●
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.
Long Term Incentive 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 Incentive Plan ('EIP').
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.
In addition, the CEO has performance options that are tied to total shareholder return with that being measured by providing
share price targets.
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.
LTIs are based on participation of the EIP. 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
EIP to offer shares and options to employees, the interest of employees is aligned with shareholder wealth. A copy of the
EIP can be found via the Group’s website.
Consolidated entity performance and link to 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:
Novatti Group Limited is a leading fintech that enables businesses to pay and be paid, from any device, anywhere. Solutions
include issuing, acquiring, processing, and billing, while the dedicated banking subsidiary, International Bank of Australia,
was granted a Restricted Authorised Deposit taking Institution (RADI) license in November 2022.
Align the interest of executives with shareholders
Attract, motivate and retain high performing individuals
- The remuneration strategy incorporates “at-risk”
components, with short-term paid in cash 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
33
Novatti Group Limited
Directors' report
30 June 2023
Remuneration
Component
Fixed Remuneration
Short Term Incentive
To provide competitive fixed
remuneration set with
reference to role, market,
experience and performance.
Vehicle
Purpose
Consisting of base salary,
superannuation and
nonmonetary 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.
Is paid in cash.
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.
Link to
Performance
Reviewed annually by the
Board, based on individual
and business unit
performance, the overall
performance of the Group
and comparable market
remunerations.
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.
Long Term Performance
Equity including Options,
Shares and/or Rights.
Details of remuneration
Details of the remuneration of key management personnel of the consolidated entity are set out in the following tables.
The key management personnel (KMPs) of the consolidated entity are:
●
●
●
●
●
Peter Pawlowitsch (Non-Executive Chairman)
Peter Cook Executive Director (retired as Managing Director and Chief Executive Officer on 15 June 2023)
Kenneth Lai (Non-Executive Director)
Abigail Cheadle (Non-Executive Director) (resigned on 28 December 2022)
Killian Murphy (Non-Executive Director) (appointed on 13 October 2022)
Other key management personnel:
●
●
●
●
Mark Healy (Chief Executive Officer) (appointed on 15 June 2023)
Alan Munday (Group Chief Operating Officer)
Steven Stamboultgis (Company Secretary) (resigned as Chief Financial Officer effective 31 March 2023)
Dharshini Mendez (Chief Financial Officer) (appointed on 3 April 2023)
34
Novatti Group Limited
Directors' report
30 June 2023
Amounts of remuneration
30 June 2023
Non-Executive Directors:
Peter Pawlowitsch
Kenneth Lai^
Killian Murphy(i)
Abigail Cheadle(ii)
Executive Directors:
Peter Cook
Other Key Management
Personnel:
Alan Munday
Steven Stamboultgis(iii)
Dharshini Mendez(iv)
Mark Healy(v)
Short-term
benefits
Short-term benefits
Cash salary
and fees monetary
Non-
$
$
Annual
leave
$
Long-term
benefits
Long
service
leave
$
Post-
employment
benefits
Share-
based
payments
Super-
annuation
$
Equity-
settled
$
Total
$
89,186
-
20,736
23,529
-
-
-
-
-
-
-
-
-
-
-
-
9,364
-
2,178
2,471
413,200
275,467
275,467
-
511,750
275,467
298,381
26,000
318,000
-
18,588
21,959
14,250
826,400 1,199,197
291,895
230,746
63,716
14,885
1,052,693
-
4,050
-
-
4,050
30,188
(55,957)
(1,943)
1,335
(7,789)
19,122
(17,318)
123
29
23,915
27,500
17,229
6,677
1,269
377,986
9,281
183,390
4,640
126,712
58,139
50,156
32,638
80,938 1,895,232 3,049,039
Killian Murphy was appointed on 13 October 2022
(i)
(ii) Abigail Cheadle resigned on 28 December 2022
(iii) Steven Stamboultgis resigned as Chief Financial Officer effective 31 March 2023
(iv) Dharshini Mendez was appointed as Chief Financial Officer on 3 April 2023
(v) Mark Healy was appointed as Chief Executive Officer on 15 June 2023
^ $140,000 remains unpaid for director fees for Kenneth Lai
Short-term
benefits
Short-term benefits
Cash salary
and fees monetary
Non-
$
$
Annual
leave
$
Long-term
benefits
Long
service
leave
$
Post-
employment
benefits
Share-
based
payments
Super-
annuation
$
Equity-
settled
$
Total
$
119,455
-
-
54,546
26,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
11,946
-
-
2,727
2,600
273,733
136,867
-
136,867
42,221
405,134
136,867
-
194,140
70,821
402,579
8,329
1,312
9,690
19,000
410,600
851,510
277,574
182,022
1,062,176
-
5,400
13,729
30,569
9,410
41,291
6,870
4,697
21,257
383,877
41,364
27,500
246,878
26,127
19,222
82,995 1,067,779 2,289,227
30 June 2022
Non-Executive Directors:
Peter Pawlowitsch
Kenneth Lai^
Paul Burton*^
Steven Zhou***
Abigail Cheadle**
Executive Directors:
Peter Cook
Other Key Management
Personnel:
Alan Munday
Steven Stamboultgis
35
Novatti Group Limited
Directors' report
30 June 2023
*
**
Paul Burton resigned from Non-Executive Director on 3 September 2021.
Abigail Cheadle was appointed as Non-Executive Director on 13 December 2021. Abigail Cheadle's options are subject
to shareholders' approval at the 2022 AGM.
*** Steven Zhou resigned from Non-Executive Director on 17 March 2022.
^ $100,000 remains unpaid for director fees for Kenneth Lai and Paul Burton.
The proportion of remuneration linked to performance and the fixed proportion are as follows:
Name
Non-Executive Directors:
Peter Pawlowitsch
Kenneth Lai
Steven Zhou
Abigail Cheadle
Executive Directors:
Peter Cook
Other Key Management
Personnel:
Alan Munday
Steven Stamboultgis
Dharshini Mendez
Mark Healy
Fixed remuneration
At risk - STI
30 June 2023 30 June 2022 30 June 2023 30 June 2022 30 June 2023 30 June 2022
At risk - LTI
19%
-
8%
100%
32%
-
30%
40%
31%
52%
98%
97%
54%
38%
89%
89%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
81%
100%
92%
-
68%
100%
70%
60%
69%
48%
2%
3%
46%
62%
11%
11%
-
-
Service agreements
Remuneration and other terms of employment for key management personnel are formalised in service agreements. Details
of these agreements are as follows:
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Peter Cook
Executive Director (retired as Managing Director and Chief Executive Officer on 15
June 2023)
20 November 2015
The term is not fixed.
Base salary of $400,000 (including statutory superannuation). 6.7M incentive options
exercisable at variable dollar values upon the achievement of certain milestones.
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.
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.
36
Novatti Group Limited
Directors' report
30 June 2023
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Alan Munday
Group Chief Operating Officer
20 November 2015
The term is not fixed.
Base salary of $304,468 (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.
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.
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Steven Stamboultgis
Chief Financial Officer and Company Secretary
20 November 2015 (Ceased on 31 March 2023)
The term is not fixed.
Base salary of $213,368 (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.
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.
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Mark Healy
Chief Executive Officer
15 June 2023
The term is not fixed.
Base salary of $350,000 (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 between the Executive and the Board.
The agreement may be terminated,(A) with six months’ notice from the Group or six
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 six month’s
notice, if the executive is unable to perform his duties due to illness, accident or
incapacitation, for six consecutive months or a period aggregating more than six
months in any 12-month period or (C), summarily following material breach or in the
case of serious misconduct.
37
Novatti Group Limited
Directors' report
30 June 2023
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Dharshini Mendez
Chief Financial Officer (appointed on 3 April 2023)
17 April 2023
The term is not fixed.
Base salary of $310,000 (including statutory superannuation).
Remuneration is subject to an annual review at review date to be conducted by the
Remuneration Committee (or in the absence of a Remuneration Committee, the
Managing Director). Factors
include personal competency
to be considered
progression, achievement of personal development targets and KPIs, company
remuneration policy, financial position and performance and current market equivalent
positions. KPIs to be agreed each year and may be varied by mutual agreement
between the Executive and the Remuneration Committee.
The agreement may be terminated,(A) with three months’ notice from the Group or
three 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
three month’s notice, if the executive is unable to perform his duties due to illness,
accident or incapacitation, for six consecutive months or a period aggregating more
than six months in any 12-month period or (C), summarily following material breach or
in the case of serious misconduct.
Key management personnel have no entitlement to termination payments in the event of removal for misconduct.
Share-based compensation
Issue of shares
There were no shares issued to key management personnel as part of compensation during the year ended 30 June 2023.
Options
There were no options over ordinary shares issued to directors and other key management personnel as part of
compensation that were outstanding as at 30 June 2023.
38
Novatti Group Limited
Directors' report
30 June 2023
Name
Service /
Market
conditions
Number of
options
granted
Grant date
Vesting date
and
exercisable
date
Expiry date
Exercise
price
Fair value
at per
option
grant date
Peter Pawlowitsch
Peter Pawlowitsch
Peter Pawlowitsch
Peter Cook
Peter Cook
Peter Cook
Peter Cook
Peter Cook
Peter Cook
Alan Munday
Alan Munday
Steven Stamboultgis
Peter Pawlowitsch
Peter Pawlowitsch
Peter Pawlowitsch
Peter Cook
Peter Cook
Peter Cook
Kenneth Lai
Kenneth Lai
Kenneth Lai
Alan Munday
Steven Stamboultgis
Mark Healy
Mark Healy
Mark Healy
Peter Pawlowitsch
Peter Pawlowitsch
Peter Pawlowitsch
Peter Cook
Peter Cook
Peter Cook
Kenneth Lai
Kenneth Lai
Kenneth Lai
Killian Murphy
Killian Murphy
Killian Murphy
Dharshini Mendez
Dharshini Mendez
Dharshini Mendez
Mark Healy
Mark Healy
Mark Healy
Mark Healy
Mark Healy
Mark Healy
Market
Market
Market
Market
Market
Market
Market
Market
Market
None
None
None
Market
Market
Market
Market
Market
Market
Market
Market
Market
Service
Service
Service
Service
Service
Market
Market
Market
Market
Market
Market
Market
Market
Market
Market
Market
Market
Service
Service
Service
Service
Service
Service
Market /
Service
Market /
Service
Market /
Service
166,666 25/11/2019
166,666 25/11/2019
166,667 25/11/2019
833,333 25/11/2019
833,333 25/11/2019
833,333 25/11/2019
833,334 25/11/2020
833,333 25/11/2020
833,333 25/11/2020
500,000 22/12/2020
500,000 22/12/2020
400,000 22/12/2020
666,667 20/12/2021
666,667 20/12/2021
666,666 20/12/2021
1,000,000 20/12/2021
1,000,000 20/12/2021
1,000,000 20/12/2021
333,334 20/12/2021
333,333 20/12/2021
333,333 20/12/2021
500,000 19/04/2022
250,000 19/04/2022
833,333 06/07/2022
833,333 06/07/2022
833,334 06/07/2022
1,000,000 23/11/2022
1,000,000 23/11/2022
1,000,000 23/11/2022
2,000,000 23/11/2022
2,000,000 23/11/2022
2,000,000 23/11/2022
666,667 23/11/2022
666,667 23/11/2022
666,666 23/11/2022
666,667 23/11/2022
666,667 23/11/2022
666,666 23/11/2022
500,000 17/04/2023
500,000 17/04/2023
500,000 17/04/2023
3,000,000 13/06/2023
795,455 13/06/2023
4,772,727 13/06/2023
13/06/2023
30/11/2020
30/11/2020
30/11/2020
30/11/2020
30/11/2020
30/11/2020
01/12/2020
01/12/2020
01/12/2020
22/12/2020
22/12/2020
22/12/2020
20/12/2021
20/12/2021
20/12/2021
20/12/2021
20/12/2021
20/12/2021
20/12/2021
20/12/2021
20/12/2021
19/04/2022
19/04/2022
06/07/2022
06/07/2023
06/07/2024
23/11/2022
23/11/2022
23/11/2022
23/11/2022
23/11/2022
23/11/2022
23/11/2022
23/11/2022
23/11/2022
23/11/2022
23/11/2022
23/11/2022
17/04/2023
17/04/2024
17/04/2025
30/06/2024
30/06/2024
30/06/2026
30/06/2026
30/11/2023
30/11/2023
30/11/2023
30/11/2023
30/11/2023
30/11/2023
30/11/2024
30/11/2024
30/11/2024
22/12/2023
22/12/2023
22/12/2023
30/11/2025
30/11/2025
30/11/2025
30/11/2025
30/11/2025
30/11/2025
30/11/2025
30/11/2025
30/11/2025
19/04/2025
19/04/2025
06/07/2025
06/07/2025
06/07/2025
30/11/2026
30/11/2026
30/11/2026
30/11/2026
30/11/2026
30/11/2026
30/11/2026
30/11/2026
30/11/2026
30/11/2026
30/11/2026
30/11/2026
17/04/2026
17/04/2026
17/04/2026
30/06/2027
30/06/2027
30/06/2027
30/06/2027
$0.200
$0.200
$0.200
$0.200
$0.200
$0.200
$0.270
$0.270
$0.270
$0.275
$0.275
$0.275
$0.450
$0.450
$0.450
$0.450
$0.450
$0.450
$0.450
$0.450
$0.450
$0.350
$0.350
$0.250
$0.157
$0.157
$0.200
$0.200
$0.200
$0.200
$0.200
$0.200
$0.200
$0.200
$0.200
$0.200
$0.200
$0.200
$0.180
$0.180
$0.180
$0.200
$0.000
$0.000
$0.200
$0.106
$0.086
$0.074
$0.106
$0.086
$0.074
$0.110
$0.114
$0.119
$0.102
$0.083
$0.102
$0.128
$0.137
$0.146
$0.128
$0.137
$0.146
$0.128
$0.137
$0.146
$0.084
$0.084
$0.091
$0.111
$0.111
$0.135
$0.137
$0.141
$0.135
$0.137
$0.141
$0.135
$0.137
$0.141
$0.135
$0.137
$0.141
$0.089
$0.089
$0.089
$0.064
$0.120
$0.120
$0.046
1,250,000
1,250,000
1,250,000
13/06/2023
30/06/2026
30/06/2027
$0.200
$0.039
13/06/2023
30/06/2026
30/06/2027
$0.200
$0.033
42,968,180
39
Novatti Group Limited
Directors' report
30 June 2023
The number of options over ordinary shares granted to and vested by directors and other key management personnel as
part of compensation during the year ended 30 June 2023 are set out below:
Name
Peter Pawlowitsch
Peter Cook
Kenneth Lai
Abigail Cheadle (a)
Steven Zhou (b)
Alan Munday
Killian Murphy (c)
Mark Healy (d)
Steven Stamboultgis (e)
Dharshini Mendez (f)
Number of
Number of
Number of
Number of
options
granted
options
granted
options
vested
options
vested
during the
during the
during the
during the
year
year
year
year
30 June 2023 30 June 2022 30 June 2023 30 June 2022
3,000,000
6,000,000
2,000,000
2,000,000
-
-
2,000,000
14,818,182
-
1,500,000
2,000,000
3,000,000
1,000,000
1,500,000
1,000,000
500,000
-
-
250,000
-
-
-
-
-
-
125,000
-
833,333
62,500
500,000
2,000,000
3,000,000
1,000,000
1,500,000
1,000,000
937,500
-
-
675,000
-
(a) Abigail Cheadle resigned as a Non-Executive Director on 28 December 2022
(b) Steven Zhou resigned from Non-Executive Director on 17 March 2022
(c) Killian Murphy was appointed as a Non-Executive Director on 13 October 2022
(d) Mark Healy was appointed as Chief Executive Officer on 15 June 2023
(e) Steven Stamboultgis resigned as Chief Financial Officer effective 31 March 2023
Dharshini Mendez was appointed as Chief Financial Officer on 3 April 2023
(f)
Additional information
The factors that are considered to affect total shareholders return ('TSR') are summarised below:
2023
2022
2021
2020
2019
Share price at financial year end ($)
Total dividends declared (cents per share)
Basic loss per share (cents per share)
0.120
-
(7.800)
0.155
-
(5.115)
0.640
-
(5.162)
0.310
-
(6.398)
0.165
-
(3.098)
Additional disclosures relating to key management personnel
Shareholding
The number of shares in the Company held during the financial year by each director and other members of key management
personnel of the consolidated entity, including their personally related parties, is set out below:
Balance at Received Exercise
the start of as part of
remuneration
the year
of
options (f)
Other (g)
Balance at
the end of
the year
Ordinary shares
Peter Pawlowitsch
Peter Cook
Kenneth Lai
Alan Munday
Steven Stamboultgis (a)
Killian Murphy (b)
Abigail Cheadle (c)
Dharshini Mendez (d)
Mark Healy (e)
-
-
-
-
-
-
-
-
-
-
484,633
-
193,853
78,348
26,390
-
-
-
-
783,224
-
4,067,295
500,000 13,674,571
- 13,309,971
128,348
-
294,403
-
-
-
-
-
-
-
29,700
29,700
529,700 31,504,288
3,582,662
13,174,571
13,116,118
50,000
268,013
-
-
-
-
30,191,364
40
Novatti Group Limited
Directors' report
30 June 2023
(a) Steven Stamboultgis resigned as Chief Financial Officer on 31 March 2023
(b) Killian Murphy was appointed on 13 October 2022
(c) Abigail Cheadle resigned on 28 December 2022
(d) Dharshini Mendez was appointed as Chief Financial Officer on 3 April 2023
(e) Mark Healy was appointed as Chief Executive Officer on 15 June 2023
(f)
Number of shares issued represented the cashless exercise of options (refer to "option holding" section) at the intrinsic
economic value of the option derived between exercise price and VWAP on ASX over 5 trading day period immediately
immediately preceding the exercise date.
(g) On-market acquisition
Option holding
The number of options over ordinary shares in the Company held during the financial year by each director and other
members of key management personnel of the consolidated entity, including their personally related parties, is set out below:
Options over ordinary shares
Peter Pawlowitsch
Peter Cook
Abigail Cheadle
Kenneth Lai
Alan Munday
Steven Stamboultgis
Dharshini Mendez
Mark Healy
Killian Murphy
Balance at
the start of
the year
Granted
Exercised * Other**
Balance at
the end of
the year
3,000,000
4,166,667
6,000,000
8,000,000
2,000,000
1,500,000
2,000,000
1,666,667
-
2,250,000
-
800,000
-
1,500,000
- 14,818,182
2,000,000
-
18,383,334 31,318,182
(1,666,667)
-
-
(666,667)
(750,000)
(150,000)
-
-
-
(3,233,334)
-
5,500,000
- 14,000,000
-
(3,500,000)
3,000,000
-
1,500,000
-
650,000
-
-
1,500,000
- 14,818,182
2,000,000
-
(3,500,000) 42,968,182
*
**
The exercises of options were cashless and the number of shares issued were according to the intrinsic economic value
of the option derived between exercise price and VWAP on ASX over 5 trading day period immediately immediately
preceding the exercise date.
Cessation of being a KMP.
Other transactions with key management personnel and their related parties
Services
No other payments were made to Directors outside of their normal duties as Directors for Novatti Group Ltd.
Current and non-current liabilities to a Director
There are no other current or non-current liabilities outstanding to Directors of the Group as at 30 June 2023.
This concludes the remuneration report, which has been audited.
41
Novatti Group Limited
Directors' report
30 June 2023
Shares under option
Unissued ordinary shares of Novatti Group Limited under option at the date of this report are as follows:
Grant date
25 November 2019
10 July 2020
10 July 2020
10 July 2020
26 October 2020
25 November 2020
22 December 2020
22 December 2020
8 February 2021
5 April 2021
7 April 2021
5 May 2021
31 May 2021
1 October 2021
15 October 2021
15 October 2021
20 December 2021
25 January 2022
5 April 2022
6 July 2022
6 July 2022
30 September 2022
23 November 2023
13 December 2022
17 April 2023
13 June 2023
13 June 2023
Expiry date
30 November 2023
10 July 2023
1 March 2024
1 March 2025
26 October 2023
30 November 2024
22 December 2023
14 October 2023
8 February 2024
5 April 2024
7 April 2024
5 May 2024
31 May 2024
31 December 2023
15 October 2024
15 October 2024
30 November 2025
25 January 2025
19 April 2025
6 July 2025
6 July 2025
30 June 2026
30 November 2026
30 June 2026
17 April 2026
30 June 2027
30 June 2027
Exercise
price
Number
under option
3,000,000
$0.200
750,000
$0.200
375,000
$0.200
375,000
$0.200
1,000,000
$0.300
2,500,000
$0.270
2,700,000
$0.275
2,000,000
$0.300
200,000
$0.300
300,000
$0.300
100,000
$0.600
100,000
$0.750
400,000
$0.750
500,000
$0.660
800,002
$0.500
1,400,000
$0.750
7,000,000
$0.450
300,000
$0.330
2,375,000
$0.350
833,333
$0.250
1,666,667
$0.157
$0.250
1,000,000
$0.200 13,000,000
250,000
$0.250
1,500,000
$0.180
6,750,000
$0.200
5,568,182
$0.000
56,743,184
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
Company or of any other body corporate.
Shares issued on the exercise of options
There were 1,906,021 ordinary shares of Novatti Group Limited issued on the exercise of options during the year ended 30
June 2023 and up to the date of this report.
Indemnity and insurance of officers
The Company has indemnified the directors and executives of the Company 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 Company paid a premium in respect of a contract to insure the directors and executives of the
Company against a 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.
Indemnity and insurance of auditor
The Company has not, during or since the end of the financial year, indemnified or agreed to indemnify the auditor of the
Company or any related entity against a liability incurred by the auditor.
During the financial year, the Company has not paid a premium in respect of a contract to insure the auditor of the Company
or any related entity.
42
Novatti Group Limited
Directors' report
30 June 2023
Proceedings on behalf of the Company
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf
of the Company, or to intervene in any proceedings to which the Company is a party for the purpose of taking responsibility
on behalf of the Company for all or part of those proceedings.
Non-audit services
Details of the amounts paid or payable to the auditor for non-audit services provided during the financial year by the auditor
are outlined in note 25 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.
The directors are of the opinion that the services as disclosed in note 25 to the financial statements do not compromise the
external auditor's independence requirements of the Corporations Act 2001 for the following reasons:
●
all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity
of the auditor; and
none of the services undermine the general principles relating to auditor independence as set out in Accounting
Professional and Ethical Standards (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 company, acting as advocate for the company or jointly sharing
economic risks and rewards.
●
Officers of the Company who are former partners of William Buck
There are no officers of the Company who are former partners of William Buck.
Rounding of amounts
The Company is of a kind referred to in Corporations Instrument 2016/191, issued by the Australian Securities and
Investments Commission, relating to 'rounding-off'. Amounts in this report have been rounded off in accordance with that
Corporations Instrument to the nearest thousand dollars, or in certain cases, the nearest dollar.
Auditor's independence declaration
A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out
immediately after this directors' report.
Auditor
William Buck continues in office in accordance with section 327 of the Corporations Act 2001.
This report is made in accordance with a resolution of directors, pursuant to section 298(2)(a) of the Corporations Act 2001.
On behalf of the directors
___________________________
Peter Pawlowitsch
Chairman
28 September 2023
43
AUDITOR’S INDEPENDENCE DECLARATION UNDER SECTION 307C OF THE
CORPORATIONS ACT 2001 TO THE DIRECTORS OF NOVATTI GROUP
LIMITED
I declare that, to the best of my knowledge and belief during the year ended 30 June 2023 there have been:
— no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in
relation to the audit; and
— no contraventions of any applicable code of professional conduct in relation to the audit.
William Buck Audit (Vic) Pty Ltd
ABN 59 116 151 136
N. S. Benbow
Director
Melbourne, 28 September 2023
Level 20, 181 William Street, Melbourne VIC 3000
+61 3 9824 8555
vic.info@williambuck.com
williambuck.com.au
William Buck is an association of firms, each trading under the name of William Buck
across Australia and New Zealand with affiliated offices worldwide.
Liability limited by a scheme approved under Professional Standards Legislation.
Novatti Group Limited
Consolidated statement of profit or loss and other comprehensive income
For the year ended 30 June 2023
Consolidated
Note 30 June 2023 30 June 2022
$'000
$'000
Revenue
Other income
Expenses
Administrative and corporate costs
Client hosting fees and other direct services
Employee benefits
Foreign currency translation gains/(losses)
Marketing and selling expenses
Data management expenses
(Loss)/Gain on investments at fair value through profit or loss
Vesting charge for share-based payments
Share of net profit of joint ventures accounted for using the equity method
Gains/(losses) on embedded derivative - convertible note facility into Novatti Group
Ltd the parent entity
Depreciation and amortisation expense
Finance costs
5
6
7
10
33
Loss before income tax expense
Income tax expense
Loss after income tax expense for the year
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Foreign currency translation
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
Loss for the year is attributable to:
Non-controlling interest
Owners of Novatti Group Limited
Total comprehensive income for the year is attributable to:
Non-controlling interest
Owners of Novatti Group Limited
38,979
32,555
16,316
1,815
(5,651)
(20,731)
(28,265)
(69)
(1,037)
(4,348)
(15,877)
(2,265)
-
-
(2,211)
(1,382)
(3,725)
(18,928)
(27,394)
403
(290)
(1,197)
3,302
(1,325)
23
729
(1,853)
(725)
(26,541)
(16,610)
(4)
(17)
(26,545)
(16,627)
(238)
(238)
43
43
(26,783)
(16,584)
(235)
(26,310)
-
(16,627)
(26,545)
(16,627)
(235)
(26,548)
-
(16,584)
(26,783)
(16,584)
Cents
Cents
Basic loss per share
Diluted loss per share
32
32
(7.800)
(7.800)
(5.115)
(5.115)
The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the
accompanying notes
45
Novatti Group Limited
Consolidated statement of financial position
As at 30 June 2023
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 at fair value through profit and loss
Plant and equipment
Right-of-use assets
Intangible assets
Security deposits
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Settlement, remittance and visa funds payable
Lease liabilities
Contract liabilities
Convertible note facilities
Employee benefits
Total current liabilities
Non-current liabilities
Trade and other payables
Borrowings
Lease liabilities
Employee benefits
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Accumulated losses
Equity attributable to the owners of Novatti Group Limited
Non-controlling interest
Total equity
Consolidated
Note 30 June 2023 30 June 2022
$'000
$'000
8
9
10
11
12
26
13
14
16
17
18
13
15
16
18
19
20
21
18,215
7,748
92,444
1,131
119,538
-
11,847
407
1,509
7,904
4,429
26,096
6,059
8,422
52,440
928
67,849
77
27,724
529
1,790
9,322
3,704
43,146
145,634
110,995
22,420
91,629
271
286
-
3,338
117,944
-
10,500
1,575
140
12,215
16,221
52,062
273
798
40
1,959
71,353
255
-
1,829
917
3,001
130,159
74,354
15,475
36,641
90,686
5,401
(83,477)
12,610
2,865
89,336
4,981
(57,676)
36,641
-
15,475
36,641
The above consolidated statement of financial position should be read in conjunction with the accompanying notes
46
Novatti Group Limited
Consolidated statement of changes in equity
For the year ended 30 June 2023
Consolidated
Share-based
payment
reserve
$'000
Foreign
currency
translation
reserve
$'000
Issued
capital
$'000
Accumulated
losses
$'000
Non-
Controlling
Interests
$'000
Total equity
$'000
Balance at 1 July 2021
44,144
3,226
577
(41,018)
1,969
8,898
Loss after income tax expense
for the year
Other comprehensive income
for the year, net of tax
Total comprehensive income for
the year
Transactions with owners in
their capacity as owners:
Vesting of share based
payments arrangements
Issue of shares in lieu of
consultancy fees
Issue of shares in lieu of staff
remuneration
Issue of shares on exercise of
options
Issue of shares on conversion
of convertible notes and
exercise of bonus options held
by convertible note holders
Reacquisition of equity in
Novatti B Holdings Pty Ltd
formerly owned by BC Invest
Proceeds from issue of shares,
net of transaction costs (note
19)
Issue of shares to acquire ATX
Fintech Holding Sdn Bhd
-
-
-
-
26
250
-
-
-
1,792
-
-
2,273
(656)
3,354
(1)
-
38,029
1,260
-
-
-
-
43
(16,627)
-
43
(16,627)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Balance at 30 June 2022
89,336
4,361
620
(57,676)
-
-
-
-
-
-
-
-
(16,627)
43
(16,584)
1,792
26
250
1,617
3,353
-
-
-
38,029
1,260
36,641
(31)
(1,969)
(2,000)
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes
47
Novatti Group Limited
Consolidated statement of changes in equity
For the year ended 30 June 2023
Consolidated
Share-based
payment
reserve
$'000
Foreign
currency
translation
reserve
$'000
Issued
capital
$'000
Accumulated
losses
$'000
Non-
Controlling
Interests
$'000
Total equity
$'000
Balance at 1 July 2022
89,336
4,361
620
(57,676)
-
36,641
Loss after income tax expense
for the year
Other comprehensive income
for the year, net of tax
Total comprehensive income for
the year
Transactions with owners in
their capacity as owners:
Expiry of share options
Vesting of share based
payments arrangements
Issue of shares in lieu of
consultancy fees
Issue of shares in lieu of staff
remuneration
Issue of shares on exercise of
options
Issue of shares in subsidiary to
external investor
-
-
-
-
-
31
221
-
-
-
(509)
2,265
-
-
1,098
(1,098)
-
-
-
(26,310)
(235)
(26,545)
(238)
-
-
(238)
(238)
(26,310)
(235)
(26,783)
-
-
-
-
-
-
509
-
-
-
-
-
-
-
-
-
-
-
2,265
31
221
-
3,100
3,100
Balance at 30 June 2023
90,686
5,019
382
(83,477)
2,865
15,475
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes
48
Novatti Group Limited
Consolidated statement of cash flows
For the year ended 30 June 2023
Cash flows from operating activities
Receipts from customers (inclusive of GST)
Payments to suppliers and employees (inclusive of GST)
Interest received
Receipt of Government Stimulus
Interest and other finance costs paid
Dividends received
Income taxes paid
Consolidated
Note 30 June 2023 30 June 2022
$'000
$'000
78,282
(91,708)
668
1,921
(1,238)
(12,075)
13,511
(43)
62,124
(75,838)
34
256
(721)
(14,145)
1,126
(13)
Net cash from/(used in) operating activities
31
1,393
(13,032)
Cash flows from investing activities
Payment for purchase of business, net of cash acquired
Payments for investments in Reckon Limited
Payments for plant and equipment
Payments for intangible assets
Payments for security deposits
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of shares, net of transaction costs
Repayment of borrowings
Repayment of convertible notes
(Repurchase)/issue of equity to BC Invest
Proceeds from exercise of options
Proceeds from borrowings
Borrowings transaction costs
Repayment of lease liabilities
Proceeds from the issue of shares into IBOA Group Holdings Pty Limited
Net cash from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Effects of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at the end of the financial year
23
12
19
21
15
-
-
(35)
(353)
(1,573)
(2,098)
(22,517)
(147)
(326)
(1,587)
(1,961)
(26,675)
-
-
(40)
-
-
10,500
(392)
(256)
3,100
38,029
(804)
-
(2,000)
1,618
-
-
(248)
-
12,912
36,595
12,344
6,059
(188)
(3,112)
8,798
373
18,215
6,059
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes
49
Novatti Group Limited
Notes to the consolidated financial statements
30 June 2023
Note 1. General information
The consolidated financial statements cover Novatti Group Limited as a consolidated entity consisting of Novatti Group
Limited (‘the Company’, ‘Novatti’ or ‘parent entity’) and the entities it controlled (collectively ‘the Group’) 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 is:
Level 3
461 Bourke Street
Melbourne VIC 3000
A description of the nature of the consolidated entity'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 28 September 2023. The
directors do not have the power to amend and reissue the financial statements.
Note 2. Significant accounting policies
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.
New or amended Accounting Standards and Interpretations adopted
The consolidated entity has adopted all of the new or amended Accounting Standards and Interpretations issued by the
Australian Accounting Standards Board ('AASB') that are mandatory for the current reporting period.
Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted.
The adoption of these Accounting Standards and Interpretations did not have any significant impact on the financial
performance or position of the consolidated entity.
Statement of Compliance
The consolidated financial statements are general-purpose financial statements which have been prepared in accordance
with Australian Accounting Standards (AASBs) adopted by the Australian Accounting Standards Board (AASB) and the
Corporations Act 2001.
The consolidated financial statements comply with International Financial Reporting Standards (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.
50
Novatti Group Limited
Notes to the consolidated financial statements
30 June 2023
Note 2. Significant accounting policies (continued)
Going concern
The financial statements for the period ended 30 June 2023 have been prepared on the basis that the entity is a going
concern, which contemplates the continuity of normal business activity, realisation of assets and settlement of liabilities in
the normal course of business. During the 12 month period the entity recorded revenue of $39,979,000, a net loss after tax
of $26,545,000 and incurred net cash inflows from operating activities of $1,393,000, which includes a one-off dividend of
approximately $12,835,000.
The Group’s ability to continue as a going concern is dependent upon its ability to generate positive cash flow from its
business operations. The above matters described indicate that a material uncertainty exists that may cast significant doubt
about the entity’s ability to continue as a going concern and, therefore, that it may be unable to realise its assets and discharge
its liabilities in the normal course of business.
The financial statements have been prepared on the basis that the entity is a going concern, which contemplates the
continuity of normal business activity, realisation of assets and settlement of liabilities in the normal course of business for
the following reasons:
●
●
●
●
●
●
The Directors are planning for the business to reduce net operating cash outflows during FY24 by increasing cash
receipts from customers in order to work towards positive future operating cash flow;
The Group owns a number of investments that the Group can potentially sell
The entity has historically demonstrated its ability to raise funds to satisfy its cash requirements;
Management are actively considering the future capital requirements of the entity and will consider all funding options
as required;
The Group is undertaking a simplification strategy to extract more value from existing resources rather than adding
extra cost and has the ability to scale back certain activities that are non-essential to existing customers so as to
conserve cash; and
During the year, the Group sold down its interest in the banking entity by 9.32%, by raising $3,100,000 for the banking
operations. The directors may consider, if required, additional partial sales of its interest in this entity, or alternatively
the sale or dilution of the Group’s interest in other non-core business assets.
Should the entity not be able to continue as a going concern it may be required to realise its assets and discharge its liabilities
other than in the ordinary course of business, and at amounts that differ from those stated in the financial statements. The
financial report does not include any adjustments relating to the recoverability or classification of recorded asset amounts,
nor the amounts or classification of liabilities that might be necessary should the Group not be able to continue as a going
concern.
Basis of preparation
The financial statements have been prepared on an accruals basis and are based on the historical cost convention, except
for the following which is recorded at fair value basis: investments at fair value through profit and loss and deferred
consideration. Unless otherwise stated the carrying amounts of financial assets and liabilities reflect their fair value.
Critical accounting estimates
The preparation of the financial statements requires the use of certain critical accounting estimates. It also requires
management to exercise its judgment in the process of applying the Group’s accounting policies. The areas involving a
higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial
statements are disclosed in Note 2.
Parent entity information
In accordance with the Corporations Act 2001, these financial statements present the results of the Group only.
Supplementary information about the legal parent entity is disclosed in note 28.
Principles of consolidation
These are the financial statements of the ‘Company’ and the ‘Group’ as at 30 June 2023.
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:
51
Novatti Group Limited
Notes to the consolidated financial statements
30 June 2023
Note 2. Significant accounting policies (continued)
●
●
●
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.
The acquisition of subsidiaries is accounted for using the acquisition method of accounting. A change in ownership interest,
without the loss of control, is accounted for as an equity transaction, where the difference between the consideration
transferred and the book value of the share of the non-controlling interest acquired is recognised directly in equity attributable
to the parent.
Non-controlling interest in the results and equity of subsidiaries are shown separately in the statement of profit or loss and
other comprehensive income, statement of financial position and statement of changes in equity of the consolidated entity.
Losses incurred by the consolidated entity are attributed to the non-controlling interest in full, even if that results in a deficit
balance.
Where the consolidated entity loses control over a subsidiary, it derecognises the assets including goodwill, liabilities and
non-controlling interest in the subsidiary together with any cumulative translation differences recognised in equity. The
consolidated entity recognises the fair value of the consideration received and the fair value of any investment retained
together with any gain or loss in profit or loss.
Operating segments
Operating segments are presented using the 'management approach', where the information presented is on the same basis
as the internal reports provided to the Chief Operating Decision Makers ('CODM'). The CODM is responsible for the allocation
of resources to operating segments and assessing their performance.
Foreign currency translation
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.
Revenue recognition
The Group recognises revenue as follows:
Revenue from contracts with customers
Revenue is recognised at an amount that reflects the consideration to which the Consolidated Entity is expected to be entitled
in exchange for transferring goods or services to a customer. For each contract with a customer, the Consolidated Entity:
identifies the contract with a customer; identifies the performance obligations in the contract; determines the transaction price
which takes into account estimates of variable consideration and the time value of money; allocates the transaction price to
the separate performance obligations on the basis of the relative stand-alone selling price of each distinct good or service to
be delivered; and recognises revenue when or as each performance obligation is satisfied in a manner that depicts the
transfer of the goods or services promised to the customer.
52
Novatti Group Limited
Notes to the consolidated financial statements
30 June 2023
Note 2. Significant accounting policies (continued)
Technology
In this revenue stream the Consolidated Entity develops, deploys and supports specialised mobile and alternate payment
technologies, whereby licence fees are amortised over the relevant period of contract and professional service revenue is
recognised as the service rendered to the customer.
Business Automation
Provisioning of customer engagement, payment, provisioning, and subscription billing solutions. Monthly fees are charged
at a transactional level. Fees for settling up and deploying the service are charged and recognised when the service is
provided.
Acquiring
A service that enables merchants to get paid. Monthly fees are charged at a transactional level. Fees for settling up and
deploying the service are charged and recognised when the service is provided.
Alternative Payments
Revenue from Alternative Payments is a mixture of:
●
●
●
●
Fees for software as a service
Fees for the facilitation of top up vouchers
Settlement Services of financial transactions
Fees from ‘Prepaid’ reloadable cards
The revenue charges for alternative payment services are based on transactional value. Revenue is therefore recognised
when the service is provided.
Banking Services
On approval as an Authorised Deposit-Taking Institution or its full banking licence by APRA, Banking services will provide a
number of services to Australian customers for which they may charge a transactional fee and/or fee for service where the
revenue is recognised when the service is provided.
Issuing
Issuing of prepaid Visa cards under licence of Visa. Monthly fees are charged at a transactional level. Fees for settling up
and deploying the service are charged and recognised when the service is provided.
ATX Payments
ATX provides digital payment services, such as third-party bill and product payments and it is paid per transaction.
Interest
Interest revenue is recognised on a time proportional basis that takes into account the effective yield on the financial asset.
Contract liabilities
Contract liabilities 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 2023.
Other revenue
Other revenue is recognised at the time it is received or when the right to receive payment is established.
Contract assets
Contract assets includes revenue from the sales of services unbilled as at 30 June 2023.
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.
Income tax
The income tax expense or benefit for the period is the tax payable on that period's taxable income based on the applicable
income tax rate for each jurisdiction, 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.
53
Novatti Group Limited
Notes to the consolidated financial statements
30 June 2023
Note 2. Significant accounting policies (continued)
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.
Cash and cash equivalents
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.
Trade and other receivables
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.
Financial assets and other investments
Financial assets and other investments are initially measured at fair value. Transaction costs are included as part of the initial
measurement, except for financial assets at fair value through profit or loss. Such assets are subsequently measured at
either amortised cost or fair value depending on their classification. Classification is determined based on both the business
model within which such assets are held and the contractual cash flow characteristics of the financial asset unless an
accounting mismatch is being avoided.
Financial assets are derecognised when the rights to receive cash flows have expired or have been transferred and the
Group has transferred substantially all the risks and rewards of ownership. When there is no reasonable expectation of
recovering part or all of a financial asset, it's carrying value is written off.
Financial assets at amortised cost
A financial asset is measured at amortised cost only if both of the following conditions are met: (i) it is held within a business
model whose objective is to hold assets in order to collect contractual cash flows; and (ii) the contractual terms of the financial
asset represent contractual cash flows that are solely payments of principal and interest.
Financial assets at fair value through profit or loss
Financial assets not measured at amortised cost 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.
Impairment of financial assets
The Group recognises a loss allowance for expected credit losses on financial assets which are measured at amortised cost.
The measurement of the loss allowance depends upon the Group's assessment at the end of each reporting period as to
whether the financial instrument's credit risk has increased significantly since initial recognition, based on reasonable and
supportable information that is available, without undue cost or effort to obtain.
54
Novatti Group Limited
Notes to the consolidated financial statements
30 June 2023
Note 2. Significant accounting policies (continued)
Where there has not been a significant increase in exposure to credit risk since initial recognition, a 12-month expected credit
loss allowance is estimated. This represents a portion of the asset's lifetime expected credit losses that is attributable to a
default event that is possible within the next 12 months. Where a financial asset has become credit impaired or where it is
determined that credit risk has increased significantly, the loss allowance is based on the asset's lifetime expected credit
losses. The amount of expected credit loss recognised is measured on the basis of the probability weighted present value of
anticipated cash shortfalls over the life of the instrument discounted at the original effective interest rate.
Plant 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 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.
Right-of-use assets
A right-of-use asset is recognised at the commencement date of a lease. The right-of-use asset is measured at cost, which
comprises the initial amount of the lease liability, adjusted for, as applicable, any lease payments made at or before the
commencement date net of any lease incentives received, any initial direct costs incurred, and, except where included in the
cost of inventories, an estimate of costs expected to be incurred for dismantling and removing the underlying asset, and
restoring the site or asset.
Right-of-use assets are amortised on a straight-line basis over the unexpired period of the lease or the estimated useful life
of the asset, whichever is the shorter. Where the consolidated entity expects to obtain ownership of the leased asset at the
end of the lease term, the depreciation is over its estimated useful life. Right-of use assets are subject to impairment or
adjusted for any remeasurement of lease liabilities.
The Group has elected not to recognise a right-of-use asset and corresponding lease liability for short-term leases with terms
of 12 months or less and leases of low-value assets. Lease payments on these assets are expensed to profit or loss as
incurred.
55
Novatti Group Limited
Notes to the consolidated financial statements
30 June 2023
Note 2. Significant accounting policies (continued)
Intangible 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:
Product Development: Technology
Customer lists
Intellectual Property: Technology - Billing Software
Brands
5 years
5 - 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.
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.
Trade and other payables
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.
Borrowings
Loans and borrowings are initially recognised at the fair value of the consideration received, net of transaction costs. They
are subsequently measured at amortised cost using the effective interest method.
Lease liabilities
A lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised at the present
value of the lease payments to be made over the term of the lease, discounted using the interest rate implicit in the lease or,
if that rate cannot be readily determined, the consolidated entity's incremental borrowing rate. Lease payments comprise of
fixed payments less any lease incentives receivable, variable lease payments that depend on an index or a rate, amounts
expected to be paid under residual value guarantees, exercise price of a purchase option when the exercise of the option is
reasonably certain to occur, and any anticipated termination penalties. The variable lease payments that do not depend on
an index or a rate are expensed in the period in which they are incurred.
56
Novatti Group Limited
Notes to the consolidated financial statements
30 June 2023
Note 2. Significant accounting policies (continued)
Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts are remeasured
if there is a change in the following: future lease payments arising from a change in an index or a rate used; residual
guarantee; lease term; certainty of a purchase option and termination penalties. When a lease liability is remeasured, an
adjustment is made to the corresponding right-of use asset, or to profit or loss if the carrying amount of the right-of-use asset
is fully written down.
Employee benefits
Short-term employee benefits
Liabilities for wages and salaries, including non-monetary benefits, annual leave and long service leave expected to be
settled wholly within 12 months of the reporting date are measured at the amounts expected to be paid when the liabilities
are settled.
Other long-term employee benefits
The liability for annual leave and long service leave not expected to be settled within 12 months of the reporting date are
measured at the present value of expected future payments to be made in respect of services provided by employees up to
the reporting date using the projected unit credit method. Consideration is given to expected future wage and salary levels,
experience of employee departures and periods of service. Expected future payments are discounted using market yields at
the reporting date on high quality corporate bonds with terms to maturity and currency that match, as closely as possible, the
estimated future cash outflows.
Share-based payments
Equity-settled and cash-settled share-based compensation benefits are provided to employees.
Equity-settled transactions are awards of shares, or options over shares, that are provided to employees in exchange for the
rendering of services. Cash-settled transactions are awards of cash for the exchange of services, where the amount of cash
is determined by reference to the share price.
The cost of equity-settled transactions are measured at fair value on grant date. Fair value is independently determined using
either the Binomial or 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.
The cost of equity-settled transactions are recognised as an expense with a corresponding increase in equity over the vesting
period. The cumulative charge to profit or loss is calculated based on the grant date fair value of the award, the best estimate
of the number of awards that are likely to vest and the expired portion of the vesting period. The amount recognised in profit
or loss for the period is the cumulative amount calculated at each reporting date less amounts already recognised in previous
periods.
The cost of cash-settled transactions is initially, and at each reporting date until vested, determined by applying either the
Binomial or Black-Scholes option pricing model, taking into consideration the terms and conditions on which the award was
granted. The cumulative charge to profit or loss until settlement of the liability is calculated as follows:
●
during the vesting period, the liability at each reporting date is the fair value of the award at that date multiplied by the
expired portion of the vesting period.
from the end of the vesting period until settlement of the award, the liability is the full fair value of the liability at the
reporting date.
●
All changes in the liability are recognised in profit or loss. The ultimate cost of cash-settled transactions is the cash paid to
settle the liability.
Market conditions are taken into consideration in determining fair value. Therefore any awards subject to market conditions
are considered to vest irrespective of whether or not that market condition has been met, provided all other conditions are
satisfied.
57
Novatti Group Limited
Notes to the consolidated financial statements
30 June 2023
Note 2. Significant accounting policies (continued)
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 the non-vesting condition is within the control of the Group or employee, the failure to satisfy the condition is treated as a
cancellation. If the condition is not within the control of the Group or employee and is not satisfied during the vesting period,
any remaining expense for the award is recognised over the remaining vesting period, unless the award is forfeited.
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.
Fair value measurement
When an asset or liability, financial or non-financial, is measured at fair value for recognition or disclosure purposes, the fair
value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date; and assumes that the transaction will take place either: in the principal
market; or in the absence of a principal market, in the most advantageous market.
Fair value is measured using the assumptions that market participants would use when pricing the asset or liability, assuming
they act in their economic best interests. For non-financial assets, the fair value measurement is based on its highest and
best use. Valuation techniques that are appropriate in the circumstances and for which sufficient data are available to
measure fair value, are used, maximising the use of relevant observable inputs and minimising the use of unobservable
inputs.
Issued 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.
Loss per share
Basic loss per share
Basic earnings per share is calculated by dividing the profit attributable to the owners of Novatti Group Limited, excluding
any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding
during the financial year, adjusted for bonus elements in ordinary shares issued during the financial year.
Diluted loss per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the
after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted
average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares.
Goods and Services Tax ('GST') and other 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. In this case it is recognised as part of the cost of the acquisition of the asset or as part of
the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST
recoverable from, or payable to, the tax authority is included in other receivables or other payables in the statement of
financial position.
Cash flows are presented on a gross basis. 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.
58
Novatti Group Limited
Notes to the consolidated financial statements
30 June 2023
Note 2. Significant accounting policies (continued)
Rounding of amounts
The Company is of a kind referred to in Corporations Instrument 2016/191, issued by the Australian Securities and
Investments Commission, relating to 'rounding-off'. Amounts in this report have been rounded off in accordance with that
Corporations Instrument to the nearest thousand dollars, or in certain cases, the nearest dollar.
New Accounting Standards and Interpretations not yet mandatory or early adopted
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 2023.
Note 3. Critical accounting judgements, estimates and assumptions
The preparation of the financial statements requires management to make judgements, estimates and assumptions that
affect the reported amounts in the financial statements. Management continually evaluates its judgements and estimates in
relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements, 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 judgements and estimates will seldom equal
the related actual results. The judgements, 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.
Share-based payment transactions
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.
Allowance for expected credit losses
The allowance for expected credit losses assessment requires a degree of estimation and judgement. It is based on the
lifetime expected credit loss, grouped based on days overdue, and makes assumptions to allocate an overall expected credit
loss rate for each group. These assumptions include recent sales experience and historical collection rates.
Revenue from contracts with customers involving performance milestones
When recognising revenue, the key performance obligation of the consolidated entity is considered to be performance
milestones detailed under each contract. Management estimates the progress against these performance milestones at each
reporting date and recognise revenue and work in progress accounts accordingly.
Fair value measurement hierarchy
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 investments in Slice Payments and Rent Pay Pty Ltd are Level 2 valuation investments as they are unlisted, with the
derivation of their value from the last available public information for trading in the shares of those investments at arms-length
terms. Refer to note 23 'Financial instruments' for further information on valuation of investments in unlisted entities. The
investment in Reckon Limited is a Level 1 investment, being that it is quoted on the Australian Securities Exchange.
Impairment of non-financial assets other than goodwill and other indefinite life intangible assets
The consolidated entity assesses impairment of non-financial assets other than goodwill and other indefinite life intangible
assets at each reporting date by evaluating conditions specific to the consolidated entity and to the particular asset that may
lead to impairment. If an impairment trigger exists, the recoverable amount of the asset is determined. This involves fair value
less costs of disposal or value-in-use calculations, which incorporate a number of key estimates and assumptions.
59
Novatti Group Limited
Notes to the consolidated financial statements
30 June 2023
Note 3. Critical accounting judgements, estimates and assumptions (continued)
Estimation of useful lives of finite life intangible assets
The Group determines the valuation, estimated useful lives and related amortisation charges for its finite life intangible assets.
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.
Recovery of deferred tax assets
Deferred tax assets are recognised for deductible temporary differences and carry-forward losses 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.
Research and Development Rebate
The consolidated entity is entitled to claim grant credits from the Australian Government in recompense for its research and
development program expenditure. The program is overseen by AusIndustry, which is entitled to audit and/or review claim
lodged for the past 4 years. In the event of a negative finding from such an audit or review AusIndustry has the right to rescind
and clawback those prior claims, potentially with penalties. Such a finding may only occur in the event that those expenditures
do not appropriately qualify for the grant program. In their estimation, considering also the independent external expertise
they have contracted to draft and claim such expenditures, the Directors of the consolidated entity consider that such a
negative review has a remote likelihood of occurring.
Note 4. Operating segments
Identification of reportable operating segments
The Group is organised into eight operating business segments:
(1) Technology, incorporating enterprise sales, Maintenance & Support via the Novatti Platform and Basis2 operating under
Novatti Incorporated
(2) Business Automation, incorporating Emersion Systems Pty Ltd and Novatti Emersion Inc.
(3) Acquiring, incorporating Novatti Acquiring Holdings Pty Ltd and Novatti Acquiring Services (AUS) Pty Ltd
(4) Alternative Payments, incorporating Flexewallet Pty Ltd, Flexe Payments (South Africa) Pty Ltd and Flexe Payments
Ltd
(5) Banking Services, incorporating the banking services under Novatti B Holding Company Pty Ltd
(6) Issuing, incorporating Flexewallet (NZ) Limited and Vasco Pay Pty Ltd
(7) ATX Payments, incorporating ATX Fintech Holding Sdn Bhd
(8) Corporate Overheads, the overhead segment that holds the financial assets for the Group and captures the corporate,
public running costs and overheads costs
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.
60
Novatti Group Limited
Notes to the consolidated financial statements
30 June 2023
Note 4. Operating segments (continued)
Types of products and services
The principal products and services of each of these operating segments are as follows:
Technology
Platform: Develops, deploys and supports specialised mobile and alternate payment
technology, primarily through the deployment of the Novatti Wallet Platform.
Business Automation
Acquiring
Alternative Payments
Banking Services
Issuing
ATX Payments
Billing Solutions: Basis2 trading under Novatti Inc. provides a technologically advanced
billing and CIS solution to service providers in the utilities industry.
Emersion: Automates business processes including customer engagement, billing,
collections, subscription management and embedded payments.
Novatti Acquiring: Enables businesses to accept a wide range of payments online and
offline with a strong focus on mobile point-of-sales as key growth area.
Novatti Billpay: Enables processing of payments from Asian wallets, including bill payments
for international and local university and college students.
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.
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.
Vasco Pay Pty Ltd and Novatti Group Ltd: Provides a payment system centred around
digital and physical prepaid, gift and debit cards for a variety of fintechs and commercial
enterprises.
ATX Fintech Holding Sdn Bhd: Provides large, established payments network across
Malaysia, including 30k+ touch points.
Intersegment transactions
Intersegment transactions were made at market rates. Intersegment transactions are eliminated on consolidation.
Intersegment receivables, payables and loans
Intersegment loans are initially recognised at the consideration received. Intersegment loans are eliminated on consolidation.
Major customers
During the year ended 30 June 2023, the consolidated entity did not transact with any single customer that individually
represented more than 10% of revenues (30 June 2022: nil).
61
Novatti Group Limited
Notes to the consolidated financial statements
30 June 2023
Note 4. Operating segments (continued)
Operating segment information
Business
Alternative Banking
ATX
Technology Automation Acquiring Payments Services Payments
Issuing
Total
Consolidated -
30 June 2023
Revenue
Sales to external
customers
Total revenue
Segment
EBITDA
Corporate
EBITDA
Depreciation and
amortisation
Interest revenue
Finance costs
Other taxes
Loss before
income tax
expense
Income tax
expense
Loss after
income tax
expense
Assets
Segment assets
Corporate assets
Total assets
Liabilities
Segment liabilities
Corporate
liabilities
Total liabilities
$'000
$'000
$'000
$'000
$'000
$'000
$'000
$'000
4,406
4,406
2,148
2,148
2,591
2,591
20,850
20,850
-
-
5,564
5,564
3,421
3,421
38,980
38,980
2,944
(2,797)
(5,066)
2,632
(3,508)
(1,287)
(1,409)
(8,491)
(14,944)
(2,211)
668
(1,382)
(181)
(26,541)
(4)
(26,545)
128,791
16,844
145,635
4,972
1,838
2,764
64,997
5,669
9,903
38,648
6,063
619
1,011
67,435
314
5,292
37,326
118,060
12,099
130,159
62
Novatti Group Limited
Notes to the consolidated financial statements
30 June 2023
Note 4. Operating segments (continued)
Business
Alternative Banking
ATX
Technology Automation Acquiring Payments Services Payments
Issuing
Total
Consolidated -
30 June 2022
Revenue
Sales to external
customers
Total revenue
Segment
EBITDA
Corporate
EBITDA
Depreciation and
amortisation
Interest revenue
Finance costs
Other taxes
Loss before
income tax
expense
Income tax
expense
Loss after
income tax
expense
Assets
Segment assets
Corporate assets
Total assets
Liabilities
Segment liabilities
Corporate
liabilities
Total liabilities
$'000
$'000
$'000
$'000
$'000
$'000
$'000
$'000
3,876
3,876
2,439
2,439
868
868
17,946
17,946
-
-
1,625
1,625
5,801
5,801
32,555
32,555
2,551
(2,995)
(3,205)
2,547
(2,404)
(2,586)
(54)
(6,146)
(7,866)
(1,853)
34
(725)
(54)
(16,610)
(17)
(16,627)
81,127
29,868
110,995
5,535
2,640
889
44,657
72
17,174
10,160
5,644
955
790
43,607
499
16,835
3,909
72,239
2,115
74,354
For the breakdown of operating segment revenue into disaggregated revenue components, refer to note 5.
63
Novatti Group Limited
Notes to the consolidated financial statements
30 June 2023
Note 4. Operating segments (continued)
Australia
Malta
Malaysia
Brazil
United States
United Arab Emirates
Netherlands
New Zealand
Gibraltar
Channel Island
Others
Note 5. Revenue
30 June 2023
Sales revenue
Technology
Business Automation
Acquiring
Alternative Payments
Banking Services
ATX Payments
Issuing
Sales to
external
customers
Sales to
external
customers
Geographica
l non-current
assets
Geographica
l non-current
assets
30 June 2023 30 June 2022 30 June 2023 30 June 2022
$'000
$'000
$'000
$'000
9,714
7,063
5,626
5,719
2,797
2,540
1,727
1,192
523
183
1,895
7,604
3,265
7,316
5,564
2,069
3
-
-
2,140
1,515
3,079
24,837
-
1,259
-
-
-
-
-
-
-
-
35,951
-
7,195
-
-
-
-
-
-
-
-
38,979
32,555
26,096
43,146
Timing of
revenue
recognition
Timing of
revenue
recognition
Services
provided
at point in
time
$
Services
provided
over time
$
Consolidated
30 June
2023
$
2,324
19
2,591
20,847
-
5,564
3,423
2,082
2,129
-
-
-
-
-
4,406
2,148
2,591
20,847
-
5,564
3,423
34,768
4,211
38,979
64
Novatti Group Limited
Notes to the consolidated financial statements
30 June 2023
Note 5. Revenue (continued)
30 June 2022
Sales revenue:
Technology
Business Automation
Acquiring
Alternative Payments
Banking Services
Issuing
ATX Payments
Note 6. Other income
Government grants
Dividends
Interest
Other
Other income
Timing of
revenue
recognition
Timing of
revenue
recognition
Services
provided
at point in
time
$
Services
provided
over time
$
Consolidated
30 June
2022
$
2,176
1,354
868
17,946
-
1,625
5,801
1,700
1,085
-
-
-
-
-
3,876
2,439
868
17,946
-
1,625
5,801
29,770
2,785
32,555
Consolidated
30 June 2023 30 June 2022
$'000
$'000
1,921
13,511
668
216
256
1,126
34
399
16,316
1,815
During the year ended 30 June 2023, the Company received dividend with franking credit rate of 60% from the investment
in Reckon Limited (note 10) of $13,511,000 (30 June 2022: $1,126,000, franking credit rate of 100%).
Note 7. Client hosting fees and other direct services
Settlement services
Tokenised technology commission
Issuing costs related to program management and Visa
Voucher top up, payment and distribution costs associated with the Malaysian subsidiary
Cross border settlement costs
Hosting and other direct services
Consolidated
30 June 2023 30 June 2022
$'000
$'000
4,250
2,191
1,546
4,108
1,559
7,077
5,932
2,422
1,307
4,976
1,697
2,594
20,731
18,928
65
Novatti Group Limited
Notes to the consolidated financial statements
30 June 2023
Note 8. Trade and other receivables
Current assets
Trade and other receivables
Less: Allowance for expected credit losses
Contract assets
Consolidated
30 June 2023 30 June 2022
$'000
$'000
6,573
(1,506)
5,067
5,703
(221)
5,482
2,681
2,940
7,748
8,422
Allowance for expected credit losses
The consolidated entity has recognised additional provision of $1,285,000 (30 June 2022: $166,000) in statement of profit or
loss and other comprehensive income in respect of the expected credit losses for the year ended 30 June 2023.
Other than the provision noted above, management are of the opinion that these receivables are reflective of fair value and
should not be impaired.
The ageing of the past due but not impaired trade and other receivables are as follows:
Expected credit loss rate
Carrying amount
30 June 2023 30 June 2022 30 June 2023 30 June 2022 30 June 2023 30 June 2022
Allowance for expected
credit losses
Consolidated
%
%
$'000
$'000
$'000
$'000
Not overdue
0 to 3 months overdue
Over 3 months overdue
-
8%
85%
-
-
30%
3,174
1,815
1,584
4,802
153
748
-
(152)
(1,354)
6,573
5,703
(1,506)
-
-
(221)
(221)
Note 9. Financial assets - funds in trust
Current assets
Settlement funds*
Remittance funds*
Client visa funds*
* Refer to note 14 Settlement, Remittance and Client visa funds payable
Consolidated
30 June 2023 30 June 2022
$'000
$'000
41,800
12,644
38,000
27,441
7,947
17,052
92,444
52,440
66
Novatti Group Limited
Notes to the consolidated financial statements
30 June 2023
Note 10. Other investments at fair value through profit and loss
Non-current assets
Investment in Slice Payments
Investment in Rent Pay Pty Ltd
Investment in Reckon Limited
Consolidated
30 June 2023 30 June 2022
$'000
$'000
-
250
11,597
452
250
27,022
11,847
27,724
For all of these investments, the directors consider that the Company has less than a significant influence. Accordingly, they
are all held at fair value through profit or loss. The investments in Slice Payments and Rent Pay Pty Ltd are Level 2 valuation
investments as they are unlisted, with the derivation of their value from the last available public information for trading in the
shares of those investments at arms-length terms. The investment in Reckon Limited is a Level 1 investment, being that it is
quoted on the Australian Securities Exchange. As at 30 June 2023, the fair value of Slice Payments decreased to nil.
The Reckon Limited shares were originally acquired at $1.00 per share. As at 30 June 2023 the value of those shares
declined to $0.52 per share, contributing to a fair valuation loss of $15,425,000. The group also has a number of financial
instruments which are not measured at fair value in the balance sheet. For the majority of these instruments, the fair values
are not materially different to their carrying amounts, since the interest receivable/payable is either close to current market
rates or the instruments are short-term in nature.
During the period the Company recognised dividend income of $13,511,000 from its strategic stake in Reckon Limited.
Note 11. Right-of-use assets
Non-current assets
Buildings - right-of-use
Less: Accumulated amortisation
Consolidated
30 June 2023 30 June 2022
$'000
$'000
2,772
(1,263)
2,761
(971)
1,509
1,790
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out
below:
Consolidated
Balance at 1 July 2021
Additions
Additions through business combinations
Amortisation expense
Balance at 30 June 2022
Additions
Amortisation expense
Balance at 30 June 2023
67
Buildings -
Right-of-use
$'000
1,933
165
70
(378)
1,790
-
(281)
1,509
Novatti Group Limited
Notes to the consolidated financial statements
30 June 2023
Note 12. Intangible assets
Non-current assets
Brand Asset
Less: Accumulated amortisation
Intellectual property - at cost
Less: Accumulated amortisation
Customer Lists
Less: Accumulated amortisation
Licences
Less: Accumulated amortisation
Other intellectual property
Product development
Less: Accumulated amortisation
Consolidated
30 June 2023 30 June 2022
$'000
$'000
4,973
(939)
4,034
2,861
(1,271)
1,590
3,789
(2,351)
1,438
475
(261)
214
53
1,643
(1,068)
575
4,973
(470)
4,503
2,588
(991)
1,597
3,789
(1,830)
1,959
475
(166)
309
51
1,643
(740)
903
7,904
9,322
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out
below:
Brand
Asset
$'000
Intellectual
Property
$'000
Customer
Lists
$'000
Licences
$'000
Intangible
Assets
$'000
Product
Development
$'000
Total
$'000
Other
Consolidated
Balance at 1 July 2021
Additions
Additions through business
combinations
Exchange differences
Amortisation expense
Balance at 30 June 2022
Additions
Disposals
Exchange differences
Amortisation expense
395
-
4,405
-
(297)
4,503
-
-
-
(469)
500
158
1,105
(15)
(151)
1,597
273
-
-
(280)
2,413
-
-
170
(624)
1,959
-
-
80
(601)
Balance at 30 June 2023
4,034
1,590
1,438
68
404
-
-
-
(95)
309
-
-
-
(95)
214
46
-
5
-
-
51
-
-
2
-
53
1,233
-
4,991
158
-
-
(330)
903
-
-
-
(328)
5,515
155
(1,497)
9,322
273
-
82
(1,773)
575
7,904
Novatti Group Limited
Notes to the consolidated financial statements
30 June 2023
Note 13. Trade and other payables
Current liabilities
Trade payables
Sundry creditors and accrued expenses
Deferred consideration related to ATX acquisition
Income tax payable
Non-current liabilities
Deferred consideration related to ATX acquisition
Other payables to ATX
Note 14. Settlement, remittance and visa funds payable
Current liabilities
Settlement funds payable*
Remittance funds payable*
Client visa funds payable*
Consolidated
30 June 2023 30 June 2022
$'000
$'000
8,062
13,720
638
-
6,969
8,201
1,012
39
22,420
16,221
-
-
-
117
138
255
22,420
16,476
Consolidated
30 June 2023 30 June 2022
$'000
$'000
41,746
12,622
37,261
27,441
7,947
16,674
91,629
52,062
*Client Funds held for Settlement, Remittance and Visa, refer to note 9 - Financial assets - funds in trust.
Note 15. Borrowings
Non-current liabilities
Bonds
Consolidated
30 June 2023 30 June 2022
$'000
$'000
10,500
-
On 15 August 2022, the Company completed a $10.5 million corporate bond issue to support growth in core payment
processing business and capital for proposed banking business. The bonds are secured over all of the assets and
undertakings of the consolidated entity other than IBOA Group Holdings Pty Ltd and its controlled subsidiaries; and are
issued for a fixed term of five years from the date funds are received by Company, with interest at 90-day BBSW plus 650bps,
interest settled quarterly and there are no equity conversion features with respect to this bond.
Transaction costs recognised in the profit and loss for the issuance of bonds was $392,000.
Refer to following table for the summary of significant terms and conditions of the bond:
69
Novatti Group Limited
Notes to the consolidated financial statements
30 June 2023
Note 15. Borrowings (continued)
●
●
●
Financial Covenant: the senior secured and unsecured debt of the Company and the entities it controls does not exceed
A$12,000,000
Reckon Holding: the Company continues maintaining a direct holding of at least 19.88% of total ordinary shares in
Reckon Limited
Reckon Dividend: the Company the pay all ordinary dividends and other distributions and proceeds received from or in
connection with the Reckon Holding or any Replacement Shares (if applicable) into a designated bank account with
restricted access provided to the Company for withdrawals
There was no breach to the terms and conditions during the year and as at 30 June 2023.
Refer to note 23 for further information on financial instruments.
Note 16. Lease liabilities
Current liabilities
Office lease liabilities for Melbourne, United Kingdom, Malta and Malaysia
Non-current liabilities
Office lease liabilities for Melbourne, United Kingdom, Malta and Malaysia
Refer to note 23 for further information on financial instruments.
Note 17. Contract liabilities
Current liabilities
Contract liabilities
Reconciliation of the values at the beginning and end of the current and previous financial
year:
Opening balance
Amounts billed in advance (ex GST)
Less: revenue recognised over a period of time
Consolidated
30 June 2023 30 June 2022
$'000
$'000
271
273
1,575
1,829
1,846
2,102
Consolidated
30 June 2023 30 June 2022
$'000
$'000
286
798
Contract liabilities
30 June 2023 30 June 2022
$
$
798
3,695
(4,207)
876
2,707
(2,785)
286
798
70
Novatti Group Limited
Notes to the consolidated financial statements
30 June 2023
Note 18. Employee benefits
Current liabilities
Annual leave
Long service leave
Provision for employee-related costs*
Non-current liabilities
Long service leave
Provision for employee-related costs*
Consolidated
30 June 2023 30 June 2022
$'000
$'000
1,261
526
1,551
1,469
490
-
3,338
1,959
140
-
140
138
779
917
3,478
2,876
*
The provision for employee-related costs relates to the earn-out milestone payments to ATX executive staff on achieving
agreed Gross Revenue targets for financial year ending 31 December 2023. Directors have considered the agreed
targets and have determined the liability recognised on the acquisition is reasonable.
As at 30 June 2023, the provision for employee-related costs included the unpaid portions for the payment for the
calendar year ended 31 December 2022.
Note 19. Issued capital
Ordinary shares - fully paid
338,656,542 335,297,521
90,686
89,336
Consolidated
30 June 2023 30 June 2022 30 June 2023 30 June 2022
Shares
Shares
$'000
$'000
71
Novatti Group Limited
Notes to the consolidated financial statements
30 June 2023
Note 19. Issued capital (continued)
Movements in ordinary share capital
Details
Date
Shares
$'000
1 July 2021
5 July 2021
5 July 2021
9 July 2021
30 July 2021
Balance
Issue of shares on conversion of convertible notes
Issue of shares on exercise of options
Issue of shares to sophisticated and institutional investors
Issue of shares on conversion of convertible notes
Issue of shares to existing shareholders under Share Purchase Plan 9 August 2021
Issue of shares to sophisticated and institutional investors
Issue of shares on exercise of options
Issue of shares on exercise of options
Issue of shares in lieu of consultancy fees
Issue of shares to employees
Issue of shares on exercise of options
Issue of shares in lieu of consultancy fees
Issue of shares on exercise of options
Issue of shares on exercise of options
Issue of shares to acquire ATX Fintech Holding Sdn Bhd
Cost of capital raising
27 August 2021
1 September 2021
1 October 2021
1 October 2021
15 October 2021
3 December 2021
24 December 2021
24 December 2021
31 December 2021
14 January 2022
Balance
Issue of shares to employees
Issue of shares on exercise of options
Issue of shares on exercise of options
Issue of shares on exercise of options
Issue of shares in lieu of consultancy fees
1 July 2022
30 September 2022
30 November 2022
13 December 2022
20 December 2022
11 May 2023
244,203,326
4,880,000
37,500
51,120,472
1,200,000
452,742
21,606,801
310,000
600,000
40,000
1,000,000
3,198,013
32,000
1,350,000
1,666,667
3,600,000
-
335,297,521
1,228,000
1,069,869
145,905
690,247
225,000
44,144
2,692
10
28,116
662
249
11,884
103
199
17
250
1,046
9
448
467
1,260
(2,220)
89,336
221
330
90
678
31
Balance
30 June 2023
338,656,542
90,686
Ordinary 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
share shall have one vote.
Share buy-back
There is no current on-market share buy-back.
Capital risk management
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.
72
Novatti Group Limited
Notes to the consolidated financial statements
30 June 2023
Note 20. Reserves
Foreign currency reserve
Share-based payments reserve
Consolidated
30 June 2023 30 June 2022
$'000
$'000
381
5,020
620
4,361
5,401
4,981
Foreign currency reserve
The reserve is used to recognise exchange differences arising from the translation of the financial statements of foreign
operations to Australian dollars. It is also used to recognise gains and losses on hedges of the net investments in foreign
operations.
Share-based payments reserve
The option reserve is used to record the fair value of options issued to employees and directors as part of their remuneration.
It is also used to record the fair value of options in other share-based payment transactions. The balance is transferred to
Issued Capital when options are exercised and balance is transferred to retained earnings when options lapse.
Note 21. Non-controlling interest
Issued capital
Accumulated losses
Consolidated
30 June 2023 30 June 2022
$'000
$'000
3,100
(235)
2,865
-
-
-
During the period, the Company finalised a Series A equity round for IBOA Group Holdings Pty Limited (IBOA Group), which
heads the Company’s dedicated banking division and is parent entity of the Bank, as part of securing a restricted banking
licence. Through this funding round, the Company made an additional $5m investment. In addition, sophisticated investors
contributed $3.1m for a total of $8m dollars in this funding round, through issuing shares of IBOA Group to the investor. The
Company consequently retained a 91% interest in IBOA Group. The aggregate $8m in new funding under this round will
enable the Bank to launch and build its business.
Note 22. Dividends
There were no dividends paid, recommended or declared during the current or previous financial year.
Note 23. Financial instruments
Financial risk management objectives
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 Group’s Audit, Risk & Compliance Committee oversees how management monitors compliance with the Group’s risk
management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks
faced by the Group.
Principal financial instruments
The principal financial instruments used by the Group, from which financial instrument risk arises, are as follows:
73
Novatti Group Limited
Notes to the consolidated financial statements
30 June 2023
Note 23. Financial instruments (continued)
●
●
●
●
●
●
Cash at bank and on deposit
Trade receivables
Financial assets at fair value through profit or loss
Trade and other payables
Lease liabilities
Bonds
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.
Credit risk
Credit risk arises from the financial assets of the Group, which comprise cash and cash equivalents, trade and other
receivables and other financial assets. The Group’s exposure to credit risk arises from potential default by the counter-party,
with maximum exposure equal to the carrying amount of these instruments. Exposure at the reporting date is addressed in
each applicable note.
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. Refer to note 8 trade and other receivable for the ageing analysis.
The Group does not have any material credit risk exposure for other receivables or other financial instruments.
Market risk
Foreign 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, also US Dollars (USD) and New Zealand Dollars (NZD).
74
Novatti Group Limited
Notes to the consolidated financial statements
30 June 2023
Note 23. Financial instruments (continued)
The carrying amount of the consolidated entity's foreign currency denominated financial assets and financial liabilities at the
reporting date were as follows:
Consolidated
CAD
USD
EUR
GBP
NZD
MYR
Assets
Liabilities
30 June 2023 30 June 2022 30 June 2023 30 June 2022
$'000
$'000
$'000
$'000
713
1,687
71,748
3
16,570
3,092
449
969
39,206
5
8,034
1,560
(454)
(427)
(2,097)
(70)
(18)
(1,108)
(334)
(275)
(1,572)
(141)
(6)
(2,703)
93,813
50,223
(4,174)
(5,031)
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 2023. 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.
Consolidated - 30 June 2023
% change
profit before
tax
Effect on
equity
% change
profit before
tax
Effect on
equity
AUD strengthened
Effect on
AUD weakened
Effect on
CAD
USD
EUR
GBP
NZD
MYR
5%
5%
5%
5%
5%
5%
(12)
(60)
(3,317)
3
(788)
(94)
(4,268)
AUD strengthened
Effect on
Consolidated - 30 June 2022
% change
profit before
tax
Effect on
equity
CAD
USD
EUR
GBP
NZD
MYR
5%
5%
5%
5%
5%
5%
(5)
(33)
(1,792)
6
(382)
54
(2,152)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
5%
5%
5%
5%
5%
5%
14
66
3,666
(4)
871
104
4,717
AUD weakened
Effect on
% change
profit before
tax
Effect on
equity
5%
5%
5%
5%
5%
5%
6
37
1,981
(7)
423
(60)
2,380
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Price risk
The Group is exposed to other price risk on its investments in listed and 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. The investments are in three 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.
75
Novatti Group Limited
Notes to the consolidated financial statements
30 June 2023
Note 23. Financial instruments (continued)
If the fair value of investments increased by 10% this would have increased total comprehensive income for the Group by
$1,184,700. A decrease of 10% would have reduced total comprehensive 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)
30 June 2023
Assets
Shares in listed entities
Shares in unlisted entities
30 June 2022
Assets
Shares in listed entities
Shares in unlisted entities
Reconciliation
Level 1
$'000
Level 2
$'000
Level 3
$'000
Total
$
11,597
-
11,597
-
250
250
Level 1
$'000
Level 2
$'000
Level 3
$'000
27,022
-
27,022
-
702
702
-
-
-
-
-
-
11,597
250
11,847
Total
$'000
27,022
702
27,724
30 June 2023 30 June 2022
$'000
$'000
Reconciliation of the fair values at the beginning and end of the current and previous
financial year are set out below:
Opening fair value
Additions
Revaluation increments
Revaluation decrements
Closing fair value
27,724
-
-
(15,877)
1,030
22,517
4,505
(328)
11,847
27,724
The investments in shares in unlisted entities are Level 2, with the derivation of their value from the last available public
information for trading in the shares of those investments at arms-length terms.
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 2023, the financial liabilities of the Group include:
76
Novatti Group Limited
Notes to the consolidated financial statements
30 June 2023
Note 23. Financial instruments (continued)
●
●
●
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 liabilities. Refer to note 16 for a summary of the outstanding lease liabilities
Bonds. Refer to note 15 for details.
The contractual amounts of financial liabilities are equal to their carrying values.
Remaining contractual maturities
The following tables detail the consolidated entity's remaining contractual maturity for its financial instrument liabilities. The
tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which
the financial liabilities are required to be paid. The tables include both interest and principal cash flows disclosed as remaining
contractual maturities and therefore these totals may differ from their carrying amount in the statement of financial position.
Consolidated - 30 June 2023
Non-derivatives
Non-interest bearing
Trade payables and other
payables
Interest-bearing - variable
Bonds
Interest-bearing - fixed rate
Lease liabilities
Total non-derivatives
Consolidated - 30 June 2022
Non-derivatives
Non-interest bearing
Trade payables and other
payables
Interest-bearing - fixed rate
Convertible note facilities
Lease liabilities
Total non-derivatives
Weighted
average
interest rate
%
1 year or less
$'000
Between 1
and 2 years
$'000
Between 2
and 5 years
$'000
Over 5 years
$'000
Remaining
contractual
maturities
$'000
-
22,420
9.66%
-
-
-
-
10,500
5.21%
271
22,691
300
300
1,275
11,775
-
-
-
-
22,420
10,500
1,846
34,766
Weighted
average
interest rate
%
1 year or less
$'000
Between 1
and 2 years
$'000
Between 2
and 5 years
$'000
Over 5 years
$'000
Remaining
contractual
maturities
$'000
-
16,221
-
9.00%
5.21%
40
273
16,534
-
1,829
1,829
-
-
-
-
-
-
-
-
16,221
40
2,102
18,363
Fair value of financial instruments
Unless otherwise stated, the carrying amounts of financial instruments reflect their fair value.
Note 24. Key management personnel disclosures
Directors
The following persons were directors of Novatti Group Limited during the financial year:
Peter Pawlowitsch (Non-Executive Chairman)
Peter Cook (Managing Director and Chief Executive Officer)
Kenneth Lai (Non-Executive Director)
Killian Murphy (Non-Executive Director)
Abigail Cheadle (Non-Executive Director)
(appointed on 13 October 2022)
(resigned on 28 December 2022)
77
Novatti Group Limited
Notes to the consolidated financial statements
30 June 2023
Note 24. Key management personnel disclosures (continued)
Other key management personnel
The following persons also had the authority and responsibility for planning, directing and controlling the major activities of
the consolidated entity, directly or indirectly, during the financial year:
Mark Healy
Alan Munday
Steven Stamboultgis
Dharshini Mendez
(Chief Executive Officer appointed 15 June 2023)
(Group Chief Operating Officer)
(Company Secretary) (resigned as Chief Financial Officer effective 31 March 2023)
(Chief Financial Officer) (appointed as Chief Financial Officer on 3 April 2023)
Compensation
The aggregate compensation made to directors and other members of key management personnel of the consolidated entity
is set out below:
Short-term employee benefits
Post-employment benefits
Long-term benefits
Share-based payments
Note 25. Remuneration of auditors
Consolidated
30 June 2023 30 June 2022
$
$
1,048,954
80,938
23,915
1,895,232
1,117,196
82,995
21,257
1,067,779
3,049,039
2,289,227
During the financial year, the following fees were paid or payable for services provided by William Buck, the auditor of the
Company, its network firms and unrelated firms:
Audit services - William Buck
Audit or review of the financial statements
Other services - William Buck
Taxation and compliance services
Other matters
Consolidated
30 June 2023 30 June 2022
$
$
170,500
98,500
17,600
36,500
71,560
6,070
54,100
77,630
224,600
176,130
78
Novatti Group Limited
Notes to the consolidated financial statements
30 June 2023
Note 26. Contingent liabilities
Deposits under non-current assets are refundable collateral held on application of the Visa issuing licence and Currency
Cloud float. The conditions in place for the deposits are relating to a) the Visa partnership Principal License; b) the Currency
Cloud float; and c) Visa Collateral.
As a Principal License holder for Visa Prepaid/Debit Issuing, Novatti can provide services to clients for both Visa BIN
Sponsorship and Visa Program Management. Visa requires the member to maintain a Collateral account which is held in
trust at a Visa nominated to settle all debts to merchants and any monies owed to issuers and their Visa Prepaid cardholders.
In addition, Novatti requires BIN Sponsors and/or Program Manager mandates, as part of the client contract, that the client
maintains a minimum of their 6 days Visa Settlement total in a bank account (held in Trust For the client) with the Visa
Settlement Bank (Australia ANZ and NZ ASB). This assures that the Visa daily settlement process is, and can be funded by
the client directly.
Alternatively, if a client does not agree to maintaining a float account Novatti will Direct Debit from the client’s nominated
corporate bank account to directly fund settlement daily. If this method is agreed the client is required to deposit a Security
Deposit to an In-Trust-For (ITF) account with Novatti.
The Currency Cloud float enables expedient payments. Where the client does not forward the balance of the funds for cross-
border payments, Novatti is at risk of the unpaid balance of that transaction.
The consolidated entity had no other contingent liabilities as at 30 June 2023 and 30 June 2022.
Note 27. Related party transactions
Parent entity
Novatti Group Limited is the parent entity.
Subsidiaries
Interests in subsidiaries are set out in note 29.
Key management personnel
Disclosures relating to key management personnel are set out in note 24 and the remuneration report included in the
directors' report.
Transactions with related parties
There were no transactions with related parties during the current and previous financial year.
Receivable from and payable to related parties
There were no trade receivables from or trade payables to related parties at the current and previous reporting date.
Loans to/from Directors
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 the Group other than as outlined in this report.
Loans to/from related parties
Loan provided to the Group’s joint venture partner, High Impact. This loan agreement is for a total of USD 24,462 (AUD
35,509) as at 30 June 2023 (30 June 2022: USD 24,462 (AUD 35,509)). 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 conditions
All transactions were made on normal commercial terms and conditions and at market rates.
79
Novatti Group Limited
Notes to the consolidated financial statements
30 June 2023
Note 28. Parent entity information
Set out below is the supplementary information about the parent entity.
Statement of profit or loss and other comprehensive income
Profit/(loss) after income tax
Total comprehensive income
Statement of financial position
Total current assets
Total assets
Total current liabilities
Total liabilities
Net assets
Equity
Issued capital
Foreign currency reserve
Share-based payments reserve
Accumulated losses
Total equity
Parent
30 June 2023 30 June 2022
$'000
$'000
(7,958)
(7,958)
253
253
Parent
30 June 2023 30 June 2022
$'000
$'000
84,985
48,122
127,528
100,308
36,340
14,335
82,820
14,335
44,708
85,973
90,686
534
5,538
(52,050)
92,853
534
4,361
(11,775)
44,708
85,973
Prepaid deposit entered into by the parent entity in relation to the debts of its subsidiaries
There exists a prepaid deposit for offices leased in Melbourne. As at 30 June 2023, this totalled $83,010 (2022: $83,010).
No other prepaid deposit exist.
Contingent liabilities
The parent entity had no contingent liabilities as at 30 June 2023 (2022: Nil).
Capital commitments - Property, plant and equipment
The parent entity had no capital commitments for property, plant and equipment as at 30 June 2023 (2022: Nil).
Significant accounting policies
The accounting policies of the parent entity are consistent with those of the consolidated entity, as disclosed in note 2, except
for the following:
●
●
●
Investments in subsidiaries are accounted for at cost, less any impairment, in the parent entity.
Investments in associates 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 and its receipt may be an
indicator of an impairment of the investment.
80
Novatti Group Limited
Notes to the consolidated financial statements
30 June 2023
Note 29. Interests in subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance
with the accounting policy described in note 2:
Name
Principal place of business /
Country of incorporation
Ownership interest
30 June 2023 30 June 2022
%
%
Novatti Pty Ltd
Flexe Payments Pty Ltd
Flexe Payments (AUS) Pty Ltd
Flexe Payments (MLT) Ltd
Flexe Payments (UK) Ltd
Novatti Commerce Solutions Inc.
Novatti Commerce Solutions (MLT) Ltd
Novatti Technologies Ltd
Novatti Inc.
Vasco Pay Pty Ltd
IBOA Group Holdings Pty Ltd *
International Bank of Australia Pty Limited **
Intella Payments Pty Ltd ***
UAB Novtec Global
Novatti Acquiring Holdings Pty Ltd
Novatti Acquiring Services (AUS) Pty Ltd
Novatti Acquiring Services (NZ) Pty Ltd
Novatti Tech Europe Ltd
Novatti Emersion Inc.
ATX Fintech Holding Sdn Bhd
Novatti Global Services Pty Ltd
Emavilis Holdings Limited
Nisaki Holding Limited
China Payments Services Pty Ltd
Novatti Singapore Services Pte Ltd
AUDC Pty Ltd
Novatti Transactions and Technology International Ltd Cyprus
Flexewallet Pty Ltd
Flexewallet (NZ) Ltd
Novatti (Malaysia) Sdn Bhd
Australia
South Africa
Australia
Malta
United Kingdom
Canada
Malta
United Kingdom
United States of America
Australia
Australia
Australia
Australia
Lithuania
Australia
Australia
New Zealand
Cyprus
United States of America
Malaysia
Australia
Cyprus
Cyprus
Australia
Singapore
Australia
Australia
New Zealand
Malaysia
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
90.7%
90.7%
49.0%
-
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
65.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
65.0%
100.0%
100.0%
-
Formerly known as Novatti B Holding Company Pty Ltd
Formerly known as Novatti IBA Pty Ltd
*
**
*** Formerly known as Novatti Billing Solutions Pty Ltd
Note 30. Events after the reporting period
No matter or circumstance has arisen since 30 June 2023 that has significantly affected, or may significantly affect the
consolidated entity's operations, the results of those operations, or the consolidated entity's state of affairs in future financial
years.
81
Novatti Group Limited
Notes to the consolidated financial statements
30 June 2023
Note 31. Reconciliation of loss after income tax to net cash from/(used in) operating activities
Loss after income tax expense for the year
Adjustments for:
Depreciation and amortisation
Write off of property, plant and equipment
Share-based payments
Unrealised foreign exchange (gain) / loss
(Gain) / loss on convertible notes
Bad debt expense
Equity investments received for services rendered
Non-cash finance charges
Gain on investments at fair value through profit or loss
Change in operating assets and liabilities:
Decrease/(increase) in trade and other receivables
Decrease in inventories
Increase in prepayments
Increase in trade and other payables
Decrease in provision for income tax
Increase in employee benefits
(Decrease)/increase in contract liabilities
Consolidated
30 June 2023 30 June 2022
$'000
$'000
(26,545)
(16,627)
2,211
-
2,265
69
-
1,285
-
144
15,877
32
-
(203)
6,207
(39)
602
(512)
1,853
127
1,902
(432)
(729)
279
(249)
113
(3,302)
(2,995)
27
-
6,333
(13)
634
47
Net cash from/(used in) operating activities
1,393
(13,032)
Note 32. Loss per share
Loss after income tax
Non-controlling interest
Consolidated
30 June 2023 30 June 2022
$'000
$'000
(26,545)
235
(16,627)
-
Loss after income tax attributable to the owners of Novatti Group Limited
(26,310)
(16,627)
Weighted average number of ordinary shares used in calculating basic loss per share
337,310,860 325,048,215
Weighted average number of ordinary shares used in calculating diluted loss per share
337,310,860 325,048,215
Number
Number
Basic loss per share
Diluted loss per share
Cents
Cents
(7.800)
(7.800)
(5.115)
(5.115)
As at 30 June 2023, the Group has 56,743,184 unlisted options on issue (30 June 2022: 43,181,668). These options are
considered to be non-dilutive whilst the Group is in a loss position.
Note 33. Share-based payments
Options issued under employee share option plan
82
Novatti Group Limited
Notes to the consolidated financial statements
30 June 2023
Note 33. Share-based payments (continued)
A share option plan has been established by the Group and approved by shareholders at a general meeting, whereby the
Group may, at the discretion of the Board, grant options over ordinary shares in the Company to certain key management
personnel and staff of the Group.
The Employee Share Option Plan is designed to provide long-term incentives for Senior Management (including Directors)
and staff to deliver long-term shareholder returns. Options are issued for nil consideration and are granted in accordance
with performance guidelines established by the Board.
The options granted during the year ended 30 June 2023 were calculated based on the Black-Scholes model or Binomial
model method of calculation for share-based payments.
The following share-based payment arrangements were in existence during the current financial year and are supported by
the table below.
Grant date
Expiry date
Service /
Market
conditions
Exercise
price ($)
Balance at
the start of
the year
Granted
Exercised
Expired /
Forfeited /
other
Balance at
the end of
the year
27/11/2018 30/11/2022 Market
25/11/2019 30/11/2023 Market
Service
19/12/2019 19/12/2022
Service
10/07/2020 10/07/2023
Service
10/07/2020 01/03/2024
Service
10/07/2020 01/03/2025
Service
10/07/2020 01/03/2026
Service
10/07/2020 31/12/2022
26/10/2020 26/10/2023
Service
25/11/2020 30/11/2024 Market
None
22/12/2020 22/12/2023
Service
22/12/2020 14/10/2023
Service
08/02/2021 08/02/2024
Service
05/04/2021 05/04/2024
Service
07/04/2021 07/04/2024
Service
05/05/2021 05/05/2024
Service
31/05/2021 31/05/2024
15/10/2021 15/10/2024
Service
Service
15/10/2021 15/10/2024
20/12/2021 30/11/2025 Market
Service
25/01/2022 25/01/2025
Service
05/04/2022 19/04/2025
Service
06/07/2022 06/07/2025
Service
06/07/2022 06/07/2025
30/09/2022 30/06/2026
None
23/11/2023 30/11/2026 Market
None
13/12/2022 30/06/2026
Service
17/04/2023 17/04/2026
30/06/2027 Market/
Service
Service
13/06/2023
13/06/2023 30/06/2027
$0.19
$0.20
$0.20
$0.20
$0.20
$0.20
$0.20
$0.20
$0.30
$0.27
$0.28
$0.30
$0.30
$0.30
$0.60
$0.75
$0.75
$0.50
$0.75
$0.45
$0.33
$0.35
$0.25
$0.16
$0.25
$0.20
$0.25
$0.18
$0.20
$0.00
-
-
- (3,666,668)
3,666,668
- 3,000,000
-
-
3,000,000
-
- (2,985,000) (1,277,500)
4,262,500
750,000
(100,000)
-
-
850,000
375,000
(66,667)
-
-
441,667
375,000
(66,667)
-
-
441,667
-
(66,666)
-
-
66,666
-
- (3,200,000)
-
3,200,000
- 1,000,000
-
-
1,000,000
- 2,500,000
-
-
2,500,000
(500,000) 2,700,000
-
-
3,200,000
- 2,000,000
-
-
2,000,000
200,000
-
-
-
200,000
300,000
-
-
-
300,000
100,000
-
-
-
100,000
100,000
-
-
-
100,000
400,000
-
-
-
400,000
-
-
800,002
(299,998)
1,100,000
(100,000) 1,400,000
-
-
1,500,000
- (1,500,000) 7,000,000
-
8,500,000
(300,000)
-
-
300,000
600,000
(200,000) 2,375,000
-
-
2,575,000
833,333
-
833,333
-
-
- 1,666,667
-
- 1,666,667
-
- 1,000,000
- 1,000,000
- (2,000,000) 13,000,000
- 15,000,000
-
-
-
250,000
250,000
- 1,500,000
-
- 1,500,000
-
6,750,000
- 5,568,182
-
-
-
6,750,000
- 5,568,182
40,004,168 32,568,182 (9,851,668) (6,477,498) 56,243,184
Weighted average exercise price
$0.319
$0.166
$0.199
$0.296
$0.255
The weighted average remaining contractual life of options outstanding at the end of the financial year was 2.49 years (2022:
1.82 years).
83
Novatti Group Limited
Notes to the consolidated financial statements
30 June 2023
Note 33. Share-based payments (continued)
For the options granted during the current financial year, the valuation model inputs used to determine the fair value at the
grant date, are as follows:
Grant date
Expiry date
Share price Exercise
at grant date
price
Expected
volatility
Dividend
yield
Risk-free
interest rate at grant date
Fair value
06/07/2022
06/07/2022
30/09/2022
23/11/2022
23/11/2022
23/11/2022
13/12/2022
17/04/2023
13/06/2023
13/06/2023
13/06/2023
13/06/2023
13/06/2023
06/07/2025
06/07/2025
30/06/2026
30/11/2026
30/11/2026
30/11/2026
30/06/2026
17/04/2026
30/06/2027
30/06/2027
30/06/2027
30/06/2027
30/06/2027
$0.185
$0.185
$0.175
$0.270
$0.270
$0.270
$0.230
$0.165
$0.120
$0.120
$0.120
$0.120
$0.120
$0.250
$0.157
$0.250
$0.200
$0.200
$0.200
$0.250
$0.180
$0.200
$0.200
$0.200
$0.200
$0.000
85.00%
85.00%
85.00%
85.00%
85.00%
85.00%
85.00%
85.00%
85.00%
85.00%
85.00%
85.00%
85.00%
-
-
-
-
-
-
-
-
-
-
-
-
-
3.45%
3.45%
3.69%
3.38%
3.38%
3.38%
3.56%
3.24%
3.80%
3.80%
3.80%
3.90%
3.90%
$0.091
$0.111
$0.066
$0.135
$0.137
$0.141
$0.053
$0.089
$0.046
$0.039
$0.033
$0.064
$0.120
These options have different tranches with different vesting periods.
Bonus options issued for convertible notes
On 30 March 2020 the Group issued 3,500,000 bonus options to the convertible note holders. These options were valued
using the Binomial model method of calculation for share-based payments.
Set out below are summaries of bonus options granted to convertible note holders:
30 June 2023
Grant date
Expiry date
Exercise
price
Balance at
the start of
the year
Granted
Exercised
Expired/
forfeited/
other
Balance at
the end of
the year
15/11/2019
18/02/2020
30/10/2022
30/10/2022
$0.25
$0.25
1,465,000
1,112,500
2,577,500
30 June 2022
Grant date
Expiry date
Exercise
price
Balance at
the start of
the year
Granted
15/11/2019
18/02/2020
30/10/2022
30/10/2022
$0.25
$0.25
1,475,000
1,112,500
2,587,500
Options issued to consultants
-
-
-
-
-
-
(1,465,000)
(1,112,500)
(2,577,500)
-
-
-
Exercised
-
-
-
(10,000)
-
(10,000)
Expired/
forfeited/
other
Balance at
the end of
the year
-
-
-
1,465,000
1,112,500
2,577,500
On 15 September 2020 and 1 October 2021, the Group issued 7,000,000 and 1,100,000 unquoted options to consultants in
lieu of investor relation service fees. These options were valued using Black-Scholes valuation model.
Set out below are summaries of options granted to consultants:
84
Novatti Group Limited
Notes to the consolidated financial statements
30 June 2023
Note 33. Share-based payments (continued)
30 June 2023
Grant date
Expiry date
price
Exercise
Balance at
the start of
the year
Granted
Exercised
Expired/
forfeited/
other
Balance at
the end of
the year
01/10/2021
01/10/2021
31/12/2022
31/12/2023
$0.60
$0.66
100,000
500,000
600,000
-
-
-
-
-
-
(100,000)
-
-
500,000
(100,000)
500,000
30 June 2022
Grant date
Expiry date
15/09/2020
01/10/2021
01/10/2021
01/10/2021
31/12/2021
30/06/2022
31/12/2022
31/12/2023
Exercise
price
Balance at
the start of
the year
Granted
Exercised
Expired
Balance at
the end of
the year
$0.25
$0.30
$0.60
$0.66
5,200,000
-
-
-
-
500,000
100,000
500,000
(5,200,000)
-
-
-
-
(500,000)
-
-
-
-
100,000
500,000
5,200,000
1,100,000
(5,200,000)
(500,000)
600,000
85
Novatti Group Limited
Directors' declaration
30 June 2023
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 2 to the financial statements;
the attached financial statements and notes give a true and fair view of the consolidated entity's financial position as at
30 June 2023 and of its performance for the financial year ended on that date; and
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
28 September 2023
86
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
(together, the Group), which comprises the consolidated statement of financial position as at 30 June 2023,
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 2023 and of its financial
performance for the year ended on that date; 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 (including Independence
Standards) (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.
Material Uncertainty Related to Going Concern
We draw attention to Note 2 in the financial report, which states that the Group incurred a net loss after tax
of $26,783,000 and net cash inflows from operations of $1,393,000 for the year ended 30 June 2023. As
stated in Note 2, these events and conditions, along with other matters as set forth in Note 2, indicate that a
material uncertainty exists that may cast significant doubt on the Group’s ability to continue as a going
concern. Our opinion is not modified in respect of this matter.
Level 20, 181 William Street, Melbourne VIC 3000
+61 3 9824 8555
vic.info@williambuck.com
williambuck.com.au
William Buck is an association of firms, each trading under the name of William Buck
across Australia and New Zealand with affiliated offices worldwide.
Liability limited by a scheme approved under Professional Standards Legislation.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our
audit of the financial report of the current period. These matters were addressed in the context of our audit
of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate
opinion on these matters. In addition to the matter described in the Material Uncertainty Related to Going
Concern section, we have determined that the following matters described below to be the key audit
matters to be communicated in our report:
REVENUE RECOGNITION
Area of focus – Note 5
Consistent with the prior year the Group continues
to enter into agreements with new trading partners
for generating new sources of revenue within the
following operating segments:
— Technology;
— Business Automation;
— Acquiring;
— Alternative Payments;
— Issuing; and
— ATX Payments.
Each revenue stream requires a bespoke revenue
recognition model to ensure that revenue is only
recognised:
a) when a performance milestone is achieved;
b) can be reliably measured; and
c) there is a low likelihood for dispute by the
customer for revenues that are recognised
which are beyond that originally scoped at the
inception of the engagement.
This matter was considered a Key Audit Matter due
to the complexity of revenue arrangements and
judgement involved when estimating the progress
towards milestones.
SHARE BASED PAYMENTS
Area of focus – Note 33
As disclosed in note 33, the Group currently has
options issued to employees, key management
personnel and other contracting parties through
share-based payment arrangements in accordance
with AASB 2 Share-based Payment.
These options include both market and non-market
vesting criteria, including:
How our audit addressed it
Our audit procedures included:
— Determining whether revenue recognised is in-
compliance with the Group’s accounting
policies and AASB 15 Revenue from Contracts
with Customers;
— Identifying and verifying the achievement of
performance milestones and recognition of
revenue relative to the accretion of that
achievement;
— Agreeing revenue streams to a sample of
underlying contracts with third parties;
— Examining the existence of revenue, both by
testing to contract, invoicing and to subsequent
receipt of the revenue from the customer;
— Analytically reviewing the reasonableness of
accrued revenue and billings-in-advance
accounts.
We also assessed the appropriateness of
disclosures attached to revenues, particularly
those mandatorily required by the Australian
Accounting Standard, AASB 15 Revenue from
Contracts with Customers.
How our audit addressed it
Our audit procedures included:
— Agreeing the material terms and conditions of
any new share-based payment arrangement to
plan documentation;
— Examining the share-based payment
arrangements to determine the
appropriateness of identifying each share-
— Service (employment) conditions;
— Market-based performance conditions; and
— Other non-market performance conditions.
The valuation of such options requires significant
judgement and expertise, particularly in determining
the likelihood of achieving the market-based
conditions and satisfying all non-vesting conditions.
The Group engages independent specialists to
appraise the fair value of its share-based payment
arrangements that involve market-based conditions
and assessment of satisfying non-vesting
conditions.
The Group recognises a vesting charge
apportioned over the service condition, over the
assessed vesting period if there is a market
condition or based on management’s assessment
of the likelihood of other non-market conditions.
This matter was considered a Key Audit Matter due
to the complexity of arrangements and judgement
applied in valuing the share-based payments.
Other Information
based payment arrangement, including
assessment of the grant date;
— Examining the appropriateness of the
amortisation model for accreting share-based
payment expense to the profit or loss over the
vesting period;
— Assessing support for likely outcome of vesting
conditions used to value share-based
payments;
— Assessing support for satisfaction of achieving
non-vesting conditions which are not market
conditions; and
— Assessed the competence and qualification of
management’s specialist.
We also assessed the adequacy of disclosures in
relation to the share options in the Remuneration
Report and notes to the financial report.
The directors are responsible for the other information. The other information comprises the information in
the Group’s annual report for the year ended 30 June 2023 but does not include the financial report and the
auditor’s report thereon.
Our opinion on the financial report does not cover the other information and we do not express any form of
assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information and, in
doing so, consider whether the other information is materially inconsistent with the financial report or our
knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the Directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a true
and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for
such internal control as the directors determine is necessary to enable the preparation of the financial
report that gives a true and fair view and is free from material misstatement, whether due to fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or has no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our
opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted
in accordance with the Australian Auditing Standards will always detect a material misstatement when it
exists. Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the
basis of this financial report.
A further description of our responsibilities for the audit of these financial statements is located at the
Auditing and Assurance Standards Board website at:
https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf
This description forms part of our independent auditor’s report.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in the directors’ report for the year ended 30 June
2023.
In our opinion, the Remuneration Report of Novatti Group Limited, for the year ended 30 June 2023,
complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the Remuneration
Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an
opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing
Standards.
William Buck Audit (Vic) Pty Ltd
ABN 59 116 151 136
N. S. Benbow
Director
Melbourne, 28 September 2023
Novatti Group Limited
Shareholder information
30 June 2023
The shareholder information set out below was applicable as at 13 September 2023.
Ordinary shares
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
Unquoted options
10,001 to 100,000
100,001 and over
Number of
holders of
ordinary
shares
Number of
ordinary
shares
% of ordinary
shares
205
1,204
628
120,226
3,454,614
5,083,513
1,322 47,109,531
376 282,888,658
3,735 338,656,542
0.04
1.02
1.50
13.91
83.53
100.00
729
1,027
0.30
Number of
holders of
unquoted
options
Number of
unquoted
options
% of
unquoted
options
16
1,450,000
29 42,025,000
3.34
96.66
45 43,475,000
100.00
91
Novatti Group Limited
Shareholder information
30 June 2023
Equity security holders
Twenty largest quoted equity security holders
The names of the twenty largest security holders of quoted equity securities are listed below:
1. BRAYTER LIMITED
2. CITICORP NOMINEES PTY LIMITED
3. CORANGAMITE PTY LTD (LAKE CORANGAMITE A/C)
4. XIADI CHEN
5. MADAM QING LI
6. MR ZHIYU NING
7. MR FREEMAN XIN WANG (AFU FAMILY A/C)
8. PORTMAN TRADING PTY LTD
9. BROADGATE INVESTMENTS PTY LTD
10. EMERSION SOFTWARE SYSTEMS PTY LTD
11. JINGTIAN LI
12. BNP PARIBAS NOMINEES PTY LTD (IB AU NOMS RETAILCLIENT DRP)
13. DASISTAS PTY LTD (DASISTAS SUPER FUND A/C)
14. BLOCKGROVE PTY LTD (NIELS HOUSE FAMILY A/C)
15. MS MARA LABBROZZI
16. SASHI KUMAR A/L A KOVINDSAMY
17. NETWEALTH INVESTMENTS LIMITED (WRAP SERVICES A/C)
18. MR HUITONG SONG
19. KONGS ACCOUNTING & TAXATION PTY LTD
20. HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
13
September
2023
Number of
ordinary
shares held
46,631,507
15,625,918
13,174,571
12,500,000
10,407,452
4,430,000
4,111,904
3,909,092
3,909,091
3,700,620
3,571,428
3,548,327
3,427,802
3,000,000
2,920,000
2,867,236
2,733,509
2,580,000
2,523,000
2,316,587
% of total
ordinary
shares
issued
13.77
4.61
3.89
3.69
3.07
1.31
1.21
1.15
1.15
1.09
1.05
1.05
1.01
0.89
0.86
0.85
0.81
0.76
0.75
0.68
147,888,044
43.65
Unquoted equity securities
There are no unquoted equity securities.
There are no holders of unquoted equity securities holding 20% or greater of the number of unquoted equity securities on
issue.
Substantial holders
There are no substantial holders in the Company.
Voting rights
The voting rights attached to ordinary shares are set out below:
Ordinary 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.
92
Novatti Group Limited
Shareholder information
30 June 2023
Securities subject to voluntary escrow
Class
Ordinary shares
Use of funds
Expiry date
14 January 2024
Number
of shares
3,600,000
Since admission, the Company has used its cash in a way consistent with business objectives.
93
+61 3 9011 8490
www.novatti.com
Level 3, 461 Bourke St
Melbourne, Victoria
AUSTRALIA 3000
Novatti Group Ltd
ABN 98 606 556 183
G.P.O. Box 171
380 Bourke St
Melbourne, Victoria
AUSTRALIA 3001